[Title 48 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2014 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          
          
          Title 48

Federal Acquisition Regulations System


________________________

Chapter 29 to End

                         Revised as of October 1, 2014

          Containing a codification of documents of general 
          applicability and future effect

          As of October 1, 2014
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as 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)           57
          Chapter 34--Department of Education Acquisition 
          Regulation                                               131
          Chapter 51--Department of the Army Acquisition 
          Regulations                                              173
          Chapter 52--Department of the Navy Acquisition 
          Regulations                                              185
          Chapter 53--Department of the Air Force Federal 
          Acquisition Regulation Supplement [Reserved]
          Chapter 54--Defense Logistics Agency, Department of 
          Defense                                                  193
          Chapter 57--African Development Foundation               199
          Chapter 61--Civilian Board of Contract Appeals, 
          General Services Administration                          203
          Chapter 63--Department of Transportation Board of 
          Contract Appeals                                         247
          Chapter 99--Cost Accounting Standards Board, Office 
          of Federal Procurement Policy, Office of Management 
          and Budget                                               261
  Finding Aids:
      Table of CFR Titles and Chapters........................     497
      Alphabetical List of Agencies Appearing in the CFR......     517

[[Page iv]]

      List of CFR Sections Affected...........................     527

[[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, 2014), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

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

OMB CONTROL NUMBERS

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

[[Page vii]]

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

PAST PROVISIONS OF THE CODE

    Provisions of the Code that are no longer in force and effect as of 
the revision date stated on the cover of each volume are not carried. 
Code users may find the text of provisions in effect on any given date 
in the past by using the appropriate List of CFR Sections Affected 
(LSA). For the convenience of the reader, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume. For changes to 
the Code prior to the LSA listings at the end of the volume, consult 
previous annual editions of the LSA. For changes to the Code prior to 
2001, consult the List of CFR Sections Affected compilations, published 
for 1949-1963, 1964-1972, 1973-1985, and 1986-2000.

``[RESERVED]'' TERMINOLOGY

    The term ``[Reserved]'' is used as a place holder within the Code of 
Federal Regulations. An agency may add regulatory information at a 
``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used 
editorially to indicate that a portion of the CFR was left vacant and 
not accidentally dropped due to a printing or computer error.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed as 
an approved incorporation by reference, please contact the agency that 
issued the regulation containing that incorporation. If, after 
contacting the agency, you find the material is not available, please 
notify the Director of the Federal Register, National Archives and 
Records Administration, 8601 Adelphi Road, College Park, MD 20740-6001, 
or call 202-741-6010.

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 Authorities 
and Rules. A list of CFR titles, chapters, subchapters, and parts and an 
alphabetical list of agencies publishing in the CFR are also included in 
this volume.

[[Page viii]]

    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

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

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, 8601 Adelphi Road, College Park, MD 
20740-6001 or e-mail [email protected].

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ELECTRONIC SERVICES

    The full text of the Code of Federal Regulations, the LSA (List of 
CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers of the Presidents of the United 
States, Compilation of Presidential Documents and the Privacy Act 
Compilation are available in electronic format via www.ofr.gov. For more 
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Printing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). E-
mail, [email protected].
    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 e-CFR is a regularly updated, unofficial editorial compilation 
of CFR material and Federal Register amendments, produced by the Office 
of the Federal Register and the Government Printing Office. It is 
available at www.ecfr.gov.

    Charles A. Barth,
    Director,
    Office of the Federal Register.
    October 1, 2014.







[[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, 2014.

    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, Ann Worley was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of John Hyrum 
Martinez, assisted by James Hemphill.

[[Page 1]]



            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM




  --------------------------------------------------------------------
                                                                    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 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--Civilian Board of Contract Appeals, General 
  Services Administration...................................        6101

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

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

[[Page 3]]



                     CHAPTER 29--DEPARTMENT OF LABOR




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

                          SUBCHAPTER A--GENERAL
Part                                                                Page
2900

[Reserved]

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

[[Page 4]]

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
2954-2999

 [Reserved]

[[Page 5]]

                          SUBCHAPTER A_GENERAL

                          PART 2900 [RESERVED]

       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.



                      Sec. 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

    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.
    (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

[[Page 35]]

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

    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.
    (b) Requests for waivers under paragraph (a) of this subsection must 
be prepared by the contracting officer as

[[Page 37]]

prescribed in FAR 30.201-5(e) and submitted to the HCA.

            PART 2931_CONTRACT COST PRINCIPLES AND PROCEDURES

    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.

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.

[[Page 38]]


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.
    (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.

[[Page 39]]

    (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.
    (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

[[Page 40]]

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.

                     Subpart 2936.5_Contract Clauses


Sec. 2936.516 Quality surveys.

[[Page 41]]

               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

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

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

              Subpart 2952.2_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



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 54]]

[GRAPHIC] [TIFF OMITTED] TR27AP04.004



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.

[[Page 55]]

[GRAPHIC] [TIFF OMITTED] TR27AP04.005



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.

[[Page 56]]

[GRAPHIC] [TIFF OMITTED] TR27AP04.006

                       PARTS 2954	2999 [RESERVED]

[[Page 57]]



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




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

                          SUBCHAPTER A--GENERAL
Part                                                                Page
3000            [Reserved]

3001            Federal Acquisition Regulations System......          59
3002            Definitions of words and terms..............          64
3003            Improper business practices and personal 
                    conflicts of interest...................          66
3004            Administrative matters......................          68
                   SUBCHAPTER B--ACQUISITION PLANNING
3005            Publicizing contract actions................          70
3006            Competition requirements....................          70
3007            Acquisition planning........................          72
3008            Required sources of supplies and services [Reserved]

3009            Contractor qualifications...................          73
3010            Market research [Reserved]

3011            Describing agency needs.....................          80
3012            XXX.........................................          81
            SUBCHAPTER C--CONTRACT METHODS AND CONTRACT TYPES
3013            Simplified acquisition procedures...........          82
3014            Sealed bidding [Reserved]

3015            Contracting by negotiation..................          82
3016            Types of contracts..........................          83
3017            Special contracting methods.................          84
3018            Emergency acquisitions......................          85
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
3019            Small business programs.....................          86
3020-3021       [Reserved]

3022            Application of labor laws to Government 
                    acquisitions............................          87

[[Page 58]]

3023            Environment, energy and water efficiency, 
                    renewable energy technologies, 
                    occupational safety, and drug-free 
                    workplace...............................          88
3024            Protection of privacy and freedom of 
                    information.............................          89
3025            Foreign acquisition.........................          89
3026            Other socioeconomic programs [Reserved]

3027            Patents, data, and copyrights...............          91
3028            Bonds and insurance.........................          92
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
3029            Taxes [Reserved]

3030            Cost accounting standards administration....          95
3031            Contract cost principles and procedures.....          95
3032            Contract financing..........................          95
3033            Protests, disputes, and appeals.............          96
3034            Major system acquisition....................          97
             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
3035            Research and development contracting........          98
3036            Construction and architect-engineer 
                    contracts...............................          99
3037            Service contracting.........................          99
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..         101
3043            Contract modifications [Reserved]

3044            Subcontracting policies and procedures [Reserved]

3046            Quality assurance...........................         101
3047            Transportation..............................         104
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         105
3053            Forms.......................................         129
3054-3099       [Reserved]

[[Page 59]]

                          SUBCHAPTER A_GENERAL

                          PART 3000 [RESERVED]

            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. 3001.103 Authority.

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: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

               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. 3001.103  Authority.

    The HSAR is issued by DHS's Chief Procurement Officer, who is the 
Senior Procurement Executive (SPE), see 41 U.S.C. 1702 and DHS 
Delegation Number 0702, under authority of 5 U.S.C. 301-302, the Office 
of Federal Procurement Policy Act, Pub. L. No. 93-400, 88 Stat. 796 
(1974), including sections 22 and 25, 41 U.S.C. 1707, 1302 and 1303, and 
(FAR) 48 CFR part 1, subpart 1.3.

[77 FR 50632, Aug. 22, 2012]



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

[[Page 60]]

regulation is authorized by the Aviation and Transportation Security Act 
of 2001 (ATSA) (section 101(a) of Public Law 107-71, as implemented at 
section 114(o) of title 49) for contracts awarded by TSA pursuant to 
this ATSA authority. The Consolidated Appropriations Act of 2008, Public 
Law 110-161, Division E, Title V, section 568 eliminates ATSA section 
114(o) effective June 23, 2008. Accordingly, TSA acquisitions initiated 
after June 22, 2008 are subject to 48 CFR Chapters 1 and 30.
    (c) Contracts involving Non-Appropriated Fund Instrumentalities 
(NAFIs) must contain suitable dispute provisions and may provide for 
appellate dispute jurisdiction in the Civilian Board of Contract Appeals 
(CBCA). 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
    (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; 72 
FR 1297, Jan. 11, 2007; 73 FR 30318, May 27, 2008]



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 and abbreviations apply:

DHS Management (MGMT), including the Office of Procurement Operations 
(OPO) and the Office of Selective Acquisitions (OSA);
Federal Emergency Management Agency (FEMA);
Federal Law Enforcement Training Center (FLETC);
Transportation Security Administration (TSA);
U.S. Coast Guard (USCG);
U.S. Customs and Border Protection (CBP);
U.S. Immigration and Customs Enforcement (ICE); and
U.S. Secret Service (USSS).

[77 FR 50632, Aug. 22, 2012]



Sec. 3001.105-3  Copies.

    Official versions of the HSAR are available in the Code of Federal 
Regulations, as supplemented and revised from time to time by the 
Federal Register, both of which are available from the Government 
Printing Office in paper and electronic form. The HSAR is also available 
in electronic form at http://www.dhs.gov. A convenient but unofficial 
up-to-date version of the HSAR is also available from the Government 
Printing office at http://www.gpoaccess.gov/ecfr/index.html. The 
Homeland Security Acquisition Manual (HSAM), which complements the HSAR, 
can also be found at http://www.dhs.gov.

[77 FR 50632, Aug. 22, 2012]



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.

[[Page 61]]

              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 
Department of Homeland Security policies and procedures for all 
acquisition activities within the Department of Homeland Security. 
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 authorizes and 
submits the proposed content for publication in the Federal Register 
under (FAR) 48 CFR part 1, subparts 1.3 and 1.5.
    (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.
    (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; 77 FR 50632, Aug. 22, 2012]



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 20528.
    (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; 77 FR 50632, Aug. 22, 2012]

[[Page 62]]



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) When required by law, contracting officers must modify existing 
contracts to include HSAR changes. Otherwise, and where feasible, 
contracting officers should consider using the Changes clause or other 
suitable authority, to modify existing contracts to include HSAR 
changes.

[71 FR 25767, May 2, 2006, as amended at 77 FR 50632, Aug. 22, 2012]



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.
    (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; 77 
FR 50632, Aug. 22, 2012]



Sec. 3001.304  Agency control and compliance procedures.

    (a) The HSAR is under the direct oversight and control of the 
Department of 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

[[Page 63]]

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; 77 
FR 50632]

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

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48801, Aug. 22, 2006; 77 
FR 50632, Aug. 22, 2012]



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.

     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.

[68 FR 67871, Dec. 4, 2003, as amended at 77 FR 50633, Aug. 22, 2012]



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]

[[Page 64]]

               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]

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: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, and 48 
CFR part 1 and subpart 1.3.

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

                       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) DHS Management (MGMT), including the Office of Procurement 
Operations (OPO) and the Office of Selective Acquisitions (OSA);
    (2) Federal Emergency Management Agency (FEMA);
    (3) Federal Law Enforcement Training Center (FLETC);
    (4) Transportation Security Administration (TSA);
    (5) U.S. Coast Guard (USCG);
    (6) U.S. Customs and Border Protection (CBP);
    (7) U.S. Immigration and Customs Enforcement (ICE); 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

[[Page 65]]

Security, or, by delegation, the Under Secretary of Management.
    Head of the Contracting Activity (HCA) means the official who has 
overall responsibility for managing the contracting activity. For DHS, 
the HCAs are:
    (1) Director, Office of Procurement Operations (OPO);
    (2) Director, Office of Selective Acquisitions (OSA);
    (3) Director, Office of Acquisition Management (FEMA);
    (4) Chief, Procurement Division (FLETC);
    (5) Assistant Administrator for Acquisition (TSA);
    (6) Director of Contracting and Procurement (USCG);
    (7) Executive Director, Procurement (CBP);
    (8) Director, Office of Acquisition Management (ICE); and
    (9) Chief, Procurement Operations (USSS).
    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, for DHS, that combination of elements that will 
function together to produce the capabilities required to fulfill a 
mission need, including hardware, equipment, software, or any 
combination thereof, but excluding construction or other improvements to 
real property. A DHS major system is one where the total lifecycle costs 
for the system are estimated to equal or exceed $300M (in constant 2009 
dollars), or if the Deputy Secretary has designated a program or project 
as a major system. This corresponds to a DHS Level 1 or 2 capital 
investment acquisition.
    Micro-purchase threshold is defined as in (FAR) 48 CFR 2.101, except 
when (HSAR) 48 CFR 3013.7003(a) applies.
    Senior Procurement Executive (SPE) for the Department of Homeland 
Security means the DHS Chief Procurement Officer (CPO), who is the 
individual appointed pursuant to 41 U.S.C. 1702 to be responsible for 
management direction of the procurement system of DHS, including 
implementation of the unique procurement policies, regulations, and 
standards of DHS.
    Sensitive Information, as used in this Chapter, means any 
information which if lost, misused, disclosed, or, without 
authorization, is accessed or modified, could adversely affect the 
national or homeland security interest, 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

[[Page 66]]

homeland security information handling procedures.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25767, May 2, 2006; 71 
FR 48801, Aug. 22, 2006; 72 FR 1297, Jan. 11, 2007; 73 FR 30318, May 27, 
2008; 75 FR 41099, July 15, 2010; 77 FR 50633, Aug. 22, 2012]

                      Subpart 3002.2_Abbreviations



Sec. 3002.270  Abbreviations.

CBCA Civilian Board of Contract Appeals
CFO Chief Financial Officer
CIO Chief Information Officer
COCO Chief of the Contracting Office
COR Contracting Officer's Representative
COTR Contracting Officer's Technical Representative
CPO Chief Procurement Officer
D&F Determination and Findings
FOIA Freedom of Information Act
HCA Head of the Contracting Activity
J&A Justification and Approval for Other than Full and Open Competition
KO Contracting Officer
MD Management Directive
OCPO Office of the Chief Procurement Officer
OIG Office of the Inspector General
OSDBU Office of Small and Disadvantaged Business Utilization
PCR SBA's Procurement Center Representative
RFP Request for Proposal
SBA Small Business Administration
SBS Small Business Specialist
SPE Senior Procurement Executive

[72 FR 1297, Jan. 11, 2007, as amended at 77 FR 50633, Aug. 22, 2012]

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.

      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.

     Subpart 3003.10_Contractor Code of Business Ethics and Conduct


Sec. 3003.1003 Requirements.

Sec. 3003.1004 Contract clauses.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

                        Subpart 3003.1_Safeguards



Sec. 3003.101  Standards of conduct.



Sec. 3003.101-3  Agency regulations.

    The United States Office of Government Ethics has promulgated 
regulations applicable to the entire Executive Branch that address the 
conduct matters referenced in (FAR) 48 CFR 3.101-3. See 5 CFR vol. 3, 
ch. XVI, subch. B. The Department of Homeland Security has also issued 
Management Directive 0480.1, Ethics/Standards of Conduct.

[77 FR 50633, Aug. 22, 2012]

      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

[[Page 67]]

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 official designated to make the determination 
under (FAR) 48 CFR 3.204(a) whether a gratuities violation has occurred. 
If the HCA has been personally and substantially involved in the 
specific procurement, the advice of legal counsel should be sought to 
determine whether the CPO should designate an alternate decision maker.
    (b) The HCA shall ensure that the hearing procedures required by 
(FAR) 48 CFR 3.204(b) are afforded to the contractor. 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 the HCA shall consult with legal counsel regarding appropriate 
action and notify the Office of Inspector General.

[77 FR 50633, Aug. 22, 2012]

        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.

     Subpart 3003.10_Contractor Code of Business Ethics and Conduct

    Source: 77 FR 50633, Aug. 22, 2012, unless otherwise noted.

[[Page 68]]



Sec. 3003.1003  Requirements.

    (a) Contractor requirements. Contractors making written disclosures 
under the clause at (FAR) 48 CFR 52.203-13 must use the electronic 
Contractor Disclosure Form at http://www.oig.dhs.gov. Contractors making 
disclosures under contracts which do not contain the clause at (FAR) 48 
CFR 52.203-13 are encouraged to also use this electronic form.



Sec. 3003.1004  Contract clauses.

    (a) The contracting officer shall insert the clause at (HSAR) 48 CFR 
3052.203-70, Instructions for Contractor Disclosure of Violations, in 
solicitations and contracts containing the clause at (FAR) 48 CFR 
52.203-13.

                    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. 3004.804-5 Procedures for closing out contract files.

Sec. 3004.804-570 Supporting closeout documents.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

                    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), 
Directives, and Instructions. MD 11042.1, Safeguarding Sensitive But 
Unclassified (For Official Use Only) Information describes how 
contractors must handle sensitive but unclassified information. The DHS 
Sensitive Systems Policy Directive 4300A and the DHS 4300A Sensitive 
Systems Handbook, provide the policies and procedures on security for 
Information Technology resources. Compliance with these policies and 
procedures, as amended, is required.
    (b) The contractor must not use or redistribute any DHS information 
processed, stored, or transmitted by the contractor except as specified 
in the contract.

[71 FR 25768, May 2, 2006, as amended at 77 FR 50634, Aug. 22, 2012]



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

[[Page 69]]

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.

[71 FR 25768, May 2, 2006, as amended at 77 FR 50634, Aug. 22, 2012]

                Subpart 3004.8_Government Contract Files



Sec. 3004.804  Closeout of contract files.



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 700-3, Contractor's Release (e.g., see (FAR) 48 CFR 
52.216-7);
    (2) DHS Form 700-2, Contractor's Assignment of Refunds, Rebates, 
Credits and Other amounts (e.g., see (FAR) 48 CFR 52.216-7);
    (3) DHS Form 700-1, 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.

[71 FR 25768, May 2, 2006, as amended at 77 FR 50634, Aug. 22, 2012]

[[Page 70]]

                    SUBCHAPTER B_ACQUISITION PLANNING

                 PART 3005_PUBLICIZING CONTRACT ACTIONS

                  Subpart 3005.4_Release of Information

Sec.

Sec. 3005.402 General public.

Sec. 3005.470 Contractor award announcements, advertisements, and 
          releases.

Sec. 3005.470-1 Policy.

Sec. 3005.470-2 Contract clauses.

   Subpart 3005.90_Publicizing Contract Actions for Personal Services 
                               Contracting


Sec. 3005.9000 Applicability (USCG).

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

                  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.



Sec. 3005.470  Contractor award announcements, advertisements, and 
          releases.



Sec. 3005.470-1  Policy.

    (a) DHS policy requires its contracting officers to restrict DHS 
contractors from referring to its DHS contract(s) in commercial 
advertising in a manner that states or implies the Government approves 
or endorses the contractor's products or services or considers them 
superior to other products or services. The intent of this policy is to 
prevent the appearance of Government bias toward any product or service.
    (b) The Department's contractors share the responsibility for 
protecting sensitive and classified information related to efforts under 
their contracts. For any contract that involves sensitive or classified 
information, prior to the release of any contract award announcement, 
advertisement, or other release of information pertaining to the 
contract, the contractor must obtain the approval of the responsible 
contracting officer.

[77 FR 50634, Aug. 22, 2012]



Sec. 3005.470-2  Contract clauses.

    (a) Insert the clause at (HSAR) 48 CFR 3052.205-70, Advertisements, 
Publicizing Awards, and Releases, in all solicitations and contracts 
that exceed the simplified acquisition threshold.
    (b) Except for research contracts with educational institutions, if 
the contract involves sensitive or classified information, use the 
clause with its Alternate I. For research contracts with educational 
institutions, see (HSAR) 48 CFR 3035.70-2(b).

[77 FR 50634, Aug. 22, 2012]

   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.

[[Page 71]]

           Subpart 3006.3_Other Than Full and Open Competition


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

Sec. 3006.302-1 Only one responsible source and no other supplies or 
          services will satisfy agency requirements.

Sec. 3006.302-270 Unusual and compelling urgency.

Sec. 3006.302-7 Public interest.

Sec. 3006.303 Justifications.

Sec. 3006.303-270 Content.

Sec. 3006.304 Approval of justification.

Sec. 3006.304-70 DHS Approval of justification.

                  Subpart 3006.5_Competition Advocates


Sec. 3006.501 Requirement.

     Subpart 3006.90_Competition Requirements for Personal Services 
                               Contracting


Sec. 3006.9000 Applicability (USCG).

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

                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]

   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. 3006.302-1  Only one responsible source and no other supplies or 
          services will satisfy agency requirements.

    (b)(4) The contracting officer may rely on this exception in the 
case where only one source is available to provide additional units or 
replacement items under a specific make and model requirement, but only 
where the CPO has determined in accordance with the agency's 
standardization program that only the specific make(s) and model(s) will 
satisfy the agency's needs.

[77 FR 50634, Aug. 22, 2012]



Sec. 3006.302-270  Unusual and compelling urgency.

    (d)(1)(iii) For contract awards to facilitate the response to or 
recovery from a natural disaster, act of terrorism, or other man-made 
disaster, that relies on this exception, the period of performance shall 
be limited to the minimum period necessary to meet the urgent and 
compelling requirements of the work to be performed and to enter into 
another contract for the required goods or services through the use of 
competitive procedures, but in no event shall the period of performance 
exceed 150 days, unless the Head of the Contracting Activity (or higher 
approval authority if required by (FAR) 48 CFR 6.304 or DHS procedures) 
determines that exceptional circumstances apply, approving the 
justification as set forth in (HSAR) 48 CFR 3006.304.

[[Page 72]]

The limitation on the period of performance applies to contracts awarded 
in response to, or to recovery from:
    (A) A major disaster or emergency declared by the President under 
Title IV or Title V of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act, as amended (42 U.S.C. 5121-5207) (see http://
www.fema.gov/news/disasters.fema#sev2 for a list of declarations);
    (B) An uncontrolled fire or fire complex, threatening such 
destruction as would constitute a major disaster, and for which the 
Federal Emergency Management Agency has approved a fire management 
assistance declaration in accordance with regulatory criteria at 44 CFR 
204.21 (see http://www.fema.gov/news/disasters.fema#sev2 for a list of 
declarations); or
    (C) An incident for which the National Operations Center (NOC), 
through the National Response Coordination Center (NRCC), coordinates 
the activation of the appropriate Emergency Support Functions and the 
Secretary of Homeland Security has designated a Federal Resource 
Coordinator (FRC) to manage Federal resource support.

[77 FR 50634, Aug. 22, 2012]



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.



Sec. 3006.303  Justifications.



Sec. 3006.303-270  Content.

    (a)(9)(iv) For a proposed contract subject to the restrictions of 
(HSAR) 48 CFR 3006.302-270(d)(1)(iii) and where (FAR) 48 CFR 6.302-2 is 
cited as the authority, the exceptional circumstances allowing for an 
award for a period of performance in excess of 150 days.

[77 FR 50634, Aug. 22, 2012]



Sec. 3006.304  Approval of justification.



Sec. 3006.304-70  DHS Approval of justification.

    A justification for other than full and open competition that cites 
(FAR) 48 CFR section 6.302-2 as its authority shall be approved in 
writing by the HCA (unless a higher approval authority is required in 
accordance with (FAR) 48 CFR section 6.304 or DHS procedures) for a 
proposed DHS contract to facilitate the response to or recovery from a 
natural disaster, act of terrorism, or other man-made disaster with a 
period of performance in excess of 150 days. The justification should 
make plain the exceptional circumstances that justify the duration of 
the contract. This authority may not be redelegated by the HCA.

[77 FR 50634, Aug. 22, 2012]

                  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

                    Subpart 3007.1_Acquisition Plans

Sec.

Sec. 3007.106 Additional Requirements for Major Systems.

Sec. 3007.106-70 Limitations on Lead System Integrators.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, and 48 
CFR part 1 and subpart 1.3.

[[Page 73]]


    Source: 75 FR 41099, July 15, 2010, unless otherwise noted.

                    Subpart 3007.1_Acquisition Plans



Sec. 3007.106  Additional Requirements for Major Systems.



Sec. 3007.106-70  Limitations on Lead System Integrators.

    See (HSAR) 48 CFR 3009.570 for policy applicable to acquisition 
strategies that consider the use of lead system integrators.

     PART 3008_REQUIRED SOURCES OF SUPPLIES AND SERVICES [RESERVED]

                   PART 3009_CONTRACTOR QUALIFICATIONS

           Subpart 3009.1_Responsible Prospective Contractors

Sec.

Sec. 3009.108-70 Prohibition on contracts with corporate expatriates.

Sec. 3009.108-7001 General.

Sec. 3009.108-7002 Definitions.

Sec. 3009.108-7003 Special rules.

Sec. 3009.108-7004 Waivers.

Sec. 3009.108-7005 Clause.

Sec. 3009.171 Prohibition on Federal Protective Service guard services 
          contracts with business concerns owned, controlled, or 
          operated by an individual convicted of a felony.

Sec. 3009.171-1 General.

Sec. 3009.171-2 Definitions.

Sec. 3009.171-3 Determination of eligibility for award of FPS guard 
          service contracts.

Sec. 3009.171-4 Determination of ownership, control, or operation.

Sec. 3009.171-5 Serious felonies prohibiting award.

Sec. 3009.171-6 Guidelines for contracting officers.

Sec. 3009.171-7 Contract award approval procedures for contractors with 
          felony convictions.

Sec. 3009.171-8 Ineligible contractors.

Sec. 3009.171-9 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. [Reserved]

Sec. 3009.507-1 Solicitation provision.

Sec. 3009.507-2 Contract clause.

Sec. 3009.570 Limitations on contractors acting as lead system 
          integrators.

Sec. 3009.570-1 Definitions.

Sec. 3009.570-2 Policy.

Sec. 3009.570-3 Procedures.

Sec. 3009.570-4 Solicitation provision and contract clause.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, and 48 
CFR part 1 and subpart 1.3.

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

           Subpart 3009.1_Responsible Prospective Contractors



Sec. 3009.108-70  Prohibition on contracts with corporate expatriates.



Sec. 3009.108-7001  General.

    Except as provided in (HSAR) 48 CFR 3009.108-7004, 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.

[76 FR 70661, Nov. 15, 2011]



Sec. 3009.108-7002  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 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

[[Page 74]]

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. 
Redesignated at 74 FR 58856, Nov. 16, 2009, 74 FR 66584, Dec. 16, 2009]



Sec. 3009.108-7003  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. 
Redesignated at 74 FR 58856, Nov. 16, 2009, 74 FR 66584, Dec. 16, 2009]



Sec. 3009.108-7004  Waivers.

    (a) The Secretary shall waive the provisions of (HSAR) 48 CFR 
3009.108-7001 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. Redesignated at 74 FR 58856, Nov. 16, 2009, 
74 FR 66584, Dec. 16, 2009; 76 FR 70661, Nov. 15, 2011]

[[Page 75]]



Sec. 3009.108-7005  Clause.

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

[71 FR 25769, May 2, 2006. Redesignated at 74 FR 58856, Nov. 16, 2009, 
74 FR 66584, Dec. 16, 2009]



Sec. 3009.171  Prohibition on Federal Protective Service guard services 
          contracts with business concerns owned, controlled, or 
          operated by an individual convicted of a felony.



Sec. 3009.171-1  General.

    Except as provided in (HSAR) 48 CFR 3009.171-6 and 3009.171-7, 
Department of Homeland Security (DHS) contracting officers shall not 
enter into a contract for guard services under the Federal Protective 
Service (FPS) guard services program with any business concern owned, 
controlled, or operated by an individual convicted of a serious felony.

[74 FR 58856, Nov. 16, 2009]



Sec. 3009.171-2  Definitions.

    As used in this subpart--
    Business concern means a commercial enterprise and the people who 
constitute it.
    Felony means an offense which, if committed by a natural person, is 
punishable by death or imprisonment for a term exceeding one year.
    Convicted of a felony means any conviction of a felony in violation 
of state or federal criminal statutes, including the Uniform Code of 
Military Justice, whether entered on a verdict or plea, including a plea 
of nolo contendere, for which a sentence has been imposed.
    Individual means any person, corporation, partnership, or other 
entity with a legally independent status.

[74 FR 58856, Nov. 16, 2009]



Sec. 3009.171-3  Determination of eligibility for award of FPS guard 
          service contracts.

    (a) Contracting officers shall make a determination of eligibility 
for award of FPS guard service contracts upon identification of the 
apparent successful offeror as a result of a solicitation for offers.
    (b) Contractors shall be required to immediately notify the 
contracting officer in writing upon any felony conviction of personnel 
who own, control or operate a business concern as defined in (HSAR) 48 
CFR 3009.171-4 at any time during the duration of an Indefinite 
Delivery/Indefinite Quantity Contract, Blanket Purchase Agreements, or 
other contractual instrument that may result in the issuance of task 
orders or calls, or exercise of an option or options to extend the term 
of a contract. Upon notification of a felony conviction, the contracting 
officer shall review and make a new determination of eligibility prior 
to the issuance of any task order, call or exercise of an option.

[74 FR 58856, Nov. 16, 2009]



Sec. 3009.171-4  Determination of ownership, control, or operation.

    (a) Whether an individual owns, controls, or operates a business 
concern is determined on the specific facts of the case, with reference 
to the factors identified in paragraphs (b) and (c) of this subsection. 
Prior to contract award, such individual must provide any additional 
documentation to the contracting officer upon the contracting officer's 
request for the agency's use in determining ownership, control, or 
operation. The refusal to provide or to timely provide such 
documentation may serve as grounds for the contracting officer to refuse 
making contract award to the business concern.
    (b) Any financial, voting, operational, or employment interest in 
the business concern of a spouse, child, or other family member of, or 
person sharing a household with, the individual will be imputed to the 
individual in determining whether and the extent to which the individual 
owns, controls, or operates the business concern.
    (c) An individual owns, controls, or operates a business concern by 
fulfilling or holding the following types of roles or interests with 
respect to the business concern:
    (1) Director or officer, including incumbents of boards and offices 
that perform duties ordinarily performed by

[[Page 76]]

a chairman or member of a board of directors, a secretary, treasurer, 
president, a vice president, or other chief official of a business 
concern, including Chief Financial Officer, Chief Operating Officer, or 
Chief contracting official.
    (2) Officials of comparable function and status to those described 
in paragraph (c)(1) of this subsection as exist in partnerships of all 
kind and other business organizations, including sole proprietorships.
    (3) A general partner in a general or limited partnership.
    (4) An individual with a limited partnership interest of 25% or 
more.
    (5) An individual that has the:
    (i) Power to vote, directly or indirectly, 25% or more interest in 
any class of voting stock of the business concern;
    (ii) Ability to direct in any manner the election of a majority of 
the business concern's directors or trustees; or
    (iii) Ability to exercise a controlling influence over the business 
concern's management, policies, or decision making.
    (d) Generally, the existence of one or more of the roles or 
interests set forth in paragraph (c) of this subsection, including roles 
or interests attributed to the individual, will be sufficient to 
determine that the individual owns, controls or operates the business 
concern. However, specific facts of the case may warrant a different 
determination by the contracting officer, where, for example, an 
indicator in paragraph (c) of this subsection, in light of all of the 
facts and circumstances, suggests that the individual lacks sufficient 
authority or autonomy to exert authority customarily associated with 
ownership or control or the assertion of operational prerogatives (e.g. 
the individual is one of twenty on a board of directors, plays no other 
role, and holds no other interest). Conversely, ownership, control, or 
the ability to operate the business concern, if it exists in fact, can 
be reflected by other roles or interests.

[74 FR 58856, Nov. 16, 2009]



Sec. 3009.171-5  Serious felonies prohibiting award.

    (a) Only serious felony convictions will prohibit a business concern 
from being awarded a contract for FPS guard services. Serious felonies 
that will prohibit contract award are any felonies that involve 
dishonesty, fraud, deceit, misrepresentation, or deliberate violence; 
that reflect adversely on the individual's honesty, trustworthiness, or 
fitness to own, control, or operate a business concern; that cast doubt 
on the integrity or business ethics of the business concern; or are of a 
nature that is inconsistent with the mission of FPS, including, without 
limitation, those felonies listed in paragraphs (b)(1) through (12) of 
this subsection.
    (b) The following is a list of offenses determined by DHS to be 
serious felonies for purposes of the Federal Protective Service Guard 
Reform Act of 2008. Except as provided in (HSAR) 48 CFR 3009.171-7(f), 
award of a contract for FPS guard services will not be made to any 
business that is owned, controlled, or operated by an individual who has 
been convicted of a felony involving:
    (1) Fraud of any type, including those arising out of a procurement 
contract, cooperative agreement, grant or other assistance relationship 
with the federal, state or local government, as well as, without 
limitation, embezzlement, fraudulent conversion, false claims or 
statements, kickbacks, misappropriations of property, unfair or 
deceptive trade practices, or restraint of trade;
    (2) Bribery, graft, or a conflict of interest;
    (3) Threatened or actual harm to a government official or family 
member;
    (4) Threatened or actual harm to government property;
    (5) A crime of violence;
    (6) A threat to national security;
    (7) Commercial bribery, counterfeiting, or forgery;
    (8) Obstruction of justice, perjury or subornation of perjury, or 
bribery of a witness;
    (9) An attempt to evade or defeat Federal tax;
    (10) Willful failure to collect or pay over Federal tax;
    (11) Trafficking in illegal drugs, alcohol, firearms, explosives, or 
other weapons;

[[Page 77]]

    (12) Immigration violations (e.g., 8 U.S.C. 1324, 1324c, 1326); and
    (13) Any other felony that involves dishonesty, fraud, deceit, 
misrepresentation, or deliberate violence; that reflects adversely on 
the individual's honesty, trustworthiness, or fitness to own, control, 
or operate a business concern; that casts doubt on the integrity or 
business ethics of the business concern; or is of a nature that is 
inconsistent with the mission of FPS.

[74 FR 58856, Nov. 16, 2009]



Sec. 3009.171-6  Guidelines for contracting officers.

    (a) In accordance with FAR Subpart 9.4 (48 CFR subpart 9.4), a 
contracting officer may not award a contract for FPS guard services to 
any business concern that is suspended, debarred or proposed for 
debarment unless the agency head determines that there is a compelling 
reason for such action.
    (b) The contracting officer shall not award a contract for FPS guard 
services to any business concern that is otherwise nonresponsible on the 
same contract.
    (c) The contracting officer shall not award an FPS guard services 
contract to any business concern that is owned, controlled or operated 
by an individual convicted of a serious felony as defined in (HSAR) 48 
CFR 3009.171-5 except as provided in under (HSAR) 48 CFR 3009.171-7.
    (d) In considering an award request under (HSAR) 48 CFR 3009.171-7, 
the contracting officer may not review the fact of the conviction 
itself, but may consider any information provided by the individual or 
business concern, and any information known to the contracting officer. 
Factors that the contracting officer may consider include, but are not 
limited to:
    (1) The age of the conviction.
    (2) The nature and circumstances surrounding the conviction.
    (3) Protective measures taken by the individual or business concern 
to reduce or eliminate the risk of further misconduct.
    (4) Whether the individual has made full restitution for the felony.
    (5) Whether the individual has accepted responsibility for past 
misconduct resulting in the felony conviction.

[74 FR 58856, Nov. 16, 2009]



Sec. 3009.171-7  Contract award approval procedures for contractors with 
          felony convictions.

    (a) The HCA has sole discretion to approve a request to permit award 
of a contract for FPS guard services to a business concern owned, 
controlled, or operated by an individual convicted of a felony, for any 
reason permitted by this regulation. This authority is not delegable.
    (b) A business concern owned, operated or controlled by an 
individual convicted of any felony (including a serious felony) may 
submit an award request to the contracting officer. The basis for such 
request shall be that the subject felony is not a serious felony as 
defined by this regulation; that such individual does not or no longer 
owns, controls or operates the business concern; or that the commission 
of a serious felony no longer poses the contract risk the Act and this 
regulation were designed to guard against. The business concern shall 
bear the burden of proof for award requests.
    (c) A copy of the award approval request with supporting 
documentation or a previously approved award request shall be attached 
with the bid or proposal.
    (d) An award approval request shall contain the basis for the 
request, including, at a minimum, the following information:
    (1) Name and date of birth of individual convicted of a felony;
    (2) A full description of which roles or interests indicate that the 
individual owns, controls, or operates, or may own control or operate 
the business concern;
    (3) Date sentenced;
    (4) Statute/Charge;
    (5) Docket/Case Number;
    (6) Court/Jurisdiction;
    (7) The nature and circumstances surrounding the conviction;
    (8) Protective measures taken by the individual or business concern 
to reduce or eliminate the risk of further misconduct;
    (9) Whether the individual has made full restitution for the felony; 
and

[[Page 78]]

    (10) Whether the individual has accepted responsibility for past 
misconduct resulting in the felony conviction.
    (e) If the contracting officer is unable to affirmatively determine 
that the subject felony is not a serious felony as defined in (HSAR) 48 
CFR 3009.171-5; that such individual no longer owns, controls or 
operates the business concern; or that the commission of a serious 
felony no longer calls into question the individual or business 
concern's integrity or business ethics and would be consistent with the 
mission of FPS, then the contracting officer shall deny the award 
approval request and not forward such request to the HCA.
    (f) For a felony that meets any of the following conditions, the 
contracting officer shall refer the award request, with a copy of the 
contracting officer's determination, to the HCA with a recommendation 
for approval:
    (1) The subject felony is not a serious felony as defined by this 
regulation;
    (2) The convicted individual does not or no longer owns, controls or 
operates the business concern; or
    (3) The commission of a serious felony no longer calls into question 
the individual or business concern's integrity or business ethics and 
that an award would be consistent with the mission of the FPS.
    (g) The HCA shall make a final written decision on the award 
approval request following referral and after any necessary additional 
inquiry.

[74 FR 58856, Nov. 16, 2009]



Sec. 3009.171-8  Ineligible contractors.

    Any business concern determined to be ineligible for award under 
(HSAR) 48 CFR 3009.171-5 to 3009.171-7 shall be ineligible to receive a 
contract for guard services under the FPS guard program until such time 
as:
    (a) The concern demonstrates that it has addressed and resolved the 
issues that resulted in the determination of ineligibility, and
    (b) The HCA approves an award request under (HSAR) 48 CFR 3009.171-
7.

[74 FR 58856, Nov. 16, 2009]



Sec. 3009.171-9  Clause.

    Insert the clause (HSAR) 48 CFR 3052.209-76, Prohibition on Federal 
Protective Service guard services contracts with business concerns 
owned, controlled, or operated by an individual convicted of a felony, 
in all solicitations and contracts for FPS guard services.

[74 FR 58856, Nov. 16, 2009]

         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--

[[Page 79]]

    (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. [Reserved]



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]



Sec. 3009.570  Limitations on contractors acting as lead system 
          integrators.



Sec. 3009.570-1  Definitions.

    ``Direct Financial Interest,'' as used in this section, is defined 
in the clause at HSAR 48 CFR 3052.209-75, Prohibited Financial Interests 
for Lead System Integrators.
    ``Lead system integrator,'' as used in this section, is defined in 
the clause at (HSAR) 48 CFR 3052.209-75, Prohibited Financial Interests 
for Lead System Integrators.

[75 FR 41099, July 15, 2010]



Sec. 3009.570-2  Policy.

    (a) Except as provided in paragraph (b) of this subsection, under 6 
U.S.C. 396, no entity performing lead system integrator functions in the 
acquisition of a major system (See (HSAR) 48 CFR 3002.101) by DHS may 
have any direct financial interest in the development or construction of 
any individual system or element of any system of systems under the 
program in which the entity is performing lead system integrator 
functions.
    (b) The prohibition in paragraph (a) of this subsection does not 
apply if--
    (1) The Secretary of Homeland Security certifies to the Committees 
on Appropriations of the Senate and the House of Representatives, the 
Committee on Homeland Security of the House of Representatives, the 
Committee on Transportation and Infrastructure of the House of 
Representatives, the Committee on Homeland Security and Governmental 
Affairs of the

[[Page 80]]

Senate, and the Committee on Commerce, Science and Transportation of the 
Senate that--
    (i) The entity was selected by DHS as a contractor to develop or 
construct the system or element concerned through the use of competitive 
procedures, and
    (ii) DHS took appropriate steps to prevent any organizational 
conflict of interest in the selection process; or
    (2) The entity was selected by a subcontractor to serve as a lower-
tier subcontractor, through a process over which the entity exercised no 
control.
    (c) CONSTRUCTION--Nothing in this section 3009.570 shall be 
construed to preclude an entity described in paragraph (a) of this 
subsection from performing work necessary to integrate two or more 
individual systems or elements of a system of systems with each other.

[75 FR 41099, July 15, 2010]



Sec. 3009.570-3  Procedures.

    In making a responsibility determination before awarding a contract 
for the acquisition of a major system, the contracting officer shall--
    (a) Determine whether the prospective contractor meets the 
definition of ``lead system integrator'';
    (b) Consider all information regarding the prospective contractor's 
direct financial interests in view of the prohibition at (HSAR) 48 CFR 
3009.570-2(a); and
    (c) Apply the following procedures:
    (1) After assessing the offeror's direct financial interests in the 
development or construction of any individual system or element of any 
system of systems, if the offeror--
    (i) Has no direct financial interest in such systems, the 
contracting officer shall document the contract file to that effect and 
may then further consider the offeror for award of the contract;
    (ii) Has a direct financial interest in such systems, but the 
exception in (HSAR) 3009.570-2(b)(2) applies, the contracting officer 
shall document the contract file to that effect and may then further 
consider the offeror for award of the contract;
    (iii) Has a direct financial interest in such systems and the 
exception in (HSAR) 3009.570-2(b)(2) does not apply, but the conditions 
in (HSAR) 3009.570-2(b)(1)(i) and (ii) do apply, the contracting 
officer--
    (A) Shall document the contract file to that effect;
    (B) May, in coordination with program officials, request an 
exception for the offeror from the Secretary of Homeland Security, in 
accordance with Homeland Security Acquisition Manual section 3009.570; 
and
    (C) Shall not award to the offeror unless the Secretary of Homeland 
Security grants the exception and provides the required certification to 
Congress; or
    (iv) Has a direct financial interest in such systems and the 
exceptions in (HSAR) 3009.570-2(b)(1) and (2) do not apply, the 
contracting officer shall not award to the offeror.

[75 FR 41099, July 15, 2010]



Sec. 3009.570-4  Solicitation provision and contract clause.

    (a) Use the provision at (HSAR) 48 CFR 3052.209-74, Limitations on 
Contractors Acting as Lead System Integrators, in solicitations for the 
acquisition of a major system when the acquisition strategy envisions 
the use of a lead system integrator.
    (b) Use the clause at (HSAR) 48 CFR 3052.209-75, Prohibited 
Financial Interests for Lead System Integrators--
    (1) In solicitations that include the provision at (HSAR) 48 CFR 
3052.209-74; and
    (2) In contracts when the contractor will fill the role of a lead 
system integrator for the acquisition of a major system.

[75 FR 41099, July 15, 2010]

                  PART 3010_MARKET RESEARCH [RESERVED]

                    PART 3011_DESCRIBING AGENCY NEEDS

     Subpart 3011.1_Selecting and Developing Requirements Documents

Sec.

Sec. 3011.103 Market acceptance.

[[Page 81]]

            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 noted.

     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
    (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

  Subpart 3012.3_Solicitation Provisions and Contract Clauses for the 
                     Acquisition of Commercial Items

Sec.

Sec. 3012.301 Solicitation provisions and contract clauses for the 
          acquisition of commercial items.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

    Source: 77 FR 50635, Aug. 22, 2012, unless otherwise noted.



Sec. 3012.301  Solicitation provisions and contract clauses for the 
          acquisition of commercial items.

    (f) Solicitation provisions and contract clauses. Insert (HSAR) 48 
CFR 3052.212-70, Contract Terms and Conditions Applicable to DHS 
Acquisition of Commercial Items, in any solicitation or contract for 
commercial items when any of the provisions or clauses listed therein 
applies and where incorporation by reference of each selected provision 
or clause is, to the maximum extent practicable, consistent with 
customary commercial practice. If necessary, tailor this clause.

[[Page 82]]

            SUBCHAPTER C_CONTRACT METHODS AND CONTRACT TYPES

               PART 3013_SIMPLIFIED ACQUSITION PROCEDURES

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

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

Subpart 3013.70 [Reserved]

                   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 noted.

  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

[[Page 83]]

agency contact point shall acknowledge receipt within three calendar 
days after making the initial review determination and advise the 
offeror of the 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 3016.1_Selecting Contract Types


Sec. 3016.170 Contracts with Lead System Integrators.

                  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: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, and 48 
CFR part 1 and subpart 1.3.

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

                 Subpart 3016.1_Selecting Contract Types

    Source: 75 FR 41100, July 15, 2010, unless otherwise noted.



Sec. 3016.170  Contracts with Lead System Integrators.

    The contracting officer should negotiate the most appropriate 
contract type and fee structure based on risks inherent in the work to 
be performed, in accordance with (FAR) 48 CFR 16.103(a). Contract type 
and fee structure should be commensurate with the work to be performed 
and the risks assumed. Worthwhile existing guidance on contract type 
selection, pricing, and fee structures, such as exists in Vol. I, Ch. 4 
of the Contract Reference Pricing Guides [http://www.acq.osd.mil/dpap/
cpf/docs/contract--pricing--finance--guide/vol4--ch1.pdf] can be 
consulted to determine the appropriate contract type and fee structure 
for use in varied contracts with lead system integrators in the 
production, fielding and sustainment of complex systems.

                  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

[[Page 84]]

(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.
    (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 noted.

                         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]

[[Page 85]]

                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 
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_EMERGENCY ACQUISITIONS

           Subpart 3018.1_Available Acquisition Flexibilities

Sec.

Sec. 3018.109 Priorities and allocations.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

    Source: 77 FR 50635, Sept. 21, 2012, unless otherwise noted.



Sec. 3018.109  Priorities and allocations.

    DHS Components may assign priority ratings on contracts and orders 
as authorized by the Defense Priorities and Allocation System (DPAS). 
(See (HSAR) 48 CFR 3011.602.)

[[Page 86]]

                   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 noted.

                         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 87]]

     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: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

                   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 700-4, 
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

[[Page 88]]

Safety Standards Act, before payment can be made to the employee.

[68 FR 67871, Dec. 4, 2003, as amended at 77 FR 50635, Aug. 22, 2012]

                    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, ENERGY AND WATER EFFICIENCY, RENEWABLE ENERGY 
       TECHNOLOGIES, 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 Requirements


Sec. 3023.1004 Requirements.

         Subpart 3023.90_Safety Requirements for USCG Contracts


Sec. 3023.9000 Contract Clause (USCG).

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

  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. 3023.1004  Requirements.

    DHS Directive 023-02 Environmental Compliance Program provides 
guidance and direction for compliance with environmental laws, 
regulations and executive orders. DHS Directive 025-01, Sustainable 
Practices for Environmental, Energy and Transportation, provides 
guidance and direction for compliance with green purchasing and other 
sustainable practices contained in Executive Order 13423. Contracting 
officers

[[Page 89]]

shall ensure that solicitations and contracts contain appropriate 
sustainable practices requirements, provisions and clauses. Contractors 
shall support the DHS Environmental Policy by taking appropriate actions 
to eliminate or reduce their impacts on the environment.

[77 FR 50635, Aug. 22, 2012]

         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.

       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 noted.

             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

 Subpart 3025.70_American Recovery and Reinvestment Act Restrictions on 
                           Foreign Acquisition

Sec.

Sec. 3025.7000 Scope of subpart.

Sec. 3025.7001 Definitions.

Sec. 3025.7002 Restrictions on clothing, fabrics, and related items.

Sec. 3025.7002-1 Restrictions.

Sec. 3025.7002-2 Exceptions.

Sec. 3025.7002-3 Specific application of trade agreements.

Sec. 3025.7003 Contract clauses.

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

    Source: 74 FR 41349, Aug. 17, 2009, unless otherwise noted.



Sec. 3025.7000  Scope of subpart.

    This subpart contains restrictions on the acquisition of certain 
foreign textile products imposed by the American Recovery and 
Reinvestment Act of 2009 on contracts, exercising of an option and 
orders entered into on or after August 16, 2009 with funds appropriated 
or otherwise provided on or before February 17, 2009.



Sec. 3025.7001  Definitions.

    As used in this subpart--
    (a) ``Commercial,'' as applied to an item described in (HSAR) 48 CFR 
3025.7002-1, means an item of supply, whether an end product or 
component, that meets the definition of ``commercial item'' set forth in 
(FAR) 48 CFR 2.101.
    (b) ``Component'' means any item supplied to the Government as part 
of an end product or of another component.

[[Page 90]]

    (c) ``End product'' means supplies delivered under a line item of a 
contract.
    (d) ``Non-commercial,'' as applied to an item described in (HSAR) 48 
CFR 3025.7002-1, means an item of supply, whether an end product or 
component, that does not meet the definition of ``commercial item'' set 
forth in (FAR) 48 CFR 2.101.
    (e) ``Item directly related to national security interests'' means 
an item intended for use in a Department of Homeland Security action 
protecting the nation from internal or external threats, including 
protecting the nation's borders, transportation system, maritime domain 
or critical infrastructure, as determined by the contracting officer.



Sec. 3025.7002  Restrictions on clothing, fabrics, and related items.



Sec. 3025.7002-1  Restrictions.

    The following restrictions implement section 604 of the American 
Recovery and Reinvestment Act of 2009 and they apply to all types of 
actions, orders, exercising of an option and contracts. Except as 
provided in subsection (HSAR) 48 CFR 3025.7002-2, do not acquire, either 
as end products or components, any item listed in paragraphs (a) or (b) 
of this section, if the item is directly related to the national 
security interests of the United States and the item has not been grown, 
reprocessed, reused, or produced in the United States:
    (a) Commercial or non-commercial items--(1) Clothing and the 
materials and components thereof, other than sensors, electronics, or 
other items added to, and not normally associated with, clothing (and 
the materials and components thereof); or
    (2) Tents, tarpaulins, covers, textile belts, bags, protective 
equipment (such as body armor), sleep systems (sleeping bags), load 
carrying equipment (such as fieldpacks), textile marine equipment, 
parachutes or bandages.
    (b) Non-commercial items--
    (1) Cotton and other natural fiber products.
    (2) Woven silk or woven silk blends.
    (3) Spun silk yarn for cartridge cloth.
    (4) Synthetic fabric or coated synthetic fabric (including all 
textile fibers and yarns that are for use in such fabrics).
    (5) Canvas products.
    (6) Wool (whether in the form of fiber or yarn or contained in 
fabrics, materials, or manufactured articles).
    (7) Any item of individual equipment manufactured from or containing 
any of the fibers, yarns, fabrics, or materials listed in this paragraph 
(b).



Sec. 3025.7002-2  Exceptions.

    Acquisitions in the following categories are not subject to the 
restrictions in (HSAR) 48 CFR 3025.7002-1:
    (a) Acquisitions at or below the simplified acquisition threshold.
    (b) Acquisition of items not directly related to national security 
interests of the United States.
    (c) Acquisitions of any of the items otherwise covered by (HSAR) 48 
CFR 3025.7002-1, if the Chief Procurement Officer determines that the 
item grown, reprocessed, reused, or produced in the United States cannot 
be acquired as and when needed in a satisfactory quality and sufficient 
quantity at United States market prices. When this exception is used--
    (1) Only the DHS Chief Procurement Officer is authorized to make the 
domestic nonavailability determination.
    (2) The DHS Component, not later than 7 days after the award of the 
contract, must post a notification that the exception has been applied 
on the Government-wide point of entry, which may be combined with any 
synopsis of award.
    (3) The supporting documentation for the CPO determination prepared 
by the DHS Component(s) shall include--
    (i) An analysis of alternatives that would not require a domestic 
nonavailability determination; and
    (ii) A written justification by the requiring activity, with 
specificity, why such alternatives are unacceptable.
    (d) Acquisitions of items listed in FAR 48 CFR 25.104.
    (e) Emergency acquisitions by activities located outside the United 
States.
    (f) Acquisitions by vessels in foreign waters.
    (g) Acquisitions of incidental amounts of cotton, other natural 
fibers, wool or other item covered by

[[Page 91]]

(HSAR) 48 CFR 3025.7002-1(a)-(b) incorporated in an end product, for 
which the estimated value of the item so covered is not more than 10 
percent of the total price of the end product.
    (h) Acquisitions of items otherwise covered by (HSAR) 48 CFR 
3025.7002-1(a) and (b) for which restricting a procurement of the items 
to those that have been grown, reprocessed, reused, or produced in the 
United States would be inconsistent with United States obligations under 
international agreements. Acquisitions of products that are eligible 
products per (FAR) 48 CFR Subpart 25.4 are not covered by these 
restrictions; see (HSAR) 48 CFR 3025.7003-2 for specific application of 
trade agreements.



Sec. 3025.7002-3  Specific application of trade agreements.

    (a) For covered items entitled to non-discriminatory treatment under 
the World Trade Organization Agreement on Government Procurement (WTO 
GPA), or any Free Trade Agreement (FTA) listed in (FAR) 48 CFR Subpart 
25.4, this subpart is applied as follows--
    (1) For solicitations, orders, exercising of an option and contracts 
issued by any component other than Transportation Security 
Administration (TSA), in which any covered items will be procured with a 
value that is both above the simplified acquisition threshold, and below 
the applicable trade agreement threshold in (FAR) 48 CFR 25.402, apply 
(HSAR) 48 CFR 3025.7002-1. Section 3025.7002-2(h) will exclude eligible 
products of designated countries with FTA thresholds beneath the 
simplified acquisition threshold from coverage of section 604.
    (2) For solicitations, orders, exercising of an option and contracts 
issued by any component other than Transportation Security 
Administration (TSA), in which any covered items will be procured with a 
value exceeding $194,000 (or the superseding threshold upon updating of 
(FAR) 48 CFR 25.402), (HSAR) 48 CFR 3025.7002-1 does not apply if the 
items are eligible products per FAR 48 CFR Subpart 25.4; follow (FAR) 48 
CFR part 25 instead.
    (3) For solicitations, orders, exercising of an option and contracts 
issued by TSA in which any covered items will be procured with a value 
exceeding the simplified acquisition threshold, (HSAR) 48 CFR 3025.7002 
applies to all covered items except those from Mexico, Canada or Chile 
because TSA is listed as a covered governmental entity in the North 
American Free Trade Agreement (NAFTA) and the U.S.-Chile Free Trade 
Agreement but TSA is excluded from all other trade agreements.
    (b) For covered items from a country that is not entitled to non-
discriminatory treatment under the WTO GPA, or any FTA listed in (FAR) 
48 CFR subpart 25.4, apply the restrictions of (HSAR) 48 CFR 3025.7002 
to all solicitations, orders, exercising of an option and contracts 
exceeding the simplified acquisition threshold in place of the Buy 
America Act policies at (FAR) 48 CFR Subpart 25.1.



Sec. 3025.7003  Contract clauses.

    Unless an exception under (HSAR) 48 CFR 3025.7002-2(a), (b), (e) or 
(f) applies, insert the clause at (HSAR) 48 CFR 3052.225-70, Requirement 
for Use of Certain Domestic Commodities, in solicitations, exercising of 
an option, contract modifications that add new items (or which make a 
cardinal change) and contracts with a value exceeding the simplified 
acquisition threshold when procuring any item covered under (HSAR) 48 
CFR 3025.7002-1(a) or (b).

            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.

[[Page 92]]


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 noted.

                         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.



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.


[[Page 93]]


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

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

          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 
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]

[[Page 94]]

                        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 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 95]]

              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 noted.

                 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 noted.

         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 noted.

                     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 96]]



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 3033.1_Protests

Sec.

Sec. 3033.102 General.

Sec. 3033.102-90 Protests on classified solicitations (OSA).

                   Subpart 3033.2_Disputes and Appeals


Sec. 3033.201 Definitions.

Sec. 3033.211 Contracting officer's decision.

Sec. 3033.214 Alternative disputes resolution (ADR).

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

                         Subpart 3033.1_Protests

    Source: 77 FR 50635, Aug. 22, 2012, unless otherwise noted.



Sec. 3033.102  General.



Sec. 3033.102-90  Protests on classified solicitations (OSA).

    To ensure that classified information is protected and appropriate 
security measures are coordinated as required, protests involving 
classified solicitations issued by the Office of Selective Acquisitions 
(OSA) shall be submitted directly to the contracting officer for further 
transmission to the GAO, the United States Court of Federal Claims, or 
for internal resolution in the case of agency protests. Specific 
instructions will be provided in Section L of the solicitation.

                   Subpart 3033.2_Disputes and Appeals



Sec. 3033.201  Definitions.

    Agency Board of Contract Appeals means the Civilian Board of 
Contract Appeals (CBCA).

[72 FR 1297, Jan. 11, 2007]



Sec. 3033.211  Contracting Officer's decision.

    For DHS contracts, the Board of Contract Appeals (BCA) noted in 
(FAR) 33.211 is the Civilian Board of Contract Appeals (CBCA) 1800 F 
Street, NW., Washington, DC 20405.

[72 FR 1297, Jan. 11, 2006]



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. CBCA 
guidance on ADR may be obtained at http://www.gsbca.gsa.gov/CBCA-17712-
v1-CBCA--ADR--INFORMATION.pdf or from the CBCA 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; 72 
FR 1297, Jan. 11, 2007]

[[Page 97]]

                   PART 3034_MAJOR SYSTEM ACQUISITION

                         Subpart 3034.0_General

Sec.

Sec. 3034.004 Acquisition strategy.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, and 48 
CFR part 1 and subpart 1.3.

    Source: 75 FR 41100, July 15, 2010, unless otherwise noted.



Sec. 3034.0  General



Sec. 3034.004  Acquisition strategy.

    See (HSAR) 48 CFR 3009.570 for policy applicable to acquisition 
strategies that consider the use of lead system integrators.

[[Page 98]]

             SUBCHAPTER F_SPECIAL CATEGORIES OF CONTRACTING

             PART 3035_RESEARCH AND DEVELOPMENT CONTRACTING

                     Subpart 3035.000_Scope of Part

Sec.

Sec. 3035.003 Policy.

Sec. 3035.008 Evaluation for award.

Sec. 3035.017 Federally Funded Research and Development Centers.

  Subpart 3035.70_Information Dissemination by Educational Institutions


Sec. 3035.70-1 Policy.

Sec. 3035.70-1 Contract clause.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, and 48 
CFR part 1 and subpart 1.3.

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

                     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. 3035.008  Evaluation for award.

    See (HSAR) 48 CFR 3009.570 for limitations on the award of contracts 
to contractors acting as lead system integrators.

[75 FR 41100, July 15, 2010]



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. 3035.70-1  Policy.

    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.

[77 FR 50635, Aug. 22, 2012]



Sec. 3035.70-2  Contract clause.

    (a) The contracting officer shall use the clause at (HSAR) 48 CFR 
3052.235-70, Dissemination of Information--Educational Institutions, in 
contracts with educational institutions for research that is not 
sensitive or classified.
    (b) If the contract involves sensitive or classified research, the 
contracting officer shall prepare and insert a Special Contract 
Requirement that conditions dissemination upon the approval of a 
designated Government official.

[77 FR 50635, Aug. 22, 2012]

[[Page 99]]

         PART 3036_CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

                         Subpart 3036.1_General

Sec.

Sec. 3036.104 Policy.

Sec. 3036.104-90 Authority for one-step turn-key design-build 
          contracting for the United States Coast Guard (USCG).

Subpart 3036.2--Special Aspects of Contracting for Construction

                     Subpart 3036.5_Contract Clauses


Sec. 3036.570 Special precautions for work at operating airports.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

                         Subpart 3036.1_General



Sec. 3036.104  Policy.



Sec. 3036.104-90  Authority for one-step turn-key design-build 
          contracting for the United States Coast Guard (USCG).

    The Head of the Contracting Activity (HCA) of the U.S. Coast Guard 
may use one-step turn-key selection procedures to enter into fixed-price 
design-build contracts in accordance with 14 U.S.C. 677.

[73 FR 24883, May 6, 2008]

Subpart 3036.2--Special Aspects of Contracting for Construction

                     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 noted.

                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))

[[Page 100]]

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 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 101]]

                    SUBCHAPTER G_CONTRACT MANAGEMENT

          PART 3042_CONTRACT ADMINISTRATION AND AUDIT SERVICES

           Subpart 3042.15_Contractor Performance Information

Sec.

Sec. 3042.1502 Policy.

     Subpart 3042.70_Contracting Officer's Technical Representative


Sec. 3042.7000 Contract clause.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

           Subpart 3042.15_Contractor Performance Information



Sec. 3042.1502  Policy.

    (a) Components shall use the Contractor Performance Assessment 
Reporting System (CPARS) or other performance reporting system as 
designated by the DHS Chief Procurement Officer for evaluating 
contractor performance in accordance with (FAR) 48 CFR sections 42.1502 
and 42.1503.
    (e) Components shall use the Construction Contractor Appraisal 
Support System (CCASS) module of CPARS, or other performance reporting 
system as designated by the DHS Chief Procurement Officer for evaluating 
construction contractor performance in accordance with (FAR) 48 CFR 
sections 42.1502 and 42.1503.
    (f) Components shall use the Architect-Engineer Contract 
Administration Support System (ACASS) module of CPARS or other 
performance reporting system as designated by the DHS Chief Procurement 
Officer for evaluating architect-engineer contractor performance in 
accordance with (FAR) 48 CFR sections 42.1502 and 42.1503.

[77 FR 50635, Aug. 22, 2012]

     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 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 noted.

[[Page 102]]

                        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 103]]

    (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 104]]



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 noted.

            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 105]]

                     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. 3052.203-70 Instructions for Contractor Disclosure of Violations.

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

Sec. 3052.204-71 Contractor employee access.

Sec. 3052.205-70 Advertisements, Publicizing Awards, and Releases.

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. 3052.209-74 Limitations on contractors acting as lead system 
          integrators.

Sec. 3052.209-75 Prohibited financial interests for lead system 
          integrators.

Sec. 3052.209-76 Prohibition on Federal Protective Service guard 
          services contracts with business concerns owned, controlled, 
          or operated by an individual convicted of a felony.

Sec. 3052.211-70 Index for specifications.

Sec. 3052.212-70 Contract Terms and Conditions Applicable to DHS 
          Acquisition of Commercial Items.

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. 3052.225-70 Requirement for Use of Certain Domestic Commodities.

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. 3052.242-72 Contracting officer's technical representative.

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: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, and 48 
CFR part 1 and subpart 1.3.

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

      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

[[Page 106]]

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;
    (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.

    Note to 3052.101: The solicitation provisions and contract clauses 
matrix referencing all HSAR provisions and clauses is available at 
http://www.dhs.gov/xopnbiz/ under Policy and Regulations, Homeland 
Security Acquisition Regulation (HSAR).

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48802, Aug. 22, 2006; 77 
FR 50636, Aug. 22, 2012]

              Subpart 3052.2_Text of Provisions and Clauses



Sec. 3052.203-70  Instructions for Contractor Disclosure of Violations.

    As prescribed in (HSAR) 48 CFR 3003.1004(a), insert the following 
clause:

     Instructions for Contractor Disclosure of Violations (SEP 2012)

    When making a written disclosure under the clause at FAR 52.203-13, 
paragraph (b)(3), the Contractor shall use the Contractor Disclosure 
Form at http://www.oig.dhs.gov and submit the disclosure electronically 
to the Department of Homeland Security Office of Inspector General. The 
Contractor shall provide a copy of the disclosure to the Contracting 
Officer by email or facsimile on the same business day as the submission 
to the Office of Inspector General. The Contractor shall provide the 
Contracting Officer a concurrent copy of any supporting materials 
submitted to the Office of Inspector General.

[77 FR 54836, Sept. 6, 2012]



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 securitplan 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).

[[Page 107]]

    (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 (SEP 2012)

    (a) Sensitive Information, as used in this clause, means any 
information, which if lost, misused, disclosed, or, without 
authorization is accessed, or modified, could adversely affect the 
national or homeland security interest, 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 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

[[Page 108]]

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)

    Alterate I (SEP 2012) 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 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) There must be a compelling reason for using this individual as 
opposed to a U.S. citizen; and
    (2) 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)

    Alterate 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; 77 
FR 50636, Aug. 22, 2012; 77 FR 54836, Sept. 6, 2012]



Sec. 3052.205-70  Advertisements, Publicizing Awards, and Releases.

    As prescribed in (HSAR) 48 CFR 3005.470-2, insert the following 
clause:

       Advertisements, Publicizing Awards, and Releases (SEP 2012)

    The Contractor shall not refer to this contract in commercial 
advertising or similar promotions in such a manner as to state or imply 
that the product or service provided is endorsed or preferred by the 
Federal Government or is considered by the Government to be superior to 
other products or services.

                             (End of clause)

    Alternate I (SEP 2012). If a contract involves sensitive or 
classified information, designate the paragraph in the base clause as

[[Page 109]]

(a) and add the following paragraph (b) to the clause:
    (b) All advertisements, releases, announcements, or other 
publication regarding this contract or the agency programs and projects 
covered under it, or the results or conclusions made pursuant to 
performance, must be approved by the Contracting Officer. Under no 
circumstances shall the Contractor, or anyone acting on behalf of the 
Contractor, refer to the supplies, services, or equipment furnished 
pursuant to the provisions of this contract in any publicity, release, 
or commercial advertising without first obtaining explicit written 
consent to do so from the Contracting Officer.

                             (End of clause)

[77 FR 50636, Aug. 22, 2012]



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

    As prescribed at (HSAR) 48 CFR 3009.108-7005, 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 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.

[[Page 110]]

    (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 3009.108-7000 through 3009.108-7003;
    -- it is a foreign incorporated entity that should be treated as an 
inverted domestic corporation pursuant to the criteria of (HSAR) 48 CFR 
3009.108-7000 through 3009.108-7003, but it has submitted a request for 
waiver pursuant to 3009.108-7004, 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 
3009.108-7000 through 3009.108-7003, but it plans to submit a request 
for waiver pursuant to 3009.108-7004.

    (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; 76 
FR 70661, Nov. 15, 2011]



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--
    (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.

[[Page 111]]

                             (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 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.

[[Page 112]]

                             (End of clause)

[71 FR 25774, May 2, 2006]



Sec. 3052.209-74  Limitations on contractors acting as lead system 
          integrators.

    As prescribed in (HSAR) 48 CFR 3009.570-4(a), use the following 
provision:

 Limitations on Contractors Acting as Lead System Integrators (JUL 2010)

    (a) Definitions. ``Direct financial interest,'' ``lead system 
integrator,'' ``lead system integrator with system responsibility,'' and 
``lead system integrator without system responsibility,'' as used in 
this provision, have the meanings given in the clause of this 
solicitation entitled ``Prohibited Financial Interests for Lead System 
Integrators'' ((HSAR) 48 CFR 3052.209-75).
    (b) General. Unless an exception is granted, no contractor 
performing lead system integrator functions in the acquisition of a 
major system by the Department of Homeland Security may have any direct 
financial interest in the development or construction of any individual 
system or element of any system of systems.
    (c) Representations. (1) The offeror represents that it does [ ] 
does not [ ] propose to perform this contract as a lead system 
integrator with system responsibility.
    (2) The offeror represents that it does [ ] does not [ ] propose to 
perform this contract as a lead system integrator without system 
responsibility.
    (3) If the offeror answered in the affirmative in paragraph (c)(1) 
or (2) of this provision, the offeror represents that it does [ ] does 
not [ ] have any direct financial interest in the development or 
construction of any system(s), subsystem(s), system of systems, element 
of any system of systems, or services it proposes or intends to seek to 
satisfy this solicitation.
    (d) If the offeror answered in the affirmative in paragraph (c)(3) 
of this provision, the offeror should contact the Contracting Officer 
for guidance on whether an exception may apply and what responsibilities 
the offeror may have in qualifying for an exception.
    (e) If the offeror does have a direct financial interest, the 
offeror shall be prohibited from receiving an award under this 
solicitation, unless:
    (1) The offeror submits to the Contracting Officer appropriate 
evidence that the offeror was selected by a subcontractor to serve as a 
lower-tier subcontractor through a process over which the offeror 
exercised no control; or
    (2) the conditions described in (HSAR) 48 CFR 3009.570-2(b)(1)(i) 
and (ii) exist, after an opportunity is afforded to the offeror to 
provide information or commitments as may be necessary to meet (HSAR) 48 
CFR 3009.570-2(b)(1)(ii), assuming any such information or commitment 
will allow DHS to meet that standard.
    (f) This provision implements the requirements of 6 U.S.C. 396, as 
added by Section 6405 of the U.S. Troop Readiness, Veterans' Care, 
Katrina Recovery, And Iraq Accountability Appropriations Act, 2007 (Pub. 
L. 110-28).

                           (End of provision)

[75 FR 41100, July 15, 2010]



Sec. 3052.209-75  Prohibited financial interests for lead system 
          integrators.

    As prescribed in (HSAR) 48 CFR 3009.570-4(b), use the following 
clause:

  Prohibited Financial Interests for Lead System Integrators (JUL 2010)

    (a) Definitions. As used in this clause--
    (1) ``Direct financial interest,'' for the purpose of this clause 
and contract, and subject to exceptions set forth 6 U.S.C. 396(b) as 
implemented, means:
    (i) Developing or constructing any individual system or element of 
any system of systems for which the Contractor is the lead system 
integrator;
    (ii) Owning or being in a position to exert corporate control over a 
subcontractor at any level under the prime contract;
    (iii) Owning, or being in a position to exert corporate control over 
an entity that either--
    (A) Is a subcontractor at any level under the prime contract, or
    (B) Owns or is in a position to control another entity that is a 
subcontractor at any level under the prime contract; and
    (iv) Participating or sharing in the profits of another firm's 
development or construction of any individual system or element of any 
system of systems for which the Contractor is the lead system integrator 
or agreeing to participate in the profits of the firm from such 
development or construction.
    (2) ``Lead system integrator'' includes ``lead system integrator 
with system responsibility'' and ``lead system integrator without system 
responsibility.''
    (3) ``Lead system integrator with system responsibility'' means a 
prime contractor for the development or production of a major system, if 
the prime contractor is not expected at the time of award to perform a 
substantial portion of the work on the system and the major subsystems.
    (4) ``Lead system integrator without system responsibility'' means a 
prime contractor under a contract for the procurement of services, the 
primary purpose of which is

[[Page 113]]

to perform acquisition functions closely associated with inherently 
governmental functions (see section 7.503(d) of the Federal Acquisition 
Regulation) with regard to the development or production of a major 
system.
    (5) The phrase ``substantial portion of the work,'' as used in the 
definition of ``lead system integrator with system responsibility,'' may 
relate to the dollar value of the effort or to the criticality of the 
effort performed.
    (b) Limitations. The Contracting Officer has determined that the 
Contractor meets the definition of lead system integrator with [ ] 
without [ ] system responsibility. Unless an exception is granted, the 
Contractor shall not have any direct financial interest in the 
development or construction of any individual system or element of any 
system of systems while performing lead system integrator functions in 
the acquisition of a major system by the Department of Homeland Security 
under this contract.
    (c) Agreement. The Contractor agrees that during performance of this 
contract it will not acquire any direct financial interest as described 
in paragraph (b) of this clause, or, if it does acquire or plan to 
acquire such interest, it will immediately notify the Contracting 
Officer. The Contractor further agrees to provide to the Contracting 
Officer all relevant information regarding the change in financial 
interests so that the Contracting Officer can determine whether an 
exception applies or whether the Contractor will be allowed to continue 
performance on this contract. If an organizational conflict of interest 
in the performance of this contract that is attributable to the 
Contractor's direct financial interest cannot be avoided, eliminated, or 
mitigated to the Contracting Officer's satisfaction, the Contracting 
Officer may terminate this contract for default or may take other 
remedial measures as appropriate in the Contracting Officer's sole 
discretion.
    (d) Notwithstanding any other clause of this contract, if the 
Contracting Officer determines that the Contractor misrepresented its 
financial interests at the time of award or has violated the agreement 
in paragraph (c) of this clause, the Government may terminate this 
contract for default or may take other remedial measures as appropriate 
in the Contracting Officer's sole discretion.
    (e) This clause implements the requirements of 6 U.S.C. 396, as 
added by Section 6405 of the U.S. Troop Readiness, Veterans' Care, 
Katrina Recovery, And Iraq Accountability Appropriations Act, 2007 (Pub. 
L. 110-28).

                             (End of clause)

[75 FR 41100, July 15, 2010]



Sec. 3052.209-76  Prohibition on Federal Protective Service guard 
          services contracts with business concerns owned, controlled, 
          or operated by an individual convicted of a felony.

    As prescribed at (HSAR) 48 CFR 3009.171-9, insert the following 
clause:

Prohibition on Federal Protective Service Guard Services Contracts With 
   Business Concerns Owned, Controlled, or Operated by an Individual 
                    Convicted of a Felony (DEC 2009)

    (a) Prohibitions. Section 2 of the Federal Protective Service Guard 
Contracting Reform Act of 2008, Public Law 110-356, generally prohibits 
the Department of Homeland Security from entering into a contract for 
guard services under the Federal Protective Service (FPS) guard services 
program with any business concern owned, controlled, or operated by an 
individual convicted of a serious felony.
    (b) Definitions. As used in this clause:
    Business concern means a commercial enterprise and the people who 
constitute it.
    Felony means an offense which, if committed by a natural person, 
would be punishable by death or imprisonment for a term exceeding one 
year.
    Individual means any person, corporation, partnership, or other 
entity with a legally independent status.
    Convicted of a felony means any conviction of a felony in violation 
of state or federal criminal statutes, including the Uniform Code of 
Military Justice, whether entered on a verdict or plea, including a plea 
of nolo contendere, for which a sentence has been imposed.
    (c) A business concern that is owned, controlled, or operated by an 
individual who has been convicted of any felony, and that wishes to 
submit a bid, proposal, or other offer on a solicitation to obtain a FPS 
contract for guard services, must submit with its offer an award request 
as specified in paragraph (d) of this clause.
    (1) A financial, voting, operational, or employment interest in the 
business concern of the individual's spouse, child, or other family 
member, or person with whom the individual shares his or her household, 
will be imputed to the individual in determining whether the individual 
owns, controls, or operates a business concern.
    (2) An individual owns, controls, or operates a business concern by 
fulfilling or holding the following types of roles or interests with 
respect to the business concern:
    (i) Director or officer, including incumbents of boards and offices 
that perform duties ordinarily performed by a chairman or member of a 
board of directors, a secretary, treasurer, president, a vice president, 
or

[[Page 114]]

other chief official of a business concern, including Chief Financial 
Officer, Chief Operating Officer, or Chief contracting official.
    (ii) Officials of comparable function and status to those described 
in paragraph (c)(2)(i) of this clause as exist in partnerships of all 
kind and other business organizations, including sole proprietorships.
    (iii) A general partner in a general or limited partnership.
    (iv) An individual with a limited partnership interest of 25% or 
more.
    (v) An individual that has the:
    (A) Power to vote, directly or indirectly, 25% or more interest in 
any class of voting stock of the business concern;
    (B) Ability to direct in any manner the election of a majority of 
the business concern's directors or trustees; or
    (C) Ability to exercise a controlling influence over the business 
concern's management and policies.
    (3) Generally, the existence of one or more of the roles or 
interests set forth in paragraph (c)(2) of this clause, including roles 
or interests attributed to the individual, will be sufficient to 
determine that the individual owns, controls or operates the business 
concern. However, specific facts of the case may warrant a different 
determination by Government in light of all of the facts and 
circumstances. Conversely, ownership, control, or the ability to operate 
the business concern, if it exists in fact, can be reflected by other 
roles or interests, and the offeror or contractor should reveal the 
existence of felony convictions if there is doubt as to whether the 
individual owns, controls or operates the business concern.
    (d) Award request. (1) A business concern owned, operated or 
controlled by an individual convicted of any felony may submit an award 
request to the Contracting Officer. The basis for such request shall be 
either that the subject felony is not a serious felony as defined in 
(HSAR) 48 CFR 3009.171-5; that such individual no longer owns, controls 
or operates the business concern; or that commission of the serious 
felony no longer calls into question the individual or business 
concern's integrity or business ethics and that an award would be 
consistent with the mission of FPS. The business concern shall bear the 
burden of proof for award requests.
    (2) If the Contracting Officer in his or her sole discretion, is 
unable to affirmatively determine that the subject felony is not a 
serious felony as defined in (HSAR) 48 CFR 3009.171-5 or that such 
individual no longer owns, controls or operates the business concern, 
then the Contracting Officer shall deny the award request.
    (3) The Head of the Contracting Activity has sole discretion to 
approve an award request.
    (4) A copy of the award request with supporting documentation or a 
copy of a previously approved award request shall be attached with the 
bid or proposal.
    (5) An award request shall contain the basis for the request (i.e., 
that the subject felony is not a serious felony as defined by this 
regulation; that the convicted individual does not or no longer owns, 
controls or operates the business concern; or that the commission of a 
serious felony no longer calls into question the individual or business 
concern's integrity or business ethics and that an award would be 
consistent with the mission of FPS). The award request shall contain, at 
a minimum, the following information:
    (i) Name and Date of Birth of Individual Convicted of a felony.
    (ii) A full description of which roles or interests indicate that 
the individual owns, controls, or operates or may own control or operate 
the business concern.
    (iii) Date sentenced.
    (iv) Statute/Charge.
    (v) Docket/Case Number.
    (vi) Court/Jurisdiction.
    (vii) The nature and circumstances surrounding the conviction.
    (viii) Protective measures taken by the individual or business 
concern to reduce or eliminate the risk of further misconduct.
    (ix) Whether the individual has made full restitution for the 
felony.
    (x) Whether the individual has accepted responsibility for past 
misconduct resulting in the felony conviction.
    (6) Upon the request of the Contracting Officer, and prior to 
contract award, in addition to information described in paragraph (d)(5) 
of this clause, the business concern must provide such other 
documentation as is requested by the Contracting Officer to use in 
determining and evaluating ownership, control, or operation; the nature 
of the felonies committed; and such other information as is needed to 
make a decision on whether award should be made to the offeror under the 
Federal Protective Service Guard Contracting Reform Act of 2008. The 
refusal to timely provide such documentation may serve as grounds to 
preclude contract award.
    (e)(1) Privacy Statement. The offeror shall provide the following 
statement to any individual whose information will be submitted in an 
award request pursuant to (d)(5) and (6) of this clause.
    (2) Privacy Notice. The collection of this information is authorized 
by the Federal Protective Service Guard Contracting Reform Act of 2008 
(Pub. L. 110-356) and Department of Homeland Security (DHS) implementing 
regulations at Homeland Security Acquisition Regulation (HSAR) 48 CFR 
3009.171. This information is being collected to determine whether an 
individual that owns, controls, or operates the business concern 
submitting this offer has been convicted of a felony that would 
disqualify the offeror from receiving

[[Page 115]]

an award. This information will be used by and disclosed to DHS 
personnel and contractors or other agents who require this information 
to determine whether an award request should be approved or denied. 
Additionally, DHS may share this personal information with the U.S. 
Justice Department and other Federal and State agencies for collection, 
enforcement, investigatory, or litigation purposes, or as otherwise 
authorized. Submission of this information by the individual is 
voluntary, however, failure to provide it may result in denial of an 
award to the offeror. Individuals who wish to correct inaccurate 
information in or to remove their information from an offer that has 
been submitted should contact the business concern submitting the offer 
and request correction. Should individuals seek to correct inaccurate 
information or remove their information from an offer that has been 
submitted in response to a solicitation for FPS guard services prior to 
contract award, an authorized representative of the business concern 
submitting the offer must contact the contracting officer of record and 
request that the firm's offer be formally withdrawn or submit a 
correction to the award request. After contract award, it is recommended 
that an authorized representative of the business concern that submitted 
the inaccurate or erroneous information contact the contracting officer 
of record. The contracting officer will handle such requests on a case 
by case basis.
    (f) Disclosure. The offeror under this solicitation represents that 
[Check one]:
    --It is not a business concern owned, controlled, or operated by an 
individual convicted of a felony.
    --It is a business concern owned, controlled, or operated by an 
individual convicted of a felony, and has submitted an award request 
pursuant to paragraph (d) of this clause.
    (g) If an award request is applied for, the offeror shall attach the 
request with supporting documentation, to the bid or proposal. The 
supporting documentation may include copies of prior award requests 
granted to the offeror.
    (h) The notification in this paragraph applies if this is an 
indefinite delivery/indefinite quantity contract, blanket purchase 
agreement, or other contractual instrument that may result in the 
issuance of task orders, calls or option to extend the terms of a 
contract. The Contractor must immediately notify the Contracting Officer 
in writing upon any felony conviction of personnel who own, control or 
operate a business concern as defined in paragraph (c) of this clause at 
any time during the performance of this contract. Upon notification of a 
felony conviction the Contracting Officer will review and make a new 
determination of eligibility prior to the issuance of any task order, 
call or exercise of an option.

                             (End of clause)

[74 FR 58856, Nov. 16, 2009, 74 FR 66584, Dec. 16, 2009]



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. 3052.212-70  Contract Terms and Conditions Applicable to DHS 
          Acquisition of Commercial Items.

    As prescribed in (HSAR) 48 CFR 3012.301, insert the following 
clause:

     Contract Terms and Conditions Applicable to DHS Acquisition of 
                       Commercial Items (SEP 2012)

    The Contractor agrees to comply with any provision or clause that is 
incorporated herein by reference to implement agency policy applicable 
to acquisition of commercial items or components. The provision or 
clause in effect based on the applicable regulation cited on the date 
the solicitation is issued applies unless otherwise stated herein. The 
following provisions and clauses are incorporated by reference: [The 
Contracting Officer should either check the provisions and clauses that 
apply or delete the provisions and clauses that do not apply from the 
list. The Contracting Officer may add the date of the provision or 
clause if desired for clarity.]

(a) Provisions.
----3052.209-72 Organizational Conflicts of Interest.
----3052.216-70 Evaluation of Offers Subject to An Economic Price 
Adjustment Clause.
----3052.219-72 Evaluation of Prime Contractor Participation in the DHS 
Mentor Prot[eacute]g[eacute] Program.

(b) Clauses.

----3052.203-70 Instructions for Contractor Disclosure of Violations.
----3052.204-70 Security Requirements for Unclassified Information 
Technology Resources.

[[Page 116]]

----3052.204-71 Contractor Employee Access.
----Alternate I
----3052.205-70 Advertisement, Publicizing Awards, and Releases.
----3052.209-73 Limitation on Future Contracting.
----3052.215-70 Key Personnel or Facilities.
----3052.216-71 Determination of Award Fee.
----3052.216-72 Performance Evaluation Plan.
----3052.216-73 Distribution of Award Fee.
----3052.217-91 Performance. (USCG)
----3052.217-92 Inspection and Manner of Doing Work. (USCG)
----3052.217-93 Subcontracts. (USCG)
----3052.217-94 Lay Days. (USCG)
----3052.217-95 Liability and Insurance. (USCG)
----3052.217-96 Title. (USCG)
----3052.217-97 Discharge of Liens. (USCG)
----3052.217-98 Delays. (USCG)
----3052.217-99 Department of Labor Safety and Health Regulations for 
Ship Repair. (USCG)
----3052.217-100 Guarantee. (USCG)
----3052.219-70 Small Business Subcontracting Plan Reporting.
----3052.219-71 DHS Mentor Prot[eacute]g[eacute] Program.
----3052.228-70 Insurance.
----3052.228-90 Notification of Miller Act Payment Bond Protection. 
(USCG)
----3052.228-91 Loss of or Damage to Leased Aircraft. (USCG)
----3052.228-92 Fair Market Value of Aircraft. (USCG)
----3052.228-93 Risk and Indemnities. (USCG)
----3052.236-70 Special Provisions for Work at Operating Airports.
----3052.242-72 Contracting Officer's Technical Representative.
----3052.247-70 F.o.B. Origin Information.
----Alternate I
----Alternate II
----3052.247-71 F.o.B. Origin Only.
----3052.247-72 F.o.B. Destination Only.

                             (End of clause)

[77 FR 50636, Aug. 22, 2012, as amended at 77 FR 54836, Sept. 6, 2012]



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 (SEP 2012)

    (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

[[Page 117]]

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-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.

                             (End of clause)

[68 FR 67871, Dec. 4, 2003, as amended at 77 FR 50637, Aug. 22, 2012]



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

[[Page 118]]

Contractor's place of business. The Contractor shall provide, at no 
additional charge, upon 24 hours' advance notice, a tug 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.

[[Page 119]]

    (2) If the Contractor fails to proceed promptly with the replacement 
or correction 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.

[[Page 120]]

    (c) The Contractor shall, without additional expense to the 
Government, employ 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.

[[Page 121]]

    (1) The Contractor's obligation to indemnify under this paragraph 
shall not exceed the sum of $300,000 as a consequence of any 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.

[[Page 122]]

    (b) Upon completion of the contract, or with the approval of the 
Contracting Officer 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.

[[Page 123]]

    (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 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

[[Page 124]]

approvals that occur after initial evaluation of proposals, but before 
final evaluation.

                           (End of provision)

[71 FR 25775, May 2, 2006]



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;

[[Page 125]]

    (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.
    (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. 3052.225-70  Requirement for Use of Certain Domestic Commodities.

    As prescribed in (HSAR) 48 CFR 3025.7003, use the following clause:

     Requirement for Use of Certain Domestic Commodities (AUG 2009)

    (a) Definitions. As used in this clause--
    (1) ``Commercial,'' as applied to an item described in subsection 
(b) of this clause, means an item of supply, whether an end product or 
component, that meets the definition of ``commercial item'' set forth in 
(FAR) 48 CFR 2.101.
    (2) ``Component'' means any item supplied to the Government as part 
of an end product or of another component.
    (3) ``End product'' means supplies delivered under a line item of 
this contract.
    (4) ``Non-commercial,'' as applied to an item described in 
subsections (b) or (c) of this clause, means an item of supply, whether 
an end product or component, that does not meet the definition of 
``commercial item'' set forth in (FAR) 48 CFR 2.101.
    (5) ``Qualifying country'' means a country with a memorandum of 
understanding or international agreement with the United States under 
which DHS procurement is covered.
    (6) ``United States'' includes the possessions of the United States.
    (b) The Contractor shall deliver under this contract only such of 
the following commercial or non-commercial items, either as end products 
or components, that have been grown, reprocessed, reused, or produced in 
the United States:
    (1) Clothing and the materials and components thereof, other than 
sensors, electronics, or other items added to, and not normally 
associated with, clothing and the materials and components thereof; or
    (2) Tents, tarpaulins, covers, textile belts, bags, protective 
equipment (such as body armor), sleep systems, load carrying equipment 
(such as fieldpacks), textile marine equipment, parachutes or bandages.
    (c) The Contractor shall deliver under this contract only such of 
the following non-commercial items, either as end products or 
components, that have been grown, reprocessed, reused, or produced in 
the United States:
    (1) Cotton and other natural fiber products.
    (2) Woven silk or woven silk blends.
    (3) Spun silk yarn for cartridge cloth.
    (4) Synthetic fabric or coated synthetic fabric (including all 
textile fibers and yarns that are for use in such fabrics).
    (5) Canvas products.
    (6) Wool (whether in the form of fiber or yarn or contained in 
fabrics, materials, or manufactured articles).
    (7) Any item of individual equipment manufactured from or containing 
any of the fibers, yarns, fabrics, or materials listed in this paragraph 
(c).
    (d) This clause does not apply--
    (1) To items listed in (FAR) 48 CFR 25.104, or other items for which 
the Government has determined that a satisfactory quality and sufficient 
quantity cannot be acquired as and when needed at United States market 
prices;
    (2) To incidental amounts of cotton, other natural fibers, or wool 
incorporated in an end product, for which the estimated value of the 
cotton, other natural fibers, or wool is not more than 10 percent of the 
total price of the end product; or
    (3) To items that are eligible products per (FAR) 48 CFR Subpart 
25.4.

                             (End of clause)

[74 FR 41350, Aug. 17, 2009]

[[Page 126]]



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.
    (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.

[[Page 127]]

                             (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 3035.70-2, 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 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; 77 FR 50637, Aug. 22, 2012]



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

[[Page 128]]

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. 3052.242-72  Contracting officer's technical representative.

    As prescribed in (HSAR) 48 CFR 3042.7000, insert the following 
clause:

        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. 3052.247-70  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)

    Alterate 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

[[Page 129]]

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.

Sec. 3053.227-70 Conveyance of invention rights acquired by the 
          Government.

Sec. 3053.245-70 [Reserved]

                  Subpart 3053.3_Illustrations of Forms


Sec. 3053.303 Agency forms.

    Authority: 5 U.S.C. 301-302, 41 U.S.C. 1707, 41 U.S.C. 1702, 48 CFR 
part 1, subpart 1.3, and DHS Delegation Number 0702.

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

                         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 700-1, Cumulative Claim and Reconciliation Statement. 
(See (HSAR) 48 CFR 3004.804-570(a)(3).)
    (b) DHS Form 700-2, Contractor's Assignment of Refunds, Rebates, 
Credits and Other Amounts. (See (HSAR) 48 CFR 3004.804-570(a)(2).)
    (c) DHS Form 700-3, Contractor Release. (See (HSAR) 48 CFR 3004.804-
570(a)(1).)

[68 FR 67871, Dec. 4, 2003, as amended at 77 FR 50637, Aug. 22, 2012]



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 700-4, Employee's Claim for Wage Restitution.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25776, May 2, 2006; 77 
FR 50637, Aug. 22, 2012]



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.

[[Page 130]]



Sec. 3053.245-70  [Reserved]

                  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 700-1.
 Statement.
Contractor's Assignment of Refunds,        DHS Form 700-2.
 Rebates, Credits and Other Amounts.
Contractor's Release.....................  DHS Form 700-3.
Employee's Claim for Wage Restitution....  DHS Form 700-4.
Contractor Report of Government Property.  DHS Form 700-5.
Report of Inventions and Subcontract.....  DD 882.
------------------------------------------------------------------------


[71 FR 25776, May 2, 2006, as amended at 77 FR 50637, Aug. 22, 2012]

                       PARTS 3054-3099 [RESERVED]

[[Page 131]]



       CHAPTER 34--DEPARTMENT OF EDUCATION ACQUISITION REGULATION




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

                          SUBCHAPTER A--GENERAL
Part                                                                Page
3400

[Reserved]

3401            ED acquisition regulation system............         133
3402            Definitions of words and terms..............         136
3403            Improper business practices and personal 
                    conflicts of interest...................         137
           SUBCHAPTER B--COMPETITION AND ACQUISITION PLANNING
3405            Publicizing contract actions................         138
3406            Competition requirements....................         139
3408            Required sources of supplies and services...         139
3409            Contractor qualifications...................         139
3412            Acquisition of commercial items.............         141
          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES
3413            Simplified acquisition procedures...........         143
3414            Sealed bidding..............................         143
3415            Contracting by negotiation..................         143
3416            Types of contracts..........................         144
3417            Special contracting methods.................         146
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
3419            Small business programs.....................         148
3422            Application of labor laws to Government 
                    acquisitions............................         148
3424            Protection of privacy and freedom of 
                    information.............................         148
3425            Foreign acquisition.........................         149
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
3427            Patents, data, and copyrights...............         151
3428            Bonds and insurance.........................         151
3432            Contract financing..........................         151

[[Page 132]]

3433            Protests, disputes, and appeals.............         152
             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
3437            Service contracting.........................         153
3439            Acquisition of information technology.......         153
                    SUBCHAPTER G--CONTRACT MANAGEMENT
3442            Contract administration and audit services..         155
3443            Contract modifications......................         155
3445            Government property.........................         155
3447            Transportation..............................         156
                     SUBCHAPTER H--CLAUSES AND FORMS
3452            Solicitation provisions and contract clauses         157
3453-3499

 [Reserved]

[[Page 133]]

                          SUBCHAPTER A_GENERAL

                          PART 3400 [RESERVED]

               PART 3401_ED ACQUISITION REGULATION SYSTEM

Sec.

Sec. 3401.000 Scope of part.

               Subpart 3401.1_Purpose, Authority, Issuance


Sec. 3401.104 Applicability.

Sec. 3401.105 Issuance.

Sec. 3401.105-2 Arrangement of regulations.

Sec. 3401.105-3 Copies.

              Subpart 3401.3_Agency Acquisition Regulations


Sec. 3401.301 Policy.

Sec. 3401.303 Publication and codification.

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_Career Development, Contracting Authority, and 
                            Responsibilities


Sec. 3401.601 General.

Sec. 3401.602-3 Ratification of unauthorized commitments.

Sec. 3401.670 Nomination and appointment of contracting officer's 
          representatives (CORs).

Sec. 3401.670-1 General.

Sec. 3401.670-2 Appointment.

Sec. 3401.670-3 Contract clause.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, 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 Federal government. This 
part establishes a system of Department of Education (Department) 
acquisition regulations, referred to as the EDAR, for the codification 
and publication of policies and procedures of the Department that 
implement and supplement the Federal Acquisition Regulation (FAR).

               Subpart 3401.1_Purpose, Authority, Issuance



Sec. 3401.104  Applicability.

    (a) The FAR and the EDAR apply to all Department contracts, as 
defined in FAR part 2, except where expressly excluded.
    (b) 20 U.S.C. 1018a provides the PBO with procurement authority and 
flexibility associated with sections (a)-(l) of the statute.
    (c) For non-appropriated fund contracts, the FAR and EDAR will be 
followed to the maximum extent practicable, excluding provisions 
determined by the contracting officer, with the advice of counsel, not 
to apply to contracts funded with non-appropriated funds. Adherence to a 
process similar to those required by or best practices suggested by the 
FAR will not confer court jurisdiction concerning non-appropriated funds 
that does not otherwise exist.



Sec. 3401.105  Issuance.



Sec. 3401.105-2  Arrangement of regulations.

    (c)(5) References and citations. 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 1.105-2(c).



Sec. 3401.105-3  Copies.

    Copies of the EDAR in the Federal Register and Code of Federal 
Regulations (CFR) may be purchased from the Superintendent of Documents, 
Government Printing Office (GPO), Washington, DC 20402. An electronic 
version of the EDAR is available for viewing at: http://www.ed.gov/
policy/fund/reg/clibrary/edar.html.

[[Page 134]]

              Subpart 3401.3_Agency Acquisition Regulations



Sec. 3401.301  Policy.

    (a)(1) Subject to the authorities in FAR 1.301(c) and other 
statutory authority, the Secretary of Education (Secretary) or delegate 
may issue or authorize the issuance of the EDAR. It implements or 
supplements the FAR and incorporates, together with the FAR, Department 
policies, procedures, contract clauses, solicitation provisions, and 
forms that govern the contracting process or otherwise control the 
relationship between the Agency, including its suborganizations, and 
contractors or prospective contractors. The Head of Contracting Activity 
(HCA) for FSA may issue supplementary guidelines applicable to FSA.



Sec. 3401.303  Publication and codification.

    (a) The EDAR is issued as chapter 34 of title 48 of the CFR.
    (1) The FAR numbering illustrations at FAR 1.105-2 apply to the 
EDAR.
    (2) The EDAR numbering system corresponds with the FAR numbering 
system. An EDAR citation will include the prefix ``34'' prior to its 
corresponding FAR part citation; e.g., FAR 25.108-2 would have 
corresponding EDAR text numbered as EDAR 3425.108-2.
    (3) Supplementary material for which there is no counterpart in the 
FAR will be codified with a suffix beginning with ``70'' or, in cases of 
successive sections and subsections, will be numbered in the 70 series 
(i.e., 71-79). These supplementing sections and subsections will appear 
to the closest corresponding FAR citation; e.g., FAR 16.4 (Incentive 
Contracts) may be augmented in the EDAR by citing EDAR 3416.470 (Award 
Term) and FAR 16.403 (Fixed-price incentive contracts) may be augmented 
in the EDAR by citing EDAR 3416.403-70 (Award fee contracts). (Note: 
These citations are for illustrative purposes only and may not actually 
appear in the published EDAR). For example:

----------------------------------------------------------------------------------------------------------------
             FAR                          Is implemented as                          Is augmented as
----------------------------------------------------------------------------------------------------------------
15..........................  3415....................................  3415.70
15.1........................  3415.1..................................  3415.170
15.101......................  3415.101................................  3415.101-70
15.101-1....................  3415.101-1..............................  3415.101-1-70
15.101-1(b).................  3415.101-1(b)...........................  3415.101-1(b)(70)
15.101-1(b)(1)..............  3415.101-1(b)(1)........................  3415.101-1(b)(1)(70)
----------------------------------------------------------------------------------------------------------------

    (c) Activity-specific authority. Guidance that is unique to an 
organization with HCA authority contains that activity's acronym 
directly preceding the cite. The following activity acronyms apply:

FSA--Federal Student Aid.



Sec. 3401.304  Agency control and compliance procedures.

    (a) The EDAR is issued for Department acquisition guidance in 
accordance with the policies stated in FAR 1.301. 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 Senior Procurement Executive (SPE).



Sec. 3401.404  Class deviations.

    A class deviation from the FAR or the EDAR must be approved by the 
Chief Acquisition Officer (CAO).

[[Page 135]]

             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 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. Comments on 
proposed Department notices of proposed rulemaking may be made at http:/
/www.regulations.gov.

     Subpart 3401.6_Career Development, Contracting Authority, and 
                            Responsibilities



Sec. 3401.601  General.

    (a) Contracting authority is vested in the Secretary. The Secretary 
has delegated this authority to the CAO. The Secretary has also 
delegated contracting authority to the SPE, giving the SPE broad 
authority to perform functions dealing with the management direction of 
the entire Department's procurement system, including implementation of 
its unique procurement policies, regulations, and standards. Limitations 
to the extent of this authority and successive delegations are set forth 
in the respective memorandums of delegations.



Sec. 3401.602-3  Ratification of unauthorized commitments.

    (a) Definitions. As used in this subpart, commitment includes 
issuance of letters of intent and arrangements for free vendor services 
or use of equipment with the promise or the appearance of commitment 
that a contract, modification, or order will, or may, be awarded.
    (b) Policy.
    (1) The HCA or Chief of the Contracting Office may, or may not, 
later ratify unauthorized commitments made by individuals without 
contracting authority or by contracting officers acting in excess of the 
limits of their delegated authority. Law and regulation requires that 
only individuals acting within the scope of their authority make 
acquisitions. Within the Department, that authority vests solely with 
the Contracting Officer. Acquisitions made by other than authorized 
personnel are matters of serious misconduct. The employee may be held 
legally and personally liable for the unauthorized commitment.
    (2) Ratifications do not require concurrence from legal counsel.
    (3) The person who made the unauthorized commitment must prepare the 
request for approval that must be submitted through the person's manager 
to the approving official.
    (4) The Chief of the Contracting Office may review and sign or 
reject ratification requests up to $25,000.
    (5) All other ratification requests must be reviewed and signed or 
rejected by the HCA.



Sec. 3401.670  Nomination and appointment of contracting officer's 
          representatives (CORs).



Sec. 3401.670-1  General.

    (a) Program offices must nominate personnel for consideration of a 
COR appointment in accordance with the Department's COR Policy Guide.
    (b) The contracting officer must determine what, if any, duties will 
be delegated to a COR.
    (c) The contracting officer may appoint as many CORs as is deemed 
necessary to support efficient contract administration.
    (d) Only individuals with a written delegation of authority from a 
contracting officer may act in any capacity as a representative of that 
contracting officer, including any alternate, assistant, or back-up 
duties to the COR.
    (e) For all contracts in which an information technology system 
exists, the System Security Officer for that system will perform all 
responsibilities necessary for contractor access to the system.



Sec. 3401.670-2  Appointment.

    COR appointments must be in accordance with the Department's COR 
Program Guide.

[[Page 136]]



Sec. 3401.670-3  Contract clause.

    Contracting officers must insert a clause substantially the same as 
the clause at 3452.201-70 (Contracting Officer's Representative (COR)), 
in all solicitations and contracts for which a COR will be (or is) 
appointed.

                PART 3402_DEFINITIONS OF WORDS AND TERMS

                       Subpart 3402.1_Definitions

Sec.

Sec. 3402.101 Definitions.

Sec. 3402.101-70 Abbreviations and acronyms.

                    Subpart 3402.2_Definitions Clause


Sec. 3402.201 Contract clause.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

                       Subpart 3402.1_Definitions



Sec. 3402.101  Definitions.

    As used in this chapter--
    Chief Acquisition Officer or CAO means the official responsible for 
monitoring the agency's acquisition activities, evaluating them based on 
applicable performance measurements, increasing the use of full and open 
competition in agency acquisitions, making acquisition decisions 
consistent with applicable laws, and establishing clear lines of 
authority, accountability, and responsibility for acquisition decision-
making and developing and maintaining an acquisition career management 
program.
    Chief of the Contracting Office means an official serving in the 
contracting activity (CAM or FSA Acquisitions) as the manager of a group 
that awards and administers contracts for a principal office of the 
Department. See also definition of Head of the Contracting Activity or 
HCA below.
    Contracting Officer's Representative or COR means the person 
representing the Federal government for the purpose of technical 
monitoring of contract performance. The COR is not authorized to issue 
any instructions or directions that effect any increases or decreases in 
the scope of work or that would result in the increase or decrease of 
the cost or price of a contract or a change in the delivery dates or 
performance period of a contract.
    Department or ED means the United States Department of Education.
    Head of the Contracting Activity or HCA means those officials within 
the Department who have responsibility for and manage an acquisition 
organization and usually hold unlimited procurement authority. The 
Director, Federal Student Aid Acquisitions, is the HCA for FSA. The 
Director, Contracts and Acquisitions Management (CAM), is the HCA for 
all other Departmental program offices and all boards, commissions, and 
councils under the management control of the Department.
    Performance-Based Organization or PBO is the office within the 
Department that is mandated by Public Law 105-244 to carry out Federal 
student assistance or aid programs and report to Congress on an annual 
basis. It may also be referred to as ``Federal Student Aid.''
    Senior Procurement Executive or SPE means the single agency official 
appointed as such by the head of the agency and delegated broad 
responsibility for acquisition functions, including issuing agency 
acquisition policy and reporting on acquisitions agency-wide. The SPE 
also acts as the official one level above the contracting officer when 
the HCA is acting as a contracting officer.



Sec. 3402.101-70  Abbreviations and acronyms.

CAO--Chief Acquisition Officer.
CO--Contracting Officer.
COR--Contracting Officer's Representative.
FSA--Federal Student Aid.
HCA--Head of the Contracting Activity.
IPv6--Internet Protocol version 6.
OMB--Office of Management and Budget.
OSDBU--Office of Small and Disadvantaged Business Utilization.
PBO--Performance-Based Organization (Federal Student Aid).
RFP--Request for Proposal.
SBA--Small Business Administration.
SPE--Senior Procurement Executive.

                    Subpart 3402.2_Definitions Clause



Sec. 3402.201  Contract clause.

    The contracting officer must insert the clause at 3452.202-1 
(Definitions--

[[Page 137]]

Department of Education) in all solicitations and contracts in which the 
clause at FAR 52.202-1 is required.

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 Misrepresentation 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.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

                        Subpart 3403.1_Safeguards



Sec. 3403.101  Standards of conduct.



Sec. 3403.101-3  Agency regulations.

    The Department's regulations on standards of conduct and conflicts 
of interest are in 34 CFR part 73, Standards of Conduct.

      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 at FAR 52.203-3 
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 SPE for disposition.

        Subpart 3403.3_Reports of Suspected Antitrust Violations



Sec. 3403.301  General.

    Any Departmental personnel who have evidence of a suspected 
antitrust violation in an acquisition must--
    (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 SPE.

                     Subpart 3403.4_Contingent Fees



Sec. 3403.409  Misrepresentation 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, must 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 3.601 must be approved by the HCA.

[[Page 138]]

            SUBCHAPTER B_COMPETITION AND ACQUISITION PLANNING

                 PART 3405_PUBLICIZING CONTRACT ACTIONS

          Subpart 3405.2_Synopses of Proposed Contract Actions

Sec.

Sec. 3405.202 Exceptions.

Sec. 3405.203 Publicizing and response time.

Sec. 3405.205 Special situations.

Sec. 3405.207 Preparation and transmittal of synopses.

Sec. 3405.270 Notices to perform market surveys.

                   Subpart 3405.5_Paid Advertisements


Sec. 3405.502 Authority.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

          Subpart 3405.2_Synopses of Proposed Contract Actions



Sec. 3405.202  Exceptions.

    (a)(15) FSA--Issuance of a synopsis is not required when the firm to 
be solicited has previously provided a module for the system under a 
contract that contained cost, schedule, and performance goals and the 
contractor met those goals.



Sec. 3405.203  Publicizing and response time.

    (c) FSA--Notwithstanding other provisions of the FAR, a bid or 
proposal due date of less than 30 days is permitted after issuance of a 
synopsis for acquisitions for noncommercial items. However, if time 
permits, a bid or proposal due date that affords potential offerors 
reasonable time to respond and fosters quality submissions should be 
established.



Sec. 3405.205  Special situations.

    (g) FSA--Module of a previously awarded system. Federal Student Aid 
must satisfy the publication requirements for sole source and 
competitive awards for a module of a previously awarded system by 
publishing a notice of intent on the governmentwide point of entry, not 
less than 30 days before issuing a solicitation. This notice is not 
required if a contractor who is to be solicited to submit an offer 
previously provided a module for the system under a contract that 
contained cost, schedule, and performance goals, and the contractor met 
those goals.



Sec. 3405.207  Preparation and transmittal of synopses.

    (c) FSA--In Phase One of a Two-Phase Source Selection as described 
in 3415.302-70, the contracting officer must publish a notice in 
accordance with FAR 5.2, except that the notice must include only the 
following:
    (1) Notification that the procurement will be conducted using the 
specific procedures included in 3415.302-70.
    (2) A general notice of the scope or purpose of the procurement that 
provides sufficient information for sources to make informed business 
decisions regarding whether to participate in the procurement.
    (3) A description of the basis on which potential sources are to be 
selected to submit offers in the second phase.
    (4) A description of the information that is to be required to be 
submitted if the request for information is made separate from the 
notice.
    (5) Any other information that the contracting officer deems is 
appropriate.
    (h) FSA--When modular contracting authority is being utilized, the 
notice must invite comments and support if it is believed that modular 
contracting is not suited for the requirement being procured.



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 
the submission of meaningful responses and the subsequent evaluation of 
the responses by the Federal government constitutes an acceptable market 
survey.
    (b) The notice must include--

[[Page 139]]

    (1) A clear statement of the supplies or services to be procured;
    (2) Any capabilities or experience required of a contractor and any 
other factor relevant to those requirements;
    (3) A statement that all responsible sources submitting a proposal, 
bid, or quotation must be considered;
    (4) Name, business address, and phone number of the Contracting 
Officer; and
    (5) Justification for a sole source and the identity of that source.

                   Subpart 3405.5_Paid Advertisements



Sec. 3405.502  Authority.

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

                   PART 3406_COMPETITION REQUIREMENTS

Sec.

Sec. 3406.001 Applicability.

           Subpart 3406.3_Other Than Full and Open Competition


Sec. 3406.302-5 Authorized or required by statute.

                  Subpart 3406.5_Competition Advocates


Sec. 3406.501 Requirement.

    Authority: 5 U.S.C. 301; 41 U.S.C. 418(a) and (b); and 20 U.S.C. 
1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.



Sec. 3406.001  Applicability.

    (b) FSA--This part does not apply to proposed contracts and 
contracts awarded based on other than full and open competition when the 
conditions for successive systems modules set forth in 3417.70 are 
utilized.

           Subpart 3406.3_Other Than Full and Open Competition



Sec. 3406.302-5  Authorized or required by statute.

    (a) Authority.
    (1) Citations: 20 U.S.C. 1018a.
    (2) Noncompetitive awards of successive modules for systems are 
permitted when the conditions set forth in 3417.70 are met.

                  Subpart 3406.5_Competition Advocates



Sec. 3406.501  Requirement.

    The Competition Advocate for the Department is the Deputy Director, 
Contracts and Acquisitions Management.

           PART 3408_REQUIRED SOURCES OF SUPPLIES AND SERVICES

       Subpart 3408.8_Acquisition of Printing and Related Supplies

Sec.

Sec. 3408.870 Printing clause.

Sec. 3408.871 Paperwork reduction.

    Authority: 5 U.S.C. 301, unless otherwise noted.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

       Subpart 3408.8_Acquisition of Printing and Related Supplies

    Authority: 44 U.S.C. 501.



Sec. 3408.870  Printing clause.

    The contracting officer must insert the clause at 3452.208-71 
(Printing) in all solicitations and contracts other than purchase 
orders.



Sec. 3408.871  Paperwork reduction.

    The contracting officer must insert the clause at 3452.208-72 
(Paperwork Reduction Act) in all solicitations and contracts in which 
the contractor will develop forms or documents for public use.

                   PART 3409_CONTRACTOR QUALIFICATIONS

         Subpart 3409.4_Debarment, Suspension, and Ineligibility

Sec.

Sec. 3409.400 Scope of subpart.

Sec. 3409.401 Applicability.

Sec. 3409.403 Definitions.

Sec. 3409.406 Debarment.

Sec. 3409.406-3 Procedures.

Sec. 3409.407 Suspension.

Sec. 3409.407-3 Procedures.

[[Page 140]]

   Subpart 3409.5_Organizational and Consultant Conflicts of Interest


Sec. 3409.502 Applicability.

Sec. 3409.503 Waiver.

Sec. 3409.506 Procedures.

Sec. 3409.507 Solicitation provision and contract clause.

Sec. 3409.507-1 Solicitation provision.

Sec. 3409.507-2 Contract clause.

Sec. 3409.570 Certification at or below the simplified acquisition 
          threshold.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

         Subpart 3409.4_Debarment, Suspension, and Ineligibility



Sec. 3409.400  Scope of subpart.

    This subpart implements FAR subpart 9.4 by detailing policies and 
procedures governing the debarment and suspension of organizations and 
individuals from participating in ED contracts and subcontracts.



Sec. 3409.401  Applicability.

    This subpart applies to all procurement debarment and suspension 
actions initiated by ED. This subpart does not apply to nonprocurement 
debarment and suspension.



Sec. 3409.403  Definitions.

    The SPE is designated as the ``debarring official'' and ``suspending 
official'' as defined in FAR 9.403 and is designated as the agency 
official authorized to make the decisions required in FAR 9.406 and FAR 
9.407.



Sec. 3409.406  Debarment.



Sec. 3409.406-3  Procedures.

    (b) Decision making process.
    (1) Contractors proposed for debarment may submit, in person, in 
writing, or through a representative, information and argument in 
opposition to the proposed debarment. The contractor must submit 
additional information within 30 days of receipt of the notice of 
proposal to debar, as described in FAR 9.406-3(c).
    (2) In actions not based upon a conviction or civil judgment, if the 
contractor's submission in opposition raises a genuine dispute over 
facts material to the proposed debarment, the contractor may request a 
fact-finding conference. If the Debarring Official determines that there 
is a genuine dispute of material fact, the Debarring Official will 
conduct fact-finding and base the decision in accordance with FAR 9.406-
3(b)(2) and (d)-(f).



Sec. 3409.407  Suspension.



Sec. 3409.407-3  Procedures.

    (b) Decision making process.
    (1) Contractors suspended in accordance with FAR 9.407 may submit, 
in person, in writing, or through a representative, information and 
argument in opposition to the suspension. The contractor must submit 
this information and argument within 30 days of receipt of the notice of 
suspension, as described in FAR 9.407-3(c).
    (2) In actions not based upon an indictment, if the contractor's 
submission in opposition raises a genuine dispute over facts material to 
the suspension and if no determination has been made, on the basis of 
Department of Justice advice, that substantial interests of the 
Government in pending or contemplated legal proceedings based on the 
same facts as the suspension would be prejudiced, the contractor may 
request a fact-finding conference. The Suspending Official will conduct 
fact-finding and base the decision in accordance with FAR 9.407-3(b)(2) 
and (d) through (e).

   Subpart 3409.5_Organizational and Consultant 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. 3409.506  Procedures.

    (a) If the effects of a potential or actual conflict of interest 
cannot be

[[Page 141]]

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 will terminate the contract 
unless the HCA deems continued performance to be in the best interest of 
the Federal government.
    (b) The HCA is designated as the official to conduct reviews and 
make final decisions under FAR 9.506(b) and (c).



Sec. 3409.507  Solicitation provision and contract clause.



Sec. 3409.507-1  Solicitation provision.

    The contracting officer must insert the provision in 3452.209-70 
(Conflict of interest certification) in all solicitations for services 
above the simplified acquisition threshold.



Sec. 3409.507-2  Contract clause.

    The contracting officer must insert the clause at 3452.209-71 
(Conflict of interest) in all contracts for services above the 
simplified acquisition threshold. The clause is applicable to each order 
for services over the simplified acquisition threshold under task order 
contracts.



Sec. 3409.570  Certification at or below the simplified acquisition 
          threshold.

    By accepting any contract, including orders against any Schedule or 
Government-wide Acquisition Contract (GWAC), with the Department at or 
below the simplified acquisition threshold:
    (a) The contractor warrants that, to the best of the contractor's 
knowledge and belief, there are no relevant facts or circumstances that 
would give rise to an organizational conflict of interest, as defined in 
FAR subpart 2.1, or that the contractor has disclosed all such relevant 
information.
    (b) The contractor agrees that if an actual or potential 
organizational conflict of interest is discovered after award, the 
contractor will make an immediate full disclosure in writing to the 
contracting officer. This disclosure must include a description of 
actions that the contractor has taken or proposes to take, after 
consultation with the contracting officer, to avoid, mitigate, or 
neutralize the actual or potential conflict.
    (c) The contractor agrees that:
    (1) The Government may terminate this contract for convenience, in 
whole or in part, if such termination is necessary to avoid an 
organizational conflict of interest.
    (2) The Government may terminate this contract for default or pursue 
other remedies permitted by law or this contract if the contractor was 
aware or should have been aware of a potential organizational conflict 
of interest prior to award, or discovers or should have discovered an 
actual or potential conflict after award, and does not disclose, or 
misrepresents, relevant information to the contracting officer regarding 
the conflict.
    (d) The contractor further agrees to insert provisions that 
substantially conform to the language of this section, including this 
paragraph (d), in any subcontract or consultant agreement hereunder.

                PART 3412_ACQUISITION OF COMMERCIAL ITEMS

 Subpart 3412.2_Special Requirements for the Acquisition of Commercial 
                                  Items

Sec.

Sec. 3412.203 Procedures for solicitation, evaluation, and award.

  Subpart 3412.3_Solicitation Provisions and Contract Clauses for the 
                     Acquisition of Commercial Items


Sec. 3412.302 Tailoring of provisions and clauses for the acquisition of 
          commercial items.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

 Subpart 3412.2_Special Requirements for the Acquisition of Commercial 
                                  Items



Sec. 3412.203  Procedures for solicitation, evaluation, and award.

    As specified in 3413.003, simplified acquisition procedures for 
commercial items may be used without regard to

[[Page 142]]

any dollar or timeframe limitations described in FAR 13.5 when acquired 
by the FSA and used for its purposes.

  Subpart 3412.3_Solicitation Provisions and Contract Clauses for the 
                     Acquisition of Commercial Items



Sec. 3412.302  Tailoring of provisions and clauses for the acquisition 
          of commercial items.

    The HCA is authorized to approve waivers in accordance with FAR 
12.302(c). The approved waiver may be either for an individual contract 
or for a class of contracts for the specific item. The approved waiver 
and supporting documentation must be incorporated into the contract 
file.

[[Page 143]]

           SUBCHAPTER C_CONTRACTING METHODS AND CONTRACT TYPES

               PART 3413_SIMPLIFIED ACQUISITION PROCEDURES

Sec.

Sec. 3413.000 Scope of part.

Sec. 3413.003 Policy.

              Subpart 3413.3_Simplified Acquisition Methods


Sec. 3413.303 Blanket purchase agreements (BPAs).

Sec. 3413.303-5 Purchases under BPAs.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.



Sec. 3413.000  Scope of part.



Sec. 3413.003  Policy.

    (c)(1)(iii) FSA--FSA may use simplified acquisition procedures for 
commercial items without regard to any dollar or timeframe limitations 
described in FAR 13.5.
    (iv) FSA--FSA may use simplified acquisition procedures for non-
commercial items up to $1,000,000 when the acquisition is set aside for 
small businesses, pursuant to 3419.502.

              Subpart 3413.3_Simplified Acquisition Methods



Sec. 3413.303  Blanket purchase agreements (BPAs).



Sec. 3413.303-5  Purchases under BPAs.

    (b) Individual purchases under blanket purchase agreements for 
commercial items may exceed the simplified acquisition threshold but 
shall not exceed the threshold for the test program for certain 
commercial items in FAR 13.500(a).

                        PART 3414_SEALED BIDDING

          Subpart 3414.4_Opening of Bids and Award of Contract

Sec.

Sec. 3414.407 Mistakes in bids.

Sec. 3414.407-3 Other mistakes disclosed before award.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

          Subpart 3414.4_Opening of Bids and Award of Contract



Sec. 3414.407  Mistakes in bids.



Sec. 3414.407-3  Other mistakes disclosed before award.

    Authority is delegated to the HCA to make determinations under FAR 
14.407-3(a) through (d).

                  PART 3415_CONTRACTING BY NEGOTIATION

  Subpart 3415.2_Solicitation and Receipt of Proposals and Information

Sec.

Sec. 3415.209 Solicitation provisions and contract clauses.

                     Subpart 3415.3_Source Selection


Sec. 3415.302 Source selection objective.

Sec. 3415.302-70 Two-phase source selection.

                  Subpart 3415.6_Unsolicited Proposals


Sec. 3415.605 Content of unsolicited proposals.

Sec. 3415.606 Agency procedures.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

  Subpart 3415.2_Solicitation and Receipt of Proposals and Information



Sec. 3415.209  Solicitation provisions and contract clauses.

    (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 52.215-1(e). 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.

[[Page 144]]

    (b) The contracting officer must insert the provision in 3452.215-
70, in all solicitations that include a reference to FAR 52.215-1 
(Instructions to Offerors--Competitive Acquisitions).

                     Subpart 3415.3_Source Selection



Sec. 3415.302  Source selection objective.



Sec. 3415.302-70  Two-phase source selection.

    (a) FSA--May utilize a two-phase process to solicit offers and 
select a source for award. The contracting officer can choose to use 
this optional method of solicitation when deemed beneficial to the FSA 
in meeting its needs as a PBO.
    (b) Phase One.
    (1) The contracting officer must publish a notice in accordance with 
FAR 5.2, except that the notice must include limited information as 
specified in 3405.207.
    (2) Information Submitted by Offerors. Each offeror must submit 
basic information such as the offeror's qualifications, the proposed 
conceptual approach, costs likely to be associated with the approach, 
and past performance data, together with any additional information 
requested by the contracting officer.
    (3) Selection for participating in second phase. The contracting 
officer must select the offerors that are eligible to participate in the 
second phase of the process. The contracting officer must limit the 
number of the selected offerors to the number of sources that the 
contracting officer determines is appropriate and in the best interests 
of the Federal government.
    (c) Phase Two.
    (1) The contracting officer must conduct the second phase of the 
source selection consistent with FAR 15.2 and 15.3, except as provided 
by 3405.207.
    (2) Only sources selected in the first phase will be eligible to 
participate in the second phase.

                  Subpart 3415.6_Unsolicited Proposals



Sec. 3415.605  Content of unsolicited proposals.

    (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 Federal 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 
15.604; and
    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. 3415.606  Agency procedures.

    (b)(1) The HCA or designee is the contact point to coordinate the 
receipt, control, and handling of unsolicited proposals.
    (2) Offerors must direct unsolicited proposals to the HCA.

                      PART 3416_TYPES OF CONTRACTS

               Subpart 3416.3_Cost-Reimbursement Contracts

Sec.

Sec. 3416.303 Cost-sharing contracts.

Sec. 3416.307 Contract clauses.

                   Subpart 3416.4_Incentive Contracts


Sec. 3416.402 Application of predetermined, formula-type incentives.

Sec. 3416.402-2 Performance incentives.

Sec. 3416.470 Award-term contracting.

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


Sec. 3416.603 Letter contracts.

[[Page 145]]


Sec. 3416.603-3 Limitations.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

               Subpart 3416.3_Cost-Reimbursement Contracts



Sec. 3416.303  Cost-sharing contracts.

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



Sec. 3416.307  Contract clauses.

    (a) If the clause at FAR 52.216-7 (Allowable Cost and Payment) is 
used in a contract with a hospital, the contracting officer must 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 must insert the clause at 3452.216-70 
(Additional cost principles) in all solicitations of and resultant cost-
reimbursement contracts with nonprofit organizations other than 
educational institutions, hospitals, or organizations listed in 
Attachment C to Office of Management and Budget Circular A-122.

                   Subpart 3416.4_Incentive Contracts



Sec. 3416.402  Application of predetermined, formula-type incentives.



Sec. 3416.402-2  Performance incentives.

    (b) Award-term contracting may be used for performance-based 
contracts or task orders. See 3416.470 for the definition of award-term 
contracting and implementation guidelines.



Sec. 3416.470  Award-term contracting.

    (a) Definition. Award-term contracting is a method, based upon a 
pre-determined plan in the contract, to extend the contract term for 
superior performance and to reduce the contract term for substandard or 
poor performance.
    (b) Applicability. A Contracting Officer may authorize use of an 
award-term incentive contract for acquisitions where the quality of 
contractor performance is of a critical or highly important nature. The 
basic contract term may be extended on the basis of the Federal 
government's determination of the excellence of the contractor's 
performance. Additional periods of performance, which are referred to 
herein as ``award terms,'' are available for possible award to the 
contractor. As award term(s) are awarded, each additional period of 
performance will immediately follow the period of performance for which 
the award term was granted. The contract may end at the base period of 
performance if the Federal government determines that the contractor's 
performance does not reflect a level of performance as described in the 
award-term plan. Award-term periods may only be earned based on the 
evaluated quality of the performance of the contractor. Meeting the 
terms of the contract is not justification to award an award-term 
period. The use of an award-term plan does not exempt the contract from 
the requirements of FAR 17.207, with respect to performing due diligence 
prior to extending a contract term.
    (c) Approvals. The Contracting Officer must justify the use of an 
award-term incentive contract in writing. The award-term plan approving 
official will be appointed by the HCA.
    (d) Disputes. The Federal government unilaterally makes all 
decisions regarding award-term evaluations, points, methodology used to 
calculate points, and the degree of the contractor's success.
    (e) Award-term limitations.
    (1) Award periods may be earned during the base period of 
performance and each option period, except the last option period. 
Award-term periods may not be earned during the final option year of any 
contract.
    (2) Award-term periods may not exceed twelve months.
    (3) The potential award-term periods will be priced, evaluated, and 
considered in the initial contract selection process.
    (f) Implementation of extensions or reduced contract terms.
    (1) An award term is contingent upon a continuing need for the 
supplies or

[[Page 146]]

services and the availability of funds. Award terms may be cancelled 
prior to the start of the period of performance at no cost to the 
Federal government if there is not a continued need or available 
funding.
    (2) The extension or reduction of the contract term is affected by a 
unilateral contract modification.
    (3) Award-term periods occur after the period for which the award 
term was granted. Award-term periods effectively move option periods to 
later contract performance periods.
    (4) Contractors have the right to decline the award of an award-term 
period. A contractor loses its ability to earn additional award terms if 
an earned Award-Term Period is declined.
    (5) Changes to the contract award-term plan must be mutually agreed 
upon.
    (g) Clause. Insert a clause substantially the same as the clause at 
3452.216-71 (Award-term) in all solicitations and resulting contracts 
where an award-term incentive contract is anticipated.

   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 SPE signs the written determination under FAR 16.603-3.

                  PART 3417_SPECIAL CONTRACTING METHODS

                         Subpart 3417.2_Options

Sec.

Sec. 3417.204 Contracts.

Sec. 3417.207 Exercise of options.

      Subpart 3417.5_Interagency Acquisitions Under the Economy Act


Sec. 3417.502 General.

                   Subpart 3417.7_Modular Contracting


Sec. 3417.70 Modular contracting.

    Authority: 31 U.S.C. 1535 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

                         Subpart 3417.2_Options



Sec. 3417.204  Contracts.

    (e) Except as otherwise provided by law, contract periods that 
exceed the five-year limitation specified in FAR 17.204(e) must be 
approved by--
    (1) The HCA for individual contracts; or
    (2) The SPE for classes of contracts.



Sec. 3417.207  Exercise of options.

    If a contract provision allows an option to be exercised within a 
specified timeframe after funds become available, it must also specify 
that the date on which funds ``become available'' is the actual date 
funds become available to the contracting officer for obligation.
    (f)(2) The Federal government may accept price reductions offered by 
contractors at any time during contract performance. Acceptance of price 
reductions offered by contractors will not be considered renegotiations 
as identified in this subpart if they were not initiated or requested by 
the Federal government.

      Subpart 3417.5_Interagency Acquisitions Under the Economy Act



Sec. 3417.502  General.

    No other Federal department or agency may purchase property or 
services under contracts established or administered by FSA unless the 
purchase is approved by SPE for the requesting Federal department or 
agency.

                   Subpart 3417.7_Modular Contracting



Sec. 3417.70  Modular contracting.

    (a) FSA--May incrementally conduct successive procurements of 
modules of overall systems. Each module must be useful in its own right 
or useful in combination with the earlier procurement modules. 
Successive modules may be procured on a sole source basis under the 
following circumstances:

[[Page 147]]

    (1) Competitive procedures are used for awarding the contract for 
the first system module; and
    (2) The solicitation for the first module included the following:
    (i) A general description of the entire system that was sufficient 
to provide potential offerors with reasonable notice of the general 
scope of future modules;
    (ii) Other sufficient information to enable offerors to make 
informed business decisions to submit offers for the first module; and
    (iii) A statement that procedures, i.e., the sole source awarding of 
follow-on modules, could be used for the subsequent awards.

[[Page 148]]

                   SUBCHAPTER D_SOCIOECONOMIC PROGRAMS

                    PART 3419_SMALL BUSINESS PROGRAMS

                         Subpart 3419.2_Policies

Sec.

Sec. 3419.201 General policy.

Sec. 3419.201-70 Office of Small and Disadvantaged Business Utilization 
          (OSDBU).

              Subpart 3419.5_Set-Asides for Small Business


Sec. 3419.502 Setting aside acquisitions.

Sec. 3419.502-4 Methods of conducting set-asides.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

                         Subpart 3419.2_Policies



Sec. 3419.201  General policy.



Sec. 3419.201-70  Office of Small and Disadvantaged Business Utilization 
          (OSDBU).

    The Office of Small and Disadvantaged Business Utilization (OSDBU), 
Office of the Deputy Secretary, is responsible for facilitating the 
implementation of the Small Business Act, as described in FAR 19.201. 
The OSDBU develops rules, policy, procedures, and guidelines for the 
effective administration of ED's small business program.

              Subpart 3419.5_Set-Asides for Small Business



Sec. 3419.502  Setting aside acquisitions.



Sec. 3419.502-4  Methods of conducting set-asides.

    (a) Simplified acquisition procedures as described in FAR part 13 
for the procurement of noncommercial services for FSA requirements may 
be used under the following circumstances:
    (1) The procurement does not exceed $1,000,000;
    (2) The procurement is conducted as a small business set-aside 
pursuant to section 15(a) of the Small Business Act;
    (3) The price charged for supplies associated with the services are 
expected to be less than 20 percent of the total contract price;
    (4) The procurement is competitive; and
    (5) The procurement is not for construction.

     PART 3422_APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

        Subpart 3422.10_Service Contract Act of 1965, as Amended

Sec.

Sec. 3422.1002 Statutory requirements.

Sec. 3422.1002-1 General.

    Authority: 5 U.S.C. 301 Subpart 3422.10--Service Contract Act of 
1965, as Amended

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.



Sec. 3422.1002  Statutory requirements.



Sec. 3422.1002-1  General.

    Consistent with 29 CFR 4.145, Extended term contracts, the five-year 
limitation set forth in the Service Contract Act of 1965, as amended 
(Service Contract Act), applies to each period of the contract 
individually, not the cumulative period of base and option periods. 
Accordingly, no contract subject to the Service Contract Act issued by 
the Department of Education will have a base period or option period 
that exceeds five years.

       PART 3424_PROTECTION OF PRIVACY AND FREEDOM OF INFORMATION

             Subpart 3424.1_Protection of Individual Privacy

Sec.

Sec. 3424.103 Procedures.

Sec. 3424.170 Protection of human subjects.

                Subpart 3424.2_Freedom of Information Act


Sec. 3424.201 Authority.

Sec. 3424.203 Policy.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

[[Page 149]]

             Subpart 3424.1_Protection of Individual Privacy



Sec. 3424.103  Procedures.

    (a) If the Privacy Act of 1974 (Privacy Act) applies to a contract, 
the contracting officer must specify in the contract the disposition to 
be made of the system or systems of records upon completion of 
performance. 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 individual's 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 must 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.



Sec. 3424.170  Protection of human subjects.

    In this subsection, ``Research'' means a systematic investigation, 
including research development, testing and evaluation, designed to 
develop or contribute to generalizable knowledge. (34 CFR 97.102(d)) 
Research is considered to involve human subjects when a researcher 
obtains information about a living individual through intervention or 
interaction with the individual or obtains personally identifiable 
private information about an individual. Some categories of research are 
exempt under the regulations, and the exemptions are in 34 CFR part 97.
    (a) The contracting officer must insert the provision in 3452.224-71 
(Notice about research activities involving human subjects) in any 
solicitation where a resultant contract will include, or is likely to 
include, research activities involving human subjects covered under 34 
CFR part 97.
    (b) The contracting officer must insert the clause at 3452.224-72 
(Research activities involving human subjects) in any solicitation that 
includes the provision in 3452.224-71 (Notice about research activities 
involving human subjects) and in any resultant contract.

                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.



Sec. 3424.203  Policy.

    (a) [Reserved]
    (b) The Department's policy is to release all information 
incorporated into a contract and documents that result from the 
performance of a contract to the public under the Freedom of Information 
Act. The release or withholding of documents requested will be made on a 
case-by-case basis. Contracting officers must advise offerors and 
prospective contractors of the possibility that their submissions may be 
released under the Freedom of Information Act, not withstanding any 
restrictions that are included at the time of proposal submission. A 
clause substantially the same as the clause at 3452.224-70 (Release of 
information under the Freedom of Information Act) must be included in 
all solicitations and contracts.

                      PART 3425_FOREIGN ACQUISITION

                Subpart 3425.1_Buy American Act_Supplies

Sec.

Sec. 3425.102 Exceptions.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

[[Page 150]]

                Subpart 3425.1_Buy American Act_Supplies



Sec. 3425.102  Exceptions.

    The HCA approves determinations under FAR 25.103(b)(2)(i).

[[Page 151]]

              SUBCHAPTER E_GENERAL CONTRACTING REQUIREMENTS

                 PART 3427_PATENTS, DATA, AND COPYRIGHTS

              Subpart 3427.4_Rights in Data and Copyrights

Sec.

Sec. 3427.409 Solicitation provisions and contract clauses.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

              Subpart 3427.4_Rights in Data and Copyrights



Sec. 3427.409  Solicitation provisions and contract clauses.

    (a) The contracting officer must insert the clause at 3452.227-70 
(Publication and publicity) in all solicitations and contracts other 
than purchase orders.
    (b) The contracting officer must insert the clause at 3452.227-71 
(Advertising of awards) in all solicitations and contracts other than 
purchase orders.
    (c) The contracting officer must insert the clause at 3452.227-72 
(Use and non-disclosure agreement) in all contracts over the simplified 
acquisition threshold, and in contracts under the simplified acquisition 
threshold, as appropriate.
    (d) The contracting officer must insert the clause at 3452.227-73 
(Limitations on the use or disclosure of Government-furnished 
information marked with restrictive legends) in all contracts of third 
party vendors who require access to Government-furnished information 
including other contractors' technical data, proprietary information, or 
software.

                      PART 3428_BONDS AND INSURANCE

                        Subpart 3428.3_Insurance

Sec.

Sec. 3428.311 Solicitation provision and contract clause on liability 
          insurance under cost-reimbursement contracts.

Sec. 3428.311-2 Contract clause.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

                        Subpart 3428.3_Insurance



Sec. 3428.311  Solicitation provision and contract clause on liability 
          insurance under cost-reimbursement contracts.



Sec. 3428.311-2  Contract clause.

    The contracting officer must insert the clause at 3452.228-70 
(Required insurance) in all solicitations and resultant cost-
reimbursement contracts.

                      PART 3432_CONTRACT FINANCING

        Subpart 3432.4_Advance Payments for Non-Commercial Items

Sec.

Sec. 3432.402 General.

Sec. 3432.407 Interest.

                     Subpart 3432.7_Contract Funding


Sec. 3432.705 Contract clauses.

Sec. 3432.705-2 Clauses for limitation of cost or funds.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

        Subpart 3432.4_Advance Payments for Non-Commercial Items



Sec. 3432.402  General.

    The HCA is delegated the authority to make determinations under FAR 
32.402(c)(1)(iii). This authority may not be redelegated.



Sec. 3432.407  Interest.

    The HCA is designated as the official who may authorize advance 
payments without interest under FAR 32.407(d).

[[Page 152]]

                     Subpart 3432.7_Contract Funding



Sec. 3432.705  Contract clauses.



Sec. 3432.705-2  Clauses for limitation of cost or funds.

    (a) The contracting officer must insert the clause at 3452.232-70 
(Limitation of cost or funds) in all solicitations and contracts where a 
Limitation of cost or Limitation of funds clause is utilized.
    (b) The contracting officer must 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. 3433.103 Protests to the agency.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

                         Subpart 3433.1_Protests



Sec. 3433.103  Protests to the agency.

    (f)(3) The contracting officer's HCA must approve the justification 
or determination to continue performance. The criteria in FAR 
33.103(f)(3) must be followed in making the determination to award a 
contract before resolution of a protest.

[[Page 153]]

             SUBCHAPTER F_SPECIAL CATEGORIES OF CONTRACTING

                      PART 3437_SERVICE CONTRACTING

                Subpart 3437.1_Service Contracts_General

Sec.

Sec. 3437.102 Policy.

Sec. 3437.170 Observance of administrative closures

             Subpart 3437.2_Advisory and Assistance Services


Sec. 3437.270 Services of consultants clauses.

              Subpart 3437.6_Performance-Based Acquisition


Sec. 3437.670 Contract type.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, 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.



Sec. 3437.170  Observance of administrative closures.

    The contracting officer must insert the clause at 3452.237-71 
(Observance of administrative closures) in all solicitations and 
contracts for services.

             Subpart 3437.2_Advisory and Assistance Services



Sec. 3437.270  Services of consultants clause.

    The contracting officer must insert the clause at 3452.237-70 
(Services of consultants) in all solicitations and resultant cost-
reimbursement contracts that do not provide services to FSA.

              Subpart 3437.6_Performance-Based Acquisition



Sec. 3437.670  Contract type.

    Award-term contracting may be used for performance-based contracts 
and task orders that provide opportunities for significant improvements 
and benefits to the Department. Use of award-term contracting must be 
approved in advance by the HCA.

             PART 3439_ACQUISITION OF INFORMATION TECHNOLOGY

 Subpart 3439.70_Department Requirements for Acquisition of Information 
                               Technology

Sec.

Sec. 3439.701 Internet Protocol version 6.

Sec. 3439.702 Department security requirements.

Sec. 3439.703 Federal desktop core configuration (FDCC) compatibility.

    Authority: 5 U.S.C. 301 and 20 U.S.C. 1018a.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

 Subpart 3439.70_Department Requirements for Acquisition of Information 
                               Technology



Sec. 3439.701  Internet Protocol version 6.

    The contracting officer must insert the clause at 3452.239-70 
(Internet protocol version 6 (IPv6)) in all solicitations and resulting 
contracts for hardware and software.



Sec. 3439.702  Department security requirements.

    The contracting officer must include the solicitation provision in 
3452.239-71 (Notice to offerors of Department security requirements) and 
the clause at 3452.239-72 (Department security requirements) when 
contractor employees will have access to Department-controlled 
facilities or space, or when the work (wherever located) involves the 
design, operation, repair, or maintenance of information systems and 
access to sensitive but unclassified information.

[[Page 154]]



Sec. 3439.703  Federal desktop core configuration (FDCC) compatibility.

    The contracting officer must include the clause at 3452.239-73 
(Federal desktop core configuration (FDCC) compatibility) in all 
solicitations and contracts where software will be developed, 
maintained, or operated on any system using the FDCC configuration.

[[Page 155]]

                    SUBCHAPTER G_CONTRACT MANAGEMENT

          PART 3442_CONTRACT ADMINISTRATION AND AUDIT SERVICES

                   Subpart 3442.70_Contract Monitoring

Sec.

Sec. 3442.7001 Litigation and claims clause.

Sec. 3442.7002 Delays.

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.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

                   Subpart 3442.70_Contract Monitoring



Sec. 3442.7001  Litigation and claims clause.

    The contracting officer must insert the clause at 3452.242-70 
(Litigation and claims) in all solicitations and resultant cost-
reimbursement contracts.



Sec. 3442.7002  Delays.

    The contracting officer must insert the clause at 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 must insert the clause at 3452.242-73 
(Accessibility of meetings, conferences, and seminars to persons with 
disabilities) in all solicitations and contracts.

                    PART 3443_CONTRACT MODIFICATIONS

                         Subpart 3443.1_General

Sec.

Sec. 3443.107 Contract clause.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

                         Subpart 3443.1_General



Sec. 3443.107  Contract clause.

    The contracting officer must insert a clause substantially the same 
as 3452.243-70 (Key personnel) in all solicitations and resultant cost-
reimbursement contracts in which it will be essential for the 
contracting officer to be notified that a change of designated key 
personnel is to take place by the contractor.

                      PART 3445_GOVERNMENT PROPERTY

     Subpart 3445.4_Contractor Use and Rental of Government Property

Sec.

Sec. 3445.405 Contracts with foreign governments or international 
          organizations.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

     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 must determine the amount of cost 
to be recovered or rental charged, if any, based on the facts and 
circumstances of each case.

[[Page 156]]

                        PART 3447_TRANSPORTATION

                      Subpart 3447.7_Foreign Travel

Sec.

Sec. 3447.701 Foreign travel clause.

    Authority: 5 U.S.C. 301.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

                      Subpart 3447.7_Foreign Travel



Sec. 3447.701  Foreign travel clause.

    The contracting officer must insert the clause at 3452.247-70 
(Foreign travel) in all solicitations and resultant cost-reimbursement 
contracts.

[[Page 157]]

                     SUBCHAPTER H_CLAUSES AND FORMS

         PART 3452_SOLICITATION PROVISIONS AND CONTRACT CLAUSES

              Subpart 3452.2_Text of Provisions and Clauses

Sec.

Sec. 3452.201-70 Contracting Officer's Representative (COR).

Sec. 3452.202-1 Definitions--Department of Education.

Sec. 3452.208-71 Printing.

Sec. 3452.208-72 Paperwork Reduction Act.

Sec. 3452.209-70 Conflict of interest. certification.

Sec. 3452.209-71 Conflict of interest.

Sec. 3452.215-70 Release of restricted data.

Sec. 3452.216-70 Additional cost principles.

Sec. 3452.216-71 Award-Term.

Sec. 3452.224-70 Release of information under the Freedom of Information 
          Act.

Sec. 3452.224-71 Notice about research activities involving human 
          subjects.

Sec. 3452.224-72 Research activities involving human subjects.

Sec. 3452.227-70 Publication and publicity.

Sec. 3452.227-71 Advertising of awards.

Sec. 3452.227-72 Use and non-disclosure agreement.

Sec. 3452.227-73 Limitations on the use or disclosure of Government-
          furnished information marked with restrictive legends.

Sec. 3452.228-70 Required insurance.

Sec. 3452.232-70 Limitation of cost or funds.

Sec. 3452.232-71 Incremental funding.

Sec. 3452.237-70 Services of consultants.

Sec. 3452.237-71 Observance of administrative closures.

Sec. 3452.239-70 Internet protocol version 6 (IPv6).

Sec. 3452.239-71 Notice to offerors of Department security requirements.

Sec. 3452.239-72 Department security requirements.

Sec. 3452.239-73 Federal desktop core configuration (FDCC) 
          compatibility.

Sec. 3452.242-70 Litigation and claims.

Sec. 3452.242-71 Notice to the Government of delays.

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.

    Source: 76 FR 12796, Mar. 8, 2011, unless otherwise noted.

              Subpart 3452.2_Text of Provisions and Clauses



Sec. 3452.201-70  Contracting Officer's Representative (COR).

    As prescribed in 3401.670-3, insert a clause substantially the same 
as:

          Contracting Officer's Representative (COR) (MAR 2011)

    (a) The Contracting Officer's Representative (COR) is responsible 
for the technical aspects of the project, technical liaison with the 
contractor, and any other responsibilities that are specified in the 
contract. These responsibilities include inspecting all deliverables, 
including reports, and recommending acceptance or rejection to the 
contracting officer.
    (b) The COR is not authorized to make any commitments or otherwise 
obligate the Government or authorize any changes that affect the 
contract price, terms, or conditions. Any contractor requests for 
changes shall be submitted in writing directly to the contracting 
officer or through the COR. No such changes shall be made without the 
written authorization of the contracting officer.
    (c) The COR's name and contact information:
    (d) The COR may be changed by the Government at any time, but 
notification of the change, including the name and address of the 
successor COR, will be provided to the contractor by the contracting 
officer in writing.

                             (End of clause)



Sec. 3452.202-1  Definitions--Department of Education.

    As prescribed in 3402.201, insert the following clause in 
solicitations and contracts in which the clause at FAR 52.202-1 is 
required.

             Definitions--Department of Education (MAR 2011)

    (a) The definitions at FAR 2.101 are appended with those contained 
in Education Department Acquisition Regulations (EDAR) 3402.101.
    (b) The EDAR is available via the Internet at http://www.ed.gov/
policy/fund/reg/clibrary/edar.html.

[[Page 158]]

                             (End of clause)



Sec. 3452.208-71  Printing.

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

                           Printing (MAR 2011)

    Unless otherwise specified in this contract, the contractor shall 
not engage in, nor subcontract for, any 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 duplication of fewer than 5,000 units of any one page, or 
fewer than 25,000 units in the aggregate of multiple pages, shall not be 
deemed to be printing. A unit is defined as one side of one sheet, one 
color only (with black counting as a color), with a maximum image size 
of 10\3/4\ by 14\1/4\ inches on a maximum paper size of 11 by 17 inches. 
Examples of counting the number of units: black plus one additional 
color on one side of one page counts as two units. Three colors 
(including black) on two sides of one page count as six units.

                             (End of clause)



Sec. 3452.208-72  Paperwork Reduction Act.

    As prescribed in 3408.871, insert the following clause in all 
relevant solicitations and contracts:

                   Paperwork Reduction Act (MAR 2011)

    (a) The Paperwork Reduction Act of 1995 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, no plan, questionnaire, interview 
guide, or other similar device for collecting information may be used 
without first obtaining clearance from the Chief Acquisition Officer 
(CAO) or the CAO's designee within the Department of Education (ED) and 
the Office of Management and Budget (OMB). Contractors and Contracting 
Officers' Representatives shall be guided by the provisions of 5 CFR 
part 1320, Controlling Paperwork Burdens on the Public, and should seek 
the advice of the Department's Paperwork Clearance Officer to determine 
the procedures for acquiring CAO and OMB clearance.
    (b) The contractor shall obtain the required clearances through the 
Contracting Officer's 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 CAO and OMB clearance. 
Excessive delay caused by the Government that 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. 3452.209-70  Conflict of interest certification.

    As prescribed in 3409.507-1, insert the following provision in all 
solicitations anticipated to result in contract actions for services 
above the simplified acquisition threshold:

              Conflict of Interest Certification (MAR 2011)

    (a)(1) The contractor, subcontractor, employee, or consultant, by 
signing the form in this clause, certifies that, to the best of its 
knowledge and belief, there are no relevant facts or circumstances that 
could give rise to an organizational or personal conflict of interest, 
(see FAR Subpart 9.5 for organizational conflicts of interest) (or 
apparent conflict of interest), for the organization or any of its 
staff, and that the contractor, subcontractor, employee, or consultant 
has disclosed all such relevant information if such a conflict of 
interest appears to exist to a reasonable person with knowledge of the 
relevant facts (or if such a person would question the impartiality of 
the contractor, subcontractor, employee, or consultant). Conflicts may 
arise in the following situations:
    (i) Unequal access to information. A potential contractor, 
subcontractor, employee, or consultant has access to non-public 
information through its performance on a government contract.
    (ii) Biased ground rules. A potential contractor, subcontractor, 
employee, or consultant has worked, in one government contract, or 
program, on the basic structure or ground rules of another government 
contract.
    (iii) Impaired objectivity. A potential contractor, subcontractor, 
employee, or consultant, or member of their immediate family (spouse, 
parent, or child) has financial or other interests that would impair, or 
give the appearance of impairing, impartial judgment in the evaluation 
of government programs, in offering advice or recommendations to the 
government, or in providing technical assistance or other services to 
recipients of Federal funds as part of its contractual responsibility. 
``Impaired objectivity'' includes but is not limited to the following 
situations that would cause a reasonable person with knowledge of the 
relevant facts to question a person's objectivity:

[[Page 159]]

    (A) Financial interests or reasonably foreseeable financial 
interests in or in connection with products, property, or services that 
may be purchased by an educational agency, a person, organization, or 
institution in the course of implementing any program administered by 
the Department;
    (B) Significant connections to teaching methodologies or approaches 
that might require or encourage the use of specific products, property, 
or services; or
    (C) Significant identification with pedagogical or philosophical 
viewpoints that might require or encourage the use of a specific 
curriculum, specific products, property, or services.
    (2) Offerors must provide the disclosure described above on any 
actual or potential conflict of interest (or apparent conflict of 
interest) regardless of their opinion that such a conflict or potential 
conflict (or apparent conflict of interest) would not impair their 
objectivity.
    (3) In a case in which an actual or potential conflict (or apparent 
conflict of interest) is disclosed, the Department will take appropriate 
actions to eliminate or address the actual or potential conflict, 
including but not limited to mitigating or neutralizing the conflict, 
when appropriate, through such means as ensuring a balance of views, 
disclosure with the appropriate disclaimers, or by restricting or 
modifying the work to be performed to avoid or reduce the conflict. In 
this clause, the term ``potential conflict'' means reasonably 
foreseeable conflict of interest.
    (b) The contractor, subcontractor, employee, or consultant agrees 
that if ``impaired objectivity'', or an actual or potential conflict of 
interest (or apparent conflict of interest) is discovered after the 
award is made, it will make a full disclosure in writing to the 
contracting officer. This disclosure shall include a description of 
actions that the contractor has taken or proposes to take to avoid, 
mitigate, or neutralize the actual or potential conflict (or apparent 
conflict of interest).
    (c) Remedies. The Government may terminate this contract for 
convenience, in whole or in part, if it deems such termination necessary 
to avoid the appearance of a conflict of interest. If the contractor was 
aware of a potential conflict of interest prior to award or discovered 
an actual or potential conflict after award and did not disclose or 
misrepresented relevant information to the contracting officer, the 
Government may terminate the contract for default, or pursue such other 
remedies as may be permitted by law or this contract. These remedies 
include imprisonment for up to five years for violation of 18 U.S.C. 
1001 and fines of up to $5000 for violation of 31 U.S.C. 3802. Further 
remedies include suspension or debarment from contracting with the 
Federal government. The contractor may also be required to reimburse the 
Department for costs the Department incurs arising from activities 
related to conflicts of interest. An example of such costs would be 
those incurred in processing Freedom of Information Act requests related 
to a conflict of interest.
    (d) In cases where remedies short of termination have been applied, 
the contractor, subcontractor, employee, or consultant agrees to 
eliminate the organizational conflict of interest, or mitigate it to the 
satisfaction of the contracting officer.
    (e) The contractor further agrees to insert in any subcontract or 
consultant agreement hereunder, provisions that conform substantially to 
the language of this clause, including specific mention of potential 
remedies and this paragraph (e).
    (f) Conflict of Interest Certification.
    The offeror, [insert name of offeror], hereby certifies that, to the 
best of its knowledge and belief, there are no present or currently 
planned interests (financial, contractual, organizational, or otherwise) 
relating to the work to be performed under the contract or task order 
resulting from Request for Proposal No. [insert number] that would 
create any actual or potential conflict of interest (or apparent 
conflicts of interest) (including conflicts of interest for immediate 
family members: spouses, parents, children) that would impinge on its 
ability to render impartial, technically sound, and objective assistance 
or advice or result in it being given an unfair competitive advantage. 
In this clause, the term ``potential conflict'' means reasonably 
foreseeable conflict of interest. The offeror further certifies that it 
has and will continue to exercise due diligence in identifying and 
removing or mitigating, to the Government's satisfaction, such conflict 
of interest (or apparent conflict of interest).

 Offeror's Name_________________________________________________________

 RFP/Contract No._______________________________________________________

 Signature______________________________________________________________

 Title__________________________________________________________________

 Date___________________________________________________________________

                             (End of clause)



Sec. 3452.209-71  Conflict of interest.

    As prescribed in 3409.507-2, insert the following clause in all 
contracts for services above the simplified acquisition threshold:

                     Conflict of Interest (MAR 2011)

    (a)(1) The contractor, subcontractor, employee, or consultant, has 
certified that, to the best of its knowledge and belief, there are no 
relevant facts or circumstances that could give rise to an 
organizational or personal conflict of interest (see FAR Subpart

[[Page 160]]

9.5 for organizational conflicts of interest) (or apparent conflict of 
interest) for the organization or any of its staff, and that the 
contractor, subcontractor, employee, or consultant has disclosed all 
such relevant information if such a conflict of interest appears to 
exist to a reasonable person with knowledge of the relevant facts (or if 
such a person would question the impartiality of the contractor, 
subcontractor, employee, or consultant). Conflicts may arise in the 
following situations:
    (i) Unequal access to information--A potential contractor, 
subcontractor, employee, or consultant has access to non-public 
information through its performance on a government contract.
    (ii) Biased ground rules--A potential contractor, subcontractor, 
employee, or consultant has worked, in one government contract, or 
program, on the basic structure or ground rules of another government 
contract.
    (iii) Impaired objectivity--A potential contractor, subcontractor, 
employee, or consultant, or member of their immediate family (spouse, 
parent, or child) has financial or other interests that would impair, or 
give the appearance of impairing, impartial judgment in the evaluation 
of government programs, in offering advice or recommendations to the 
government, or in providing technical assistance or other services to 
recipients of Federal funds as part of its contractual responsibility. 
``Impaired objectivity'' includes but is not limited to the following 
situations that would cause a reasonable person with knowledge of the 
relevant facts to question a person's objectivity:
    (A) Financial interests or reasonably foreseeable financial 
interests in or in connection with products, property, or services that 
may be purchased by an educational agency, a person, organization, or 
institution in the course of implementing any program administered by 
the Department;
    (B) Significant connections to teaching methodologies that might 
require or encourage the use of specific products, property, or 
services; or
    (C) Significant identification with pedagogical or philosophical 
viewpoints that might require or encourage the use of a specific 
curriculum, specific products, property, or services.
    (2) Offerors must provide the disclosure described above on any 
actual or potential conflict (or apparent conflict of interest) of 
interest regardless of their opinion that such a conflict or potential 
conflict (or apparent conflict of interest) would not impair their 
objectivity.
    (3) In a case in which an actual or potential conflict (or apparent 
conflict of interest) is disclosed, the Department will take appropriate 
actions to eliminate or address the actual or potential conflict (or 
apparent conflict of interest), including but not limited to mitigating 
or neutralizing the conflict, when appropriate, through such means as 
ensuring a balance of views, disclosure with the appropriate 
disclaimers, or by restricting or modifying the work to be performed to 
avoid or reduce the conflict. In this clause, the term ``potential 
conflict'' means reasonably foreseeable conflict of interest.
    (b) The contractor, subcontractor, employee, or consultant agrees 
that if ``impaired objectivity'', or an actual or potential conflict of 
interest (or apparent conflict of interest) is discovered after the 
award is made, it will make a full disclosure in writing to the 
contracting officer. This disclosure shall include a description of 
actions that the contractor has taken or proposes to take, after 
consultation with the contracting officer, to avoid, mitigate, or 
neutralize the actual or potential conflict (or apparent conflict of 
interest).
    (c) Remedies. The Government may terminate this contract for 
convenience, in whole or in part, if it deems such termination necessary 
to avoid the appearance of a conflict of interest. If the contractor was 
aware of a potential conflict of interest prior to award or discovered 
an actual or potential conflict (or apparent conflict of interest) after 
award and did not disclose or misrepresented relevant information to the 
contracting officer, the Government may terminate the contract for 
default, or pursue such other remedies as may be permitted by law or 
this contract. These remedies include imprisonment for up to five years 
for violation of 18 U.S.C. 1001 and fines of up to $5,000 for violation 
of 31 U.S.C. 3802. Further remedies include suspension or debarment from 
contracting with the Federal government. The contractor may also be 
required to reimburse the Department for costs the Department incurs 
arising from activities related to conflicts of interest. An example of 
such costs would be those incurred in processing Freedom of Information 
Act requests related to a conflict of interest.
    (d) In cases where remedies short of termination have been applied, 
the contractor, subcontractor, employee, or consultant agrees to 
eliminate the organizational conflict of interest, or mitigate it to the 
satisfaction of the contracting officer.
    (e) The contractor further agrees to insert in any subcontract or 
consultant agreement hereunder, provisions that conform substantially to 
the language of this clause, including specific mention of potential 
remedies and this paragraph (e).

                             (End of clause)



Sec. 3452.215-70  Release of restricted data.

    As prescribed in 3415.209, insert the following provision in 
solicitations:

[[Page 161]]

                  Release of Restricted Data (MAR 2011)

    (a) Offerors are hereby put on notice that regardless of their use 
of the legend set forth in FAR 52.215-1(e), 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 (FOIA). 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 FOIA. 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 or deny access to data requested pursuant to FOIA and that the 
Government's FOIA 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 FOIA;
    (3) The offeror acknowledges that proposals not resulting in a 
contract remain subject to FOIA; 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 purpose, including the release of the information pursuant to 
requests under FOIA.
    (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 52.215-1(e), 
Restriction on Disclosure and Use of Data, or
    (2) A statement taking exceptions to the terms of paragraphs (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 (MAR 2011)

    (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 basis as the 
allocations of indirect costs of sponsored research and development. The 
costs of independent research and development, including its 
proportionate share of indirect costs, are unallowable.

                             (End of clause)



Sec. 3452.216-71  Award-Term.

    As prescribed in 3416.470, insert a clause substantially the same as 
the following in all solicitations and contracts where an award-term 
arrangement is anticipated:

                          Award-Term (MAR 2011)

    (a) The initial [insert initial contract term] contract term or 
ordering period may be extended or reduced on the basis of contractor 
performance, resulting in a contract term or an ordering period lasting 
at least [insert minimum contract term] years from the date of contract 
award, to a maximum of [insert maximum contract term] years after the 
date of contract award.
    (b) The contractor's performance will be measured against stated 
standards by the performance monitors, who will report their findings to 
the Award Term Determining Official (or Board).
    (c) Bilateral changes may be made to the award-term plan at any 
time. If agreement cannot be made within 60 days, the Government 
reserves the right to make unilateral changes prior to the start of an 
award-term period.
    (d) The contractor will submit a brief written self-evaluation of 
its performance within X days after the end of the evaluation period. 
The self-evaluation report shall not exceed seven pages, and it may be 
considered in the Award Term Review Board's (ATRB's) (or Term 
Determining Official's) evaluation of the contractor's performance 
during this period.
    (e) The contract term or ordering period may be unilaterally 
modified to reflect the ATRB's decision. If the contract term or 
ordering period has one year remaining, the

[[Page 162]]

operation of the contract award-term feature will cease and the contract 
term or ordering period will not extend beyond the maximum term stated 
in the contract.
    (f) Award terms that have not begun may be cancelled (rather than 
terminated), should the need for the items or services no longer exists. 
No equitable adjustments to the contract price are applicable, as this 
is not the same procedure as a termination for convenience.
    (g) The decisions made by the ATRB or Term Determining Official may 
be made unilaterally. Alternate Dispute Resolution procedures shall be 
utilized when appropriate.

                             (End of clause)



Sec. 3452.224-70  Release of information under the Freedom of 
          Information Act.

    As prescribed in 3424.203, insert the following clause in 
solicitations and contracts.

 Release of Information Under the Freedom of Information Act (MAR 2011)

    By entering into a contract with the Department of Education, the 
contractor, without regard to proprietary markings, approves the release 
of the entire contract and all related modifications and task orders 
including, but not limited to:
    (1) Unit prices, including labor rates;
    (2) Statements of Work/Performance Work Statements generated by the 
contractor;
    (3) Performance requirements, including incentives, performance 
standards, quality levels, and service level agreements;
    (4) Reports, deliverables, and work products delivered in 
performance of the contract (including quality of service, performance 
against requirements/standards/service level agreements);
    (5) Any and all information, data, software, and related 
documentation first provided under the contract;
    (6) Proposals or portions of proposals incorporated by reference; 
and
    (7) Other terms and conditions.

                             (End of clause)



Sec. 3452.224-71  Notice about research activities involving human 
          subjects.

    As prescribed in 3424.170, insert the following provision in any 
solicitation where a resultant contract will include, or is likely to 
include, research activities involving human subjects covered under 34 
CFR part 97:

  Notice About Research Activities Involving Human Subjects (MAR 2011)

    (a) Applicable Regulations. In accordance with Department of 
Education regulations on the protection of human subjects, title 34, 
Code of Federal Regulations, part 97 (``the regulations''), the 
contractor, any subcontractors, and any other entities engaged in 
covered (nonexempt) research activities are required to establish and 
maintain procedures for the protection of human subjects.
    (b) Definitions. (1) The regulations define research as ``a 
systematic investigation, including research development, testing and 
evaluation, designed to develop or contribute to generalizable 
knowledge.'' (34 CFR 97.102(d)). If an activity follows a deliberate 
plan designed to develop or contribute to generalizable knowledge, it is 
research. Research includes activities that meet this definition, 
whether or not they are conducted under a program considered research 
for other purposes. For example, some demonstration and service programs 
may include research activities.
    (2) The regulations define a human subject as a living individual 
about whom an investigator (whether professional or student) conducting 
research obtains data through intervention or interaction with the 
individual, or obtains identifiable private information. (34 CFR 
97.102(f)). The definition of a human subject is met if an activity 
involves obtaining--
    (i) Information about a living person by--
    (A) Manipulating that person's environment, as might occur when a 
new instructional technique is tested; or
    (B) Communicating or interacting with the individual, as occurs with 
surveys and interviews; or
    (ii) Private information about a living person in such a way that 
the information can be linked to that individual (the identity of the 
subject is or may be readily determined by the investigator or 
associated with the information). Private information includes 
information about behavior that occurs in a context in which an 
individual can reasonably expect that no observation or recording is 
taking place, and information that has been provided for specific 
purposes by an individual and that an individual can reasonably expect 
will not be made public (for example, a school health record).
    (c) Exemptions. The regulations provide exemptions from coverage for 
activities in which the only involvement of human subjects will be in 
one or more of the categories set forth in 34 CFR 97.101(b)(1)-(6). 
However, if the research subjects are children, the exemption at 34 CFR 
97.101(b)(2) (i.e., research involving the use of educational tests, 
survey procedures, interview procedures or observation of public 
behavior) is modified by 34 CFR 97.401(b), as explained in paragraph

[[Page 163]]

(d) of this provision. Research studies that are conducted under a 
Federal statute that requires without exception that the confidentiality 
of the personally identifiable information will be maintained throughout 
the research and thereafter, e.g., the Institute of Education Sciences 
confidentiality statute, 20 U.S.C. 9573, are exempt under 34 CFR 
97.101(b)(3)(ii).
    (d) Children as research subjects. Paragraph (a) of 34 CFR 97.402 of 
the regulations defines children as ``persons who have not attained the 
legal age for consent to treatments or procedures involved in the 
research, under the applicable law of the jurisdiction in which the 
research will be conducted.'' Paragraph (b) of 34 CFR 97.401 of the 
regulations provides that, if the research involves children as 
subjects--
    (1) The exemption in 34 CFR 97.101(b)(2) does not apply to 
activities involving--
    (i) Survey or interview procedures involving children as subjects; 
or
    (ii) Observations of public behavior of children in which the 
investigator or investigators will participate in the activities being 
observed.
    (2) The exemption in 34 CFR 97.101(b)(2) continues to apply, 
unmodified by 34 CFR 97.401(b), to--
    (i) Educational tests; and
    (ii) Observations of public behavior in which the investigator or 
investigators will not participate in the activities being observed.
    (e) Proposal Instructions. An offeror proposing to do research that 
involves human subjects must provide information to the Department on 
the proposed exempt and nonexempt research activities. The offeror 
should submit this information as an attachment to its technical 
proposal. No specific page limitation applies to this requirement, but 
the offeror should be brief and to the point.
    (1) For exempt research activities involving human subjects, the 
offeror should identify the exemption(s) that applies and provide 
sufficient information to allow the Department to determine that the 
designated exemption(s) is appropriate. Normally, the narrative on the 
exemption(s) can be provided in one paragraph.
    (2) For nonexempt research activities involving human subjects, the 
offeror must cover the following seven points in the information it 
provides to the Department:
    (i) Human subjects' involvement and characteristics: Describe the 
characteristics of the subject population, including their anticipated 
number, age range, and health status. Identify the criteria for 
inclusion or exclusion of any subpopulation. Explain the rationale for 
the involvement of special classes of subjects, such as children, 
children with disabilities, adults with disabilities, persons with 
mental disabilities, pregnant women, institutionalized individuals, or 
others who are likely to be vulnerable.
    (ii) Sources of materials: Identify the sources of research material 
obtained from or about individually identifiable living human subjects 
in the form of specimens, records, or data.
    (iii) Recruitment and informed consent: Describe plans for the 
recruitment of subjects and the consent procedures to be followed.
    (iv) Potential risks: Describe potential risks (physical, 
psychological, social, financial, legal, or other) and assess their 
likelihood and seriousness. Where appropriate, discuss alternative 
treatments and procedures that might be advantageous to the subjects.
    (v) Protection against risk: Describe the procedures for protecting 
against or minimizing potential risks, including risks to 
confidentiality, and assess their likely effectiveness. Where 
appropriate, discuss provisions for ensuring necessary medical or 
professional intervention in the event of adverse effects to the 
subjects. Also, where appropriate, describe the provisions for 
monitoring the data collected to ensure the safety of the subjects.
    (vi) Importance of knowledge to be gained: Discuss why the risks to 
the subjects are reasonable in relation to the importance of the 
knowledge that may reasonably be expected to result.
    (vii) Collaborating sites: If research involving human subjects will 
take place at collaborating site(s), name the sites and briefly describe 
their involvement or role in the research. Normally, the seven-point 
narrative can be provided in two pages or less.
    (3) If a reasonable potential exists that a need to conduct research 
involving human subjects may be identified after award of the contract 
and the offeror's proposal contains no definite plans for such research, 
the offeror should briefly describe the circumstances and nature of the 
potential research involving human subjects.
    (f) Assurances and Certifications. (1) In accordance with the 
regulations and the terms of this provision, all contractors and 
subcontractors that will be engaged in covered human subjects research 
activities shall be required to comply with the requirements for 
Assurances and Institutional Review Board approvals, as set forth in the 
contract clause 3452.224-72 (Research activities involving human 
subjects).
    (2) The contracting officer reserves the right to require that the 
offeror have or apply for the assurance and provide documentation of 
Institutional Review Board (IRB) approval of the research prior to 
award.
    (g)(1) The regulations, and related information on the protection of 
human research subjects, can be found on the Department's protection of 
human subjects in research Web site: http://ed.gov/about/offices/list/
ocfo/humansub.html.

[[Page 164]]

    (2) Offerors may also contact the following office to obtain 
information about the regulations for the protection of human subjects 
and related policies and guidelines: Protection of Human Subjects 
Coordinator, U.S. Department of Education, Office of the Chief Financial 
Officer, Financial Management Operations, 400 Maryland Avenue, SW., 
Washington, DC 20202-4331, Telephone: (202) 245 8090.

                           (End of provision)



Sec. 3452.224-72  Research activities involving human subjects.

    As prescribed in 3424.170, insert the following clause in any 
contract that includes research activities involving human subjects 
covered under 34 CFR part 97:

         Research Activities Involving Human Subjects (MAR 2011)

    (a) In accordance with Department of Education regulations on the 
protection of human subjects in research, title 34, Code of Federal 
Regulations, part 97 (``the regulations''), the contractor, any 
subcontractors, and any other entities engaged in covered (nonexempt) 
research activities are required to establish and maintain procedures 
for the protection of human subjects. The definitions in 34 CFR 97.102 
apply to this clause. As used in this clause, covered research means 
research involving human subjects that is not exempt under 34 CFR 
97.101(b) and 97.401(b).
    (b) If ED determines that proposed research activities involving 
human subjects are covered (i.e., not exempt under the regulations), the 
contracting officer or contacting officer's designee will require the 
contractor to apply for the Federal Wide Assurance from the Office for 
Human Research Protections, U.S. Department of Health and Human 
Services, if the contractor does not already have one on file. The 
contracting officer will also require that the contractor obtain and 
send to the Department documentation of Institutional Review Board (IRB) 
review and approval of the research.
    (c) In accordance with 34 CFR part 97, all subcontractors and any 
legally separate entity (neither owned nor operated by the contractor) 
that will be engaged in covered research activities under or related to 
this contract shall be required to comply with the requirements for 
assurances and IRB approvals. The contractor must include the substance 
of this clause, including paragraph (c) of this clause, in all 
subcontracts, and must notify any other entities engaged in the covered 
research activities of their responsibility to comply with the 
regulations.
    (d) Under no condition shall the contractor conduct, or allow to be 
conducted, any covered research activity involving human subjects prior 
to the Department's receipt of the certification that the research has 
been reviewed and approved by the IRB. (34 CFR 97.103(f).) No covered 
research involving human subjects shall be initiated under this contract 
until the contractor has provided the contracting officer (or the 
contracting officer's designee) a properly completed certification form 
certifying IRB review and approval of the research activity, and the 
contracting officer or designee has received the certification. This 
restriction applies to the activities of each participating entity.
    (e) In accordance with 34 CFR 97.109(e), an IRB must conduct 
continuing reviews of covered research activities at intervals 
appropriate to the degree of risk, but not less than once a year. 
Covered research activities that are expected to last one year or more 
are therefore subject to review by an IRB at least once a year.
    (1) For each covered activity under this contract that requires 
continuing review, the contractor shall submit an annual written 
representation to the contracting officer (or the contracting officer's 
designee) stating whether covered research activities have been reviewed 
and approved by an IRB within the previous 12 months. The contractor may 
use the form titled ``Protection of Human Subjects: Assurance 
Identification/Certification/Declaration of Exemption'' for this 
representation. For multi-institutional projects, the contractor shall 
provide this information on its behalf and on behalf of any other entity 
engaged in covered research activities for which continuing IRB reviews 
are required.
    (2) If the IRB disapproves, suspends, terminates, or requires 
modification of any covered research activities under this contract, the 
contractor shall immediately notify the contracting officer in writing 
of the IRB's action.
    (f) The contractor shall bear full responsibility for performing as 
safely as is feasible all activities under this contract involving the 
use of human subjects and for complying with all applicable regulations 
and requirements concerning human subjects. No one (neither the 
contractor, nor any subcontractor, agent, or employee of the contractor, 
nor any other person or organization, institution, or group of any kind 
whatsoever) involved in the performance of such activities shall be 
deemed to constitute an agent or employee of the Department of Education 
or of the Federal government with respect to such activities. The 
contractor agrees to discharge its obligations, duties, and undertakings 
and the work pursuant thereto, whether requiring professional judgment 
or otherwise, as an independent contractor without imputing liability on 
the part of the Government for the acts of the contractor and its 
employees.

[[Page 165]]

    (g) Upon discovery of any noncompliance with any of the requirements 
or standards stated in paragraphs (b) and (c) of this clause, the 
contractor shall immediately correct the deficiency. If at any time 
during performance of this contract, the contracting officer determines, 
in consultation with the Protection of Human Subjects Coordinator, 
Office of the Chief Financial Officer, or the sponsoring office, that 
the contractor is not in compliance with any of the requirements or 
standards stated in paragraphs (b) and (c) of this clause, the 
contracting officer may immediately suspend, in whole or in part, work 
and further payments under this contract until the contractor corrects 
such noncompliance. Notice of the suspension may be communicated by 
telephone and confirmed in writing.
    (h) The Government may terminate this contract, in full or in part, 
for failure to fully comply with any regulation or requirement related 
to human subjects involved in research. Such termination may be in lieu 
of or in addition to suspension of work or payment. Nothing herein shall 
be construed to limit the Government's right to terminate the contract 
for failure to fully comply with such requirements.
    (i) The regulations, and related information on the protection of 
human research subjects, can be found on the Department's protection of 
human subjects in research Web site: http://ed.gov/about/offices/list/
ocfo/humansub.html.
    Contractors may also contact the following office to obtain 
information about the regulations for the protection of human subjects 
and related policies and guidelines: Protection of Human Subjects 
Coordinator, U.S. Department of Education, Office of the Chief Financial 
Officer, Financial Management Operations, 400 Maryland Avenue, SW., 
Washington, DC 20202-4331, Telephone: (202) 245-8090.

                             (End of clause)



Sec. 3452.227-70  Publication and publicity.

    As prescribed in 3427.409, insert the following clause in all 
solicitations and contracts other than purchase orders:

                  Publication and Publicity (MAR 2011)

    (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 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 acknowledgement 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 [Insert 
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.''

                             (End of clause)



Sec. 3452.227-71  Advertising of awards.

    As prescribed in 3427.409, insert the following clause in all 
solicitations and contracts other than purchase orders:

                    Advertising of Awards (MAR 2011)

    The contractor agrees not to refer to awards issued by, or products 
or services delivered to, 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 considered 
by the Federal government to be superior to other products or services.

                             (End of clause)



Sec. 3452.227-72  Use and Non-Disclosure Agreement.

    As prescribed in 3427.409, insert the following clause in all 
contracts over the simplified acquisition threshold, and in contracts 
under the simplified acquisition threshold as appropriate:

               Use and Non-Disclosure Agreement (MAR 2011)

    (a) Except as provided in paragraph (b) of this clause, proprietary 
data, technical data, or computer software delivered to the Government 
with restrictions on use, modification, reproduction, release, 
performance, display, or disclosure may not be provided to third parties 
unless the intended recipient completes and signs the use and non-
disclosure agreement in paragraph (c) of this clause prior to release or 
disclosure of the data.
    (1) The specific conditions under which an intended recipient will 
be authorized to use, modify, reproduce, release, perform, display, or 
disclose proprietary data or technical data subject to limited rights, 
or computer software subject to restricted rights must be stipulated in 
an attachment to the use and non-disclosure agreement.
    (2) For an intended release, disclosure, or authorized use of 
proprietary data, technical data, or computer software subject to 
special

[[Page 166]]

license rights, modify paragraph (c)(1)(iv) of this clause to enter the 
conditions, consistent with the license requirements, governing the 
recipient's obligations regarding use, modification, reproduction, 
release, performance, display, or disclosure of the data or software.
    (b) The requirement for use and non-disclosure agreements does not 
apply to Government contractors that require access to a third party's 
data or software for the performance of a Government contract that 
contains the 3452.227-73 clause, Limitations on the use or disclosure of 
Government-furnished information marked with restrictive legends.
    (c) The prescribed use and non-disclosure agreement is:

                    Use and Non-Disclosure Agreement

    The undersigned, [Insert Name], an authorized representative of the 
[Insert Company Name], (which is hereinafter referred to as the 
``recipient'') requests the Government to provide the recipient with 
proprietary data, technical data, or computer software (hereinafter 
referred to as ``data'') in which the Government's use, modification, 
reproduction, release, performance, display, or disclosure rights are 
restricted. Those data are identified in an attachment to this 
agreement. In consideration for receiving such data, the recipient 
agrees to use the data strictly in accordance with this agreement.
    (1) The recipient shall--
    (i) Use, modify, reproduce, release, perform, display, or disclose 
data marked with Small Business Innovative Research (SBIR) data rights 
legends only for government purposes and shall not do so for any 
commercial purpose. The recipient shall not release, perform, display, 
or disclose these data, without the express written permission of the 
contractor whose name appears in the restrictive legend (the 
contractor), to any person other than its subcontractors or suppliers, 
or prospective subcontractors or suppliers, who require these data to 
submit offers for, or perform, contracts with the recipient. The 
recipient shall require its subcontractors or suppliers, or prospective 
subcontractors or suppliers, to sign a use and non-disclosure agreement 
prior to disclosing or releasing these data to such persons. Such an 
agreement must be consistent with the terms of this agreement.
    (ii) Use, modify, reproduce, release, perform, display, or disclose 
proprietary data or technical data marked with limited rights legends 
only as specified in the attachment to this agreement. Release, 
performance, display, or disclosure to other persons is not authorized 
unless specified in the attachment to this agreement or expressly 
permitted in writing by the contractor.
    (iii) Use computer software marked with restricted rights legends 
only in performance of contract number [insert contract number(s)]. The 
recipient shall not, for example, enhance, decompile, disassemble, or 
reverse engineer the software; time share; or use a computer program 
with more than one computer at a time. The recipient may not release, 
perform, display, or disclose such software to others unless expressly 
permitted in writing by the licensor whose name appears in the 
restrictive legend.
    (iv) Use, modify, reproduce, release, perform, display, or disclose 
data marked with special license rights legends [To be completed by the 
contracting officer. See paragraph (a)(2) of this clause. Omit if none 
of the data requested is marked with special license rights legends].
    (2) The recipient agrees to adopt or establish operating procedures 
and physical security measures designed to protect these data from 
inadvertent release or disclosure to unauthorized third parties.
    (3) The recipient agrees to accept these data ``as is'' without any 
Government representation as to suitability for intended use or warranty 
whatsoever. This disclaimer does not affect any obligation the 
Government may have regarding data specified in a contract for the 
performance of that contract.
    (4) The recipient may enter into any agreement directly with the 
contractor with respect to the use, modification, reproduction, release, 
performance, display, or disclosure of these data.
    (5) The recipient agrees to indemnify and hold harmless the 
Government, its agents, and employees from every claim or liability, 
including attorneys fees, court costs, and expenses arising out of, or 
in any way related to, the misuse or unauthorized modification, 
reproduction, release, performance, display, or disclosure of data 
received from the Government with restrictive legends by the recipient 
or any person to whom the recipient has released or disclosed the data.
    (6) The recipient is executing this agreement for the benefit of the 
contractor. The contractor is a third party beneficiary of this 
agreement who, in addition to any other rights it may have, is intended 
to have the rights of direct action against the recipient or any other 
person to whom the recipient has released or disclosed the data, to seek 
damages from any breach of this agreement, or to otherwise enforce this 
agreement.
    (7) The recipient agrees to destroy these data, and all copies of 
the data in its possession, no later than 30 days after the date shown 
in paragraph (8) of this agreement, to have all persons to whom it 
released the data do so by that date, and to notify the contractor that 
the data have been destroyed.
    (8) This agreement shall be effective for the period commencing with 
the recipient's execution of this agreement and ending upon [Insert 
Date]. The obligations imposed by this

[[Page 167]]

agreement shall survive the expiration or termination of the agreement.
    [Insert business name.]
    Recipient's Business Name
    [Have representative sign.]
    Authorized Representative
    [Insert date.]
    Date
    [Insert name and title.]
    Representative's Typed Name and Title

                             (End of clause)



Sec. 3452.227-73  Limitations on the use or disclosure of Government-
          furnished information marked with restrictive legends.

    As prescribed in 3427.409, insert the following clause in all 
contracts of third party vendors who require access to Government-
furnished information including other contractors' technical data, 
proprietary information, or software:

Limitations on The Use Or Disclosure of Government-Furnished Information 
               Marked With Restrictive Legends (MAR 2011)

    (a) For contracts under which data are to be produced, furnished, or 
acquired, the terms limited rights and restricted rights are defined in 
the rights in data--general clause (FAR 52.227-14).
    (b) Proprietary data, technical data, or computer software provided 
to the contractor as Government-furnished information (GFI) under this 
contract may be subject to restrictions on use, modification, 
reproduction, release, performance, display, or further disclosure.
    (1) Proprietary data with legends that serve to restrict disclosure 
or use of data. The contractor shall use, modify, reproduce, perform, or 
display proprietary data received from the Government with proprietary 
or restrictive legends only in the performance of this contract. The 
contractor shall not, without the express written permission of the 
party who owns the data, release, or disclose such data or software to 
any person.
    (2) GFI marked with limited or restricted rights legends. The 
contractor shall use, modify, reproduce, perform, or display technical 
data received from the Government with limited rights legends or 
computer software received with restricted rights legends only in the 
performance of this contract. The contractor shall not, without the 
express written permission of the party whose name appears in the 
legend, release or disclose such data or software to any person.
    (3) GFI marked with specially negotiated license rights legends. The 
contractor shall use, modify, reproduce, release, perform, or display 
proprietary data, technical data, or computer software received from the 
Government with specially negotiated license legends only as permitted 
in the license. Such data or software may not be released or disclosed 
to other persons unless permitted by the license and, prior to release 
or disclosure, the intended recipient has completed the use and non-
disclosure agreement. The contractor shall modify paragraph (c)(1)(iii) 
of the use and non-disclosure agreement (3452.227-72) to reflect the 
recipient's obligations regarding use, modification, reproduction, 
release, performance, display, and disclosure of the data or software.
    (c) Indemnification and creation of third party beneficiary rights.
    (1) The contractor agrees to indemnify and hold harmless the 
Government, its agents, and employees from every claim or liability, 
including attorneys fees, court costs, and expenses, arising out of, or 
in any way related to, the misuse or unauthorized modification, 
reproduction, release, performance, display, or disclosure of 
proprietary data, technical data, or computer software received from the 
Government with restrictive legends by the contractor or any person to 
whom the contractor has released or disclosed such data or software.
    (2) The contractor agrees that the party whose name appears on the 
restrictive legend, in addition to any other rights it may have, is a 
third party beneficiary who has the right of direct action against the 
contractor, or any person to whom the contractor has released or 
disclosed such data or software, for the unauthorized duplication, 
release, or disclosure of proprietary data, technical data, or computer 
software subject to restrictive legends.

                             (End of clause)



Sec. 3452.228-70  Required insurance.

    As prescribed in 3428.311-2, insert the following clause in all 
solicitations and resultant cost-reimbursement contracts:

                      Required Insurance (MAR 2011)

    (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. 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

[[Page 168]]

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  Limitation of cost or funds.

    The following clause shall be inserted in all contracts that include 
a Limitation of cost or Limitation of funds clause in accordance with 
3432.705-2:

                 Limitation of Cost or Funds (MAR 2011)

    (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.
    (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 order:
    (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.
    (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.

                             (End of clause)



Sec. 3452.232-71  Incremental funding.

    As prescribed in 3432.705-2, insert the following provision in 
solicitations if a cost-reimbursement contract using incremental funding 
is contemplated:

                     Incremental Funding (MAR 2011)

    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 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 costs incurred in excess of 
the periodic allotments, nor will the contractor be obligated to perform 
in excess of the amount allotted.

                           (End of provision)



Sec. 3452.237-70  Services of consultants.

    As prescribed in 3437.270, insert the following clause in all 
solicitations and resultant cost-reimbursement contracts that do not 
provide services to FSA:

                   Services of Consultants (MAR 2011)

    Except as otherwise expressly provided elsewhere in this contract, 
and notwithstanding the provisions of the clause of the contract 
entitled ``Subcontracts'' (FAR 52.244-2), 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)(1) 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, $800, exclusive of travel costs, 
or if the services of any consultant under this contract will exceed 10 
days in any calendar year.
    (2) 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 fee to be paid, including, but not limited to, 
whether fees to be paid to any consultant exceed the lowest fee charged 
by the consultant to others for performing consultant services of a 
similar nature.

                             (End of clause)



Sec. 3452.237-71  Observance of administrative closures.

    As prescribed in 3437.170, insert the following clause in all 
solicitations and service contracts:

            Observance of Administrative Closures (MAR 2011)

    (a) The contract schedule identifies all Federal holidays that are 
observed under this contract. Contractor performance is required under 
this contract at all other times, and compensated absences are not 
extended due to administrative closures of Government facilities and 
operations due to inclement weather, Presidential decree, or other 
administrative issuances where Government

[[Page 169]]

personnel receive early dismissal instructions.
    (b) In cases of contract performance at a Government facility when 
the facility is closed, the vendor may arrange for performance to 
continue during the closure at the contractor's site, if appropriate.

                             (End of clause)



Sec. 3452.239-70  Internet protocol version 6 (IPv6).

    As prescribed in 3439.701, insert the following clause in all 
solicitations and resulting contracts for hardware and software:

                 Internet Protocol Version 6 (MAR 2011)

    (a) Any system hardware, software, firmware, or networked component 
(voice, video, or data) developed, procured, or acquired in support or 
performance of this contract shall be capable of transmitting, 
receiving, processing, forwarding, and storing digital information 
across system boundaries utilizing system packets that are formatted in 
accordance with commercial standards of Internet protocol (IP) version 6 
(IPv6) as set forth in Internet Engineering Task Force (IETF) Request 
for Comments (RFC) 2460 and associated IPv6-related IETF RFC standards. 
In addition, this system shall maintain interoperability with IPv4 
systems and provide at least the same level of performance and 
reliability capabilities of IPv4 products.
    (b) Specifically, any new IP product or system developed, acquired, 
or produced must--
    (1) Interoperate with both IPv6 and IPv4 systems and products; and
    (2) Have available contractor/vendor IPv6 technical support for 
development and implementation and fielded product management.
    (c) Any exceptions to the use of IPv6 require the agency's CIO to 
give advance, written approval.

                             (End of clause)



Sec. 3452.239-71  Notice to offerors of Department security 
          requirements.

    As prescribed in 3439.702, include the following provision in 
solicitations when the offeror's employees would have access to 
Department-controlled facilities or space, or when the work (wherever 
located) would involve the design, operation, repair, or maintenance of 
information systems and access to sensitive but unclassified 
information:

    Notice to Offerors of Department Security Requirements (MAR 2011)

    (a) The offeror and any of its future subcontractors will have to 
comply with Department security policy requirements as set forth in the 
``Bidder's Security Package: Security Requirements for Contractors Doing 
Business with the Department of Education'' at: http://www.ed.gov/fund/
contract/about/bsp.html.
    (b) All contractor employees must undergo personnel security 
screening if they will be employed for 30 days or more, in accordance 
with Departmental Directive OM:5-101, ``Contractor Employee Personnel 
Security Screenings,'' available at: http://www.ed.gov/fund/contract/
about/acs/acsom5101.doc.
    (c) The offeror shall indicate the following employee positions it 
anticipates to employ in performance of this contract and their proposed 
risk levels based on the guidance provided in Appendix I of Departmental 
Directive OM:5-101:
    High Risk (HR): [Specify HR positions.].
    Moderate Risk (MR): [Specify MR positions.].
    Low Risk (LR): [Specify LR positions.].
    (d) In the event the Department disagrees with a proposed risk level 
assignment, the issue shall be subject to negotiation. However, if no 
agreement is reached, the Department's risk level assignment shall be 
used. The type of screening and the timing of the screening will depend 
upon the nature of the contractor position, the type of data to be 
accessed, and the type of information technology (IT) system access 
required. Personnel security screenings will be commensurate with the 
risk and magnitude of harm the individual could cause.

                           (End of provision)



Sec. 3452.239-72  Department security requirements.

    As prescribed in 3439.702, include the following clause in contracts 
when the contractor's employees will have access to Department-
controlled facilities or space, or when the work (wherever located) 
would involve the design, operation, repair, or maintenance of 
information systems and access to sensitive but unclassified 
information:

               Department Security Requirements (MAR 2011)

    (a) The contractor and its subcontractors shall comply with 
Department security policy requirements as set forth in the ``Bidder's 
Security Package: Security Requirements for Contractors Doing Business 
with the Department of Education'' at http://www.ed.gov/fund/contract/
about/bsp.html.

[[Page 170]]

    (b) The following are the contractor employee positions required 
under this contract and their designated risk levels:
    High Risk (HR): [Specify HR positions.]
    Moderate Risk (MR): [Specify MR positions.]
    Low Risk (LR): [Specify LR positions.]
    (c) All contractor employees must undergo personnel security 
screening if they will be employed for 30 days or more, in accordance 
with Departmental Directive OM:5-101, ``Contractor Employee Personnel 
Security Screenings.'' The type of screening and the timing of the 
screening will depend upon the nature of the contractor position, the 
type of data to be accessed, and the type of information technology (IT) 
system access required. Personnel security screenings will be 
commensurate with the risk and magnitude of harm the individual could 
cause.
    (d) The contractor shall--
    (1) Ensure that all non-U.S. citizen contractor employees are lawful 
permanent residents of the United States or have appropriate work 
authorization documents as required by the Department of Homeland 
Security, Bureau of Immigration and Appeals, to work in the United 
States.
    (2) Ensure that no employees are assigned to high risk designated 
positions prior to a completed preliminary screening.
    (3) Submit all required personnel security forms to the contracting 
officer's representative (COR) within 24 hours of an assignment to a 
Department contract and ensure that the forms are complete.
    (4) Ensure that no contractor employee is placed in a higher risk 
position than that for which he or she was previously approved, without 
the approval of the contracting officer or the COR, the Department 
personnel security officer, and the Department computer security 
officer.
    (5) Ensure that all contractor employees occupying high-risk 
designated positions submit forms for reinvestigation every five years 
for the duration of the contract or if there is a break in service to a 
Department contract of 365 days or more.
    (6) Report to the COR all instances of individuals seeking to obtain 
unauthorized access to any departmental IT system, or sensitive but 
unclassified and/or Privacy Act protected information.
    (7) Report to the COR any information that raises an issue as to 
whether a contractor employee's eligibility for continued employment or 
access to Department IT systems, or sensitive but unclassified and/or 
Privacy Act protected information, promotes the efficiency of the 
service or violates the public trust.
    (8) Withdraw from consideration under the contract any employee 
receiving an unfavorable adjudication determination.
    (9) Officially notify each contractor employee if he or she will no 
longer work on a Department contract.
    (10) Abide by the requirements in Departmental Directive OM:5-101, 
``Contractor Employee Personnel Security Screenings.''
    (e) Further information including definitions of terms used in this 
clause and a list of required investigative forms for each risk 
designation are contained in Departmental Directive OM:5-101, 
``Contractor Employee Personnel Security Screenings'' available at the 
Web site listed in the first paragraph of this clause.
    (f) Failure to comply with the contractor personnel security 
requirements may result in a termination of the contract for default.

                             (End of clause)



Sec. 3452.239-73  Federal desktop core configuration (FDCC) 
          compatibility.

    As prescribed in 3439.703, insert the following clause in all 
solicitations and contracts where software will be developed, 
maintained, or operated on any system using the FDCC configuration:

   Federal Desktop Core Configuration (FDCC) Compatibility (MAR 2011)

    (a) (1) The provider of information technology shall certify 
applications are fully functional and operate correctly as intended on 
systems using the Federal desktop core configuration (FDCC). This 
includes Internet Explorer 7 configured to operate on Windows XP and 
Windows Vista (in Protected Mode on Vista).
    (2) For the Windows XP settings, see: http://csrc.nist.gov/itsec/
guidance--WinXP.html, and for the Windows Vista settings, see: http://
csrc.nist.gov/itsec/guidance--vista.html.
    (b) The standard installation, operation, maintenance, update, or 
patching of software shall not alter the configuration settings from the 
approved FDCC configuration. The information technology should also use 
the Windows Installer Service for installation to the default ``program 
files'' directory and should be able to silently install and uninstall.
    (c) Applications designed for normal end users shall run in the 
standard user context without elevated system administration privileges.

                             (End of clause)



Sec. 3452.242-70  Litigation and claims.

    As prescribed in 3442.7001, insert the following clause in all 
solicitations and resultant cost-reimbursement contracts:

[[Page 171]]

                    Litigation and Claims (MAR 2011)

    (a) The contractor shall give the contracting officer immediate 
notice in writing of--
    (1) Any legal 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 cost that is allowable 
under the ``allowable cost and payment'' clause.
    (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 claims (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 that 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 3442.7002, insert the following clause in all 
solicitations and contracts other than purchase orders:

              Notice to The Government Of Delays (MAR 2011)

    The contractor shall notify the contracting officer of any actual or 
potential situation, including but not limited to labor disputes, that 
delays or threatens to delay the timely performance of work under this 
contract. The contractor shall immediately give written notice thereof, 
including all relevant information.

                             (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 (MAR 2011)

    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 3443.107, insert a clause substantially the same as 
the following in all solicitations and resultant cost-reimbursement 
contracts in which it will be essential for the contracting officer to 
be notified that a change of designated key personnel is to take place 
by the contractor:

                        Key Personnel (MAR 2011)

    (a) 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

[[Page 172]]

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 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 the addition or 
deletion of key personnel.
    (b) The following personnel have been identified as Key Personnel in 
the performance of this contract:

------------------------------------------------------------------------
              Labor category                            Name
------------------------------------------------------------------------
[Insert category.]                          [Insert name.]
------------------------------------------------------------------------

                             (End of clause)



Sec. 3452.247-70  Foreign travel.

    As prescribed in 3447.701, insert the following clause in all 
solicitations and resultant cost-reimbursement contracts:

                        Foreign Travel (MAR 2011)

    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 Continental United States, as defined in 
the Federal Travel Regulation. Travel to non-foreign areas (including 
the States of Alaska and Hawaii, the Commonwealths of Puerto Rico, Guam 
and the Northern Mariana Islands and the territories and possessions of 
the United States) is considered ``foreign travel'' for the purposes of 
this clause.

                             (End of clause)

                       PARTS 3453-3499 [RESERVED]

[[Page 173]]



       CHAPTER 51--DEPARTMENT OF THE ARMY ACQUISITION REGULATIONS




  --------------------------------------------------------------------
Part                                                                Page
5100-5107       [Reserved]

5108            Required sources of supplies and services...         175
5119            Small business and small disadvantaged 
                    business concerns.......................         175
5145            Government property.........................         177
5152            Solicitations provisions and contract 
                    clauses.................................         178
5153-5199

 [Reserved]

[[Page 175]]

                       PARTS 5100-5107 [RESERVED]

           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.

[[Page 176]]

  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'' (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

[[Page 177]]

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 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 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.

[[Page 178]]

    (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 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. 5152.245-9000 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.

[[Page 179]]

    (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 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. 5152.245-9000  Government property for installation support 
          services (fixed-price contracts).

    As prescribed in 5145.302-3(91), insert the following:

   Government Property for Installation Support Services (Fixed-Price 
                       Contracts) (OCT 1989) (DEV)

    The Government property listed at Technical Exhibit ---- is provided 
``as is'' to the contractor for use in the performance of this contract. 
This property may be used by the Contractor until the Contractor no 
longer desires to use it for contract performance or the Contracting 
Officer withdraws it from use under this contract in accordance with FAR 
52.245-2(b). The Contractor will comply with instructions from the 
Contracting Officer relative to disposition of the property. No 
equitable adjustment or other claim will be payable to the Contractor 
based upon the condition or availability of the property, except as 
provided in FAR 52.245-19. The Contractor remains responsible for 
performance of the required services under this contract regardless of 
the length of time which the property provided hereunder remains 
operational. Property provided by or obtained by the Contractor under 
this contract remains Contractor property. Except as provided herein, 
the property listed at Technical Exhibit ---- will be governed by FAR 
52.245-2, Government Property (Fixed-Price Contracts), and FAR 52.245-
19, Government Property Furnished ``as is''.

                             (End of clause)

[54 FR 39539, Sept. 27, 1989]



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

[[Page 180]]

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 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.

[[Page 181]]

    (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.
    (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

[[Page 182]]

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 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 183]]

                       PARTS 5153-5199 [RESERVED]

[[Page 185]]



       CHAPTER 52--DEPARTMENT OF THE NAVY ACQUISITION REGULATIONS




  --------------------------------------------------------------------
Part                                                                Page
5200-5214       [Reserved]

5215            Contracting by negotiation..................         187
5231            Contract cost principles and procedures.....         189
5242            Contract administration.....................         190
5243            [Reserved]

5252            Solicitation provisions and contract clauses         191
5253-5299       [Reserved]

[[Page 187]]

                       PARTS 5200-5214 [RESERVED]

                  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

[[Page 188]]

less than 40% unless thoroughly justified.
    (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.

[[Page 189]]

    (b)(3) Examples of contract awards for which prices may be based on 
adequate price competition and/or to have 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

[[Page 190]]

indirect costs that would have been allocated to the private sector work 
in accordance with the contractor's established accounting practices.
    (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 191]]

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)

    Alterate 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.

[[Page 192]]

    (d) If notified in accordance with paragraph (c) of this clause, the 
contractor 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]

                       PARTS 5253-5299 [RESERVED]

 CHAPTER 53_DEPARTMENT OF THE AIR FORCE FEDERAL ACQUISITION REGULATION 
                          SUPPLEMENT [RESERVED]

[[Page 193]]



       CHAPTER 54--DEFENSE LOGISTICS AGENCY, DEPARTMENT OF DEFENSE




  --------------------------------------------------------------------
Part                                                                Page
5400-5415       [Reserved]

5416            Types of contracts..........................         195
5433            Protests, disputes and appeals..............         195
5452            Solicitation provisions and contract clauses         195
5453-5499       [Reserved]

[[Page 195]]

                       PARTS 5400-5415 [RESERVED]

                      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

[[Page 196]]

of ADR with the other party. The documentation rejecting ADR must be 
signed by an official authorized to bind the contractor (see FAR 52.233-
1), or, for the Agency, by the 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 197]]

                       PARTS 5453-5499 [RESERVED]

[[Page 199]]



               CHAPTER 57--AFRICAN DEVELOPMENT FOUNDATION




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

                   SUBCHAPTER B--ACQUISITION PLANNING
Part                                                                Page
5700-5705       [Reserved]

5706            Competition requirements....................         201
5707-5799       [Reserved]

[[Page 201]]

                    SUBCHAPTER B_ACQUISITION PLANNING

                       PARTS 5700-5705 [RESERVED]

                   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]

                       PARTS 5707-5799 [RESERVED]

[[Page 203]]



    CHAPTER 61--CIVILIAN BOARD OF CONTRACT APPEALS, GENERAL SERVICES 

                             ADMINISTRATION




  --------------------------------------------------------------------
Part                                                                Page
6100            [Reserved]

6101            Contract dispute cases......................         205
6102            Crop insurance cases........................         237
6103            Transportation rate cases...................         239
6104            Travel and relocation expenses cases........         241
6105            Decisions authorized by 31 U.S.C. 3529......         243
6106-6199       [Reserved]

[[Page 205]]

                          PART 6100 [RESERVED]

                    PART 6101_CONTRACT DISPUTE CASES

Sec.

Sec. 6101.1 Scope of rules; definitions; construction; rulings, orders, 
          and directions; panels; location and address [Rule 1].

Sec. 6101.2 Filing cases; time limits for filing; notice of docketing; 
          consolidation [Rule 2].

Sec. 6101.3 Time: enlargement; computation [Rule 3].

Sec. 6101.4 Appeal file [Rule 4].

Sec. 6101.5 Appearances; notice of appearance [Rule 5].

Sec. 6101.6 Pleadings and amendment of pleadings [Rule 6].

Sec. 6101.7 Service of papers other than subpoenas [Rule 7].

Sec. 6101.8 Motions [Rule 8].

Sec. 6101.9 Record of Board proceedings; review and copying [Rule 9].

Sec. 6101.10 Admissibility of evidence [Rule 10].

Sec. 6101.11 Conferences; conference memorandum [Rule 11].

Sec. 6101.12 Suspensions and dismissals [Rule 12].

Sec. 6101.13 General provisions governing discovery [Rule 13].

Sec. 6101.14 Interrogatories to parties; requests for admission; 
          requests for production [Rule 14].

Sec. 6101.15 Depositions [Rule 15].

Sec. 6101.16 Subpoenas [Rule 16].

Sec. 6101.17 Exhibits [Rule 17].

Sec. 6101.18 Election of hearing or record submission [Rule 18].

Sec. 6101.19 Submission on the record without a hearing [Rule 19].

Sec. 6101.20 Hearings: scheduling; notice; unexcused absences [Rule 20].

Sec. 6101.21 Hearing procedures [Rule 21].

Sec. 6101.22 Transcripts of proceedings; corrections [Rule 22].

Sec. 6101.23 Briefs and memoranda of law [Rule 23].

Sec. 6101.24 Closing the record [Rule 24].

Sec. 6101.25 Decisions; settlements [Rule 25].

Sec. 6101.26 Reconsideration; amendment of decisions; new hearings [Rule 
          26].

Sec. 6101.27 Relief from decision or order [Rule 27].

Sec. 6101.28 Full Board consideration [Rule 28].

Sec. 6101.29 Clerical mistakes; harmless error [Rule 29].

Sec. 6101.30 Award of fees and other expenses [Rule 30].

Sec. 6101.31 Payment of Board awards [Rule 31].

Sec. 6101.32 Appeal from a Board decision [Rule 32].

Sec. 6101.33 Ex parte contact; sanctions and other proceedings [Rule 
          33].

Sec. 6101.34 Seal of the Board [Rule 34].

Sec. 6101.35-6101.50 [Reserved]

Sec. 6101.51 Variation from standard proceedings [Rule 51].

Sec. 6101.52 Small claims procedure [Rule 52].

Sec. 6101.53 Accelerated procedure [Rule 53].

Sec. 6101.54 Alternate dispute resolution [Rule 54].


Sec. Appendix to Part 6101--Form Nos. 1-5

    Authority: 41 U.S.C. 7101-7109.

    Source: 72 FR 36795, July 5, 2007, unless otherwise noted.



Sec. 6101.1  Scope of rules; definitions; construction; rulings, orders, 
          and directions; panels; location and address [Rule 1].

    (a) Scope. The rules of this chapter govern proceedings in all cases 
filed with the Board on or after January 6, 2007, 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. The Board 
will look to the rules of this chapter 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 fees and other 
expenses, under the Equal Access to Justice Act, 5 U.S.C. 504, pursuant 
to 6101.30 (Rule 30). 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 fees and other expenses, 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 fees 
and other expenses is filed upon the earlier of its receipt by the 
Office of the Clerk of the Board or if mailed, the date on which it is 
mailed to the Board. A United States Postal Service postmark shall be 
prima facie evidence that the document with

[[Page 206]]

which it is associated was mailed on the date of the postmark.
    (ii) Facsimile transmissions to the Board and the parties are 
permitted. The filing of a document by facsimile transmission occurs 
upon receipt by the Board of the entire submission by facsimile. Parties 
are specifically cautioned that a deadline for filing will not be 
extended merely because the Board's facsimile machine is busy or 
otherwise unavailable when a filing is due. Parties are expected to 
submit their facsimile machine numbers with their filings.
    (iii) Filings submitted by electronic mail (e-mail) are permitted, 
with the exception of appeal files submitted pursuant to 6101.4 (Rule 
4), classified documents, and filings submitted in camera or under 
protective order pursuant to 6101.9(c) (Rule 9(c)). Filings by e-mail 
shall be submitted to: [email protected]. Filings must be in PDF 
format and may not exceed 18 megabytes (MB) total. Filings that are not 
in PDF format or over 18 MB will not be accepted. The filing of a 
document by e-mail occurs upon receipt by the Board on a working day, as 
defined in 6101.1(b)(9) (Rule 1(b)(9)). All e-mail filings received by 
4:30 p.m., Eastern Time, on a working day will be considered to be filed 
on that day. E-mail filings received after that time will be considered 
to be filed on the next working day.
    (6) Party. The term ``party'' means an appellant, 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 application.
    (9) Working day. The term ``working day'' means any day other than a 
Saturday, Sunday, federal holiday, day on which the Office of the Clerk 
is required to close earlier than 4:30 p.m., or day on which the Office 
of the Clerk does not open at all, as in the event of inclement weather.
    (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 of this chapter shall be construed to 
secure the just, informal, expeditious, 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 
of this chapter and make such rulings and issue such orders and 
directions as are necessary to secure the just, informal, expeditious, 
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 of this chapter may be made on the motion or request of any party 
or on the initiative of the Board. The Board may also amend, alter, or 
vacate a ruling, order, or direction upon such terms as it deems just. 
In making rulings and issuing orders and directions pursuant to the 
rules of this chapter, the Board takes into consideration those Federal 
Rules of Civil Procedure which address matters not specifically covered 
herein.
    (e) Panels. Each case will be assigned to a panel consisting of 
three judges, with one member designated as the presiding judge, in 
accordance with such procedures as may be established by the Board. The 
presiding judge is responsible for processing the case, including 
scheduling and conducting proceedings and hearings. In addition, the 
presiding judge may, without participation by other panel members, 
decide an appeal under the small claims procedure in 6101.52 [Rule 52], 
rule on nondispositive motions (except for amounts in controversy under 
6101.52(a)(2) [Rule 52(a)(2)] and 6101.53(a)(2) [Rule 53(a)(2)]), and 
dismiss a case as permitted by 6101.12(e) [Rule 12(e)]). All other 
matters, except for those before the full Board under 6101.28 [Rule 28], 
are decided for the Board by a majority of the panel.
    (f) Location and address. The location of the Office of the Clerk of 
the Board

[[Page 207]]

is: 1800 M Street, NW, 6th Floor, Washington, DC 20036. The mailing 
address of the Office of the Clerk of the Board is: 1800 F Street, NW, 
Washington, DC 20405. The Clerk's telephone number is: (202) 606-8800. 
The Clerk's facsimile machine number is: (202) 606-0019. The Clerk's e-
mail address for receipt of filings is: [email protected].

[72 FR 36795, July 5, 2007, as amended at 73 FR 26950, May 12, 2008; 74 
FR 66585, Dec. 16, 2009; 76 FR 50927, Aug. 17, 2011]



Sec. 6101.2  Filing cases; time limits for filing; notice of docketing; 
          consolidation [Rule 2].

    (a) Filing cases. Filing of a case occurs as provided in 
6101.1(b)(5) (Rule 1(b)(5)).
    (1) Notice of appeal. (i) A notice of appeal shall be in writing and 
shall 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 the rules in this chapter, 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 government agency and the component thereof 
against which the claim has been asserted;
    (C) The name, address, telephone number, facsimile machine number, 
and e-mail address, if available, of the contracting officer whose 
decision is appealed and the date of the decision;
    (D) If the appeal is from the failure of the contracting officer to 
decide a claim, the name, address, telephone number, facsimile machine 
number, and e-mail address, if available, of the contracting officer who 
received the claim;
    (E) A brief account of the circumstances giving rise to the appeal; 
and
    (F) 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 government agency and the component thereof 
against which the claim has been asserted; and
    (C) The name, address, telephone number, facsimile machine number, 
and e-mail address, if available, of the contracting officer whose 
decision is sought.
    (3) Application. An application for fees and other expenses shall 
meet all requirements specified in 6101.30 (Rule 30).
    (b) Time limits for filing--(1) Appeals. (i) An appeal from a 
decision of a contracting officer shall be filed no later than 90 
calendar days after the date the appellant receives that decision.
    (ii) An appeal may be filed with the Board if the contracting 
officer fails or refuses to issue a timely decision on a claim submitted 
in writing, properly certified if required.
    (2) Applications. An application for fees and other expenses shall 
be filed within 30 calendar days of a final disposition in the 
underlying appeal, as provided in 6101.30 (Rule 30).

[[Page 208]]

    (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.
    (d) Consolidation. When cases involving common questions of law or 
fact are filed, the Board may:
    (1) Order the cases consolidated; or
    (2) Make such other orders concerning the proceedings as are needed 
to avoid unnecessary costs or delay.

[72 FR 36795, July 5, 2007,, as amended at 76 FR 50927, Aug. 17, 2011]



Sec. 6101.3  Time: enlargement; computation [Rule 3].

    (a) Time for performing required actions. All time limitations 
prescribed in the rules of this chapter 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 chapter 
or by an order or direction of the Board except the time limit for 
filing appeals (6101.2(b)(1) (Rule 2(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 though 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 chapter or by 
order of the Board, the day from which the designated period of time 
begins to run shall not be counted, but the last day of the period shall 
be counted unless that day is a Saturday, a Sunday, or a federal 
holiday, or 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. 6101.4  Appeal file [Rule 4].

    (a) Submission to the Board by the respondent. Within 30 calendar 
days from receipt of the Board's docketing notice or within such time as 
the Board may allow, the respondent 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. Exhibits will be numbered as required by 6101.4(b) 
[Rule 4(b)] and will include, if any:
    (1) The contracting officer's decision from which the appeal is 
taken;
    (2) The contract, including amendments, specifications, plans, and 
drawings;
    (3) 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;
    (4) Affidavits or statements of any witnesses concerning the matter 
in dispute and transcripts of any testimony taken before the filing of 
the notice of appeal;
    (5) All documents and other tangible things on which the contracting 
officer relied in making the decision, and any related correspondence;
    (6) The abstract of bids, if relevant; and
    (7) Any additional existing evidence or information necessary to 
determine the merits of the appeal, such as internal memoranda and notes 
to the file.
    (b) Organization of the appeal file. Appeal file exhibits may be 
originals or true, legible, and complete copies. They shall be arranged 
in chronological order, earliest documents first; bound in a loose-leaf 
binder on the left margin except where size or shape makes such binding 
impracticable;

[[Page 209]]

numbered; tabbed; and indexed. The loose-leaf binders cannot exceed four 
inches in depth. 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 containing more than three 
pages 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 shall include the date and a brief 
description of each exhibit and shall identify which exhibits, if any, 
have been filed with the Board in camera or under protective order or 
otherwise have not been served on the other party.
    (c) Service. The respondent shall serve a copy of the appeal file on 
the appellant at the same time that the respondent files it with the 
Board, except that the respondent need not serve on the appellant those 
documents furnished the Board in camera pursuant to 6101.9(c) (Rule 
9(c)), and the respondent shall serve documents submitted under 
protective order only on those individuals who have been granted access 
to such documents by the Board. However, the respondent 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.
    (d) Submission to the Board by the appellant. Within 30 calendar 
days after the respondent files its 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 respondent. The 
appellant shall serve a copy of its additional exhibits upon the 
respondent at the same time as it files them with the Board, and shall 
organize the file as required by 6101.4(b) (Rule 4(b)).
    (e) 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. The Board may also 
require a party to file either copies of electronically stored 
information or printed versions of electronically stored information.
    (f) Lengthy or bulky materials. The Board may waive the requirement 
to furnish the other party copies or duplicates of bulky, lengthy, or 
outsized materials submitted to the Board as exhibits if furnishing 
copies would impose an undue burden, so long as the materials are 
available to the opposing party for inspection.
    (g) 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 evidentiary 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 without a hearing pursuant to 6101.19 [Rule 19], 
at any time prior to or concurrent with the first record submission. The 
Board may shorten or 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.
    (h) 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.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26950, May 12, 2008]



Sec. 6101.5  Appearances; notice of appearance [Rule 5].

    (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 or her own behalf; a corporation, trust, or association may 
appear by one of its officers; and a partnership may appear by one of 
its members.

[[Page 210]]

    (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.
    (3) Others. The Board may, on motion, in its discretion, permit a 
special or limited appearance, such as by an amicus curiae. Permission 
to appear, if granted, will be for such purposes and in such manner as 
allowed by the presiding judge.
    (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. Other attorneys actively participating in the proceedings 
before the Board must file notices of appearance. A notice of appearance 
in the form specified in the appendix to the rules of this chapter 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, facsimile machine 
number, and e-mail address, if available, 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.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26950, May 12, 2008; 76 
FR 50928, Aug. 17, 2011]



Sec. 6101.6  Pleadings and amendment of pleadings [Rule 6].

    (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 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 (e) of this section. The Board will inform the 
parties when it enters a general denial on behalf of the respondent.
    (d) Small claims and accelerated procedures. When an appellant 
elects to use the small claims or accelerated procedures described in 
6101.52 and 6101.53 (Rules 52 and 53), the Board may shorten the time 
for filing the complaint and the answer.
    (e) Amendment of pleadings. Each party to an appeal may amend its

[[Page 211]]

pleadings once without leave of the Board at any time before a 
responsive pleading is filed. The Board may permit other amendments on 
conditions fair to both parties. A response to an amended pleading will 
be filed within the time set by the Board.
    (f) 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 or 
in record submissions, they shall be treated in all respects as if they 
had been raised in the pleadings. The Board may order the parties to 
amend the pleadings to conform to the proof or may order that the record 
be deemed to contain amended pleadings.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26950, May 12, 2008]



Sec. 6101.7  Service of papers other than subpoenas [Rule 7].

    (a) On whom and when service must be made. Except for subpoenas 
(6101.16 [Rule 16]) and documents filed in camera (6101.9(c) [Rule 
9(c)]), when a party sends a document to the Board it must at the same 
time send a copy to the other party by an equally or more expeditious 
means of transmittal. The parties will confer and agree upon the method 
they will use to serve one another. They may agree to use electronic 
mail, facsimile, overnight courier, hand delivery, or any other mutually 
acceptable method for accomplishing service promptly and efficiently.
    (b) Proof of service. A party sending a document to the Board must 
represent 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 by any other means that can reasonably be 
expected to show 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 show 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.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26950, May 12, 2008]



Sec. 6101.8  Motions [Rule 8].

    (a) How motions are made. Motions may be oral or written. A written 
motion shall state 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. Section 6101.23 (Rule 23) prescribes 
the form and content of legal memoranda. Oral motions shall be made on 
the record and in the presence of the other party. Except for joint 
motions by the parties, all motions must represent that the moving party 
has attempted to discuss the grounds for the motion with the non-moving 
party and tried to resolve the matter informally.
    (b) When motions may be made. A motion filed in lieu of an answer 
pursuant to 6101.6(c) (Rule 6(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 the rules of this 
chapter.
    (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. When filing a motion for an enlargement of time, the moving 
party shall state that it has contacted the

[[Page 212]]

opposing party about the request and shall inform the Board whether the 
opposing party consents to the request or will file an opposition.
    (e) Jurisdictional questions. The Board may at any time consider the 
issue of its jurisdiction to decide a case.
    (f) Procedure. Unless otherwise directed by the Board, a party may 
respond to a written motion other than a motion pursuant to 6101.26, 
6101.27, 6101.28, or 6101.29 (Rules 26, 27, 28, or 29) at any time 
within 20 calendar days after the filing of the motion. Responses to 
motions pursuant to 6101.26, 6101.27, 6101.28, or 6101.29 (Rules 26, 27, 
28, or 29) 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 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 (Rule 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 (Rule 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 6101.8 (Rule 8), an opposing party may not rest upon the 
mere allegations or denials of its pleadings. The opposing party's 
response, by affidavits or as otherwise provided by 6101.8 (Rule 8), 
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 make such other order as is just.
    (h) Effect of pending motion. Except as the rules of this chpater 
provide or the Board may order, a pending motion shall not excuse the 
parties from proceeding with the case in accordance with the rules of 
this chapter and the orders and directions of the Board.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26950, May 12, 2008]



Sec. 6101.9  Record of Board proceedings; review and copying [Rule 9].

    (a) Composition of the record for decision. The record upon which 
any decision of the Board will be rendered consists of:
    (1) The notice of appeal, petition, or application;
    (2) Appeal file exhibits other than those as to which an objection 
has been sustained;
    (3) Hearing exhibits other than those as to which an objection has 
been sustained;
    (4) Pleadings;
    (5) Motions and responses thereto;
    (6) Memoranda, orders, rulings, and directions to the parties issued 
by the Board;

[[Page 213]]

    (7) Documents and other tangible things admitted in evidence by the 
Board;
    (8) Written transcripts or electronic recordings of proceedings;
    (9) Stipulations and admissions by the parties;
    (10) Depositions, or parts thereof, received in evidence;
    (11) Written interrogatories and responses received in evidence;
    (12) Briefs and memoranda of law; and
    (13) Anything else that the Board may designate. All other papers 
and documents are part of the administrative record of the proceedings 
and are not included in the record upon which the Board's decision will 
be rendered.
    (b) 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.
    (c) 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 (c)(1) of this section shall be followed with respect to such 
request or direction.
    (d) Review and copying. Except for any part thereof that is subject 
to a protective order or deemed an in camera submission, the record in a 
Board proceeding shall be made available for review 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. If a request is made for copies of documents, and 
if making such copies involves more than minimal costs to the Board, 
reimbursement will be required. If a request is made for a copy of a 
transcript which was prepared pursuant to a contract with the Board, the 
fee charged by the Board for a copy of the transcript will be at the 
rate established by the contract. 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 6101.17 and 6101.32 (Rules 17 and 32), the 
Office of the Clerk will not release any part of the record in its 
possession to anyone.



Sec. 6101.10  Admissibility of evidence [Rule 10].

    In general, any relevant and material evidence will be admitted into 
the record. The Board may exclude 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. As a general 
matter, and subject to the other provisions of 6101.10 [Rule 10], the 
Board will look to the Federal Rules of Evidence for guidance when it 
makes evidentiary rulings.

[73 FR 26950, May 12, 2008]



Sec. 6101.11  Conferences; conference memorandum [Rule 11].

    (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:

[[Page 214]]

    (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;
    (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 6101.51 and 6101.54 (Rules 51 and 54).
    (b) Conference memorandum. The Board may issue a memorandum of the 
results of a conference, 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.



Sec. 6101.12  Suspensions and dismissals [Rule 12].

    (a) Suspension of proceedings to obtain contracting officer's 
decision. The Board may in its discretion suspend 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, such as to permit the parties to finalize a 
settlement. 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 taken by the parties during the period 
of suspension or following its expiration.
    (c) Dismissal, 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 a response has been 
permitted. Every dismissal shall be with prejudice to reinstatement of 
the case except as specified in paragraph (d) of this section.
    (d) Dismissal without prejudice. 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 within 180 calendar 
days after the date of the dismissal. When a case has been dismissed 
without prejudice and neither party has timely requested that the case 
be reinstated, the case shall be deemed to be dismissed with prejudice 
on the last day such a request could have been made.
    (e) Issuance of order. The presiding judge alone may issue an order 
suspending proceedings. 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 presiding judge alone 
if the motion to dismiss is not contested.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26951, May 12, 2008]



Sec. 6101.13  General provisions governing discovery [Rule 13].

    (a) Discovery methods. The parties are encouraged to exchange 
documents and other information voluntarily. In addition, 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, electronically stored 
information, or other tangible or intangible things; and
    (4) Requests for admission.
    (b) Scope of discovery. Except as otherwise limited by order of the 
Board, 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

[[Page 215]]

location of any books, documents, electronically stored information, or 
other tangible or intangible 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 6101.13 (Rule 13) 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 6101.11 (Rule 11).
    (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.
    (g) Failure to make or cooperate in discovery. If a party fails to 
appear for a deposition, after being served with a proper notice; to 
serve answers or objections to interrogatories submitted under 6101.14 
[Rule 14], after proper service of interrogatories; or to serve a 
written response to a request for inspection, production, and copying of 
any documents, electronically stored information, and things under 
6101.14 [Rule 14], the party seeking discovery may move the Board to 
impose appropriate sanctions under 6101.33 [Rule 33].
    (h) Subpoenas. A party may request the issuance of a subpoena in aid 
of discovery under the provisions of 6101.16 (Rule 16).

[72 FR 36795, July 5, 2007, as amended at 73 FR 26951, May 12, 2008]

[[Page 216]]



Sec. 6101.14  Interrogatories to parties; requests for admission; 
          requests for production [Rule 14].

    Upon order from the Board permitting such discovery, a party may 
serve on another party written interrogatories, requests for admission, 
and requests for production.
    (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 calendar 
days after service. Objections shall be filed within the time limits set 
forth in 6101.13(f)(2) (Rule 13(f)(2)).
    (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 
or electronically stored information, 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 6101.13(f)(2) [Rule 13(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 (c) 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. A written request for the 
production, inspection, and copying of any documents, electronically 
stored information, or things shall be answered within 30 calendar days 
after service. Objections shall be filed within the time limits set 
forth in 6101.13(f)(2) [Rule 13(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 6101.14 (Rule 14).
    (f) Responses. A party that has responded to written 
interrogatories, requests for admission, or requests for production of 
documents, electronically stored information, or things, upon becoming 
aware of deficiencies or inaccuracies in its original responses, or upon 
acquiring additional information or additional documents, electronically 
stored information, or things 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, electronically stored information, and things 
as are necessary to give a complete and accurate response to the 
request.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26951, May 12, 2008]



Sec. 6101.15  Depositions [Rule 15].

    (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 6101.16 (Rule 16), and the 
Board may upon motion order that the testimony at a deposition be 
recorded by other than stenographic means, in which event the

[[Page 217]]

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. In addition, if the Board 
orders deposition testimony to be recorded by other than stenographic 
means, the Board will also determine who shall bear the burden of the 
cost of such recording, and shall permit the non-moving party to 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 corporation, partnership, 
association, or government 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. 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 action were 
pending before the Board. The motion shall show:
    (1) 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
    (2) The reasons for perpetuating the testimony of the persons named. 
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 6101.13 (Rule 
13) and in 6101.15 (Rule 15). Thereupon, the depositions may be taken 
and used as prescribed in the rules of this chapter 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 
6101.16 (Rule 16), for the purpose of perpetuating testimony by 
deposition during the pendency of an appeal from a Board decision.

[[Page 218]]



Sec. 6101.16  Subpoenas [Rule 16].

    (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 the cooperation of third-party witnesses and production 
of evidence by third parties, 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 upon 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, electronically stored 
information, and other tangible and intangible things designated in the 
subpoena.
    (c) Request for subpoena. A request for a subpoena shall contain the 
name of the assigned judge, the name of the case, and the docket number 
of the case. It shall state the reasonable scope and general relevance 
to the case of the testimony and of any evidence sought. A request for a 
subpoena shall be filed at least 15 calendar days before the testimony 
of a witness or evidence is to be provided. The Board may, in its 
discretion, honor requests for subpoenas not made within this time 
limitation.
    (d) Form; issuance. (1) Every subpoena shall be in the form 
specified in the appendix to the rules of this chapter and this form 
shall not be altered. 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 rogatory 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 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 quash or modify the subpoena if it is 
unreasonable and oppressive or for other good cause shown, or require 
the party in whose behalf the subpoena was issued to advance the 
reasonable cost of producing subpoenaed evidence. Where circumstances 
require, the Board may act upon such a motion at any time after a copy 
has been served upon opposing parties.

[[Page 219]]

    (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.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26951, May 12, 2008]



Sec. 6101.17  Exhibits [Rule 17].

    (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 ordered by the Board, will be added to 
the appeal file as exhibits before the commencement of the hearing in 
order, for example, to eliminate the introduction of additional exhibits 
at the hearing.
    (2) If a party elects to proceed on the record without a hearing 
pursuant to 6101.19 (Rule 19), documentary evidence submitted by that 
party will be numbered consecutively 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 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 may be substituted in evidence for the 
original by leave of the Board at any time. The Board may require a 
party to provide either copies of electronically stored information or 
printed versions of electronically stored information to be included in 
the record.
    (c) Withdrawal of exhibits and other items. With the permission of 
the Board, a party that submits an exhibit or any other item may 
withdraw the exhibit or item from the record during the course of a 
proceeding.
    (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.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26951, May 12, 2008]



Sec. 6101.18  Election of hearing or record submission [Rule 18].

    Each party shall inform the Board, in writing, whether it elects a 
hearing or submission of its case on the record pursuant to 6101.19 
(Rule 19). Such an election may be filed at any time unless a time for 
filing is prescribed by the Board. In most cases, the Board will require 
the parties to make an election soon after discovery closes. A party 
electing to submit its case on the record pursuant to 6101.19 (Rule 19) 
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 
6101.19 (Rule 19).



Sec. 6101.19  Submission on the record without a hearing [Rule 19].

    (a) Submission on the record. 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:

[[Page 220]]

    (1) Any relevant documents or other tangible things it wishes the 
Board to admit into evidence;
    (2) Affidavits, depositions, and other discovery materials that set 
forth relevant evidence; and
    (3) A brief or memorandum of law. 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, and 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 either before it issues its 
decision or at the time it issues its decision.



Sec. 6101.20  Hearings: scheduling; notice; unexcused absences [Rule 
          20].

    (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 the rules of this chapter, 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 6101.18 (Rule 
18) or otherwise. The time or 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 a written notice 
of hearing or 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. If a party fails to acknowledge a notice of hearing 
as required, the Board will deem the party to have consented to the time 
and place of 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 6101.19 (Rule 19).



Sec. 6101.21  Hearing procedures [Rule 21].

    (a) Nature and conduct of hearings. (1) 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.
    (2) When cases involving common questions of law or fact are 
pending, the Board may order a joint hearing of any or all of the 
matters, claims, or issues in the cases.
    (3) The Board may order a separate hearing of any matters, claims, 
or issues pending in any case. The Board may enter appropriate orders or 
decisions with respect to any matters, claims, or issues that are heard 
separately.
    (4) Upon the agreement of the parties or upon its own initiative, 
the Board may notify the parties before a hearing begins that it will 
limit the 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.
    (5) Before the hearing begins, the Board may prescribe a time within 
which the presentation of evidence must be concluded, and may establish

[[Page 221]]

time limits on the direct and cross-examination of witnesses.
    (6) Upon the request of either party or if the Board deems it 
advisable, the Board will order witnesses to be excluded from the 
hearing room so they cannot hear the testimony of other witnesses. The 
Board will not exclude a party who is an individual, the designated 
representative of a party which is an entity, a person whose presence is 
essential to the presentation of a party's case, or someone authorized 
by statute to be present.
    (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 6101.20(a) (Rule 20(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 whomever it wishes to call and whatever it 
wishes to use is available at the hearing. If a witness cannot be made 
available at the site of the hearing, the party who wishes to call the 
witness may file a motion that the witness be allowed to testify 
remotely, whether by telephone, video conference, or some other method.
    (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 be sworn or to affirm and, in the event of continued refusal, 
the Board may permit the taking of testimony without oath or 
affirmation. If the Board permits a witness to testify without oath or 
affirmation, the Board will explain that statements made during the 
hearing are subject to provisions of federal law imposing penalties, 
including criminal penalties, for knowingly making false 
representations. 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 be sworn or to affirm, may seek 
enforcement of that subpoena pursuant to 6101.16(h) (Rule 16(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 it 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 6101.16(h) (Rule 
16(h)).
    (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 6101.6(f) (Rule 6(f)).
    (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

[[Page 222]]

undue prolongation of the presentation of evidence, it may, during the 
hearing, 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  Transcripts of proceedings; corrections [Rule 22].

    (a)Transcripts. Except as the Board may otherwise order, all 
hearings, other than those under the small claims procedure prescribed 
by 6101.52 (Rule 52), will be stenographically or electronically 
recorded and transcribed. Any other hearing or conference will be 
recorded or transcribed only by order of the Board. 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. 6101.23  Briefs and memoranda of law [Rule 23].

    (a)  Form and content of briefs and memoranda of law. Briefs and 
memoranda of law shall be on standard size 8\1/2\ by 11-inch paper. They 
shall be double-spaced with text in the body and in the footnotes no 
smaller than 12 point. Otherwise, no particular form or organization is 
prescribed. The presiding judge may request prehearing and posthearing 
briefs and may also request, at any point in the proceedings, memoranda 
of law. Prehearing and 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.
    (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 6101.19 (Rule 19), the filing of record 
submissions in the form of briefs shall be governed by 6101.23 (Rule 
23).

[72 FR 36795, July 5, 2007, as amended at 73 FR 26951, May 12, 2008]



Sec. 6101.24  Closing the record [Rule 24].

    (a) 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.
    (b) 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.



Sec. 6101.25  Decisions; settlements [Rule 25].

    (a) Decisions. (1) Except as provided in 6101.52 (Rule 52) (small 
claims procedure), decisions of the Board will be made in writing upon 
the record as prescribed in 6101.9 (Rule 9). The Board may also take 
notice of any fact or law of which a court could take judicial notice. 
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. In addition, 
all Board decisions are posted weekly on the Internet. The Board's 
Internet address is: http://www.cbca.gov.
    (2) In its decision, the Board may reserve determination of the 
amount of recovery for other proceedings, regardless of whether there is 
evidence in the

[[Page 223]]

record concerning the amount of recovery, provided the Board notified 
the parties before the hearing began that its decision would not address 
the amount of any recovery. In any instance in which the Board has 
reserved its determination of the amount of recovery for other 
proceedings, as provided in 6101.21(a)(4) (Rule 21(a)(4)), its decision 
on the question of the right to recover shall be final so far as 
proceedings at the Board are concerned, subject to the provisions of 
6101.26 through 6101.28 (Rules 26 through 28).
    (b) Settlements. When an appeal or application is settled, the 
parties may file with the Board a stipulation setting forth the amount 
of the award. The Board will adopt the parties' stipulation by decision, 
provided the stipulation states the parties will not seek 
reconsideration of, or relief from, the Board's decision, and they will 
not appeal the decision. The Board's decision under this paragraph (b) 
is an adjudication of the case on the merits.

[72 FR 36795, July 5, 2007,, as amended at 76 FR 50928, Aug. 17, 2011]



Sec. 6101.26  Reconsideration; amendment of decisions; new hearings 
          [Rule 26].

    (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 6101.27(a) (Rule 27(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, for altering or amending a decision, or for 
granting a new hearing. Upon granting a motion for a new hearing, the 
Board will take additional testimony and, if a decision has been issued, 
either amend its findings of fact and conclusions or law or issue a new 
decision.
    (b) Procedure. Any motion under 6101.26 (Rule 26) shall comply with 
the provisions of 6101.8 (Rule 8) and shall set forth:
    (1) The reason or reasons why the Board should consider the motion; 
and
    (2) The relief sought and the grounds therefor. 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. In an appeal or petition, a motion for 
reconsideration, to alter or amend a decision or order, or for a new 
hearing shall be filed within 30 calendar days after the date the moving 
party receives the decision or order. In an application, such a motion 
shall be filed within 7 working days after the date the moving party 
receives 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 6101.26 (Rule 26) does 
not affect the finality of a decision or suspend its operation.



Sec. 6101.27  Relief from decision or order [Rule 27].

    (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 6101.27 (Rule 27) shall comply with 
the provisions of 6101.8 and 6101.26(b) (Rules

[[Page 224]]

8 and 26(b)), and will be considered and ruled upon by the Board as 
provided in 6101.26 (Rule 26).
    (c) Time for filing. Any motion under 6101.27 (Rule 27) shall be 
filed as soon as practicable after the discovery of the reasons 
therefor, but in any event no later than 120 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 
6101.27 (Rule 27), 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 6101.27 (Rule 27) does 
not affect the finality of a decision or suspend its operation.



Sec. 6101.28  Full Board consideration [Rule 28].

    (a) Requests by parties. (1) A request for full Board consideration 
is not favored. Ordinarily, full Board consideration will be ordered 
only when it is necessary to secure or maintain uniformity of Board 
decisions, or 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 after the panel to which the case is 
assigned has issued its decision on a motion for reconsideration or 
relief from decision and 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) 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.
    (b) Initiation by Board. A majority of the judges may initiate full 
Board consideration of a matter at any time while the case is before the 
Board, no later than the last date on which any party may file a motion 
for reconsideration or relief from decision or order, or if such a 
motion is filed by a party, within ten days after a panel has resolved 
it. The parties will be informed promptly, through an order, of the 
matter to be considered by the full Board. 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 at the request 
of a party or initiated by the Board, 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.
    (d) Effect of motion. A pending request for full Board 
consideration, whether initiated by a party or by the Board, does not 
affect the finality of a decision or suspend its operation.



Sec. 6101.29  Clerical mistakes; harmless error [Rule 29].

    (a) Clerical mistakes. 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.
    (b) Harmless error. 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 not 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.

[[Page 225]]



Sec. 6101.30  Award of fees and other expenses [Rule 30].

    (a) Applications for fees and other expenses. An appropriate party 
in a proceeding before the Board may apply for an award of fees and 
other expenses, 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. Until it issues a decision, the Board will 
not consider a request for fees and other expenses.
    (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. The Board's decision becomes final (for purposes 
of 6101.30 [Rule 30]) 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. An application for fees or 
other expenses may not be filed before the Board's decision is final; a 
request for fees or other expenses made before the Board's decision is 
final does not constitute an application.
    (c) Application requirements. An application for fees and other 
expenses shall:
    (1) Identify the applicant and the appeal for which fees and other 
expenses 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 fees and other expenses;
    (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 professional 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. 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 fees and 
other expenses claimed and/or to submit to an audit by the Government of 
the claimed fees and other expenses;
    (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 6101.30 (Rule 30), the respondent may 
file an answer. The answer shall explain in detail any objections to the 
award requested and set out the legal and factual bases supporting the 
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

[[Page 226]]

6101.30 (Rule 30) 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 6101.31 (Rule 31).

[72 FR 36795, July 5, 2007, as amended at 73 FR 26952, May 12, 2008]



Sec. 6101.31  Payment of Board awards [Rule 31].

    (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 6101.26 and 6101.27 (Rules 26 and 27) 
and also their rights to appeal the decision of the Board; or
    (2) The time for filing an appeal must expire.
    (c) Procedure. Whenever the Board issues a decision or an order 
awarding an appellant any amount of money, it will attach to the copy of 
the decision sent to each party forms such as those contained in the 
appendix to the rules of this chapter. Unless the appellant files a 
timely appeal from the decision, the appellant will complete the 
Certificate of Finality, sign it, and forward it to the person or 
persons who entered an appearance in the appeal on behalf of the 
respondent. Upon receipt of a completed and executed Certificate of 
Finality, unless the respondent files a timely appeal from the decision, 
the person or persons who entered an appearance in the appeal on behalf 
of the respondent will promptly transmit the appellant's Certificate of 
Finality, along with a certified copy of the Board's decision and any 
other necessary documentation, to the United States Department of the 
Treasury for payment.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26952, May 12, 2008]



Sec. 6101.32  Appeal from a Board decision [Rule 32].

    (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 6101.9(a)(1) through (a)(13) 
(Rule 9(a)(1) through (a)(13)), and such other material contained in the 
Board's file as may be required by the Court of Appeals.
    (b) Notice. At the same time a party seeking review of a Board 
decision files a notice of appeal, that party shall provide a copy of 
the notice to the Board.
    (c) Filing of certified list of record materials. Promptly after 
service upon the 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 for a reasonable period of time the record on appeal to 
review and to copy if the attorney is unable to gain access to the 
record from another source.



Sec. 6101.33  Ex parte contact; sanctions and other proceedings [Rule 
          33].

    (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 that attorney is licensed to practice, to the 
extent that those rules are relevant to conduct affecting the integrity 
of the Board, its process, or its proceedings. The Board will also look 
to voluntary

[[Page 227]]

professional guidelines in evaluating an individual's conduct.
    (b) Ex parte communications. No member of the Board or of the 
Board's staff shall entertain, nor shall any person directly or 
indirectly involved in an appeal submit to the Board or the Board's 
staff, off the record, any evidence, explanation, analysis, or advice, 
whether written or oral, without the knowledge and consent of the 
adverse party, regarding any matter at issue in that appeal. This 
provision does not apply to consultation among Board members or to ex 
parte communications concerning the Board's administrative functions or 
procedures.
    (c) 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 may 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 order for 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.
    (d) 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 a 
protective order, regardless of who issued the order.
    (e) Disciplinary proceedings. (1) In addition to the procedures in 
this section 6101.33 (Rule 33), 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, its process, or its 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. 6101.34  Seal of the Board [Rule 34].

    The Seal of the Board shall be a circular boss, the outer margin of 
which shall bear the legend ``Civilian 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. 6101.35-6101.50  [Reserved]



Sec. 6101.51  Variation from standard proceedings [Rule 51].

    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 purpose, 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 the issue(s) in 
controversy. Although any party may ask the Board to vary from standard 
proceedings, individuals and small businesses may find such variations 
to be

[[Page 228]]

especially useful. The following are examples of these changes:
    (a) Establishing an expedited schedule of proceedings, such as by 
limiting the times provided in 6101.1 through 6101.34 (Rules 1 through 
34) 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 
presiding judge rather than through formal direct and cross-examination 
of each of these same witnesses. This discussion shall be controlled by 
the presiding judge. It may be conducted, for example, through the 
presentation of narrative statements of witnesses or on an issue by 
issue basis. The presiding judge may also request that the parties' 
counsel or representatives present opening and/or closing statements in 
lieu of written briefs.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26952, May 12, 2008]



Sec. 6101.52  Small claims procedure [Rule 52].

    (a) Election. (1) The small claims procedure is available solely at 
the appellant's election. Such election shall be made no later than 30 
calendar days after the appellant's receipt of the agency answer, unless 
the presiding judge enlarges the time for good cause shown. The 
appellant may elect this procedure when:
    (i) There is a monetary amount in dispute and that amount is $50,000 
or less, or
    (ii)(A) There is a monetary amount in dispute and that amount is 
$150,000 or less, and
    (B) The appellant is a small business concern (as that term is 
defined in the Small Business Act and regulations promulgated under that 
Act).
    (2) At the request of the respondent, or on its own initiative, the 
Board may determine whether the amount in dispute and/or the appellant's 
status makes the election inappropriate. The respondent shall raise any 
objection to the election no later than 10 working days after receipt of 
a notice of election.
    (b) Decision. The presiding judge 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 presiding judge 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 inferences adverse 
to the party at fault.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26952, May 12, 2008]



Sec. 6101.53  Accelerated procedure [Rule 53].

    (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 presiding judge enlarges the time for good 
cause shown.
    (2) At the request of the respondent, or on its own initiative, the 
Board may determine whether the amount in dispute is greater than 
$100,000, such that

[[Page 229]]

the election is inappropriate. The respondent 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 presiding judge 
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 Board 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.

[72 FR 36795, July 5, 2007, as amended at 73 FR 26952, May 12, 2008]



Sec. 6101.54  Alternative dispute resolution [Rule 54].

    (a) Availability of alternative dispute resolution (ADR) procedures 
at the Board. The Board will make its services available for ADR 
proceedings to help resolve issues in controversy and claims involving 
procurements, contracts (including interagency agreements), and grants. 
The use of ADR will not toll any relevant statutory time limitations.
    (1) Matters not on Board's Contract Disputes Act (CDA) docket. Upon 
request, the Board will make an ADR Neutral available for an ADR 
proceeding, even if a contracting officer's decision has not been issued 
or is not contemplated. To initiate an ADR proceeding for all matters 
other than docketed CDA appeals, the parties shall jointly request ADR 
in writing and direct such a request to the Board Chairman. For agencies 
whose issues in controversy do not fall within the Board's jurisdiction, 
the Board may provide ADR services on a reimbursable basis.
    (2) Docketed CDA appeals. Parties are encouraged to consider the 
advantages of using ADR techniques at any stage of an appeal. Joint 
requests for ADR services for docketed appeals should be addressed to 
the Board Chairman, with a copy to the presiding judge. ADR may be used 
concurrently with standard litigation proceedings such as the filing of 
pleadings and discovery, or the presiding judge may suspend such 
proceedings for a reasonable period of time while the parties attempt to 
resolve the appeal using ADR.
    (b) Conduct of ADR--(1) Selection of ADR Neutral. The parties may 
ask the Board Chairman to appoint a judge(s) to serve as the ADR 
Neutral(s). If desired, the parties may request the appointment of a 
particular judge(s). In a docketed appeal, the parties may also request 
that the presiding judge serve as the ADR Neutral for the ADR 
proceeding. If the parties elect a non-binding ADR procedure and the 
implementation of the procedure does not result in a settlement, where 
the procedure has involved ex parte contact, the ADR Neutral may retain 
the case for adjudication as the presiding judge, but only if the 
parties and the presiding judge all agree to such retention. If the 
procedure has not involved ex parte contact, the ADR Neutral, after 
considering the parties' views, may retain the case as the presiding 
judge at his/her discretion.
    (2) The ADR agreement. Before an ADR proceeding can occur, the 
parties must execute a written ADR agreement. This agreement should set 
forth, among other things, the identity of the ADR Neutral to be used, 
the role and authority of the Neutral, the ADR techniques to be 
employed, the scope and extent of any discovery relating to ADR, the 
location and schedule for the ADR proceeding, and the extent to which 
dispute resolution communications in conjunction with the ADR proceeding 
are to be kept confidential (6101.54(b)(3) (Rule 54(b)(3))).
    (3) Confidentiality of ADR communications and materials. Written 
material

[[Page 230]]

prepared specifically for use in an ADR proceeding, oral presentations 
made at an ADR proceeding, and all discussions in connection with such 
proceedings are considered ``dispute resolution communications'' as 
defined in 5 U.S.C. 571(5) and are subject to the confidentiality 
requirements of 5 U.S.C. 574. Unless otherwise specifically agreed by 
the parties, confidential dispute resolution communications shall be 
inadmissible as evidence in any pending or future Board proceeding 
involving the parties or the issue in controversy which is the subject 
of the ADR proceeding. However, evidence otherwise admissible before the 
Board is not rendered inadmissible because of its use in an ADR 
proceeding. The Board will not retain written materials used in an ADR 
proceeding after the proceeding is concluded or otherwise terminated. 
Parties may request a protective order in an ADR proceeding in the 
manner provided in 6101.9(c) (Rule 9(c)).
    (c) Types of ADR. ADR is not defined by any single procedure or set 
of procedures. Board judges, when engaged as ADR Neutrals, most commonly 
use a combination of facilitative and evaluative mediation approaches, 
as explained in paragraphs (c)(1) through (c)(7) of this section. 
However, the Board will consider the use of any ADR technique or 
combination of techniques proposed by the parties in their ADR agreement 
which is deemed to be fair, reasonable, and in the best interest of the 
parties, the Board, and the resolution of the issue(s) in controversy. 
The following are descriptions of some available techniques:
    (1) Facilitative mediation. Facilitative mediations usually begin 
with a joint session, where the parties each make informal presentations 
to one another and the ADR Neutral regarding the facts and circumstances 
giving rise to the issues in controversy as well as an explanation of 
their respective legal positions. The ADR Neutral, as a mediator, aids 
the parties in settling their dispute, frequently by meeting with each 
party separately in confidential sessions and engaging in ex parte 
discussions with each of the parties, for the purpose of facilitating 
the formulation and transmission of settlement offers.
    (2) Evaluative mediation. In addition to engaging in facilitative 
mediation, if authorized under the terms of the parties' ADR agreement, 
the ADR Neutral may also discuss informally the strengths and weaknesses 
of the parties' respective positions in either joint sessions or 
confidential sessions.
    (3) Mini-trial. The parties make abbreviated presentations to an ADR 
Neutral who sits with the parties' designated principal representatives 
as a mini-trial panel to hear and evaluate evidence relating to an issue 
in controversy. The ADR Neutral may thereafter meet with the principal 
representatives to attempt to mediate a settlement. The mini-trial 
process may also be a prelude to the Neutral's provision of a non-
binding advisory opinion (6101.54(c)(4) (Rule 54(c)(4))) or to the 
Neutral's rendering of a binding decision (6101.54(c)(5) (Rule 
54(c)(5))).
    (4) Non-binding advisory opinion. The parties present to the ADR 
Neutral information upon which the Neutral bases a non-binding, advisory 
opinion regarding the merits of the dispute. The opinion may be 
delivered to the parties jointly, either orally or in writing. The 
manner in which the information is presented will vary, depending upon 
the circumstances of the dispute and the terms of the parties' ADR 
agreement. Presentations may range from an informal proffer of evidence 
together with limited argument from the parties, to a more formal 
presentation, with oral testimony, exchange of documentary evidence, and 
argument from counsel.
    (5) Summary binding decision. This is a binding ADR procedure 
similar to binding arbitration under which, by prior agreement of the 
parties, the ADR Neutral renders a brief written decision which is 
binding, non-precedential, and non-appealable. As in a procedure under 
which the Neutral provides a non-binding advisory opinion, the manner in 
which information is presented for a summary binding decision may vary 
depending on the circumstances of the particular dispute and the wishes 
of the parties as set out in their ADR agreement.
    (6) Other procedures. In addition to other ADR techniques, including 
modifications to those listed in paragraphs

[[Page 231]]

(c)(1) through (c)(5) of this section, the parties may use ADR neutrals 
outside the Board and techniques which do not require direct Board 
involvement.
    (7) Selective use of standard procedures. Parties considering ADR 
proceedings are encouraged to adapt for their purposes any provisions in 
6101.1 through 6101.34 (Rules 1 through 34) of the Board's rules which 
they believe will be useful.



                Sec. Appendix to Part 6101--Form Nos. 1-5

    Form 1, GSA Form 2465, Notice of Appeal.

[[Page 232]]

[GRAPHIC] [TIFF OMITTED] TR05JY07.000

    Form 2, Notice of Appearance.

[[Page 233]]

[GRAPHIC] [TIFF OMITTED] TR05JY07.001

    Form 3, GSA Form 9534, Subpoena.

[[Page 234]]

[GRAPHIC] [TIFF OMITTED] TR05JY07.002


[[Page 235]]


[GRAPHIC] [TIFF OMITTED] TR05JY07.003

    Form 4, Government Certificate of Finality.

[[Page 236]]

[GRAPHIC] [TIFF OMITTED] TR05JY07.004

    Form 5, Appellant/Applicant Certificate of Finality.

[[Page 237]]

[GRAPHIC] [TIFF OMITTED] TR05JY07.005

                     PART 6102_CROP INSURANCE CASES

Sec.

Sec. 6102.201 Scope of rules [Rule 201].

Sec. 6102.202 Rules for crop insurance cases [Rule 202].

    Authority: 7 U.S.C. 1501 et seq.; 41 U.S.C. 438(c)(2).

[[Page 238]]


    Source: 72 FR 36816, July 5, 2007, unless otherwise noted.



Sec. 6102.201  Scope of rules [Rule 201].

    These procedures govern the Board's resolution of disputes between 
insurance companies and the Department of Agriculture's Risk Management 
Agency (RMA) involving actions of the Federal Crop Insurance Corporation 
(FCIC). Prior to the creation of this Board, the Department of 
Agriculture Board of Contract Appeals resolved this variety of dispute 
pursuant to statute, 7 U.S.C. 1501 et seq. (the Federal Crop Insurance 
Act), and regulation, 7 CFR 24.4(b) and 400.169. The Board has this 
authority under an agreement with the Secretary of Agriculture, as 
permitted under section 42(c)(2) of the Office of Federal Procurement 
Policy Act, 41 U.S.C. 438(c)(2).



Sec. 6102.202  Rules for crop insurance cases [Rule 202].

    The rules of procedure for these cases are the same as the rules of 
procedure for Contract Disputes Act appeals, with these exceptions:
    (a) Rule 1. (1) In 6101.1(b)(1) (Rule 1(b)(1)), the term ``appeal'' 
means a dispute between an insurance company that is a party to a 
Standard Reinsurance Agreement (or other reinsurance agreement) and the 
RMA, and the term ``appellant'' means the insurance company filing an 
appeal.
    (2) In 6101.1(b)(5)(i) (Rule 1(b)(5)(i)), a notice of appeal is 
filed upon its receipt by the Office of the Clerk of the Board, not when 
it is mailed.
    (3) Section 6101.1(b)(7) (Rule 1(b)(7)) does not apply to FCIC 
cases.
    (b) Rule 2. (1) Section 6101.2(a)(1)(i) (Rule 2(a)(1)(i)) is 
replaced with the following for FCIC cases: A notice of appeal shall be 
in writing and shall be signed by the appellant or by the appellant's 
attorney or authorized representative. If the appeal is from a 
determination by the Deputy Administrator of Insurance Services 
regarding an action alleged not to be in accordance with the provisions 
of a Standard Reinsurance Agreement (or other reinsurance agreement), or 
if the appeal is from a determination by the Deputy Administrator of 
Compliance concerning a determination regarding a compliance matter, the 
notice of appeal should describe the determination 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 Deputy Administrator's determination. If an appeal 
is taken from the failure of the Deputy Administrator to make a timely 
determination (see 6101.2(b)(1)(ii) (Rule 2(b)(1)(ii))), the notice of 
appeal should describe in detail the matter that the Deputy 
Administrator has failed to determine; the appellant can satisfy this 
requirement by attaching to the notice of appeal a copy of the written 
request for a determination it sent to the Deputy Administrator.
    (2) In 6101.2(a)(1)(ii) and (iii) (Rule 2(a)(1)(ii) and (iii)), the 
references to ``contracting officer'' are references to ``Deputy 
Administrator.''
    (3) Section 6101.2(a)(2) (Rule 2(a)(2)) does not apply to FCIC 
cases.
    (4) In 6101.2(b)(1)(i) (Rule 2(b)(1)(i)), an appeal from a 
determination of a Deputy Administrator shall be filed no later than 90 
calendar days after the date the appellant receives that determination. 
The Board is authorized to resolve only those appeals that are timely 
filed.
    (5) In 6101.2(b)(1)(ii) (Rule 2(b)(1)(ii)), an appeal may be filed 
with the Board if the Deputy Administrator fails or refuses to issue a 
determination within 90 days after the appellant submits a request for a 
determination.
    (c) Rule 4. (1) In 6101.4 (Rule 4), the references to ``contracting 
officer'' are references to ``Deputy Administrator.''
    (2) In 6101.4(a), paragraphs (1) through (7) (Rule 4(a), paragraphs 
(1) through (7)), describing materials included in the appeal file, are 
replaced by the following:
    (i) The determination of the Deputy Administrator that is the 
subject of the dispute;
    (ii) The reinsurance agreement (with amendments or modifications) at 
issue in the dispute;
    (iii) Pertinent correspondence between the parties that is relevant 
to the dispute, including prior administrative determinations and 
related submissions;

[[Page 239]]

    (iv) Documents and other tangible materials on which the Deputy 
Administrator relied in making the underlying determination; and
    (v) Any additional material pertinent to the authority of the Board 
or the resolution of the dispute.
    (3) The following subsection is added to 6101.4 (Rule 4): Media on 
which appeal file is to be submitted. All appeal file submissions, 
including the index, shall be submitted in two forms: paper and in a 
text or .pdf format submitted on a compact disk. Each compact disk shall 
be labeled with the name and docket number of the case. The judge may 
delay the submission of the compact disk copy of the appeal file until 
the close of the evidentiary record.
    (d) Rule 5. In 6101.5(a)(2) (Rule 5(a)(2)), the references to 
``contracting officer'' are references to ``Deputy Administrator.''
    (e) Rule 6. In 6101.6(d) (Rule 6(d)) does not apply to FCIC cases.
    (f) Rule 12. In 6101.12(a) (Rule 12(a)), the references to 
``contracting officer'' are references to ``Deputy Administrator.''
    (g) Rule 15. In 6101.15(d) (Rule 15(d)), the final sentence does not 
apply to FCIC cases.
    (h) Rule 16. In 6101.16(b) through (h) (Rule 16(b) through (h)) do 
not apply to FCIC cases. Instead, upon the written request of any party 
filed with the Office of the Clerk of the Board, or upon the initiative 
of a judge, a judge is authorized by delegation from the Secretary of 
Agriculture to request the appropriate United States Attorney to apply 
to the appropriate United States District Court for the issuance of 
subpoenas pursuant to 5 U.S.C. 304.
    (i) Rule 21. (1) In 6101.21(f) (Rule 21(f)), the final sentence does 
not apply to FCIC cases.
    (2) In 6101.21(g) (Rule 21(g)), the final sentence does not apply to 
FCIC cases.
    (j) Rule 25. In 6101.25(a) (Rule 25(a)), the initial phrase, 
``Except as provided in 6101.52 (Rule 52) (small claims procedure),'' 
does not apply to FCIC cases.
    (k) Rule 32. In 6101.32(a) through (c) (Rule 32(a) through (c)) are 
replaced with the following for FCIC cases:
    (1) Finality of Board decision. A decision of the Board is a final 
administrative decision.
    (2) Appeal permitted. An appellant may file suit in the appropriate 
United States District Court to challenge the Board's decision. An 
appellant which files such a suit shall provide the Board with a copy of 
the complaint.
    (l) Rule 52. 6101.52 (Rule 52) does not apply to FCIC cases.
    (m) Rule 53. 6101.53 (Rule 53) does not apply to FCIC cases.

                   PART 6103_TRANSPORTATION RATE CASES

Sec.

Sec. 6103.301 Scope [Rule 301].

Sec. 6103.302 Filing claims [Rule 302].

Sec. 6103.303 Responses to claims [Rule 303].

Sec. 6103.304 Reply to the audit division and agency responses [Rule 
          304].

Sec. 6103.305 Proceedings [Rule 305].

Sec. 6103.306 Decisions [Rule 306].

Sec. 6103.307 Reconsideration of Board decision [Rule 307].

Sec. 6103.308 Payment of successful claims [Rule 308].

    Authority: 31 U.S.C. 3726(i)(1); 41 U.S.C. 7101-7109; Sec. 201(o), 
Pub. L. 104-316, 110 Stat. 3826.

    Source: 72 FR 36816, July 5, 2007, unless otherwise noted.



Sec. 6103.301  Scope [Rule 301].

    (a) Authority. 31 U.S.C. 3726(i)(1) provides that a carrier or 
freight forwarder may request the Administrator of General Services to 
review an action taken by the Audit Division of the General Services 
Administration's Office of Transportation and Property Management (the 
Audit Division). The Administrator has redelegated those functions to 
the Civilian 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(i)(1). The Board will issue the final agency decision 
on a claim based on the information submitted by the claimant, the Audit 
Division, and the department or agency (the agency) for which the 
services were provided. The burden is on the claimant to establish the 
timeliness of its claim, the liability of the agency, and the claimant's 
right to payment.

[[Page 240]]



Sec. 6103.302  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, facsimile machine number, 
and e-mail address, 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. The Board's mailing address is: 1800 F Street, NW, 
Washington, DC 20405. The Board is located at: 1800 M Street, NW, 6th 
Floor, Washington, DC 20036. The Clerk's telephone number is: (202) 606-
8800. The Clerk's facsimile machine number is: (202) 606-0019. The 
Clerk's e-mail address for receipt of filings is: [email protected]. 
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.

[72 FR 36816, July 5, 2007, as amended at 76 FR 50928, Aug. 17, 2011]



Sec. 6103.303  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.



Sec. 6103.304  Reply to the 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.



Sec. 6103.305  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

[[Page 241]]

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.



Sec. 6103.306  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: http://www.cbca.gov.

[72 FR 36816, July 5, 2007, as amended at 76 FR 50928, Aug. 17, 2011]



Sec. 6103.307  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.



Sec. 6103.308  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_TRAVEL AND RELOCATION EXPENSES CASES

Sec.

Sec. 6104.401 Scope [Rule 401].

Sec. 6104.402 Filing claims [Rule 402].

Sec. 6104.403 Response to claim [Rule 403].

Sec. 6104.404 Reply to agency response [Rule 404].

Sec. 6104.405 Proceedings [Rule 405].

Sec. 6104.406 Decisions [Rule 406].

Sec. 6104.407 Reconsideration of Board decision [Rule 407].

Sec. 6104.408 Payment of successful claims [Rule 408].

    Authority: Secs. 202(n), 204, Pub. L. 104-316, 110 Stat. 3826; Sec. 
211, Pub. L. 104-53, 109 Stat. 535; 31 U.S.C. 3702; 41 U.S.C. 7101-7109.

    Source: 72 FR 36817, July 5, 2007, unless otherwise noted.



Sec. 6104.401  Scope [Rule 401].

    (a) Authority. These procedures govern the Board's resolution of 
claims by Federal civilian employees for certain travel or relocation 
expenses. 31 U.S.C. 3702 vests the authority to settle these claims in 
the Administrator of General Services, who has redelegated that function 
to the Civilian 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
    (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

[[Page 242]]

submitted by the claimant and the agency.



Sec. 6104.402  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, facsimile machine number, 
and e-mail address, if available, of the claimant;
    (ii) The name, address, telephone number, facsimile machine number, 
and e-mail address, 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 6104.403 (Rule 403).
    (3) Where claims are filed. Claims should be filed with the Office 
of the Clerk of the Board. The Board's mailing address is: 1800 F 
Street, NW, Washington, DC 20405. The Board is located at: 1800 M 
Street, NW, 6th Floor, Washington, DC 20036. The Clerk's telephone 
number is: (202) 606-8800. The Clerk's facsimile machine number is: 
(202) 606-0019. The Clerk's e-mail address for receipt of filings is: 
[email protected]. 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.

[72 FR 36817, July 5, 2007, as amended at 76 FR 50928, Aug. 17, 2011]



Sec. 6104.403  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 the agency considers 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. 6104.404  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 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,

[[Page 243]]

if the claimant does not wish to reply, the claimant should so notify 
the Board and the agency.



Sec. 6104.405  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. 6104.406  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: http://www.cbca.gov.

[72 FR 36817, July 5, 2007, as amended at 76 FR 50928, Aug. 17, 2011]



Sec. 6104.407  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. 6104.408  Payment of successful claims [Rule 408].

    The agency shall pay amounts the Board determines are due the 
claimant.

           PART 6105_DECISIONS AUTHORIZED UNDER 31 U.S.C. 3529

Sec.

Sec. 6105.501 Scope [Rule 501].

Sec. 6105.502 Request for decision [Rule 502].

Sec. 6105.503 Additional submissions [Rule 503].

Sec. 6105.504 Proceedings [Rule 504].

Sec. 6105.505 Decisions [Rule 505].

Sec. 6105.506 Reconsideration of Board decision [Rule 506].

    Authority: 31 U.S.C. 3529; 31 U.S.C. 3702; 41 U.S.C. 7101-7109; 
Secs. 202(n), 204, Pub. L. 104-316, 110 Stat. 3826; Sec. 211, Pub. L. 
104-53, 109 Stat. 535.

    Source: 72 FR 36819, July 5, 2007, unless otherwise noted.



Sec. 6105.501  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, Pub. L. 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 Civilian Board of Contract Appeals.



Sec. 6105.502  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 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

[[Page 244]]

    (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, facsimile machine number, 
and e-mail address, if available, of the official making the request;
    (B) The name, address, telephone number, facsimile machine number, 
and e-mail address, if available, of the employee affected by the 
specific payment or
    (C) Any other information which the official believes the Board 
should consider; and
    (iv) Be delivered to the Office of the Clerk of the Board. The 
Board's mailing address is: 1800 F Street, NW, Washington, DC 20405. The 
Board is located at: 1800 M Street, NW, 6th Floor, Washington, DC 20036. 
The Clerk's telephone number is: (202) 606-8800. The Clerk's e-mail 
address for receipt of filings is: [email protected]. The Clerk's 
facsimile machine number is: (202) 606-0019. 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.

[72 FR 36819, July 5, 2007, as amended at 76 FR 50928, Aug. 17, 2011]



Sec. 6105.503  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. 6105.504  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. 6105.505  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: http://
www.cbca.gov.

[72 FR 36819, July 5, 2007, as amended at 76 FR 50928, Aug. 17, 2011]

[[Page 245]]



Sec. 6105.506  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 (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.

                       PARTS 6106-6199 [RESERVED]

[[Page 247]]



   CHAPTER 63--DEPARTMENT OF TRANSPORTATION BOARD OF CONTRACT APPEALS




  --------------------------------------------------------------------
Part                                                                Page
6300            [Reserved]

6301            Board of contract appeals...................         249
6302            Rules of procedure..........................         250
6303-6399       [Reserved]

[[Page 249]]

                          PART 6300 [RESERVED]

                   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 250]]



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 251]]

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 252]]

    (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 253]]

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 254]]

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 255]]

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 256]]

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 257]]

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 258]]

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 259]]

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 260]]

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.

                       PARTS 6303-6399 [RESERVED]

[[Page 261]]



     CHAPTER 99--COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL 
           PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET




  --------------------------------------------------------------------
Part                                                                Page
9900            Scope of chapter............................         263
                      SUBCHAPTER A--ADMINISTRATION
9901            Rules and procedures........................         265
9902            [Reserved]

    SUBCHAPTER B--PROCUREMENT PRACTICES AND COST ACCOUNTING STANDARDS
9903            Contract coverage...........................         269
9904            Cost accounting standards...................         355
9905            Cost accounting standards for educational 
                    institutions............................         484
9906-9999       [Reserved]

[[Page 263]]

                       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 265]]

                       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 266]]

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 the Truth in 
Negotiations Act (TINA) threshold, as adjusted for inflation (41 U.S.C. 
1908 and 41 U.S.C. 1502(b)(1)(B)), other than contracts or subcontracts 
that have been exempted by the Board's regulations.

[76 FR 40819, July 12, 2011]



Sec. 9901.307  Exemptions and waivers.

    The Board may exempt classes or categories of contractors and 
subcontractors from cost accounting

[[Page 267]]

standards requirements, and establish 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 268]]

                          PART 9902 [RESERVED]

[[Page 269]]

    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: Public Law 111-350, 124 Stat. 3677, 41 U.S.C. 1502.

    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 270]]

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 the Truth 
in Negotiations Act (TINA) threshold, as adjusted for inflation (41 
U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)). 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, fixed-priced with economic price adjustment 
(provided that price adjustment is not based on actual costs incurred), 
time-and-materials, and labor-hour 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) [Reserved]
    (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; 72 FR 32810, June 14, 
2007; 72 FR 36369, July 3, 2007; 76 FR 40819, July 12, 2011; 76 FR 
49368, Aug. 10, 2011]



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 271]]

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 the Truth in Negotiations Act (TINA) 
threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 U.S.C. 
1502(b)(1)(B)), 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 the Truth in Negotiations Act (TINA) threshold, as 
adjusted for inflation (41 U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)). For 
CAS-covered contracts awarded to an 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,

[[Page 272]]

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; 72 FR 32810, June 14, 2007; 76 FR 
40819, July 12, 2011]



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 (JUL 2011)

    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 the Truth in Negotiations Act (TINA) 
threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 U.S.C. 
1502(b)(1)(B)), 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.

[[Page 273]]

    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.
    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)

    Alterate 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; 72 FR 32810, June 14, 2007; 76 FR 40819, July 12, 
2011]



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

[[Page 274]]

the clause prescribed in paragraph (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 (JUL 2011)

    (a) Unless the contract is exempt under 9903.201-1 and 9903.201-2, 
the provisions of 9903 are incorporated herein by reference and the 
Contractor in connection with this contract, shall--
    (1) (CAS-covered Contracts Only) By submission of a Disclosure 
Statement, disclosed in writing the Contractor's cost accounting 
practices as required by 9903.202-1 through 9903.202-5 including methods 
of distinguishing direct costs from indirect costs and the basis used 
for allocating indirect costs. The practices disclosed for this contract 
shall be the same as the practices currently disclosed and applied on 
all other contracts and subcontracts being performed by the Contractor 
and which contain a Cost Accounting Standards (CAS) clause. If the 
Contractor has notified the Contracting Officer that the Disclosure 
Statement contains trade secrets, and commercial or financial 
information which is privileged and confidential, the Disclosure 
Statement shall be protected and shall not be released outside of the 
Government.
    (2) Follow consistently the Contractor's cost accounting practices 
in accumulating and reporting contract performance cost data concerning 
this contract. If any change in cost accounting practices is made for 
the purposes of any contract or subcontract subject to CAS requirements, 
the change must be applied prospectively to this contract and the 
Disclosure Statement must be amended accordingly. If the contract price 
or cost allowance of this contract is affected by such changes, 
adjustment shall be made in accordance with subparagraph (a)(4) or 
(a)(5) of this clause, as appropriate.
    (3) Comply with all CAS, including any modifications and 
interpretations indicated thereto contained in part 9904, in effect on 
the date of award of this contract or, if the Contractor has submitted 
cost or pricing data, on the date of final agreement on price as shown 
on the Contractor's signed certificate of current cost or pricing data. 
The Contractor shall also comply with any CAS (or modifications to CAS) 
which hereafter become applicable to a contract or subcontract of the 
Contractor. Such compliance shall be required prospectively from the 
date of applicability of such contract or subcontract.
    (4)(i) Agree to an equitable adjustment as provided in the Changes 
clause of this contract if the contract cost is affected by a change 
which, pursuant to subparagraph (a)(3) of this clause, the Contractor is 
required to make to the Contractor's established cost accounting 
practices.
    (ii) Negotiate with the Contracting Officer to determine the terms 
and conditions under which a change may be made to a cost accounting 
practice, other than a change made under other provisions of 
subparagraph (a)(4) of this clause; provided that no agreement may be 
made under this provision that will increase costs paid by the United 
States.
    (iii) When the parties agree to a change to a cost accounting 
practice, other than a change under subdivision (a)(4)(i) of this 
clause, negotiate an equitable adjustment as provided in the Changes 
clause of this contract.
    (5) Agree to an adjustment of the contract price or cost allowance, 
as appropriate, if the Contractor or a subcontractor fails to comply 
with an applicable Cost Accounting Standard, or to follow any cost 
accounting practice consistently and such failure results in any 
increased costs paid by the United States. Such adjustment shall provide 
for recovery of the increased costs to the United States, together with 
interest thereon computed at the annual rate established under section 
6621(a)(2) of the Internal Revenue Code of 1986 (26 U.S.C. 6621(a)(2)) 
for such period, from the time the payment by the United States was made 
to the time the adjustment is effected. In no case shall the Government 
recover costs greater than the increased cost to the Government, in the 
aggregate, on the relevant contracts subject to the price adjustment, 
unless the Contractor made a change in its cost accounting practices of 
which it was aware or should have been aware at the time of price 
negotiations and which it failed to disclose to the Government.
    (b) If the parties fail to agree whether the Contractor or a 
subcontractor has complied with an applicable CAS in part 9904 or a CAS 
rule or regulation in part 9903 and as to any cost adjustment demanded 
by the United States, such failure to agree will constitute a dispute 
under the Contract Disputes Act (41 U.S.C. 601).
    (c) The Contractor shall permit any authorized representatives of 
the Government to examine and make copies of any documents, papers, or 
records relating to compliance with the requirements of this clause.
    (d) The contractor shall include in all negotiated subcontracts 
which the Contractor enters into, the substance of this clause, except 
paragraph (b), and shall require such inclusion in all other 
subcontracts, of any tier, including the obligation to comply with all 
CAS in effect on the subcontractor's award date or if the subcontractor 
has submitted

[[Page 275]]

cost or pricing data, on the date of final agreement on price as shown 
on the subcontractor's signed Certificate of Current Cost or Pricing 
Data. If the subcontract is awarded to a business unit which pursuant to 
9903.201-2 is subject to other types of CAS coverage, the substance of 
the applicable clause set forth in 9903.201-4 shall be inserted. This 
requirement shall apply only to negotiated subcontracts in excess of the 
Truth in Negotiations Act (TINA) threshold, as adjusted for inflation 
(41 U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)), except that the 
requirement shall not apply to negotiated subcontracts otherwise exempt 
from the requirement to include a CAS clause as specified in 9903.201-1.

                             (End of clause)

    (b) [Reserved]
    (c) Disclosure and Consistency of Cost Accounting Practices. (1) The 
contracting officer shall insert the clause set forth below, Disclosure 
and Consistency of Cost Accounting Practices, in negotiated contracts 
when the contract amount is over the Truth in Negotiations Act (TINA) 
threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 U.S.C. 
1502(b)(1)(B)), but less than $50 million, and the offeror certifies it 
is eligible for and elects to use modified CAS coverage (see 9903.201-2, 
unless the clause prescribed in paragraph (d) of this subsection is 
used).
    (2) The clause below requires the contractor to comply with CAS 
9904.401, 9904.402, 9904.405, and 9904.406, to disclose (if it meets 
certain requirements) actual cost accounting practices, and to follow 
consistently disclosed and established cost accounting practices.

   Disclosure and Consistency of Cost Accounting Practices (JUL 2011)

    (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.

[[Page 276]]

    (2) This requirement shall apply only to negotiated subcontracts in 
excess of the Truth in Negotiations Act (TINA) threshold, as adjusted 
for inflation (41 U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)).
    (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) [Reserved]
    (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 (JUL 2011)

    (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

[[Page 277]]

Contractor or a subcontractor fails to comply with an applicable Cost 
Accounting Standard, or to follow any cost accounting practice 
consistently and such failure results in any increased costs paid by the 
United States. Such adjustment shall provide for recovery of the 
increased costs to the United States, together with interest thereon 
computed at the annual rate established under section 6621(a)(2) of the 
Internal Revenue Code of 1986 (26 U.S.C. 6621(a)(2)) for such period, 
from the time the payment by the United States was made to the time the 
adjustment is effected. In no case shall the Government recover costs 
greater than the increased cost to the Government, in the aggregate, on 
the relevant contracts subject to the price adjustment, unless the 
Contractor made a change in its cost accounting practices of which it 
was aware or should have been aware at the time of price negotiations 
and which it failed to disclose to the Government.
    (b) If the parties fail to agree whether the Contractor or a 
subcontractor has complied with an applicable CAS or a CAS rule or 
regulation in 9903 and as to any cost adjustment demanded by the United 
States, such failure to agree will constitute a dispute under the 
Contract Disputes Act (41 U.S.C. 601).
    (c) The Contractor shall permit any authorized representatives of 
the Government to examine and make copies of any documents, papers, or 
records relating to compliance with the requirements of this clause.
    (d) The Contractor shall include in all negotiated subcontracts 
which the Contractor enters into, the substance of this clause, except 
paragraph (b), and shall require such inclusion in all other 
subcontracts, of any tier, including the obligation to comply with all 
applicable CAS in effect on the subcontractor's award date or if the 
subcontractor has submitted cost or pricing data, on the date of final 
agreement on price as shown on the subcontractor's signed Certificate of 
Current Cost or Pricing Data, except that--
    (1) If the subcontract is awarded to a business unit which pursuant 
to 9903.201-2 is subject to other types of CAS coverage, the substance 
of the applicable clause set forth in 9903.201-4 shall be inserted; and
    (2) This requirement shall apply only to negotiated subcontracts in 
excess of the Truth in Negotiations Act (TINA) threshold, as adjusted 
for inflation (41 U.S.C. 1908 and 41 U.S.C 1502(b)(1)B)).
    (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)

    (f) Disclosure and Consistency of Cost Accounting Practices--Foreign 
Concerns. (1) The contracting officer shall insert the clause set forth 
below, Disclosure and Consistency of Cost Accounting Practices--Foreign 
Concerns, in negotiated contracts when the contract is with a foreign 
concern and the contract is not otherwise exempt under 9903.201-1 (see 
9903.201-2(e)).
    (2) The clause below requires the contractor to comply with 9904.401 
and 9904.402, to disclose (if it meets certain requirements) actual cost 
accounting practices, and to follow consistently disclosed and 
established cost accounting practices.

    Disclosure and Consistency of Cost Accounting Practices--Foreign 
                           Concerns (JUL 2011)

    (a) The Contractor, in connection with this contract, shall--
    (1) Comply with the requirements of 9904.401, Consistency in 
Estimating, Accumulating, and Reporting Costs; and 9904.402, Consistency 
in Allocating Costs Incurred for the Same Purpose, 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

[[Page 278]]

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 the Truth in Negotiations Act (TINA) threshold, as adjusted 
for inflation (41 U.S.C. 1908 and 41 U.S.C. 1502(b)(1)
    (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)

[73 FR 15940, Mar. 26, 2008, as amended at 76 FR 40819, July 12, 2011]



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;
    (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

[[Page 279]]

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.
    (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

[[Page 280]]

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 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

[[Page 281]]

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 the Truth 
in Negotiations Act (TINA) threshold, as adjusted for inflation (41 
U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)) 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 the Truth 
in Negotiations Act (TINA) threshold, as adjusted for inflation (41 
U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)), and is part of a college or 
university location listed in Exhibit A of Office of Management and 
Budget (OMB) Circular A-21 shall submit a Disclosure Statement before 
award. A Disclosure Statement is not required; however, if the listed 
entity can demonstrate that the net amount of Federal contract and 
financial assistance awards received during its immediately preceding 
cost accounting period was less than $25 million.
    (ii) Any business unit that is selected to receive a CAS-covered 
contract or subcontract of $25 million or more shall submit a Disclosure 
Statement before award.
    (iii) Any educational institution which, together with its segments, 
received net awards of negotiated prime contracts and subcontracts 
subject to CAS totaling $25 million or more in its most recent cost 
accounting period, of

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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 the Truth in Negotiations Act 
(TINA) threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 
U.S.C. 1502(b)(1)(B)), 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 the Truth in Negotiations Act 
(TINA) threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 
U.S.C. 1502(b)(1)(B)), 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 the Truth in Negotiations Act 
(TINA) threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 
U.S.C. 1502(b)(1)(B)), 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 FR 29458, May 23, 2005; 72 FR 32812, June 14, 2007; 72 FR 
35307, June 27, 2007; 76 FR 40820, July 12, 2011]



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

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the Government. Resubmission of complete, updated, Disclosure Statements 
is discouraged except when extensive changes require it to assist the 
review process.



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

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higher tier subcontractors or prime contractors shall not reverse the 
determination of the ACO cognizant of the subcontractor.



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

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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.

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.

[[Page 352]]

 
(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.
------------------------------------------------------------------------

9903.302-4  Illustrations of changes which do not meet the definition of ``Change to a cost accounting practice.''

------------------------------------------------------------------------
              Description                      Accounting treatment
------------------------------------------------------------------------
(a) Changes in the interest rate levels  (a) Adopting the increase
 in the national economy have             (decrease) in the interest
 invalidated the prior actuarial          rate actuarial assumption is
 assumption with respect to anticipated   not a change in cost
 investment earnings. The pension plan    accounting practice.
 administrators adopted an increased
 (decreased) interest rate actuarial
 assumption. The company allocated the
 resulting pension costs to all final
 cost objectives.
(b) The basic benefit amount for a       (b) The increase in the amount
 company's pension plan is increased      of the benefits is not a
 from $8 to $10 per year of credited      change in cost accounting
 service. The change increases the        practice.
 dollar amount of pension cost
 allocated to all final cost objectives.
(c) A contractor who has never paid      (c) The initial adoption of an
 pensions establishes for the first       accounting practice for the
 time a pension plan. Pension costs for   first time incurrence of a
 the first year amounted to $3.5          cost is not a change in cost
 million.                                 accounting practice.
(d) A contractor maintained a Deferred   (d) There was a termination of
 Incentive Compensation Plan. After       the Deferred Incentive
 several years' experience, the plan      Compensation Plan. Elimination
 was determined not to be attaining its   of a cost is not a change in
 objective, so it was terminated, and     cost accounting practice.
 no future entitlements were paid.

[[Page 353]]

 
(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.
    (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

[[Page 354]]

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 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

[[Page 355]]

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]

Sec. 9904.407-62 Exemption.

Sec. 9904.407-63 Effective date.

Sec. 9904.408 Accounting for costs of compensated personal absence.

[[Page 356]]


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. 9904.412-60.1 Illustrations--CAS Pension Harmonization Rule.

Sec. 9904.412-61 Interpretation. [Reserved]

Sec. 9904.412-62 Exemption.

Sec. 9904.412-63 Effective date.

Sec. 9904.412-64 Transition method.

Sec. 9904.412-64.1 Transition Method for the CAS Pension Harmonization 
          Rule.

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. 9904.413-64.1 Transition Method for the CAS Pension Harmonization 
          Rule.

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.

[[Page 357]]


Sec. 9904.420-30 Definitions.

Sec. 9904.420-40 Fundamental requirement.

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 358]]

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 359]]

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 360]]

    (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 361]]

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 362]]

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 363]]

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 364]]

    (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 365]]

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 366]]

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 367]]

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 368]]

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 369]]

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 370]]

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 371]]



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 372]]

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 373]]

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 374]]

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 375]]

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 376]]

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 377]]

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 378]]

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 379]]

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 380]]

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 $2,800 ($.35x8,000) 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 381]]

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 382]]

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 383]]

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 384]]

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
                                                              ----------

[[Page 385]]

 
    Amount to be held in suspense (9904.408-50(d)(1))........     90,000
                                                              ==========
1976 ending liability........................................     75,000
Plus: Paid in 1976...........................................     95,000
                                                              ----------
    Subtotal.................................................    170,000
Less: 1976 beginning liability...............................     90,000
                                                              ----------
    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.

[[Page 386]]

    (g) Company G determines a ``charging rate'' for each employee. The 
charging rate includes an allowance for compensated personal absence 
based on average experience. As the employee performs services, the 
related cost objectives are charged for the services at the charging 
rate, the employee is paid at his base rate, and the excess is credited 
to the accrued liability for each 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.

[[Page 387]]

    (3) Tangible capital asset means an asset that has physical 
substance, more than minimal value, and is expected to be held by an 
enterprise for continued use or possession beyond the current accounting 
period for the services it yields.
    (b) The following modifications of terms defined elsewhere in this 
Chapter 99 are applicable to this Standard: None.



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

[[Page 388]]

and ending cost accounting periods of asset use. The policy may provide 
for any reasonable starting and ending dates in computing the first and 
last year depreciable cost.
    (d) Tangible capital assets may be accounted for by treating each 
individual asset as an accounting unit, or by combining two or more 
assets as a single accounting unit, provided such treatment is 
consistently applied over the service life of the asset or group of 
assets.
    (e) Estimated service lives initially established for tangible 
capital assets (or groups of assets) shall be reasonable approximations 
of their expected actual periods of usefulness, considering the factors 
mentioned in paragraph (a) of this subsection. The estimate of the 
expected actual periods of usefulness need not include the additional 
period tangible capital assets are retained for standby or incidental 
use where adequate records are maintained which reflect the withdrawal 
from active use.
    (1) The expected actual periods of usefulness shall be those periods 
which are supported by records of either past retirement or, where 
available, withdrawal from active use (and retention for standby or 
incidental use) for like assets (or groups of assets) used in similar 
circumstances appropriately modified for specifically identified factors 
expected to influence future lives. The factors which can be used to 
modify past experience include:
    (i) Changes in expected physical usefulness from that which has been 
experienced such as changes in the quantity and quality of expected 
output.
    (ii) Changes in expected economic usefulness, such as changes in 
expected technical or economic obsolescence of the asset (or group of 
assets), or of the product or service produced.
    (2) Supporting records shall be maintained which are adequate to 
show the age at retirement or, if the contractor so chooses, at 
withdrawal from active use (and retention for standby or incidental use) 
for a sample of assets for each significant category. Whether assets are 
accounted for individually or by groups, the basis for estimating 
service life shall be predicated on supporting records of experienced 
lives for either individual assets or any reasonable grouping of assets 
as long as that basis is consisently used. The burden shall be on the 
contractor to justify estimated service lives which are shorter than 
such experienced lives.
    (3) The records required in subparagraphs (e) (1) and (2) of this 
subsection, if not available on the date when the requirements of this 
Standard must first be followed by a contractor, shall be developed from 
current and historical fixed asset records and be available following 
the second fiscal year after that date. They shall be used as a basis 
for estimates of service lives of tangible capital assets acquired 
thereafter. Estimated service lives used for financial accounting 
purposes (or other accounting purposes where depreciation is not 
recorded for financial accounting purposes for some non-commercial 
organizations), if not unreasonable under the criteria specified in 
paragraph (e) of this subsection, shall be used until adequate 
supporting records are available.
    (4) Estimated service lives for tangible capital assets for which 
the contractor has no available data or no prior experience for similar 
assets shall be established based on a projection of the expected actual 
period of usefulness, but shall not be less than asset guideline periods 
(mid-range) established for asset guideline classes under Internal 
Revenue Procedures which are in effect as of the first day of the cost 
accounting period in which the assets are acquired. Use of this 
alternative procedure shall cease as soon as the contractor is able to 
develop estimates which are appropriately supported by his own 
experience.
    (5) The contracting parties may agree on the estimated service life 
of individual tangible capital assets where the unique purpose for which 
the equipment was acquired or other special circumstances warrant a 
shorter estimated service life than the life determined in accordance 
with the other provisions of this 9904.409-50(e) and where the shorter 
life can be reasonably predicted.
    (f)(1) The method of depreciation used for financial accounting 
purposes (or other accounting purposes where

[[Page 389]]

depreciation is not recorded for financial accounting purposes) shall be 
used for contract costing unless:
    (i) Such method does not reasonably reflect the expected consumption 
of services for the tangible capital asset (or group of assets) to which 
applied, or
    (ii) The method is unacceptable for Federal income tax purposes.

If the contractors' method of depreciation used for financial accounting 
purposes (or other accounting purposes as provided above) does not 
reasonably reflect the expected consumption of services or is 
unacceptable for Federal income tax purposes, he shall establish a 
method of depreciation for contract costing which meets these criteria, 
in accordance with subparagraph (f)(3) of this subsection.
    (2) After the date of initial applicability of this Standard, 
selection of methods of depreciation for newly acquired tangible capital 
assets, which are different from the methods currently being used for 
like assets in similar circumstances, shall be supported by projections 
of the expected consumption of services of those assets (or groups of 
assets) to which the different methods of depreciation shall apply. 
Support in accordance with paragraph (f)(3) of this subsection shall be 
based on the expected consumption of services of either individual 
assets or any reasonable grouping of assets as long as the basis 
selected for grouping assets is consistently used.
    (3) The expected consumption of asset services over the estimated 
service life of a tangible capital asset (or group of assets) is 
influenced by the factors mentioned in paragraph (a) of this subsection 
which affect either potential activity or potential output of the asset 
(or group of assets). These factors may be measured by the expected 
activity or the expected physical output of the assets, as for example: 
Hours of operation, number of operations performed, number of units 
produced, or number of miles traveled. An acceptable surrogate for 
expected activity or output might be a monetary measure of that activity 
or output generated by use of tangible capital assets, such as estimated 
labor dollars, total cost incurred or total revenues, to the extent that 
such monetary measures can reasonably be related to the usage of 
specific tangible capital assets (or groups of assets). In the absence 
of reliable data for the measurement or estimation of the consumption of 
asset services by the techniques mentioned, the expected consumption of 
services may be represented by the passage of time. The appropriate 
method of depreciation should be selected as follows:
    (i) An accelerated method of depreciation is appropriate where the 
expected consumption of asset services is significantly greater in early 
years of asset life.
    (ii) The straight-line method of depreciation is appropriate where 
the expected consumption of asset services is reasonably level over the 
service life of the asset (or group of assets).
    (g) The estimated service life and method of depreciation to be used 
for an original complement of low-cost equipment shall be based on the 
expected consumption of services over the expected useful life of the 
complement as a whole and shall not be based on the individual items 
which form the complement.
    (h) Estimated residual values shall be determined for all tangible 
capital assets (or groups of assets). For tangible personal property, 
only estimated residual values which exceed ten percent of the 
capitalized cost of the asset (or group of assets) need be used in 
establishing depreciable costs. Where either the declining balance 
method of depreciation or the class life asset depreciation range system 
is used consistent with the provisions of this Standard, the residual 
value need not be deducted from capitalized cost to determine 
depreciable costs. No depreciation cost shall be charged which would 
significantly reduce book value of a tangible capital asset (or group of 
assets) below its residual value.
    (i) Estimates of service life, consumption of services, and residual 
value shall be reexamined for tangible capital assets (or groups of 
assets) whenever circumstances change significantly. Where changes are 
made to the estimated service life, residual value, or method of 
depreciation during the life of a tangible capital asset, the remaining 
depreciable costs for cost

[[Page 390]]

accounting purposes shall be limited to the undepreciated cost of the 
assets and shall be assigned only to the cost accounting period in which 
the change is made and to subsequent periods.
    (j)(1) Gains and losses on disposition of tangible capital assets 
shall be considered as adjustments of depreciation costs previously 
recognized and shall be assigned to the cost accounting period in which 
disposition occurs except as provided in subparagraphs (j) (2) and (3) 
of this subsection. The gain or loss for each asset disposed of is the 
difference between the net amount realized, including insurance proceeds 
in the event of involuntary conversion, and its undepreciated balance. 
However, the gain to be recognized for contract costing purposes shall 
be limited to the difference between the original acquisition cost of 
the asset and its undepreciated balance.
    (2) Gains and losses on the disposition of tangible capital assets 
shall not be recognized where:
    (i) Assets are grouped and such gains and losses are processed 
through the accumulated depreciation account, or
    (ii) The asset is given in exchange as part of the purchase price of 
a similar asset and the gain or loss is included in computing the 
depreciable cost of the new asset.

Where the disposition results from an involuntary conversion and the 
asset is replaced by a similar asset, gains and losses may either be 
recognized in the period of disposition or used to adjust the 
depreciable cost base of the new asset.
    (3) The contracting parties may account for gains and losses arising 
from mass or extraordinary dispositions in a manner which will result in 
treatment equitable to all parties.
    (4) Gains and losses on disposition of tangible capital assets 
transferred in other than an arms-length transaction and subsequently 
disposed of within 12 months from the date of transfer shall be assigned 
to the transferor.
    (5) The provisions of this subsection 9904.409-50(j) do not apply to 
business combinations. The carrying values of tangible capital assets 
acquired subsequent to a business combination shall be established in 
accordance with the provisions of subsection 9904.404-50(d).
    (k) Where, in accordance with 9904.409-40(b)(1), the depreciation 
costs of like tangible capital assets used for similar purposes are 
directly charged to cost objectives on the basis of usage, average 
charging rates based on cost shall be established for the use of such 
assets. Any variances between total depreciation cost charged to cost 
objectives and total depreciation cost for the cost accounting period 
shall be accounted for in accordance with the contractor's established 
practice for handling such variances.
    (l) Practices for determining depreciation methods, estimated 
service lives and estimated residual values need not be changed for 
assets acquired prior to compliance with this Standard if otherwise 
acceptable under applicable procurement regulations. However, if changes 
are effected such changes must conform to the criteria established in 
this Standard and may be effected on a prospective basis to cover the 
undepreciated balance of cost by agreement between the contracting 
parties pursuant to negotiation under subdivision (a)(4) (ii) or (iii) 
of the contract clause set out at 9903.201-4(a).

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992; 61 FR 5523, Feb. 
13, 1996]



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

[[Page 391]]

the provisions of the Standard, Company Y shall use a life of 12 years 
for the acquisition unless it can support a different estimate for the 
entire group.
    (3) Company Z estimates service life for tangible capital assets by 
grouping assets according to use without regard to service lives. 
Accordingly, all machinery and equipment is accounted for as a single 
group. The average replacement life for machinery and equipment in 
Company Z is 10 years. In accordance with the provisions of the 
Standard, Company Z shall use an estimated service life of ten years for 
the acquisition unless it can support a different estimate for the 
entire group.
    (b) Company X desires to charge depreciation of the milling machine 
described in paragraph (a) of this subsection, directly to final cost 
objectives. Usage of the milling machine can be measured readily based 
on hours of operation. Company X may charge depreciation cost directly 
on a unit of time basis provided he uses one depreciation charging rate 
for all like milling machines in the machine shop and charges 
depreciation for all such milling machines directly to benefiting cost 
objectives.
    (c) A contractor acquires, and capitalizes as an asset 
accountability unit, a new lathe. The estimated service life is 10 years 
for the lathe. He acquires, and capitalizes as an original complement of 
low-cost equipment related to the lathe, a collection of tool holders, 
chucks, indexing heads, wrenches, and the like. Although individual 
items comprising the complement have an average life of 6 years, 
replacements of these items will be made as needed and, therefore, the 
expected useful life of the complement is equal to the life of the 
lathe. An estimated service life of 10 years should be used for the 
original complement.
    (d) A contractor acquires a test facility with an estimated physical 
life of 10 years, to be used on contracts for a new program. The test 
facility was acquired for $5 million. It is expected that the program 
will be completed in 6 years and the test facility acquired is not 
expected to be required for other products of the contractor. Although 
the facility will last 10 years, the contracting parties may agree in 
advance to depreciate the facility over 6 years.
    (e) Contractor acquires a building by donation from its local 
Government. The building had been purchased new by another company and 
subsequently acquired by the local Government. Contractor capitalizes 
the building at its fair value. Under the Standard the depreciable cost 
of the asset based on that value may be accounted for over its estimated 
service life and allocated to cost objectives in accordance with 
contractor's cost allocation practices.
    (f) A major item of equipment which was acquired prior to the 
applicability of this Standard was estimated, at acquisition, to have a 
service life of 12 years and a residual value of no more than 10 percent 
of acquisition cost. After 4 years of service, during which time this 
Standard has become applicable, a change in the production situation 
results in a well-supported determination to shorten the estimated 
service life to a total of 7 years. The revised estimated residual value 
is 15 percent of acquisition cost. The annual depreciation charges based 
on this particular asset will be appropriately increased to amortize the 
remaining cost, less the current estimate of residual value, over the 
remaining 3 years of expected usefulness. This change is not a change of 
cost accounting practice, but a correction of numeric estimates. The 
requirement of 9904.409-50(1) for an adjustment pursuant to subdivision 
(a)(4) (ii) or (iii) of the CAS clause does not apply.
    (g) The support required by 9904.409-50(e) can, in all likelihood, 
be derived by sampling from almost any reasonable fixed asset records. 
Of course, the more complete the data in the records which are 
available, the more confidence there can be in determinations of asset 
service lives. The following descriptions of sampling methods are 
illustrations of techniques which may be useful even with limited fixed 
asset records.
    (1) A company maintains an inventory of assets in use. The company 
should select a sampling time period which, preferably, is significantly 
longer than the anticipated life of the assets for which lives are to be 
established. Of course, the inventory must

[[Page 392]]

be available for each year in the sampling time period. The company 
would then select a randon sample of items in each year except the most 
recent year of the time period. Each item in the sample would be 
compared to the subsequent year's inventory to determine if the asset is 
still in service; if not, then the asset had been retired in the year 
from which the sample was drawn. The item is then traced to prior year 
inventories to determine the year in which acquired.

    Note: Sufficient items must be drawn in each year to ensure an 
adequate sample.

    (2) A company maintains an inventory of assets in use and also has a 
record of retirements. In this case the company does not have to compare 
the sample to subsequent years to determine if disposition has occurred. 
As in Example (g)(1) of this subsection, the sample items are traced to 
prior years to determine the year in which acquired.
    (3) A company maintains retirement records which show acquisition 
dates. The company should select a sampling time period which, 
preferably, is significantly longer than the anticipated life of the 
assets for which lives are to be estimated. The company would then 
select a random sample of items retired in each year of the sampling 
time period and tabulate age at requirement.
    (4) A company maintains only a record of acquisitions for each year. 
The company should select a random sample of items acquired in the most 
recent complete year and determine from current records or observations 
whether each item is currently in service. The acquisitions of each 
prior year should be samples in turn to determine if sample items are 
currently in service. This sampling should be performed for a time 
period significantly longer than the anticipated life of assets for 
which the lives are to be established, but can be discontinued at the 
point at which sample items no longer appear in current use. From the 
data obtained, mortality tables can be constructed to determine average 
asset life.
    (5) A company does not maintain accounting records on fully 
depreciated assets. However, property records are maintained, and such 
records are retained for 3 years after disposition of an asset in groups 
by year of disposition. An analysis of these retirements may be made by 
selecting the larger dollar items for each category of assets for which 
lives are to be determined (for example, at least 75 percent of the 
acquisition values retired each year). The cases cited above are only 
examples and many other examples could have been used. Also, in any 
example, a company's individual circumstances must be considered in 
order to take into account possible biased results because of changes in 
organizations, products, acquisition policies, economic factors, etc. 
The results from example (g)(5) of this subsection, for instance, might 
be substantially distorted if the 3-year period was unusual with respect 
to dispositions. Therefore, the examples are illustrative only and any 
sampling performed in compliance with this Standard should take into 
account all relevant information to ensure that reasonable results are 
obtained.



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

[[Page 393]]

contract or subcontract to which this revised Standard applies.

[61 FR 5523, Feb. 13, 1996]



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

[[Page 394]]

one which best represents the total activity of a typical cost 
accounting period.
    (2) The allocation of the G&A expense pool to any particular final 
cost objectives which receive benefits significantly different from the 
benefits accruing to other final cost objectives shall be determined by 
special allocation (9904.410-50(j)).
    (c) Home office expenses received by a segment shall be allocated to 
segment cost objectives as required by 9904.410-50(g).
    (d) Any costs which do not satisfy the definition of G&A expense but 
which have been classified by a business unit as G&A expenses, can 
remain in the G&A expense pool unless they can be allocated to business 
unit cost objectives on a beneficial or causal relationship which is 
best measured by a base other than a cost input base.



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,

[[Page 395]]

    (ii) Residual expenses, and
    (iii) Directly allocated expenses related to the management and 
administration of the receiving segment as a whole, shall be included in 
the receiving segment's G&A expense pool.
    (2) Any separate allocation of the expenses of home office 
centralized service functions, staff management of specific activities 
of segments, and central payments or accruals, which is received by a 
segment, shall be allocated to the segment cost objectives in proportion 
to the beneficial or causal relationship between the cost objectives and 
the expense if such allocation is significant in amount. Where a 
beneficial or causal relationship for the expense is not identifiable 
with segment cost objectives, the expense may be included in the G&A 
expense pool.
    (h) Where a segment performs home office functions and also performs 
as an operating segment having a responsibility for final cost 
objectives, the expense of the home office functions shall be 
segregated. These expenses shall be allocated to all benefiting or 
causing segments, including the segment performing the home office 
functions, pursuant to disclosed or established accounting practices for 
the allocation of home office expenses to segments.
    (i) For purposes of allocating the G&A expense pool, items produced 
or worked on for stock or product inventory shall be accounted for as 
final cost objectives in accordance with the following paragraphs:
    (1) Where items are produced or worked on for stock or product 
inventory in a given cost accounting period, the cost input to such 
items in that period shall be included only once in the computation of 
the G&A expense allocation base and in the computation of the G&A 
expense allocation rate for that period and shall not be included in the 
computation of the base or rate for any other cost accounting period.
    (2) A portion of the G&A expense pool shall be allocated to items 
produced or worked on for stock or product inventory in the cost 
accounting period or periods in which such items are produced at the 
rates determined for such periods except as provided in subparagraph 
(i)(3) of this subsection.
    (3) Where the contractor does not include G&A expense in inventory 
as part of the cost of stock or product inventory items, the G&A rate of 
the cost accounting period in which such items are issued to final cost 
objectives may be used to determine the G&A expenses applicable to 
issues of stock or product inventory items.
    (j) Where a particular final cost objective in relation to other 
final cost objectives receives significantly more or less benefit from 
G&A expense than would be reflected by the allocation of such expenses 
using a base determined pursuant to paragraph (d) of this subsection, 
the business unit shall account for this particular final cost objective 
by a special allocation from the G&A expense pool to the particular 
final cost objective commensurate with the benefits received. The amount 
of a special allocation to any such final cost objective shall be 
excluded from the G&A expense pool required by 9904.410-40(a), and the 
particular final cost objective's cost input data shall be excluded from 
the base used to allocate this pool.



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.

[[Page 396]]

    (c)(1) Business Unit C has a personnel function which is divided 
into two parts: A vice president of personnel who establishes personnel 
policy and overall guidance, and a personnel department which handles 
hirings, testing, evaluations, etc. The expense of the vice president is 
included in the G&A expense pool. The expense of the personnel 
department is allocated to the other indirect cost pools based on the 
beneficial or causal relationship between that expense and the indirect 
cost pools. This procedure is in compliance with the requirements of 
this Standard.
    (2) Business Unit C has included selling costs as part of its G&A 
expense pool. Unit C wishes to continue to include selling costs in its 
G&A pool. Under the provisions of this Standard, Unit C may continue to 
include selling costs in its G&A pool, and these costs will be allocated 
over a cost input base selected in accordance with the provisions of 
9904.410-50(d).
    (3) Business Unit C has included IR&D and B&P costs in its G&A 
expense pool. Unit C has used a cost of sales base to allocate its G&A 
expense pool. As of January 1, 1978 (assumed for purposes of this 
illustration), the date on which Unit C must first allocate its G&A 
expense pool in accordance with the requirements of this Standard, Unit 
C has among its final cost objectives several cost reimbursement 
contracts and fixed price contracts subject to the CAS clause (referred 
to as the preexisting contracts). If Unit C chooses to use the 
transition method in 9904.410-50(e):
    (i) Unit C shall allocate IR&D and B&P costs during the transition 
period (from January 1, 1978, to and including the cost accounting 
period during which the preexisting contracts are completed), to the 
preexisting contracts as part of its G&A expense pool using a cost of 
sales base pursuant to 9904.410-50(e) and appendix A to 9904.410.
    (ii) During the transition period such costs, as part of the G&A 
expense pool, shall be allocated to new cost reimbursement contracts and 
new fixed price contracts subject to the CAS clause using a cost input 
base as required by 9904.410-50 (d) and (e) and appendix A to 9904.410.
    (iii) Beginning with the cost accounting period after the transition 
period the IR&D and B&P costs, as part of the G&A expense pool, shall be 
allocated to all final cost objectives using a cost input base as 
required by 9904.410-50(d). If Unit C chooses not to use the transition 
method in 9904.410-50(e), the contractual provision requiring 
appropriate equitable adjustment of the prices of affected prime 
contracts and subcontracts will be implemented.
    (4) Business Unit C has accounted for and allocated IR&D and B&P 
costs in a cost pool separate and apart from the G&A expense pool. Unit 
C may continue to account for these costs in a separate cost pool under 
the provision of this Standard. If Unit C is to use a total cost input 
base, these costs when accounted for and allocated in a cost pool 
separate and apart from the G&A expense pool will become part of the 
total cost input base used by Unit C to allocate the G&A expense pool.
    (5) Business Unit C has included selling costs as part of its G&A 
expense pool. Unit C has used a cost of sales base to allocate the G&A 
expense pool. Unit C desires to continue to allocate selling costs using 
the costs of sales base. Under the provisions of this Standard, Unit C 
would account for selling costs as a cost pool separate and apart from 
the G&A expense pool, and continue to allocate these costs over a cost 
of sales base. If Unit C uses a total cost input base to allocate the 
G&A expense pool, the selling costs will become part of the total cost 
input base.
    (d)(1) Business Unit D has accounted for selling costs in a cost 
pool separate and apart from its G&A expense pool and has allocated 
these costs using a cost of sales base. Under the provisions of this 
Standard, Unit D may continue to account for those costs in a separate 
pool and allocate them using a cost of sales base. Unit D has a total 
cost input base to allocate its G&A expense pool. The selling costs will 
become part of the cost input base used by Unit D to allocate the G&A 
expense pool.
    (2) During a cost accounting period, Business Unit D buys $2,000,000 
of raw

[[Page 397]]

materials. At the end of that cost accounting period, $500,000 of raw 
materials inventory have not been charged out to contracts or other cost 
objectives. The $500,000 of raw materials are not part of the total cost 
input base for the cost accounting period, because they have not been 
charged to the production of goods and services during that period. If 
all of the $2,000,000 worth of raw material had been charged to cost 
objectives during the cost accounting period, the cost input base for 
the allocation of the G&A expense pool would include the entire 
$2,000,000.
    (3) Business Unit D manufactures a variety of testing devices. 
During a cost accounting period, Unit D acquires and uses a small 
building, constructs a small production facility using its own 
resources, and keeps for its own use one unit of a testing device that 
it manufactures and sells to its customers. The acquisition cost of the 
building is not part of the total cost input base; however, the 
depreciation taken on the building would be part of the total cost input 
base. The costs of construction of the small production facility are not 
part of the total cost input base. The requirements of 9904.404 provide 
that those G&A expenses which are identifiable with the constructed 
asset and are material in amount shall be capitalized as part of the 
cost of the production facility. If there are G&A expenses material in 
amount and identified with the constructed asset, these G&A expenses 
would be removed from the G&A expense pool prior to the allocation of 
this pool to final cost objectives. The cost of the testing device shall 
be part of the total cost input base per the requirements of 9904.404 
which provides that the costs of constructed assets identical with the 
contractor's regular product shall include a full share of indirect 
cost.
    (e)(1) Business Unit E produces Item Z for stock or product 
inventory. The business unit does not include G&A expense as part of the 
inventory cost of these items for costing or financial reporting 
purposes. A production run of these items occurred during Cost 
Accounting Period 1. A number of the units produced were not issued 
during Period 1 and are issued in Period 2. However, those units 
produced in Period 1 shall be included in the cost input of that period 
for calculating the G&A expense allocation base and shall not be 
included in the cost input of Period 2.
    (2) Business Unit E should apply the G&A expense rate of Period 1 to 
those units of Item Z issued during Period 1 and may apply the rate of 
Period 2 to the units issued in Period 2.
    (3) If the practice of Business Unit E is to include G&A expense as 
part of the cost of stock or product inventory, the inventory cost of 
all units of Item Z produced in Period 1 and remaining in inventory at 
the end of Period 1, should include G&A expense using the G&A rate of 
Period 1.
    (f)(1) Business Unit F produced Item X for stock or product 
inventory. The business unit does not include G&A expense as part of the 
inventory cost of these items. A production run of these items was 
started, finished, and placed into inventory in a single cost accounting 
period. These items are issued during the next cost accounting period.
    (2) The cost of items produced for stock or product inventory should 
be included in the G&A base in the same year they are produced. The cost 
of such items is not to be included in the G&A base on the basis of when 
they are issued to final cost objectives. Therefore, the time of 
issuance of these items from inventory to a final cost objective is 
irrelevant in computing the G&A base.
    (g) The normal productive activity of Business Unit G includes the 
construction of base operating facilities for others. Unit G uses a 
total cost input base to allocate G&A expense to final cost objectives. 
As part of a contract to construct an operating facility, Unit G agrees 
to acquire a large group of trucks and other mobile equipment to equip 
the base operating facility. Unit G does not usually supply such 
equipment. The cost of the equipment constitutes a significant part of 
the contract cost. A special G&A allocation to this contract shall be 
agreed to by the parties if they agree that in the circumstances the 
contract as a whole receives substantially less benefit from the G&A 
expense pool than that which

[[Page 398]]

would be represented by a cost allocation based on inclusion of the 
contract cost in the total cost input base.
    (h)(1) The home office of Segment H separately allocates to 
benefiting or causing segments significant home office expenses of staff 
management functions relative to manufacturing, staff management 
functions relative to engineering, central payment of health insurance 
costs, and residual expenses. Segment H receives these expenses as 
separate allocations and maintains three indirect cost pools; i.e., G&A 
expense, manufacturing overhead, and engineering overhead; all home 
office expenses allocated to Segment H are included in Segment H's G&A 
expense pool.
    (2) This accounting practice of Segment H does not comply with 
9904.410-50(g)(2). Home office residual expenses should be in the G&A 
expense pool, and the expenses of the staff management functions 
relative to manufacturing and engineering should be included in the 
manufacturing overhead and engineering overhead pools, respectively. The 
health insurance costs should be allocated in proportion to the 
beneficial and causal relationship between these costs and Segment H's 
cost objectives.



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.

[[Page 399]]

    (b) The G&A expenses applicable to contracts subject to the CAS 
clause shall be reduced by an amount determined by multiplying the 
difference between the balance of the inventory suspense account and the 
ending inventory of contracts subject to the CAS clause by the cost of 
sales rate, as determined under subparagraph (1) of this appendix, of 
the cost accounting period in which a business unit must first allocate 
costs in accordance with the requirements of this Cost Accounting 
Standard.
    (8) In any cost accounting period in which such a reduction is made, 
the balance of the inventory suspense account shall be reduced to be 
equal to the ending inventory of contracts subject to the CAS clause of 
that cost accounting period.
    The following illustrates how a business unit would use this 
transition method.
    1. Business Unit R has been using a cost of sales base to allocate 
its G&A expense pool to final cost objectives. Unit R uses a calendar 
year as its cost accounting period. On October 1, 1976 (assumed for 
purposes of this illustration) Cost Accounting Standard 410 becomes 
effective. On October 2, 1976, Unit R receives a 3-year contract 
containing the Cost Accounting Standards clause. As a result, Unit R 
must comply with the requirements of the Standard in the cost accounting 
period beginning in January 1978. As of January 3, 1978, Business Unit R 
has the following contracts:
    (1) Contract I--A 4-year contract awarded in January 1975.
    (2) Contract II--A 3-year contract which was negotiated in March 
1976, and was awarded on October 2, 1976.
    (3) Contract III--A 4-year contract awarded on January 2, 1978.
    If Business Unit R chooses to use the transition method provided in 
9904.410-50(e), it will allocate the G&A expense pool to these contracts 
as follows:
    (a) Contract I--Since Contract I was in existence prior to January 
1, 1978, the G&A expense pool shall be allocated to it using a cost of 
sales base as provided in 9904.410-50(e).
    (b) Contract II--Since this contract was in existence prior to 
January 1, 1978, the G&A expense pool shall be allocated to it using a 
cost of sales base as provided in 9904.410-50(e).
    (c) Contract III--Since this contract was awarded after January 1, 
1978, the G&A expense pool shall be allocated to this contract using a 
cost input base.
    Having chosen to use 9904.410-50(e), Business Unit R will use the 
transition method of allocating the G&A expense pool to final cost 
objectives until all contracts awarded prior to January 1, 1978, are 
completed (1979 if the contracts are completed on schedule). Beginning 
with the cost accounting period subsequent to that time, 1980, Unit R 
will use a cost input base to allocate the G&A expense pool to all cost 
objectives. Unit R will also carry forward an inventory suspense account 
in accordance with the requirements of this Standard.
    2.A. Business Unit N is first required to allocate its costs in 
accordance with the requirements of 9904.410 during the fiscal year 
beginning January 1, 1978. Unit N has used a cost of sales base to 
allocate its G&A expense pool.
    During the years 1978, 1979, 1980, Business Unit N reported the 
following data:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Contracts prior to Jan. 1, 1978              Contracts prior to Jan. 1, 1978
                                                              ------------------------------------------------------------------------------------------
                                                                              Non-CAS     CAS-fixed     CAS-cost     Non-CAS     CAS-fixed     CAS-cost
                                                                  Total         work      price work    contract       work      price work   contracts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year 1978:
  Beginning inventory........................................         $500          300          200            0            0            0            0
  Cost input.................................................        +3000          400          600          700          500          500          300
                                                              ------------------------------------------------------------------------------------------
    Total....................................................         3500          700          800          700          500          500          300
  Cost of sales..............................................        -3000          600          550          700          450          400          300
                                                              ------------------------------------------------------------------------------------------
  Ending inventory...........................................          500          100          250            0           50          100            0
Year 1979:
  Beginning inventory........................................          500          100          250            0           50          100            0
  Cost input.................................................        +3000          400          600          700          500          500          300
                                                              ------------------------------------------------------------------------------------------
    Total....................................................         3500          500          850          700          550          600          300
  Cost of sales..............................................        -2500          450          650          700          150          250          300
                                                              ------------------------------------------------------------------------------------------
    Ending inventory.........................................         1000           50          200            0          400          350            0
Year 1980:
  Beginning inventory........................................         1000           50          200            0          400          350            0
  Cost input.................................................        +3000          400          600          700          500          500          300
                                                              ------------------------------------------------------------------------------------------
    Total....................................................         4000          450          800          700          900          850          300
  Cost of sales..............................................        -3250          450          800          700          450          550          300
  Ending inventory...........................................          750            0            0            0          450          300            0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:

[[Page 400]]

 
Operating data is in thousands of dollars.
G. & A. expense $375,000 in accordance with the requirements of this standard.

Work existing prior to January 1, 1978, may include--
    (1) Government contracts which contain the CAS clause;
    (2) Government contracts which do not contain the CAS clause;
    (3) Contracts other than Government contracts or customer orders; 
and
    (4) Production not specifically identified with contracts or 
customer orders under production or work orders existing prior to the 
date on which a business unit must first allocate its costs in 
compliance with this Standard and which are limited in time or quantity.
    Production under standing or unlimited work orders, continuous flow 
processes and the like, not identified with contracts or customer orders 
are to be treated as final cost objectives awarded after the date on 
which a business unit must first allocate its costs in compliance with 
the requirements of this Standard.
    Business Unit N may allocate the G&A expense pool as follows:

                                                  [In dollars]
----------------------------------------------------------------------------------------------------------------
                                                           Year 1978           Year 1979           Year 1980
----------------------------------------------------------------------------------------------------------------
1. G.&A. expense pool...............................                 375                 375                 375
    Cost of sales rate..............................      375/3,000=.125      375/2,500=.150      375/3,250=.115
    Cost input......................................      375/3,000=.125      375/3,000=.125      375/3,000=.125
                                                     ===========================================================
2. G.&A. allocations:
    Prior contracts:
        Non-CAS work................................     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.


[[Page 401]]


[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 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

[[Page 402]]

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.



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

[[Page 403]]

significant element of production cost to an indirect cost pool. Such 
practices conform to this Standard.
    (d) A contractor has one established inventory for type ``R'' 
transformers. The contractor allocates by the LIFO method the current 
costs of the individual units issued to Government contracts. Such a 
practice would conform to the requirements of this Standard.
    (e) A contractor has established inventories for various categories 
of material which are used on Government contracts. During the year the 
contractor allocates the costs of the units of the various categories of 
material issued to contracts by the moving average cost method. The 
contractor uses the LIFO method for tax and financial reporting purposes 
and, at year end, applies a pooled LIFO inventory adjustment for all 
categories of material to Government contracts. This application of 
pooled costs to Government contracts would be a violation of this 
Standard because the lump sum adjustment to all of the various 
categories of material is, in effect, a noncurrent repricing of the 
material issues.



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.

    (a) The purpose of this Standard 9904.412 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.
    (b) This Standard does not cover the cost of Employee Stock 
Ownership Plans (ESOPs) that meet the definition of a pension plan. Such 
plans are considered a form of deferred compensation and are covered 
under 9904.415.

[73 FR 23964, May 1, 2008]



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 
measurement 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

[[Page 404]]

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) 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 
Internal Revenue Code at Title 26 of the U.S.C.
    (9) Assignable cost limitation means the excess, if any, of the 
actuarial accrued liability and the normal cost for the current period 
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

[[Page 405]]

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.
    (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 income and expenses in accordance with 9904.413-
50(c)(7) 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; 
76 FR 81309, Dec. 27, 2011]



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

[[Page 406]]

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 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.
    (3) For qualified defined benefit pension plans, the measurement of 
pension costs shall recognize the requirements of 9904.412-50(b)(7) for 
periods beginning with the ``Applicability Date of the CAS Pension 
Harmonization Rule.'' However, paragraphs 9904.413-50(c)(8), (9) and 
(12) are exempt from the requirements of 9904.412-50(b)(7).
    (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, as amended at 76 FR 81309, Dec. 27, 2011]



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.

[[Page 407]]

    (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.
    (2)(i) Except as provided in 9904.412-50(d)(2), any portion of 
unfunded actuarial liability attributable to either pension costs 
applicable to prior years that were specifically unallowable in 
accordance with then existing Government contractual provisions or 
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.
    (ii) Such portions of unfunded actuarial liability shall be adjusted 
for interest based on the interest assumption established in accordance 
with 9904.412-50(b)(4) without regard to 9904.412-50(b)(7). 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 
income and expenses in accordance with 9904.413-50(c)(7) 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 the minimum 
funding requirements implemented by the Employee Retirement Income 
Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq., as amended, 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.

[[Page 408]]

    (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.
    (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. For qualified defined benefit plans 
whose benefits are subject to a collectively bargained agreement(s) and 
whose benefits are not based on salaries and wages, the contractor may 
recognize benefit improvements expected to occur in succeeding plan 
years determined on the basis of the average annual increase in benefits 
over the 6 immediately preceding plan years.
    (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).
    (7) CAS Pension Harmonization Rule: For qualified defined benefit 
pension plans, the pension cost shall be determined in accordance with 
the provisions of paragraph (b)(7)(i) of this section.
    (i) In any period that the sum of the minimum actuarial liability 
and the minimum normal cost exceeds the sum of the actuarial accrued 
liability and the normal cost, the contractor shall measure and assign 
the pension cost for the period in accordance with 9904.412 and 9904.413 
by using the minimum actuarial liability and minimum normal cost as the 
actuarial accrued liability and normal cost, respectively, for all 
purposes unless otherwise excepted.
    (ii) Special definitions to be used for this paragraph:
    (A) The minimum actuarial liability shall be the actuarial accrued 
liability measured under the accrued benefit cost method and using an 
interest rate assumption as described in 9904.412-50(b)(7)(iii).

[[Page 409]]

    (B) The minimum normal cost shall be the normal cost measured under 
the accrued benefit cost method and using an interest rate assumption as 
described in 9904.412-50(b)(7)(iii). Anticipated administrative expense 
for the period shall be recognized as a separate incremental component 
of normal cost.
    (iii) Actuarial Assumptions: The actuarial assumptions used to 
measure the minimum actuarial liability and minimum normal cost shall 
meet the following criteria:
    (A) The interest assumption used to measure the pension cost for the 
current period shall reflect the contractor's best estimate of rates at 
which the pension benefits could effectively be settled based on the 
current period rates of return on investment grade fixed-income 
investments of similar duration to the pension benefits and that are in 
the top 3 quality levels available, e.g., Moody's' single ``A'' rated or 
higher;
    (B) The contractor may elect to use the same rate or set of rates, 
for investment grade corporate bonds of similar duration to the pension 
benefits, as may be published by the Secretary of the Treasury and used 
for determination of the minimum contribution required by ERISA. The 
contractor's cost accounting practice includes the election of the 
specific published rate or set of rates and must be consistently 
followed;
    (C) For purposes of 9904.412-50(b)(7)(ii)(A) and (B), use of current 
period rates of return on investment grade corporate bonds of similar 
duration to the pension benefits shall not violate the provisions of 
9904.412-40(b)(2) and 9904.412-50(b)(4) regarding the interest rate used 
to measure the minimum actuarial liability and minimum normal cost; and
    (D) All actuarial assumptions, other than interest assumptions, used 
to measure the minimum actuarial liability and minimum normal cost shall 
be the same as the assumptions used elsewhere in this Standard.
    (c) Assignment of pension cost. (1) Amounts funded in excess of the 
pension cost assigned to 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 
measured for a cost accounting period is assigned to that period subject 
to the following adjustments, in order of application:
    (i) Any amount of pension cost measured for the period 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 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 9904.412-50(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) An amount of 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 the Internal Revenue Code at Title 26 of 
the U.S.C., 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 and the accumulated 
value of prepayment credits.
    (3) The cost of nonqualified defined-benefit pension plans shall be 
assigned

[[Page 410]]

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:
    (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 measured for a cost accounting 
period and adjusted in accordance with 9904.412-50(c)(2) 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; 
76 FR 81310, Dec. 27, 2011]



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

[[Page 411]]

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 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

[[Page 412]]

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 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 interest rate 
assumption, which is based on expected rate of return on investments and 
complies with 9904.412-40(b)(2) and 9904.412-50(b)(4), 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) and 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.
    (i) Under the first plan, in which the benefits are not subject to a 
collective bargaining agreement, 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 based on an 
established pattern of benefit improvements. In calculating pension 
costs for this first plan, the contractor may not assume future benefits 
greater than that currently required by the plan.
    (ii) 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 not only benefits increases required by the 
collective bargaining agreement, but may also consider subsequent 
benefit increases based on the average increase in benefits during the 
previous 6 years in computing pension costs for the current cost 
accounting period in accordance with 9904.412-50(b)(5). The contractor 
shall limit projected benefits to the increases specified in the 
provisions of the existing plan, as amended by the collective bargaining 
agreement, 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.

[[Page 413]]

    (c) Assignment of pension cost. (1) Contractor J maintains a 
qualified defined-benefit pension plan. The actuarial accrued liability 
for the plan is $20 million and is measured by the minimum actuarial 
liability in accordance with 9904.412-50(b)(7)(ii) since the criterion 
of 9904.412-50(b)(7(i) has been satisfied. 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). 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 2017, 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 2017 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, 2018, 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 a ten-year period 
beginning in 2018 in accordance with 9904.412-50(c)(2)(ii)(C) and 
9904.413-50(a)(2)(ii).
    (3) Assume the same facts shown in illustration 9904.412-60(c)(2), 
except that in 2016, 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 2016 and 2017, and was brought forward to 2017 in 
accordance with 9904.412-50(a)(2). Therefore, $216,000 ($200,000x1.08) 
is excluded from the amount considered fully amortized in 2017. The next 
year, 2018, 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 2017 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. The 
accumulated value of prepayment credits is $0. However, because of the 
limitation on tax-deductible contributions imposed by the Internal 
Revenue Code at Title 26 of the U.S.C., 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 2018 as an assignable cost 
deficit in accordance with 9904.412-50(a)(1)(vi).

[[Page 414]]

    (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 tax-deductible contribution 
which was deposited on the first day of the plan year, Contractor K 
could apply up to $700,000 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), the amount of pension 
cost assigned to the current period shall not exceed $1,700,000, which 
the sum of the $1 million maximum tax-deductible amount and $700,000 
accumulated value of prepayment credits. Contractor K's assignable 
pension cost for the period is the full $1.5 million computed for the 
period. A new prepayment credit of $200,000 is created by the excess 
funding after applying sum of the $1 million contribution and $700,000 
accumulated value of prepayment credits towards the $1.5 million 
assigned pension cost ($700,000 + $1,000,000-$1,500,000). The $200,000 
of remaining accumulated value of prepayment credits is adjusted for 
$14,460 of investment income allocated in accordance with 9904.412-
50(a)(4) and 9904.413-50(c)(7) and the sum of $214,460 is carried 
forward until needed in future accounting periods in accordance with 
9904.412-50(a)(4) and 9904.412-50(c)(1).
    (6) Assume the same facts for Contractor K in 9904.412-60(c)(4), 
except that the 2017 assignable cost limitation is $1.3 million and the 
accumulated value of prepayment credits is $0. 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 9904.412-50(a)(1) are 
considered fully amortized. The assignable cost of $1.3 million is then 
compared to the maximum tax-deductible amount of $1 million. Pursuant to 
9904.412-50(c)(2)(iii), Contractor K's assignable pension cost for the 
period is limited to $1 million. The $300,000 ($1.3 million-$1 million) 
excess of the assignable cost limitation over the tax-deductible maximum 
is assigned to future periods as an assignable cost deficit.
    (7) Contractor L is currently amortizing a large decrease in 
unfunded actuarial liability over a period of ten years. A similarly 
large increase in unfunded actuarial liability is being amortized over 
30 years. The absolute value of the resultant net amortization credit is 
greater than the normal cost so that the pension cost computed for the 
period is a negative $200,000. Contractor L first applies the provisions 
of 9904.412-50(c)(2)(i) and determines the assignable pension cost is 
$0. The negative pension cost of $200,000 is assigned to the next ten 
cost accounting periods as an assignable cost credit in accordance with 
9904.412-50(a)(1)(vi). However, when Contractor L applies the provisions 
of 9904.412-50(c)(2)(ii), the assignable cost limitation is also $0. 
Because the assignable cost of $0 determined under 9904.412-50(c)(2)(i) 
is equal to the assignable cost limitation, the assignable cost credit 
of $200,000 is considered fully amortized along with all other portions 
of unfunded actuarial liability being amortized pursuant to 9904.412-
50(a)(1). Conversely, if the assignable cost limitation had been greater 
than zero, the assignable cost credit of $200,000 would have carried-
forward and amortized in future periods.
    (8) Contractor M has a qualified defined-benefit pension plan which 
is funded through a funding agency. It computes $1 million of pension 
cost for a cost accounting period. However, pursuant to a waiver granted 
under the provisions of ERISA, Contractor M is required to fund only 
$800,000. Under the provisions of 9904.412-50(c)(5), the remaining 
$200,000 shall be accounted for as an assignable cost deficit and 
assigned to the next five cost accounting periods in accordance with the 
terms of the waiver.
    (9) Contractor N has a company-wide defined-benefit pension plan, 
wherein benefits are calculated on one consistently applied formula. 
That part of the formula defining benefits within ERISA limits is 
administered and reported as a qualified plan and funded through a 
funding agency. The remainder of the benefits are considered to be a 
supplemental or excess plan which, while it meets the criteria at 
9904.412-

[[Page 415]]

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 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 ([$700,000 - $600,000] - $75,000) 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-

[[Page 416]]

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 an 
interest assumption of 8%, which is based on the expected rate of return 
on investments and complies with 9904.412-40(b)(2) and 9904.412-
50(b)(4). 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 an 
allocated portion of the total investment income and expenses in 
accordance with 9904.412-50(a)(4) and 9904.413-50(c)(7). Allocated 
earnings and expenses, and the prepayment credits, shall be excluded 
from the actuarial value of assets used to compute the next year's 
pension cost. For the current period the net return on assets 
attributable to investment income and expenses was 6.5%. Therefore, the 
accumulated value of prepayment credits of $5,325 (5,000x1.065) 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 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 ($400,000x(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

[[Page 417]]

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, as amended at 76 FR 81311, Dec. 27, 2011]



Sec. 9904.412-60.1  Illustrations--CAS Pension Harmonization Rule.

    The following illustrations address the measurement, assignment and 
allocation of pension cost on or after the Applicability Date of the CAS 
Harmonization Rule. The illustrations present the measurement, 
assignment and allocation of pension cost for a contractor that 
separately computes pension costs by segment or aggregation of segments. 
The actuarial gain and loss recognition of changes between measurements 
based on the actuarial accrued liability, determined without regard to 
the provisions of 9904.412-50(b)7) and the minimum actuarial liability 
are illustrated in 9904.412-60.1(d). The structural format for 
9904.412.60.1 differs from the format for 9904.412-60.
    (a) Description of the pension plan, actuarial assumptions and 
actuarial methods used for 9904.412-60.1 Illustrations--(1) 
Introduction: Harmony Corporation has a defined-benefit pension plan 
covering employees at seven segments, of which some segments have 
contracts that are subject to this Standard and 9904.413, while other 
segments perform commercial work only. The demographic experience 
regarding employee terminations for employees of Segment 1 is materially 
different from that of the other six segments so that pursuant to 
9904.413-50(c)(2)(iii) the contractor must separately compute the 
pension cost for Segment 1. Because the factors comprising pension cost 
for Segments 2 through 7 are relatively equal, the contractor computes 
pension cost for these six segments in the aggregate and allocates the 
aggregate cost to segments on a composite basis. Inactive employees are 
retained in the segment from which they terminated employment. The 
contractor has received its annual actuarial valuation for its qualified 
defined benefit pension plan, which bases the pension benefit on the 
employee's final average salary.
    (2) Actuarial Methods and Assumptions: (i) Salary Projections: As 
permitted by 9904.412-50(b)(5), the contractor includes a projection of 
future salary increases and uses the projected unit credit cost method, 
which is an immediate gain actuarial cost method that satisfies the 
requirements of 9904.412-40(b)(1) and 50(b)(1), for measuring the 
actuarial accrued liability and normal cost. The contractor uses the 
accrued benefit cost method (also known as the unit credit cost method 
without projection) to measure the minimum actuarial liability and 
minimum normal cost. The accrued benefit cost method satisfies 9904.412-
50(b)(7)(ii) as well as 9904.412-40(b)(1) and 50(b)(1).
    (ii) Interest Rates: (A) Assumed interest rate used to measure the 
actuarial accrued liability and normal cost: The contractor's basis for 
establishing the expected rate of return on investments assumption 
satisfies the criteria of 9904.412-40(b)(2) and 9904.412-50(b)(4). This 
is referred to as the ``assumed interest rate'' for purposes of this 
illustration.
    (B) Corporate bond rate used to measure the minimum actuarial 
liability and minimum normal cost: For purposes of measuring the minimum 
actuarial liability and minimum normal cost the contractor has elected 
to use a specific set of investment grade corporate bond yield rates 
published by the Secretary of the Treasury for ERISA's minimum funding 
requirements. The basis for establishing the set of corporate bond rates 
meets the requirements of 9904.412-50(b)(7)(iii)(A) as permitted by 
9904.412-50(b)(7)(iii)(B). This set of rates is referred to as the 
``corporate bond rates'' for purposes of this illustration.
    (iii) Mortality: The mortality assumption is based on a table of 
generational

[[Page 418]]

mortality rates published by the Secretary of the Treasury and reflects 
recent mortality improvements. This table satisfies 9904.412-40(b)(2) 
which requires assumptions to ``represent the contractor's best 
estimates of anticipated experience under the plan, taking into account 
past experience and reasonable expectations.'' The specific table used 
for each valuation shall be identified.
    (iv) Termination of Employment: The termination of employment 
(turnover) assumption is based on an experience study of Harmony Company 
employee terminations or causes other than retirement. Because the 
experience for Segment 1 was materially different from the experience 
for the rest of the company, the termination of employee assumption for 
Segment 1 was developed based on the experience of that segment only in 
accordance with 9904.413-50(c)(2)(iii). The termination of employment 
experiences for each of Segments 2 through 7 were materially similar, 
and therefore the termination of employee assumption for Segments 2 
through 7 was developed based on the experiences of those segments in 
the aggregate.
    (v) Actuarial Value of Assets: The valuation of the actuarial value 
of assets used for CAS 412 and 413 is based on a recognized smoothing 
technique that ``provides equivalent recognition of appreciation and 
depreciation of the market value of the assets of the pension plan.'' 
The disclosed method also constrains the asset value to a corridor 
bounded by 80% to 120% of the market value of assets. This method for 
measuring the actuarial value of assets satisfies the provisions of 
9904.413-50(b)(2).
    (b) Measurement of Pension Costs. Based on the pension plan, 
actuarial methods and actuarial assumptions described in 9904.412-
60.1(a), the Harmony Corporation determines that the pension plan, as 
well as Segment 1 and Segments 2 through 7, have unfunded actuarial 
liabilities and measures its pension cost for plan year 2017 as follows:
    (1) Asset Values: (i) Market Values of Assets: The contractor 
accounts for the market value of assets in accordance with 9904.413-
50(c)(7). The contractor has elected to separately identify the 
accumulated value of prepayment credits from the assets allocated to 
segments. The accumulated value of prepayment credits are adjusted in 
accordance with 9904.412-50(a)(4) and 9904.413-50(c)(7). The market 
value of assets as of January 1, 2017, including the accumulated value 
of prepayment credits, is summarized in Table 1.

                                Table 1--January 1, 2017, Market Value of Assets
----------------------------------------------------------------------------------------------------------------
                                                                       Segments 2      Accumulated
                                     Total plan       Segment 1        through 7       prepayments       Note
----------------------------------------------------------------------------------------------------------------
Market Value of Assets..........     $14,257,880       $1,693,155      $11,904,328         $660,397           1
----------------------------------------------------------------------------------------------------------------
Note 1: Information taken directly from the actuarial valuation report prepared for CAS 412 and 413 purposes and
  supporting documentation.

    (ii) Actuarial Value of Assets: Based on the contractor's disclosed 
asset valuation method, and recognition of the asset gain or loss, which 
is the difference between the expected income, based on the assumed 
interest rate, which complies with 9904.412-40(b)(2) and 9904.412-
50(b)(4), and the actual income, including realized and unrealized 
appreciation and depreciation for the current and four prior periods as 
required by 9904.413-40(b), is delayed and amortized over a five-year 
period. The portion of the appreciation and depreciation that is 
deferred until future periods is subtracted from the market value of 
assets to determine the actuarial value of assets for CAS 412 and 413 
purposes. The actuarial value of assets cannot be less than 80%, or more 
than 120%, of the market value of assets. The development of the 
actuarial value of assets for the total plan, as well as for Segment 1 
and Segments 2 through 7, as of January 1, 2017 is shown in Table 2.

[[Page 419]]



                               Table 2--January 1, 2017, Actuarial Value of Assets
----------------------------------------------------------------------------------------------------------------
                                                                        Segments 2      Accumulated
                                      Total plan       Segment 1        through 7       prepayments       Note
----------------------------------------------------------------------------------------------------------------
Market Value at January 1, 2017..      $14,257,880       $1,693,155      $11,904,328         $660,397          1
    Total Deferred Appreciation..         (37,537)          (4,398)         (31,400)          (1.739)          2
                                  --------------------------------------------------------------------
Unlimited Actuarial Value of            14,220,343        1,688,757       11,872,928          658,658
 Assets..........................
CAS 413 Asset Corridor 80% of           11,406,304        1,354,524        9,523,462          528,318
 Market Value of Assets..........
Market Value at January 1, 2017..       14,257,880        1,693,155       11,904,328          660,397          1
120% of Market Value of Assets...       17,109,456        2,031,786       14,285,194          792,476
CAS Actuarial Value of Assets....       14,220,343        1,688,757       11,872,928          658,658       3, 4
----------------------------------------------------------------------------------------------------------------
Note 1: See Table 1.
Note 2: Information taken directly from the actuarial valuation report prepared for CAS 412 and 413 purposes and
  supporting documentation.
Note 3: CAS Actuarial Value of Assets cannot be less than 80% of Market Value of Assets or more than 120% of
  Market Value of Assets.
Note 4: The Actuarial Value of Assets are used in determination of any Unfunded Actuarial Liability or Unfunded
  Actuarial Surplus regardless of whether the liability is based on the actuarial accrued liability measured
  without regard to 9904.412-50(b)(7) or minimum actuarial liability measured in accordance with 9904.412-
  50(b)(7).

    (2) Liabilities and Normal Costs: (i) Actuarial Accrued Liabilities 
and Normal Costs: Based on the plan population data and the disclosed 
methods and assumptions for CAS 412 and 413 purposes, the contractor 
measures the actuarial accrued liability and normal cost on a going 
concern basis using an assumed interest rate that satisfies the 
requirements of 9904.412-40(b)(2) and 9904.412-50(b)(4). The actuarial 
accrued liability and normal cost for each segment are measured based on 
the termination of employment assumption unique to that segment. The 
actuarial accrued liability and normal cost for the total plan is the 
sum of the actuarial accrued liability and normal cost for the segments. 
The actuarial accrued liability and normal cost are shown in Table 3.

                  Table 3--Actuarial Accrued Liabilities and Normal Costs as of January 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                       Total plan       Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
Actuarial Accrued Liability (AAL).................      $16,325,000       $2,100,000      $14,225,000          1
Normal Cost.......................................          910,700           89,100          821,600          1
Expense Load on Normal Cost.......................  ...............  ...............  ...............       1, 2
----------------------------------------------------------------------------------------------------------------
Note 1: Information taken directly from the actuarial valuation report prepared for CAS 412 and 413 purposes and
  supporting documentation. The actuarial accrued liability and normal cost are computed using the assumed
  interest rate in accordance with 9904.412-40(b)(2) and 9904.412.50(b)(4).
Note 2: Expected administrative expenses are implicitly recognized as part of the assumed interest rate.

    (ii) Likewise, based on the plan population data and the disclosed 
methods and assumptions for CAS 412 and 413 purposes, the contractor 
measures the minimum actuarial liability and minimum normal cost using a 
set of investment grade corporate bond yield rates published by the 
Secretary of the Treasury that satisfy the requirements of 9904.412-
50(b)(7)(iii). The minimum actuarial liability and minimum normal cost 
for each segment are measured based on the termination of employment 
assumption for that segment. The minimum actuarial liability and minimum 
normal cost for the total plan is the sum of the actuarial accrued 
liability and normal cost for the segments as shown in Table 4.

              Table 4--Minimum Actuarial Liabilities and Minimum Normal Costs as of January 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                       Total plan       Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
Minimum Actuarial Liability.......................      $16,636,000       $2,594,000      $14,042,000          1
Minimum Normal Cost...............................          942,700          102,000          840,700          1

[[Page 420]]

 
Expense Load on Minimum Normal Cost...............           82,000            8,840           73,160       1, 2
----------------------------------------------------------------------------------------------------------------
Note 1: Plan level information taken directly from the actuarial valuation report prepared for ERISA purposes
  and supporting documentation and equals the sum of the data for the segments. Data for the segments is taken
  directly from the actuarial valuation report prepared for CAS 412 and 413 purposes and supporting
  documentation.
Note 2: Anticipated annual administrative expenses are separately recognized as an incremental component of
  minimum normal cost in accordance with 9904.412-50(b)(7)(ii)(B).

    (3) CAS Pension Harmonization Test: (i) In accordance with 9904.412-
50(b)(7)(i), the contractor compares the sum of the actuarial accrued 
liability and normal cost plus any expense load, to the sum of the 
minimum actuarial liability and minimum normal cost plus any expense 
load. Because the contractor separately computes pension costs by 
segment, or aggregation of segments, the applicability of 9904.412-
50(b)(7)(i) is determined separately for Segment 1 and Segments 2 
through 7. See Table 5, which shows the application of the provisions of 
9904.412-50(b)(7)(i), i.e., the CAS pension harmonization test.

                           Table 5--CAS Pension Harmonization Test at January 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                       Total plan       Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                           (Note 1)         (Note 2)         (Note 2)
``Going Concern'' Liability for Period:...........  ...............  ...............  ...............          3
    Actuarial Accrued Liability...................  ...............       $2,100,000      $14,225,000          4
    Normal Cost...................................  ...............           89,100          821,600          4
    Expense Load on Normal Cost...................  ...............  ...............  ...............       4, 5
                                                                    ----------------------------------
        Total Liability for Period................  ...............        2,189,100       15,046,600
Minimum Liability for Period:
    Minimum Actuarial Liability...................  ...............        2,594,000       14,042,000          6
    Minimum Normal Cost...........................  ...............          102,000          840,700          6
    Expense Load on Minimum Normal Cost...........  ...............            8,840           73,160       6, 7
                                                                    ----------------------------------
        Total Minimum Liability for Period........  ...............        2,704,840       14,955,860
----------------------------------------------------------------------------------------------------------------
Note 1: Because the contractor determines pension costs separately for Segment 1 and Segments 2 through 7, the
  data for the Total Plan is not needed for purposes of the 9904.412-50(b)(7)(i) determination.
Note 2: Because the contractor determines pension cost separately for Segment 1 and Segments 2 through 7, the
  9904.412-50(b)(7) CAS Pension Harmonization test is applied at the segment level to determine the larger of
  the Total Liability for Period or the Total Minimum Liability for Period. For Segment 1, the larger Total
  Minimum Liability for Period determines the measurement basis for the liability and normal cost. For Segments
  2 through 7, the larger Total Liability for Period determines the measurement basis for the liability and
  normal cost.
Note 3: The actuarial accrued liability and normal cost plus any expense load are computed using interest
  assumptions based on long-term expectations in accordance with 9904.412-40(b)(2) and 9904.412-50(b)(4). For
  purposes of Illustration 9904.412-60.1(b), the sum of these amounts are referred to as the ``Going Concern''
  Liability for the Period.
Note 4: See Table 3.
Note 5: Because the contractor's assumed interest rate implicitly recognizes expected administrative expenses
  there is no explicit amount added to the normal cost.
Note 6: See Table 4.
Note 7: The contractor explicitly identifies the expected expenses as a separate component of the minimum normal
  cost, as required by 9904.412-50(b)(7)(ii)(B).

    (ii) As shown in Table 5 for Segment 1, the total minimum liability 
for the period (minimum actuarial liability and minimum normal cost) of 
$2,704,840 exceeds the total liability for the period (actuarial accrued 
liability and normal cost) of $2,189,100. Therefore, the contractor must 
measure the pension cost for Segment 1 using the minimum actuarial 
liability and minimum normal cost as the values of the actuarial accrued 
liability and normal cost in accordance with 9904.412-50(b)(7)(i). In 
other words, the contractor substitutes the minimum actuarial liability 
and minimum normal cost for the actuarial accrued liability and normal 
cost.
    (iii) Conversely, as shown in Table 5 for Segments 2 through 7, the 
total liability for the period of $15,046,600 exceeds the total minimum 
liability for the period of $14,955,860 for Segments 2 through 7. 
Therefore, the contractor

[[Page 421]]

must measure the pension cost using the actuarial accrued liability and 
normal cost without regard for the minimum actuarial liability and 
minimum normal cost.
    (4) Measurement of Current Period Pension Cost: (i) To determine the 
pension cost for Segment 1, the contractor measures the unfunded 
actuarial liability, pension cost without regard to 9904.412-50(c)(2) 
limitations, and the assignable cost limitation using the actuarial 
accrued liability and normal cost as measured by the minimum actuarial 
liability and minimum normal cost, respectively, which are based on the 
accrued benefit cost method. This measurement complies with the 
requirements of 9904.412-50(b)(7) and the definition of actuarial 
accrued liability, 9904.412-30(a)(2) and normal cost, 9904.412-
30(a)(18).
    (ii) To determine the pension cost for Segments 2 through 7, the 
contractor measures the unfunded actuarial liability, pension cost 
without regard to 9904.412-50(c)(2) limitations, and the assignable cost 
limitation using the actuarial accrued liability and normal cost based 
on the projected unit credit cost method, which is the contractor's 
established cost accounting method and the contractor's assumed interest 
rate based on long-term trends as required by 9904.412-50(b)(4).
    (iii) Unfunded Actuarial Liability (Table 6):

                           Table 6--Unfunded Actuarial Liability as of January 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                       Total plan       Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                           (Note 1)  ...............  ...............
Actuarial Accrued Liability.......................      $16,819,000      $ 2,594,000      $14,225,000          2
CAS Actuarial Value of Assets.....................     (13,561,685)      (1,688,757)     (11,872,928)          3
                                                   ---------------------------------------------------
Unfunded Actuarial Liability......................        3,257,315          905,243        2,352,072
----------------------------------------------------------------------------------------------------------------
Note 1: Because the contractor determines pensions separately for Segment 1 and Segments 2 through 7, the values
  are the sum of the values for Segment 1 and Segments 2 through 7.
Note 2: For Segment 1, the actuarial accrued liability is measured by the accrued benefit cost method as
  required by 9904.412-50(b)(7), i.e., the minimum actuarial liability as described in 9904.412-50(b)(7)(ii).
  See Table 4. For Segments 2 through 7, the actuarial accrued liability is measured by the projected unit
  credit cost method, which is the contractor's established actuarial cost method since these the 9904.412-
  50(b)(7)(i) criterion was not met for these segments. See Table 3.
Note 3: See Table 2. The CAS Actuarial Value of Assets is used regardless of the basis for determining the
  liabilities. The CAS Actuarial Value of Assets allocated to Segment 1 and Segments 2 through 7 excludes the
  accumulated value of prepayment credits as required by 9904.412-50(a)(4).

    (iv) Measurement of the Adjusted Pension Cost (Table 7):

                             Table 7--Measurement of Pension Cost at January 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                       Total plan       Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                           (Note 1)  ...............  ...............
Normal Cost.......................................  ...............        $ 102,000         $821,600          2
Expense Load on Normal Cost.......................  ...............            8,840  ...............       2, 3
Amortization Installments.........................  ...............          140,900          366,097          4
                                                   ---------------------------------------------------
Measured Pension Cost.............................        1,439,437          251,740        1,187,697
----------------------------------------------------------------------------------------------------------------
Note 1: Because the contractor separately computes pension cost for Segment 1 and Segments 2 through 7, only the
  total pension cost is shown.
Note 2: For Segment 1, the normal cost is measured by the accrued benefit cost method as required by 9904.412-
  50(b)(7), i.e., the minimum normal cost as described in 9904.412-50(b)(7)(ii). See Table 4. For Segments 2
  through 7, the normal cost is measured by the contractor's established immediate gain cost method since these
  the 9904.412-50(b)(7)(i) criterion was not met for these segments. See Table 3.
Note 3: Because the criterion of 9904.412-50(b)(7)(i) was met for Segment 1, the Normal Cost is measured by the
  Minimum Normal Cost, which explicitly identifies the expected expenses as a separate component of the minimum
  normal cost in accordance with 9904.412-50(b)(7)(ii)(B). See Table 4. For Segments 2 through 7, the normal
  cost is measured by the contractor's established immediate gain cost method, which implicitly recognizes
  expenses as a decrement to expected assumed interest rate, since the 9904.412-50(b)(7)(i) criterion was not
  met for these segments. See Table 3.
Note 4: Net amortization installment based on the unfunded actuarial liability of $3,257,315 ($905,243 for
  Segment 1, and $2,352,072 for Segments 2 through 7) and the contractor's assumed interest rate in compliance
  with 9904.412-40(b)(2) and 9904.412-50(b)(4). See Table 6.

    (c) Assignment of Pension Cost. In 9904.412-60.1(b), the Harmony 
Corporation measured the total pension cost to be $1,439,437 ($251,740 
for Segment 1 and

[[Page 422]]

$1,187,697 for Segments 2 through 7). The contractor must now determine 
if any of the limitations of 9904.412-50(c)(2) apply at the segment 
level.
    (1) Zero Dollar Floor: The contractor compares the measured pension 
cost to a zero dollar floor as required by 9904.412-50(c)(2)(i). In this 
case, the measured pension cost is greater than zero and no assignable 
cost credit is established. See Table 8.

                      Table 8--CAS 412-50(c)(2)(i) Zero Dollar Floor as of January 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                       Total plan       Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                           (Note 1)  ...............  ...............
Measured Pension Cost = $0.............  ...............         $251,740       $1,187,697          2
Assignable Cost Credit............................  ...............  ...............  ...............          3
----------------------------------------------------------------------------------------------------------------
Note 1: Because the provisions of CAS 412-50(c)(2)(i) are applied at the segment level, no values are shown for
  the Total Plan.
Note 2: See Table 7. The Assignable Pension Cost in accordance with 9904.412-50(c)(2)(i) is the greater of zero
  or the Harmonized Pension Cost.
Note 3: There is no Assignable Cost Credit since the Measured Pension Cost is greater than zero.

    (2) Assignable Cost Limitation: (i) As required by 9904.412-
50(c)(2)(ii), the contractor measures the assignable cost limitation 
amount. The pension cost assigned to the period cannot exceed the 
assignable cost limitation amount. Because the measured pension cost for 
Segment 1 met the harmonization criterion of 9904.412-50(b)(7)(i), the 
assignable cost limitation is based on the sum of the actuarial accrued 
liability and normal cost plus expense load, using the accrued benefit 
cost method in accordance with 9904.412-50(b)(7)(ii). Therefore, the 
actuarial accrued liability and normal cost plus expense load are 
measured by the minimum actuarial liability and minimum normal cost plus 
expense load. See Table 9.

                 Table 9--CAS 412-50(c)(2)(ii) Assignable Cost Limitation as of January 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                       Total plan       Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                           (Note 1)  ...............  ...............
Actuarial Accrued Liability.......................  ...............       $2,594,000      $14,225,000          2
Normal Cost.......................................  ...............          102,000          821,600          3
Expense Load on Normal Cost.......................  ...............            8,840  ...............          4
                                                                    ----------------------------------
Total Liability for Period........................  ...............       $2,704,840      $15,046,600
CAS Actuarial Value of Plan Assets................  ...............      (1,688,757)     (11,872,928)          5
                                                                    ----------------------------------
(A) Assignable Cost Limitation Amount.............  ...............       $1,016,083       $3,173,672          6
(B) 412-50(c)(2)(i) Assigned Cost.................  ...............         $251,740       $1,187,697          7
(C) 412-50(c)(2)(ii) Assigned Cost................       $1,439,437         $251,740       $1,187,697          8
----------------------------------------------------------------------------------------------------------------
Note 1: Because the assignable cost limitation is applied at the segment level when pension costs are separately
  calculated by segment or aggregation of segments, no values are shown for the Total Plan other than the
  Assigned Cost after consideration of the Assignable Cost Limit.
Note 2: For Segment 1, the actuarial accrued liability is measured by the accrued benefit cost method as
  required by 9904.412-50(b)(7), i.e., the minimum actuarial liability as described in 9904.412-50(b)(7)(ii)(A).
  See Table 4. For Segments 2 through 7, the actuarial accrued liability is measured by the contractor's
  established immediate gain cost method since these the 9904.412-50(b)(7)(i) criterion was not met for these
  segments. See Table 3.
Note 3: For Segment 1, the normal cost is measured by the accrued benefit cost method as required by 9904.412-
  50(b)(7), i.e., the minimum normal cost as described in 9904.412-50(b)(7)(ii)(B). See Table 4. For Segments 2
  through 7, the normal cost is measured by the contractor's established immediate gain cost method since these
  the 9904.412-50(b)(7)(i) criterion was not met for these segments. See Table 3.
Note 4: For Segment 1, the normal cost is measured by the accrued benefit cost method as required by 9904.412-
  50(b)(7), i.e., the minimum normal cost as described in 9904.412-50(b)(7)(ii)(B), which explicitly identifies
  the expected expenses as a separate component of the minimum normal cost. See Table 4. For Segments 2 through
  7, the normal cost is measured by the contractor's established immediate gain cost method, which implicitly
  recognizes expenses as a decrement to the assumed interest rate since these the 9904.412-50(b)(7)(i) criterion
  was not met for these segments. See Table 3.
Note 5: See Table 2. The CAS Actuarial Value of Assets is used regardless of the basis for determining the
  liabilities. The CAS Actuarial Value of Assets allocated to Segment 1 and Segments 2 through 7 excludes the
  accumulated value of prepayment credits as required by 9904.412-50(a)(4).
Note 6: The Assignable Cost Limitation cannot be less than $0.
Note 7: See Illustration 9904.412-60.1(c)(1), Table 8.
Note 8: Lesser of lines (A) or (B).


[[Page 423]]

    (ii) As shown in Table 9, the contractor determines that the 
measured pension costs for Segment 1 and Segments 2 through 7 do not 
exceed the assignable cost limitation and are not limited.
    (3) Measurement of Tax-Deductible Limitation on Assignable Pension 
Cost: (i) Finally, after limiting the measured pension cost in 
accordance with 9904.412-50(c)(2)(i) and (ii), the contractor checks to 
ensure that the total assigned pension cost will not exceed $15,674,697, 
which is the sum of the maximum tax-deductible contribution 
($15,014,300), which is developed in the actuarial valuation prepared 
for ERISA, and the accumulated value of prepayment credits ($660,397) 
shown in Table 1. Since the tax-deductible contribution and accumulated 
value of prepayment credits are maintained for the plan as a whole, 
these values are allocated to segments based on the assignable pension 
cost after adjustment, if any, for the assignable cost limitation in 
accordance with 9904.413-50(c)(1)(ii). See Table 10.

                 Table 10--CAS 412-50(c)(2)(iii) Tax-Deductible Limitation as of January 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                       Total plan       Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
Maximum Tax-deductible Amount.....................      $15,014,300       $2,625,818      $12,388,482       1, 2
Accumulated Prepayment Credits....................          660,397          115,495          544,902       3, 4
                                                   ---------------------------------------------------
(A) 412-50(c)(2)(iii) Limitation..................      $15,674,697       $2,741,313      $12,933,384
(B) 412-50(c)(2)(ii) Assigned Cost................       $1,439,437         $251,740       $1,187,697          5
Assigned Pension Cost.............................       $1,439,437         $251,740       $1,187,697          6
----------------------------------------------------------------------------------------------------------------
Note 1: The Maximum Deductible Amount for the Total Plan is obtained from the valuation report prepared for
  ERISA purposes.
Note 2: The Maximum Tax-deductible Amount for the Total Plan is allocated to segments based on the assigned cost
  after application of 9904.412-50(c)(2)(ii) in accordance with 9904.413-50(c)(1)(i) for purposes of this
  assignment limitation test.
Note 3: The Accumulated Prepayment Credits for the Total Plan are allocated to segments based on the assigned
  cost after application of 9904.412-50(c)(2)(ii) in accordance with 9904.413-50(c)(1)(i) for purposes of this
  assignment limitation test.
Note 4: See Table 1.
Note 5: See Table 9.
Note 6: Lesser of lines (A) or (B).

    (ii) For Segment 1, the assignable pension cost of $251,740, 
measured after considering the assignable cost limitation, does not 
exceed the 9904.412-50(c)(2)(iii) limit of $2,741,313. For Segments 2 
through 7, the assignable pension cost of $1,187,697, measured after 
considering the assignable cost limitation, does not exceed the 
9904.412-50(c)(2)(iii) limit of $12,933,384.
    (d) Actuarial Gain and Loss--Change in Liability Basis. (1) Assume 
the same facts shown in 9904.412-60.1(b) for Segment 1 of the Harmony 
Corporation for 2017. Table 11 shows the actuarial liabilities and 
normal costs plus any expense loads for Segment 1 for 2016 through 2018.

                         Table 11--Summary of Liabilities for Segment 1 as of January 1
----------------------------------------------------------------------------------------------------------------
                                                          2016             2017             2018         Notes
----------------------------------------------------------------------------------------------------------------
``Going Concern'' Liabilities for the Period:
    Actuarial Accrued Liability...................       $1,915,000       $2,100,000       $2,305,000          1
    Normal Cost...................................           89,600           89,100           99,500          1
    Expense Load on Normal Cost...................  ...............  ...............  ...............       1, 2
                                                   ---------------------------------------------------
        Total Liability for Period................       $2,004,600       $2,189,100       $2,404,500
Minimum Liabilities for the Period:
    Minimum Actuarial Liability...................       $1,901,000       $2,594,000       $2,212,000          3
    Minimum Normal Cost...........................           83,800          102,000           96,500          3
    Expense Load on Minimum Normal Cost...........            8,300            8,840            9,300       3, 4
                                                   ---------------------------------------------------
        Total Minimum Liability for Period........       $1,993,100       $2,704,840       $2,317,800
Interest Basis as Determined by Segment's           9904.412-50(b)(  9904.412-50(b)(  9904.412-50(b)(          5
 Liabilities for Period...........................               4)          7)(iii)               4)
----------------------------------------------------------------------------------------------------------------
Note 1: See Table 3 for 2017 values. For 2016 and 2018, the data for Segment 1 is taken directly from the
  actuarial valuation report prepared for CAS 412 and 413 purposes and supporting documentation, including
  subtotals of the data by segment.

[[Page 424]]

 
Note 2: Because the contractor's interest assumption, which satisfies the requirements of 9904.412-40(b)(2) and
  9904.412-50(b)(4), implicitly recognizes expected administrative expenses there is no explicit amount shown
  for the normal cost.
Note 3: See Table 4 for 2017 values. For 2016 and 2018, the data for Segment 1 is taken directly from the
  actuarial valuation report prepared for ERISA purposes and supporting documentation, including subtotals of
  the data by segment. The values for 2016 are based on the transitional minimum actuarial liability and
  transitional minimum normal cost measured in accordance with 9904.412-64.1(a) and (b).
Note 4: For purposes of determining minimum normal cost, the contractor explicitly identifies the expected
  administrative expense as a separate component as required by 9904.412-50(b)(7)(ii)(B).
Note 5: For determining the pension cost for the period, the measurements are based on the actuarial accrued
  liability and normal cost unless the total minimum liability for the period exceeds the ``Going Concern''
  total liability for the period. The measurement basis was separately determined for each segment in accordance
  with 9904.412-50(b)(7)(i).

    (2) For 2016, the sum of the minimum actuarial liability and minimum 
normal cost does not exceed the sum of the actuarial accrued liability 
and normal cost. Therefore the criterion of 9904.412-50(b)(7)(i) is not 
met, and the actuarial accrued liability and normal cost are used to 
compute the pension cost for 2016. For 2017, the sum of the minimum 
actuarial liability and minimum normal cost exceeds the sum of the 
actuarial accrued liability and normal cost, and therefore the pension 
cost is computed using minimum actuarial liability and minimum normal 
cost as required by 9904.412-50(b)(7)(i). For 2018, the sum of the 
minimum actuarial liability and minimum normal cost does not exceed the 
sum of the actuarial accrued liability and normal cost, and the 
actuarial accrued liability and normal cost are used to compute the 
pension cost for 2018 because the criterion of 9904.412-50(b)(7)(i) is 
not met. Table 12 shows the measurement of the unfunded actuarial 
liability for 2016 through 2018.

                      Table 12--Unfunded Actuarial Liability for Segment 1 as of January 1
----------------------------------------------------------------------------------------------------------------
                                                          2016             2017             2018         Notes
----------------------------------------------------------------------------------------------------------------
Current Year Actuarial Liability Basis............  9904.412-50(b)(  9904.412-50(b)(  9904.412-50(b)(          1
                                                                 4)          7)(iii)               4)
Actuarial Accrued Liability.......................       $1,915,000       $2,594,000       $2,305,000          1
CAS Actuarial Value of Assets.....................      (1,500,000)      (1,688,757)      (1,894,486)          2
                                                   ---------------------------------------------------
Unfunded Actuarial Liability (Actual).............         $415,000         $905,243         $410,514
----------------------------------------------------------------------------------------------------------------
Note 1: See Table 11.
Note 2: The 2017 CAS Actuarial Value of Assets is developed in Table 2. For 2016 and 2018, the Actuarial Value
  of Assets for Segment 1 is taken directly from the actuarial valuation report prepared for CAS 412 and 413
  purposes and supporting documentation.

    (3) Except for changes in the value of the assumed interest rate 
used to measure the minimum actuarial liability and minimum normal cost, 
there were no changes to the pension plan's actuarial assumptions or 
actuarial cost methods during the period of 2016 through 2018. The 
contractor's actuary measured the expected unfunded actuarial liability 
and determined the actuarial gain or loss for 2017 and 2018 as shown in 
Table 13.

                  Table 13--Measurement of Actuarial Gain or Loss for Segment 1 as of January 1
----------------------------------------------------------------------------------------------------------------
                                                         2016              2017             2018         Notes
----------------------------------------------------------------------------------------------------------------
Actual Unfunded Actuarial Liability..............         (Note 1)          $905,243         $410,514          2
Expected Unfunded Actuarial Liability............  ................        (381,455)        (848,210)          3
                                                                    ----------------------------------
Actuarial Loss (Gain)............................  ................         $523,788       $(437,696)
----------------------------------------------------------------------------------------------------------------
Note 1: The determination of the actuarial gain or loss that occurred during 2015 and measured on 2016 is
  outside the scope of this Illustration.
Note 2: See Table 12.
Note 3: Information taken directly from the actuarial valuation report prepared for CAS 412 and 413 purposes and
  supporting documentation. The expected unfunded actuarial liability is based on the prior unfunded actuarial
  liability updated based on the assumed interest rate in compliance with 9904.412-40(b)(2) and 9904.412-
  50(b)(4). Note that in accordance with 9904.412-50(b)(7)(iii)(D), the corporate bond yield rate is only used
  to determine the minimum actuarial liability but not to adjust the liability for the passage of time.


[[Page 425]]

    (4) According to the actuarial valuation report, the 2017 actuarial 
loss of $523,788 includes a $494,000 actuarial loss due to a change in 
measurement basis from using an actuarial accrued liability of 
$2,100,000 to using a minimum actuarial liability of $2,594,000, 
including the effect of any change in the interest rate basis. (See 
Table 11 for the actuarial accrued liability and the minimum actuarial 
liability.) The $494,000 loss ($2,594,000-$2,100,000) due to the change 
in the liability basis is amortized as part of the total actuarial loss 
of $523,788 over a ten-year period in accordance with 9904.412-
50(a)(1)(v) and 9904.413-50(a)(2)(ii). Similarly, the next year's 
valuation report shows a 2018 actuarial gain of $437,696, which includes 
a $93,000 actuarial gain ($2,305,000-$2,212,000) due to a change from a 
minimum actuarial liability back to a an actuarial accrued liability 
basis, which includes the effect of any change in interest rate basis. 
The $93,000 gain due the change in the liability basis will be amortized 
as part of the total $437,696 actuarial gain over a ten-year period in 
accordance with 9904.412-50(a)(1) and 9904.413-50(a)(2)(ii).

[76 FR 81312, Dec. 27, 2011, as amended at 77 FR 43543, July 25, 2012]



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 February 27, 2012, hereafter 
known as the ``Effective Date'', and is applicable for cost accounting 
periods after June 30, 2012, hereafter known as the ``Implementation 
Date.''
    (b) Following the award of a contract or subcontract subject to this 
Standard on or after the Effective Date, contractors shall follow this 
Standard, as amended, beginning with its next cost accounting period 
beginning after the later of the Implementation Date or the award date 
of a contract or subcontract to which this Standard is applicable. The 
first day of the cost accounting period that this Standard, as amended, 
is first applicable to a contractor or subcontractor is the 
``Applicability Date of the CAS Pension Harmonization Rule'' for 
purposes of this Standard. Prior to the Applicability Date of the CAS 
Pension Harmonization Rule, contractors or subcontractors shall follow 
the Standard in 9904.412 in effect prior to the Effective Date.
    (1) Following the award of a contract or subcontract subject to this 
Standard received on or after the Effective Date, contractors with 
contracts or subcontracts subject to this Standard that were received 
prior to the Effective Date shall continue to follow the Standard in 
9904.412 in effect prior to the Effective Date. Beginning with the 
Applicability Date of the CAS Pension Harmonization Rule, such 
contractors shall follow this Standard, as amended, for all contracts or 
subcontracts subject to this Standard.
    (2) Following the award of a contract or subcontract subject to this 
Standard received during the period beginning on or after the date 
published in the Federal Register and ending before the Effective Date, 
contractors shall follow the Standard in 9904.412 in effect prior to the 
Effective Date. If another contract or subcontract, subject to this 
Standard, is received on or after the Effective Date, the provisions of 
9904.412-63(b)(1) shall apply.

[76 FR 81319, Dec. 27, 2011, as amended at 77 FR 43543, July 25, 2012]



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 426]]

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 427]]

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 ($200,000x1.07), 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 
($200,000x1.07) 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 ($300,000x1.07) 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 ($400,000x1.07). 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 428]]

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. 9904.412-64.1  Transition Method for the CAS Pension Harmonization 
          Rule.

    Contractors or subcontractors that become subject to the Standard, 
as amended, during the Pension Harmonization Transition Period shall 
recognize the change in cost accounting method in accordance with 
paragraphs (a) and (b).
    (a) The Pension Harmonization Rule Transition Period is the five 
cost accounting periods beginning with a contractor's first cost 
accounting period beginning after June 30, 2012, and is independent of 
the receipt date of a contract or subcontract subject to this Standard. 
The Pension Harmonization Rule Transition Period begins on the first day 
of a contractor's first cost accounting period that begins after June 
30, 2012.
    (b) Phase in of the Minimum Actuarial Liability and Minimum Normal 
Cost. During each successive accounting period of Pension Harmonization 
Rule Transition Period, the contractor shall recognize on a scheduled 
basis the amount by which the minimum actuarial liability differs from 
the actuarial accrued liability; and the amount by which the sum of the 
minimum normal cost plus any expense load differs from the sum of the 
normal cost plus any expense load.

[[Page 429]]

    (1) For purposes of determining the amount of the difference, the 
minimum actuarial liability and minimum normal cost shall be measured in 
accordance with 9904.412-50(b)(7)(ii).
    (2) During each successive accounting period of the Pension 
Harmonization Rule Transition Period, the transitional minimum actuarial 
liability shall be set equal to the actuarial accrued liability adjusted 
by an amount equal to the difference between the minimum actuarial 
liability and actuarial accrued liability, multiplied by the scheduled 
applicable percentage for that period. The sum of the transitional 
minimum normal cost plus any expense load shall be set equal to the sum 
of normal cost plus any expense load, adjusted by an amount equal to the 
difference between the minimum normal cost and the normal cost, plus 
expense loads, multiplied by the scheduled applicable percentage for 
that period.
    (3) The scheduled applicable percentages for each successive 
accounting period of the Pension Harmonization Rule Transition Period 
are as follows: 0% for the First Cost Accounting Period, 25% for the 
Second Cost Accounting Period, 50% for the Third Cost Accounting Period, 
75% for the Fourth Cost Accounting Period, and 100% for the Fifth Cost 
Accounting Period.
    (4) The transitional minimum actuarial liability and transitional 
minimum normal cost measured in accordance with this provision shall be 
used for purposes of the 9904.412-50(b)(7) minimum actuarial liability 
and minimum normal cost.
    (5) The actuarial gain or loss attributable to experience since the 
prior valuation, measured as of the First Cost Accounting Period of the 
Pension Harmonization Rule Transition Period, shall be amortized over a 
ten-year period in accordance with 9904.413-50(a)(2)(ii).
    (c) Transition Illustration. Assume the same facts for the Harmony 
Corporation in Illustration 9904.412-60.1(a) and (b), except that this 
is the Fourth Cost Accounting Period of the Pension Harmonization Rule 
Transition Period. As in Illustration 9904.412-60.1(a) and (b), the 
contractor separately computes pension costs for Segment 1, and computes 
pension costs for Segments 2 through 7 in the aggregate. The contractor 
has two actuarial valuations prepared: one measures the actuarial 
accrued liability and normal cost using the contractor's expected rate 
of return on investments assumption, in accordance with 9904.412-
40(b)(2) and 9904.412-50(b)(4), and the other valuation measures the 
minimum actuarial liability and minimum normal cost based on the assumed 
current yields on investment quality corporate bonds in accordance with 
9904.412-50(b)(7)(iii)(A). The actuarial valuations present the values 
subtotaled for each segment and in total for the plan as a whole.
    (1) The contractor applies 9904.412-64.1(b) as follows:
    (i) (A) For Segment 1, the $494,000 ($2,594,000--$2,100,000) 
difference between the minimum actuarial liability and the actuarial 
accrued liability is multiplied by 75%. Therefore for Segment 1, the 
minimum actuarial liability for purposes of 9904.412-50(b)(7) is 
adjusted to a transitional minimum actuarial liability of $2,470,500 
($2,100,000+[75%x$494,000]).
    (B) For Segments 2 through 7, the ($183,000) difference 
($14,042,000-$14,225,000) between the minimum actuarial liability and 
the actuarial accrued liability is multiplied by 75%. For Segment 2 
through 7, the minimum actuarial liability for purposes of 9904.412-
50(b)(7) is adjusted to a transitional minimum actuarial liability of 
$14,087,750 ($14,225,000+[75%x($183,000)]).
    (C) The computation of the transitional minimum actuarial liability 
that incrementally recognizes the difference between the minimum 
actuarial liability and the actuarial accrued liability for Segment 1, 
and for Segments 2 through 7, is shown in Table 1 below:

[[Page 430]]



          Table 1--Development of Transitional Minimum Actuarial Liability for Fourth Transition Period
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                      Total plan        Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                          (Note 1)   ...............  ...............
Minimum Actuarial Liability......................  ................       $2,594,000      $14,042,000          2
                                                                         (2,100,000)     (14,225,000)          3
                                                                    ----------------------------------
Actuarial Accrued Liability......................  ................      (2,100,000)     (14,225,000)  .........
Actuarial Accrued Liability Difference...........  ................         $494,000       $(183,000)          4
Phase In Percentage (Period 4)...................  ................              75%              75%          5
                                                                    ----------------------------------
Phase In Liability Difference....................  ................         $370,500       $(137,250)          6
Actuarial Accrued Liability......................  ................        2,100,000       14,225,000          6
                                                                    ----------------------------------
Transitional Minimum:
    Actuarial Liability..........................  ................       $2,470,500      $14,087,750
----------------------------------------------------------------------------------------------------------------
Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
  applied separately for each segment.
Note 2: See Illustration 9904.412-60.1(b)(2)(ii), Table 4.
Note 3: See Illustration 9904.412-60.1(b)(2)(i), Table 3.
Note 4: The phase in percentage will be applied to positive or negative differences in the actuarial
  liabilities, since the purpose of the phase in is to incrementally move the measurement away from the
  actuarial accrued liability to the minimum actuarial liability, regardless of the direction of the movement.
Note 5: Appropriate transition percentage for the Fourth Cost Accounting Period of the Pension Harmonization
  Rule Transition Period as stipulated in 9904.412-64.1(b)(3).
Note 6: The actuarial accrued liability is adjusted by the phase in difference between liabilities, either
  positive or negative, in accordance with 9904.412-64.1(b)(2).

    (ii) (A) For Segment 1, the $21,740 ($110,840-$89,100) difference 
between the minimum normal cost and the normal cost, plus expense loads, 
is multiplied by 75%. Therefore for Segment 1, the minimum normal cost 
plus expense load, for purposes of 9904.412-50(b)(7), is adjusted to a 
transitional minimum normal cost plus expense load of $105,405 ($89,100 
+ [75%x$21,740]).
    (B) For Segments 2 through 7, the 92,260 ($913,860-$821,600) 
difference between the minimum normal cost and the normal cost, plus 
expense loads, is multiplied by 75%. Therefore, for Segments 2 through 
7, the minimum normal cost for purposes of 9904.412-50(b)(7) is adjusted 
to a transitional minimum normal cost plus expense load of $890,795 
($821,600+[75%x$92,260]).
    (C) The computation of the transitional minimum normal cost plus 
expense load for Segment 1, and for Segments 2 through 7, is shown in 
Table 2 below:

              Table 2--Development of Transitional Minimum Normal Cost for Fourth Transition Period
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                      Total plan        Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                          (Note 1)   ...............  ...............
Minimum Normal Cost..............................  ................         $102,000         $840,700          2
Expense Load on Normal Cost......................  ................            8,840           73,160       2, 3
                                                                    ----------------------------------
Minimum Normal Cost Plus Expense Load............  ................         $110,840         $913,860          2
Normal Cost Plus Expense Load....................  ................         (89,100)        (821,600)          4
                                                                    ----------------------------------
Difference.......................................  ................          $21,740          $92,260          5
Phase In Percentage (Period 4)...................  ................              75%              75%          6
                                                                    ----------------------------------
Phase In Normal Cost Difference..................  ................          $16,305          $69,195          7
Normal Cost Plus Expense Load....................  ................           89,100          821,600          7
                                                                    ----------------------------------
Transitional Minimum:
    Normal Cost Plus Expense Load................  ................         $105,405         $890,795
----------------------------------------------------------------------------------------------------------------
Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
  applied separately for each segment.
Note 2: See Illustration 9904.412-60.1(b)(2)(ii), Table 4.
Note 3: For minimum normal cost valuation purposes, the contractor explicitly identifies the expected
  administrative expenses as a separate component of minimum normal cost.

[[Page 431]]

 
Note 4: See Illustration 9904.412-60.1(b)(2)(i), Table 3. Expected expenses are implicitly recognized as part of
  the contractor's expected rate of return on investments assumption.
Note 5: The phase in percentage will be applied to positive and negative differences in the normal costs plus
  expense loads, since the purpose of the phase in is to incrementally move the measurement from the normal cost
  plus expense load, to the minimum normal cost plus expense load, regardless of the direction of the movement.
Note 6: Appropriate transition percentage for the Fourth Cost Accounting Period of the Pension Harmonization
  Rule Transition Period stipulated in 9904.412-64.1(b)(3).
Note 7: The sum of the normal cost plus expense load is adjusted by the phase in difference between normal
  costs, either positive or negative, in accordance with 9904.412-64.1(b)(2).

    (2) The contractor applies the provisions of with 9904.412-
50(b)(7)(i) using the transitional minimum actuarial liability and 
transitional minimum normal cost plus expense load, in accordance with 
9904.412-64.1(b)(4).
    (i) The comparison of the sum of the actuarial accrued liability and 
normal cost plus expense load, and the sum of the transitional minimum 
actuarial liability and minimum normal cost plus expense load, for 
Segment 1, and for Segments 2 through 7, is summarized in Table 3 below:

                Table 3--Summary of Liability and Normal Cost Values for Fourth Transition Period
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                      Total plan        Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                          (Note 1)   ...............  ...............
``Going Concern'' Liabilities for Period:
    Actuarial Accrued Liability..................  ................       $2,100,000      $14,225,000          2
    Normal Cost Plus Expense Load................  ................           89,100          821,600          3
                                                                    --------------------------------------------
        ,s,nTotal Liability for Period..........  ................        2,189,100       15,046,600
Transitional Minimum Liabilities for the Period:
    Transitional Minimum Actuarial Liability.....  ................        2,470,500       14,087,750          1
    Transitional Minimum Normal Cost Plus Expense  ................          105,405          890,795          3
     Load........................................
                                                                    --------------------------------------------
    ,s,nTotal Transitional Minimum Liability for  ................        2,575,905       14,978,545          4
     Period......................................
----------------------------------------------------------------------------------------------------------------
Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
  applied separately for each segment.
Note 2: See Table 1.
Note 3: See Table 2.
Note 4: If the threshold criterion is met, then the pension cost for the period is measured based on the
  Transitional Minimum Actuarial Liability and Transition Normal Cost Plus Expense Load.

    (ii) For Segment 1, the Total Transitional Minimum Liability for the 
Period of $2,575,905 exceeds the total liability for the period of 
$2,189,100. (See Table 3.) Therefore, in accordance with 9904.412-
50(b)(7)(i), the pension cost for Segment 1 is measured using the 
actuarial accrued liability and normal cost as measured by the 
transitional minimum actuarial liability and transitional minimum normal 
cost, which are based on the accrued benefit cost method. This 
measurement complies with the requirements of 9904.412-50(b)(7) and with 
the definition of actuarial accrued liability, 9904.412-30(a)(2), and 
normal cost, 9904.412-30(a)(18).
    (iii) For Segments 2 through 7, the total liability for the period 
of $15,046,600 exceeds the Total Transitional Minimum Liability for the 
Period of $14,978,545. (See Table 3.) Therefore, in accordance with 
9904.412-50(b)(7)(i), the pension cost for Segment 2 through 7 is 
measured using the actuarial accrued liability and normal cost, which 
are based on the projected benefit cost method.
    (3) The contractor computes the pension cost for the period in 
accordance with the provisions of 9904.412-50(b)(7)(i), which considers 
the transitional minimum actuarial liability and transitional minimum 
normal cost plus expense load, in accordance with 9904.412-64.1(b).
    (i) The contractor computes the unfunded actuarial liability as 
shown in Table 4 below:

[[Page 432]]



                       Table 4--Unfunded Actuarial Liability for Fourth Transition Period
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                      Total Plan        Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                          (Note 1)
Actuarial Accrued Liability......................  ................       $2,470,500      $14,225,000          2
CAS Actuarial Value of Assets....................  ................      (1,688,757)     (11,872,928)          3
                                                                    --------------------------------------------
,s,nUnfunded Actuarial Liability................  ................          781,743        2,352,072
----------------------------------------------------------------------------------------------------------------
Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
  applied separately for each segment.
Note 2: Because the Pension Harmonization criterion of 9904.412-50(b)(7)(i) has been met for Segment 1, the
  actuarial accrued liability is measured by the transitional minimum actuarial liability as required by
  9904.412-64.1(b)(4). See Table 3. Because the Pension Harmonization criterion of 9904.412-50(b)(7)(i) was not
  satisfied for Segments 2 through 7, the actuarial accrued liability is based on the actuarial assumptions that
  reflect long-term trends in accordance with 9904.412-50(b)(4), i.e., the transitional minimum actuarial
  liability does not apply.
Note 3: See Illustration 9904.412-60.1(b)(1)(ii), Table 2.

    (ii) Measurement of the Pension Cost for the current period (Table 
5):

                               Table 5--Pension Cost for Fourth Transition Period
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                       Total plan       Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                           (Note 1)
Normal Cost Plus Expense Load.....................  ...............         $105,405         $821,600          2
Amortization Installments.........................  ...............          101,990          314,437       3, 4
                                                                    --------------------------------------------
,s,nPension Cost Computed for the Period.........        1,343,432          207,395        1,136,037
----------------------------------------------------------------------------------------------------------------
Note 1: Except for the Total Pension Cost Computed for the Period, the values for the Total Plan are not shown
  because the 9904.412-50(b)(7)(i) threshold criterion is applied separately for each segment.
Note 2: See Table 3. Because the Pension Harmonization criterion of 9904.412-50(b)(7)(i) has been met for
  Segment 1, the sum of the normal cost plus the expense load is measured by the sum of the transitional minimum
  normal cost plus the expense load, as required by 9904.412-64.1(a). Because the Pension Harmonization
  criterion of 9904.412-50(b)(7)(i) was not satisfied for Segments 2 through 7, the sum of the normal cost plus
  any applicable expense load is based on the contractor's actuarial assumptions reflecting long-term trends in
  accordance with 9904.412-40(b)(2) and 9904.412-50(b)(4), i.e., the transitional minimum normal cost plus the
  expense load does not apply.
Note 3: Net amortization installment based on the unfunded actuarial liability of $781,743 for Segment 1, and
  $2,352,072 for Segments 2 through 7, including an interest equivalent on the unamortized portion of such
  liability. See Table 4. The interest adjustment is based on the contractor's interest rate assumption in
  compliance with 9904.412-40(b)(2) and 9904.412-50(b)(4).
Note 4: See 9904.64-1(c)(4) for details concerning the recognition of the unfunded actuarial liability during
  the first Pension Harmonization Rule Transition Period.

    (4) The Silvertone Corporation separately computes pension costs for 
Segment 1, and computes pension costs for Segments 2 through 7 in the 
aggregate.
    (i) For the First Cost Accounting Period of the Pension 
Harmonization Rule Transition Period, the difference between the 
actuarial accrued liability and the minimum actuarial liability, and the 
difference between the normal cost and the minimum normal cost, are 
multiplied by 0%. Therefore the transitional minimum actuarial liability 
and transitional minimum normal are equal to the actuarial accrued 
liability and normal cost. The total transitional minimum liability for 
the period does not exceed the total liability for the period in 
conformity with the criterion of 9904.412-50(b)(7)(i). Therefore, the 
pension cost for the First Cost Accounting Period of the Pension 
Harmonization Rule Transition Period is computed using the actuarial 
accrued liability and normal cost.
    (ii) The actuarial gain attributable to experience during the prior 
period that is measured for the cost accounting period is amortized over 
a ten-year period in accordance with 9904.412-50(a)(1)(v) and 9904.413-
50(a)(2)(ii).
    (iii) The contractor computes the pension cost for First Cost 
Accounting Period of the Pension Harmonization Rule Transition Period as 
shown in Table 6 below.

                       Table 6--Computation of the Pension for the First Transition Period
----------------------------------------------------------------------------------------------------------------
                                                                                         Segments 2
                                                      Total plan        Segment 1        through 7       Notes
----------------------------------------------------------------------------------------------------------------
                                                          (Note 1)

[[Page 433]]

 
Amortization of Unfunded Liability Net             ................          $81,019         $523,801          2
 Amortization Installment from Prior Periods.....
    January 1, 2013, Actuarial Loss (Gain)         ................          (9,369)         (68,740)          3
     Amortization Installment....................
                                                                    ----------------------------------
Net Amortization Installment.....................  ................           71,650          455,061
Normal Cost plus expense load....................  ................           78,400          715,000          4
                                                                    ----------------------------------
Pension Cost Computed for the Period.............  ................          150,050        1,170,061
----------------------------------------------------------------------------------------------------------------
Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
  applied separately for each segment.
Note 2: Amortization installments of actuarial gains and losses, and other portions of the unfunded actuarial
  liability identified prior to January 1, 2013, in accordance with 9904.412-50(a)(1)(v) and 9904.413-
  50(b)(2)(ii), including an interest adjustment based on the contractor's long-term interest assumption in
  compliance with 9904.412-40(b)(2) and 9904.412-50(b)(4).
Note 3: The actuarial gains for both Segment 1, and Segments 2 through 7, as measured as of January 1, 2013, are
  amortized over a ten-year period in accordance with 9904.413-50(a)(2)(ii) and 9904.412-64-1(b)(4). Note that
  although the source of the actuarial gains was the deviation between assumed and actual changes during the
  prior period, the gain is measured on January 1, 2013, and so the ten-year amortization period applies in the
  current period, including an interest adjustment based on the contractor's long-term interest assumption in
  compliance with 9904.412-40(b)(2) and 9904.412-50(b)(4).
Note 4: For the first period of the Pension Harmonization Rule transition period, the adjustment to the sum of
  the actuarial accrued liability and normal cost is adjusted by $0. Therefore the sum of the transitional
  minimum actuarial liability and transitional minimum normal cost plus expense load is equal to the sum of the
  actuarial accrued liability and normal cost plus expense load, and the criterion of 9904.412-50(b)(7)(i) was
  not met for either Segment 1, or Segments 2 through 7. The sum of the normal cost plus expense load is based
  on the sum of the going concern normal cost plus expense load.


[76 FR 81319, Dec. 27, 2011, as amended at 77 FR 43543, July 25, 2012]



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 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 
measurement 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

[[Page 434]]

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 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

[[Page 435]]

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 income and expenses in accordance with 9904.413-
50(c)(7) 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; 
76 FR 81323, Dec. 27, 2011]



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 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.
    (1) 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.
    (2) When pension costs are separately computed for a segment or 
segments, the provisions of Cost Accounting

[[Page 436]]

Standard 9904.412 regarding the assignable cost limitation shall be 
based on the actuarial value of assets, actuarial accrued liability and 
normal cost for the segment or segments for purposes of such 
computations. In addition, for purposes of 9904.412-50(c)(2)(iii), the 
amount of pension cost assignable to a segment or segments shall not 
exceed the sum of:
    (i) The maximum tax-deductible amount computed for the plan as a 
whole, and
    (ii) The accumulated value of prepayment credits not already 
allocated to segments apportioned among the segment(s).

[57 FR 14153, Apr. 17, 1992, as amended at 60 FR 16550, Mar. 30, 1995; 
76 FR 81323, Dec. 27, 2011]



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 shall be amortized as required by 
9904.412-50(a)(1)(v).
    (i) For periods beginning prior to the ``Applicability Date of the 
CAS Pension Harmonization Rule,'' 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 fifteen-year period in 
equal annual installments, beginning with the date as of which the 
actuarial valuation is made.
    (ii) For periods beginning on or after the ``Applicability Date of 
the CAS Pension Harmonization Rule,'' such actuarial gains and losses 
shall be amortized over a ten-year period in equal annual installments, 
beginning with the date as of which the actuarial valuation is made.
    (iii) The installment for a cost accounting period shall consist of 
an element for amortization of the gain or loss, and 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.
    (6) The market value of the assets of a pension plan shall include 
the present value of contributions received after the date the market 
value of plan assets is measured.
    (i) The assumed rate of interest, established in accordance with 
9904.412-40(b)(2) and 9904.412-50(b)(4), shall be used to determine the 
present value of

[[Page 437]]

such receivable contributions as of the valuation date.
    (ii) The market value of plan assets measured in accordance with 
paragraphs (b)(6)(i) of this section shall be the basis for measuring 
the actuarial value of plan assets in accordance with this Standard.
    (c) Allocation of pension cost to segments. (1) For contractors who 
compute a composite pension cost covering plan participants in two or 
more segments, the base to be used for allocating such costs shall be 
representative of the factors on which the pension benefits are based. 
For example, a base consisting of salaries and wages shall be used for 
pension costs that are calculated as a percentage of salaries and wages; 
a base consisting of the number of participants shall be used for 
pension costs that are calculated as an amount per participant. If 
pension costs are separately calculated for one or more segments, the 
contractor shall make a distribution among the segments for the maximum 
tax-deductible amount and the contribution to the funding agency as 
follows:
    (i) When apportioning to the segments the sum of (A) the maximum 
tax-deductible amount, which is determined for a qualified defined-
benefit pension plan as a whole pursuant to the Internal Revenue Code at 
Title 26 of the U.S. C., as amended, and (B) the accumulated value of 
the prepayment credits not already allocated 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

[[Page 438]]

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 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 
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, including the accumulated 
value of prepayment credits, 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 transferred, determined using the accrued benefit cost 
method and long-term assumptions in accordance with 9904.412-40(b)(2) 
and 9904.412-50(b)(4).
    (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 and long-term 
assumptions in accordance with 9904.412-40(b)(2) and 9904.412-50(b)(4), 
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 and 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,

[[Page 439]]

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 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

[[Page 440]]

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 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.
    (viii) If a benefit curtailment is caused by a cessation of benefit 
accruals mandated by the Employee Retirement Income Security Act of 1974 
(ERISA), 29 U.S.C. 1001 et seq., as amended based on the plan's funding 
level, then no adjustment for the curtailment of benefit pursuant to 
this paragraph (c)(12) is required. Instead, the curtailment of benefits 
shall be recognized as follows:
    (A) If the written plan document provides that benefit accruals are 
nonforfeitable once employment service has been rendered, and shall be 
retroactively restored if, and when, the benefit accrual limitation 
ceases, then the contractor may elect to recognize the expected benefit 
accruals in the actuarial accrued liability and normal cost during the 
period of cessation for the determination of pension cost in accordance 
with the provisions of 9904-412 and 413.
    (B) Otherwise, the curtailment of benefits shall be recognized as an 
actuarial gain or loss for the period. The subsequent restoration of 
missed benefit accruals shall be recognized as an actuarial gain or loss 
in the period in which the restoration occurs.

[60 FR 16550, Mar. 30, 1995, as amended at 76 FR 81323, Dec. 27, 2011]



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, and any actuarial gains or losses measured 
must be separately amortized over a specific period of years beginning 
with the period for which the actuarial valuation is made in accordance 
with 9904.413-50(a)(1) and (2). If the actuarial gain or loss is 
measured for a period beginning prior to the ``Applicability Date for 
the CAS Pension Harmonization Rule,'' the gain or loss shall be 
amortized over a fifteen-year period. For gains and losses measured for 
periods beginning on or after the ``Applicability Date for the CAS 
Pension Harmonization Rule,'' the gain or loss shall be amortized over a 
ten-year period.
    (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

[[Page 441]]

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.
    (3) Assume that besides the market value of assets of $10 million 
that Contractor B has on the valuation date of January 1, 2017, the 
contractor makes a contribution of $100,000 on July 1, 2017, to cover 
its prior year's pension cost. Based on the contractor's assumed 
interest rate of 8% which complies with 9904.412-40(b)(2) and 9904.412.-
50(b)(5), the contribution is discounted for the six-month period from 
January 1, 2017 to July 1, 2017. For contract cost accounting purposes, 
the contractor measures $96,225 as the present value (PV) of the 
$100,000 contribution on January 1, 2017 (discounted at 8% per annum for 
one half year using compound interest, i.e., Net PV = $100,000/
1.08\0.5\), and therefore recognizes $10,096,225 as the market value of 
assets as required by 9904.413-50(b)(6)(ii). The actuarial value of 
assets on January 1, 2017, must also reflect $96,225 as the present 
value of the July 1, 2017, contribution of $100,000.
    (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 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

[[Page 442]]

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 
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

[[Page 443]]

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 
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

[[Page 444]]

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 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 plan assets to the new plan 
sponsored by the buyer. 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's 
new plan in accordance with the terms of the sales agreement. The 
adjustment amount, which is the difference between the remaining assets 
($2 million)

[[Page 445]]

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 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 is $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, the Internal Revenue Code imposes a 50% excise tax of $15 
million (50% of $30 million) on

[[Page 446]]

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 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

[[Page 447]]

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 
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.

[[Page 448]]

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.
    (26) Assume the same facts as Illustration 9904.413-60(c)(20), 
except that ERISA required Contractor R to cease benefit accruals. In 
this case, the segment closing adjustment is exempted by 9904.413-
50(c)(12)(viii). If the written plan document provides that benefit 
accruals will automatically be retroactively reinstated when permitted 
by ERISA, then the pension cost measured pursuant to CAS 412 and this 
Standard for contract costing purposes may continue to recognize the 
benefit accruals, if the contractor has so elected. If there is evidence 
that the contractor might revoke the plan provision to restore the 
missed benefit accruals, then the contractor shall not make such 
election. Otherwise, the pension cost measured pursuant to CAS 412 and 
this Standard shall not recognize any benefit accruals until, and 
unless, the plan is subsequently amended to reinstate the accruals. 
Furthermore, when the plan is amended, the change in the actuarial 
accrued liability shall be measured as an actuarial gain or loss, and 
amortized in accordance with 9904.412-50(a)(1)(v) and 9904.413-
50(a)(2)(ii).

[60 FR 16553, Mar. 30, 1995; 60 FR 20248, Apr. 25, 1995, as amended at 
61 FR 58011, Nov. 12, 1996; 76 FR 81324, Dec. 27, 2011; 77 FR 43543, 
July 25, 2012]



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 February 27, 2012, hereafter known 
as the ``Effective Date'', and is applicable for cost accounting periods 
after June 30, 2012, hereafter known as the ``Implementation Date.''
    (b) Following the award of a contract or subcontract subject to this 
Standard on or after the Effective Date, contractors shall follow this 
Standard, as amended, beginning with its next cost accounting period 
beginning after the later of the Implementation Date or the award date 
of a contract or subcontract to which this Standard is applicable. The 
first day of the cost accounting period that this Standard, as amended, 
is first applicable to a contractor or subcontractor is the 
``Applicability Date of the CAS Pension Harmonization Rule'' for 
purposes of this Standard. Prior to the Applicability Date of the CAS 
Pension Harmonization Rule, contractors or subcontractors shall follow 
the Standard in 9904.413 in effect prior to the Effective Date.
    (1) Following the award of a contract or subcontract subject to this 
Standard received on or after the Effective Date, contractors with 
contracts or subcontracts subject to this Standard that were received 
prior to the Effective Date shall continue to follow the Standard in 
9904.413 in effect prior to the Effective Date. Beginning with the 
Applicability Date of the CAS Pension Harmonization Rule, such 
contractors shall follow this Standard, as amended, for all contracts or 
subcontracts subject to this Standard.
    (2) Following the award of a contract or subcontract subject to this 
Standard received during the period beginning on or after the date 
published in the Federal Register and ending before the Effective Date, 
contractors shall follow the Standard in 9904.413 in effect prior to the 
Effective Date. If another contract or subcontract, subject to this 
Standard, is received on or after the Effective Date, the provisions of 
9904.413-63(b)(1) shall apply.

[60 FR 16557, Mar. 30, 1995, as amended at 76 FR 81325, Dec. 27, 2011; 
77 FR 43543, July 25, 2012]



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

[[Page 449]]

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 method or 
adjustment amount for the computation of costs/prices of contracts 
subject to this Standard.

[60 FR 16557, Mar. 30, 1995]



Sec. 9904.413-64.1  Transition Method for the CAS Pension Harmonization 
          Rule.

    The transition method for the CAS Pension Harmonization Rule under 
this Standard shall be in accordance with 9904.412.64.1 Transition 
Method for CAS Pension Harmonization Rule.

[76 FR 81325, Dec. 27, 2011]



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.

[[Page 450]]



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.
    (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 451]]

[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 452]]

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 453]]

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 454]]


                 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 455]]

 
    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 456]]

 
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 457]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.070


[[Page 458]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.071


[[Page 459]]


                     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 460]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.072


[[Page 461]]

[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 462]]

 
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 9904.415 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 the following which are covered in other Cost 
Accounting Standards:
    (1) The cost for compensated personal absence, and
    (2) The cost for pension plans that do not meet the definition of an 
Employee Stock Ownership Plan (ESOP).

[73 FR 23964, May 1, 2008]



Sec. 9904.415-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard 9904.415. Other terms defined elsewhere in this Chapter 99 
shall have the meanings ascribed to them in those definitions unless 
paragraph (b) of this section 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

[[Page 463]]

time after the end of a cost accounting period.
    (2) Employee Stock Ownership Plan (ESOP) means:
    (i) An employee benefit plan that is described by the Employee 
Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue 
Code (IRC) of 1986 as a stock bonus plan, or combination stock bonus and 
money purchase pension plan, designed to invest primarily in employer 
stock, and
    (ii) Any other deferred compensation plan designed to invest 
primarily in the stock of the contractor's corporation including, but 
not limited to, plans covered by ERISA.
    (3) Fair value means the amount that a seller would reasonably 
expect to receive in a current arm's length transaction between a 
willing buyer and a willing seller, other than a forced or liquidation 
sale.
    (b) The following modifications of terms defined elsewhere in this 
Chapter 99 are applicable to this Standard:
    (1) Market value means the current or prevailing price of a stock or 
other property as indicated by market quotations.
    (2) [Reserved]

[57 FR 14153, Apr. 17, 1992, as amended at 73 FR 23964, May 1, 2008]



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) Measurement of deferred compensation costs.
    (1) For deferred compensation other than ESOPs, the deferred 
compensation cost shall be the present value of the future benefits to 
be paid by the contractor.
    (2) For an ESOP, the deferred compensation cost shall be the amount 
contributed to the ESOP 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 and assigned with reasonable accuracy on a group basis, 
separate computations for each employee are not required.

[73 FR 23965, May 1, 2008]



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, other than 
ESOPs,

[[Page 464]]

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 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, other than 
ESOPs, 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 in this paragraph 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

[[Page 465]]

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 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.
    (f)(1) For an ESOP, the contractor's cost shall be measured by the 
contractor's contribution, including interest and dividends if 
applicable, to the ESOP. The measurement of contributions made in the 
form of stock of the corporation or property, shall be based on the 
market value of the stock or property at the time the contributions are 
made. If the market value is not available, then fair value of the stock 
or property shall be used.
    (2) A contractor's contribution to an ESOP shall be assignable to a 
cost accounting period only to the extent that the stock, cash, or any 
combination thereof resulting from the contribution is awarded to 
employees and allocated to individual employee accounts by the tax 
filing date for that period, including any permissible extensions 
thereof. All stock or cash that is allocated to

[[Page 466]]

the individual employee accounts between the end of the cost accounting 
period and the tax filing date for that period must be assigned to the 
cost accounting period in which the employee is awarded the stock or 
cash. Any portion of the stock or cash resulting from a contractor's 
contribution that is not awarded to employees or allocated to individual 
employee accounts by the tax filing date for that period, including any 
permissible extensions thereof, shall be assigned to a future cost 
accounting period or periods when the remaining portion of stock or cash 
has been awarded to employees and allocated to individual employee 
accounts. This stock shall retain the value established when it was 
originally purchased by or otherwise made available to the ESOP.

[57 FR 14153, Apr. 17, 1992, as amended at 73 FR 23965, May 1, 2008]



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 paymentxdiscount
                Year                     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, 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

[[Page 467]]

 
  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 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
    (f) Contractor F has a non-leveraged ESOP. Under the contractor's 
plan, employees are awarded 5,000 shares of stock for the year ended 
December 31, 2007. On February 5, 2008, when the shares have a market 
value of $10.00

[[Page 468]]

each, the 5,000 shares are contributed to the ESOP and allocated to the 
individual employee accounts. The total measured and assigned deferred 
compensation cost for FY 2007 is $50,000 (5,000x$10=$50,000). The market 
value of the contractor's stock when awarded to the employees, whether 
higher or lower than the $10.00 per share market value when the 
contractor's contribution was made to the ESOP, is irrelevant to the 
measurement of the contractor's ESOP costs.
    (g) Contractor G has a leveraged ESOP. Under the contractor's plan, 
employees are awarded 10,000 shares of stock for the year ended December 
31, 2007. On February 15, 2008, the contractor contributes $780,000 in 
cash to the ESOP trust (ESOT) to satisfy the principal and interest 
payment on the ESOT loan for FY 2007, resulting in the bank releasing 
9,000 shares of stock, and 1,000 shares of stock valued at $60,000 to 
the ESOT, representing the balance of the 10,000 shares. On February 22, 
2008, the ESOP allocates 10,000 shares to the individual employee 
accounts. The total measured and assigned deferred compensation cost for 
FY 2007 is $840,000--the contractor's total contribution required to 
satisfy the deferred compensation obligation totaling 10,000 shares.
    (h)(1) Contractor H has a leveraged ESOP. Under the contractor's 
plan, employees are awarded 8,000 shares of stock for the year ended 
December 31, 2007. On January 31, 2008, the contractor contributes 
$500,000 in cash to the ESOT to satisfy the principal and interest 
payment on the ESOT loan for 2007, resulting in the bank releasing 
10,000 shares of stock. On February 10, 2008, 8,000 shares are allocated 
to individual employee accounts, satisfying the deferred compensation 
obligation for 2007. The total measured deferred compensation cost for 
2007 is $500,000--the contractor's contribution for the cost accounting 
period. However, the total assignable deferred compensation cost for 
2007 is $400,000--the portion of the contribution that satisfies the 
2007 deferred compensation obligation of 8,000 shares [(8,000 shares / 
10,000 shares) x $500,000 = $400,000]. The remaining $100,000 of the 
contribution made in 2007 is assignable to future periods in which the 
remaining 2,000 shares of stock are awarded to employees and allocated 
to individual employee accounts.
    (2) At December 31, 2008, the employees are awarded 12,000 shares of 
stock. On January 31, 2009, Contractor H contributes $500,000 in cash to 
the ESOT to satisfy the principal and interest payment on the ESOT loan 
for 2008, resulting in the bank releasing 10,000 shares of stock. On 
February 10, 2009, 12,000 shares are allocated to individual employee 
accounts satisfying the deferred compensation obligation for 2008. The 
total deferred compensation assignable to 2008 is $600,000, the cost of 
the 12,000 shares awarded to employees and allocated to individual 
employee accounts for 2008. The cost of the award is comprised of the 
contractor's contribution for the current cost accounting period (10,000 
shares at $500,000) and the 2007 contribution carryover (2,000 shares at 
$100,000).
    (i) Contractor I has a leveraged ESOP. Under the contractor's plan, 
employees are awarded 10,000 shares for FY 2007, which ended December 
31, 2007. On February 10, 2008, Contractor I contributes $700,000 in 
cash to satisfy the principal and interest payment for the ESOP loan for 
FY 2007. This contribution results in the bank releasing 10,000 shares 
of stock. On March 1, 2008, the ESOP allocates the 10,000 shares to 
individual employee accounts satisfying the 2007 obligation. The 10,000 
shares of stock must be assigned to FY 2007 (these shares cannot be 
assigned to 2008).

[57 FR 14153, Apr. 17, 1992, as amended at 73 FR 23965, May 1, 2008]



Sec. 9904.415-61  Interpretation. [Reserved]



Sec. 9904.415-62  Exemption.

    None for this Standard.



Sec. 9904.415-63  Effective date.

    (a) This Standard 9904.415 is effective as of June 2, 2008.
    (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.

[[Page 469]]

    (c) Contractors with prior CAS-covered contracts with full coverage 
shall continue to follow Standard 9904.415 in effect prior to June 2, 
2008 until this Standard, effective June 2, 2008, becomes applicable 
following receipt of a contract or subcontract to which this revised 
Standard applies.
    (d) For contractors and subcontractors that have established advance 
agreements prior to June 2, 2008 regarding the recognition of the costs 
of existing ESOPs, the awarding agency and contractor shall comply with 
the provisions of such advance agreement(s) for these existing ESOPs, 
regardless of whether the ESOP was previously subject to CAS 412 or 415. 
These advance agreements may be modified, by mutual agreement, to 
incorporate the requirements effective on June 2, 2008.

[73 FR 23966, May 1, 2008]



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 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,

[[Page 470]]

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 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,

[[Page 471]]

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 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

[[Page 472]]

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 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

[[Page 473]]

$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.



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

[[Page 474]]

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 $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

[[Page 475]]

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.



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

[[Page 476]]

Standard. Other terms defined elsewhere in this chapter 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Allocate means to assign an item of cost, or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignment of cost and the reassignment of a share from an indirect cost 
pool.
    (2) 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.



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

[[Page 477]]

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
    (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

[[Page 478]]

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 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

[[Page 479]]

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 activities 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. 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

[[Page 480]]

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 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.

[[Page 481]]

    (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.
    (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

[[Page 482]]

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 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

[[Page 483]]

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 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

[[Page 484]]

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 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

[[Page 485]]

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 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,

[[Page 486]]

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.
    (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,

[[Page 487]]

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 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

[[Page 488]]

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, 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.

[[Page 489]]



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 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 490]]

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.
    (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

[[Page 491]]

unallowable. Following receipt of the contracting officer's decision, 
the educational institution must clearly identify the disallowed direct 
labor and direct material costs in the institution's accounting records 
and reports covering any subsequent submission which includes such 
costs. Also, if the educational institution's base for allocation of any 
indirect cost pool relevant to the subject contract consists of direct 
labor, direct material, total prime cost, total cost input, etc., the 
institution must include the disallowed direct labor and material costs 
in its allocation base for such pool. Had the contracting officer's 
decision been against the auditor, the educational institution would 
not, of course, have been required to account separately for the costs 
questioned by the auditor.
    (b) An educational institution incurs, and separately identifies, as 
a part of a service center or expense pool, certain costs which are 
expressly unallowable under the existing and currently effective 
regulations. If the costs of the service center or indirect expense pool 
are regularly a part of the educational institution's base for 
allocation of other indirect expenses, the educational institution must 
allocate the other indirect expenses to contracts and other final cost 
objectives by means of a base which includes the identified unallowable 
indirect costs.
    (c) An auditor recommends disallowance of certain indirect costs. 
The educational institution claims that the costs in question are 
allowable under the provisions of Office Of Management and Budget 
Circular A-21, Cost Principles For Educational Institutions; the auditor 
disagrees. The issue is referred to the contracting officer for 
resolution pursuant to the contract disputes clause. The contracting 
officer issues a written decision supporting the auditor's position that 
the total costs questioned are unallowable under the Circular. Following 
receipt of the contracting officer's decision, the educational 
institution must identify the disallowed costs and specific other costs 
incurred for the same purpose in like circumstances in any subsequent 
estimating, cost accumulation or reporting for Government contracts, in 
which such costs are included. If the contracting officer's decision had 
supported the educational institution's contention, the costs questioned 
by the auditor would have been allowable and the educational institution 
would not have been required to provide special identification.
    (d) An educational institution incurred certain unallowable costs 
that were charged indirectly as general administration and general 
expenses (GA&GE). In the educational institution's proposals for final 
indirect cost rates to be applied in determining allowable contract 
costs, the educational institution identified and excluded the expressly 
unallowable GA&GE costs form the applicable indirect cost pools. In 
addition, during the course of negotiation of indirect cost rates to be 
used for bidding and billing purposes, the educational institution 
agreed to classify as unallowable cost, various directly associated 
costs of the identifiable unallowable costs. On the basis of 
negotiations and agreements between the educational institution and the 
contracting officer's authorized representatives, indirect cost rates 
were established, based on the net balance of allowable GA&GE. 
Application of the rates negotiated to proposals, and to billings, for 
covered contracts constitutes compliance with the Standard.
    (e) An employee, whose salary, travel, and subsistence expenses are 
charged regularly to the general administration and general expenses 
(GA&GE), an indirect cost category, takes several business associates on 
what is clearly a business entertainment trip. The entertainment costs 
of such trips is expressly unallowable because it constitutes 
entertainment expense prohibited by OMB Circular A-21, and is separately 
identified by the educational institution. In these circumstances, the 
employee's travel and 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.

[[Page 492]]



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).



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

[[Page 493]]

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 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

[[Page 494]]

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.

                       PARTS 9906-9999 [RESERVED]

[[Page 495]]



                              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 497]]



                    Table of CFR Titles and Chapters




                     (Revised as of October 1, 2014)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
       III  Administrative Conference of the United States (Parts 
                300--399)
        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 2--199)
        II  Office of Management and Budget Guidance (Parts 200--
                299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300--
                399)
        IV  Department of Agriculture (Parts 400--499)
        VI  Department of State (Parts 600--699)
       VII  Agency for International Development (Parts 700--799)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1800--1899)
        XX  United States Nuclear Regulatory Commission (Parts 
                2000--2099)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Housing and Urban Development (Parts 2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)
     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)

[[Page 498]]

       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
     XXXIV  Department of Education (Parts 3400--3499)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
    XXXVII  Peace Corps (Parts 3700--3799)
     LVIII  Election Assistance Commission (Parts 5800--5899)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--199)
        II  Recovery Accountability and Transparency Board (Parts 
                200--299)

                   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 (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)
      XXVI  Department of Defense (Parts 3600--3699)
    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)

[[Page 499]]

    XXXIII  Overseas Private Investment Corporation (Parts 4300--
                4399)
     XXXIV  Securities and Exchange Commission (Parts 4400--4499)
      XXXV  Office of Personnel Management (Parts 4500--4599)
    XXXVII  Federal Election Commission (Parts 4700--4799)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
      XLIX  Federal Labor Relations Authority (Parts 5900--5999)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
       LXX  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 8000--8099)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)
    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
      LXXX  Federal Housing Finance Agency (Parts 9000--9099)
   LXXXIII  Special Inspector General for Afghanistan 
                Reconstruction (Parts 9300--9399)

[[Page 500]]

    LXXXIV  Bureau of Consumer Financial Protection (Parts 9400--
                9499)
    LXXXVI  National Credit Union Administration (Parts 9600--
                9699)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
     XCVII  Council of the Inspectors General on Integrity and 
                Efficiency (Parts 9800--9899)
      XCIX  Military Compensation and Retirement Modernization 
                Commission (Parts 9900--9999)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 1--99)
         X  Privacy and Civil Liberties Oversight Board (Parts 
                1000--1099)

                         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)

[[Page 501]]

       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  Local Television Loan Guarantee Board (Parts 2200--
                2299)
       XXV  Office of Advocacy and Outreach, Department of 
                Agriculture (Parts 2500--2599)
      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  National Institute of Food and 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)

[[Page 502]]

        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1300--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts 9400--9499)

                      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)
         X  Bureau of Consumer Financial Protection (Parts 1000--
                1099)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
      XIII  Financial Stability Oversight Council (Parts 1300--
                1399)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
       XVI  Office of Financial Research (Parts 1600--1699)
      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)

[[Page 503]]

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--1199)
         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)

[[Page 504]]

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  U.S. 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  U.S. 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  Office of Workers' Compensation Programs, 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 Service, Department of 
                Labor (Parts 1000--1099)

[[Page 505]]

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board (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)
      XIII  Millennium Challenge Corporation (Parts 1300--1399)
       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)

[[Page 506]]

        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--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)
        XV  Emergency Mortgage Insurance and Loan Programs, 
                Department of Housing and Urban Development (Parts 
                2700--2799) [Reserved]
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
      XXIV  Board of Directors of the HOPE for Homeowners Program 
                (Parts 4000--4099) [Reserved]
       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)

[[Page 507]]

         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 (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--End)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        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)

[[Page 508]]

         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)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Bureau of Safety and Environmental Enforcement, 
                Department of the Interior (Parts 200--299)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
         V  Bureau of Ocean Energy Management, Department of the 
                Interior (Parts 500--599)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)
       XII  Office of Natural Resources Revenue, Department of the 
                Interior (Parts 1200--1299)

                 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)
         X  Financial Crimes Enforcement Network, Department of 
                the Treasury (Parts 1000--1099)

[[Page 509]]

                      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)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of 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)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799)[Reserved]
            Subtitle C--Regulations Relating to Education

[[Page 510]]

        XI  National Institute for Literacy (Parts 1100--1199)
       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)
        VI  [Reserved]
       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 (Parts 1500--
                1599)
       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  U.S. Copyright Office, Library of Congress (Parts 
                200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                300--399)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--199)
        II  Armed Forces Retirement Home (Parts 200--299)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)

[[Page 511]]

        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)
      VIII  Gulf Coast Ecosystem Restoration Council (Parts 1800--
                1899)

          Title 41--Public Contracts and Property Management

            Subtitle A--Federal Procurement Regulations System 
                [Note]
            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)
   62--100  [Reserved]
            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)
  103--104  [Reserved]
       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)
  129--200  [Reserved]
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System [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)

[[Page 512]]

                        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--599)
         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 400--999)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10099)

             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)

                       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)

[[Page 513]]

       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)
        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)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)

           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  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  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)

[[Page 514]]

        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)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399) 
                [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  Civilian Board of Contract Appeals, General Services 
                Administration (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)

[[Page 515]]

        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 (Parts 1400--1499) 
                [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)
        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)

[[Page 517]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of October 1, 2014)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Administrative Conference of the United States    1, III
Advisory Council on Historic Preservation         36, VIII
Advocacy and Outreach, Office of                  7, XXV
Afghanistan Reconstruction, Special Inspector     22, LXXXIII
     General for
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              2, VII; 22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            2, IV; 5, LXXIII
  Advocacy and Outreach, Office of                7, XXV
  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
  Economic Research Service                       7, XXXVII
  Energy Policy and New Uses, Office of           2, IX; 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
  National Institute of Food and Agriculture      7, XXXIV
  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, L
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV, L
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII, L
  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

[[Page 518]]

Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
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
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
Bureau of Ocean Energy Management, Regulation,    30, II
     and Enforcement
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chemical Safety and Hazardous Investigation       40, VI
     Board
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                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Council of the Inspectors General on Integrity    5, XCVIII
     and Efficiency
Court Services and Offender Supervision Agency    5, LXX
     for the District of Columbia
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               2, XIII; 44, IV; 50, VI
  Census Bureau                                   15, I
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  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
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III, IV
       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 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 Financial Protection Bureau              5, LXXXIV; 12, X
Consumer Product Safety Commission                5, LXXI; 16, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    5, LXX; 28, VIII
     for the District of Columbia
Customs and Border Protection                     19, I

[[Page 519]]

Defense Contract Audit Agency                     32, I
Defense Department                                2, XI; 5, XXVI; 32, 
                                                  Subtitle A; 40, VII
  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, 2
  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                 2, XI; 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          5, LXX; 28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          2, XXXIV; 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
Election Assistance Commission                    2, LVIII; 11, II
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                             2, IX; 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                   2, XV; 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                2, Subtitle A; 5, III, 
                                                  LXXVII; 14, VI; 48, 99

[[Page 520]]

  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           2, XXXV; 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                       5, XXXVII; 11, I
Federal Emergency Management Agency               44, I
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 Agency                    5, LXXX; 12, XII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority                 5, XIV, XLIX; 22, XIV
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
Financial Crimes Enforcement Network              31, X
Financial Research Office                         12, XVI
Financial Stability Oversight Council             12, XIII
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
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

[[Page 521]]

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
  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
Gulf Coast Ecosystem Restoration Council          40, VIII
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 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
  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
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 6, I; 8, I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection                   19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 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 Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII

[[Page 522]]

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
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
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII, XV
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior Department                               2, XIV
  American Indians, Office of the Special         25, VII
       Trustee
  Bureau of Ocean Energy Management, Regulation,  30, II
       and Enforcement
  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
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Natural Resource Revenue, Office of             30, XII
  Ocean Energy Management, Bureau of              30, V
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  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 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
Investment Security, Office of                    31, VIII
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                                2, XXVIII; 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
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V

[[Page 523]]

  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
  Office of Workers' Compensation Programs        20, VII
  Public Contracts                                41, 50
  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 Royalty Board                         37, III
  U.S. Copyright Office                           37, II
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, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Military Compensation and Retirement              5, XCIX
     Modernization Commission
Millennium Challenge Corporation                  22, XIII
Mine Safety and Health Administration             30, I
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
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 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   2, XXII; 45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
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              5, LXXXVI; 12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 47, VI; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Food and Agriculture        7, XXXIV
National Institute of Standards and Technology    15, II
National Intelligence, Office of Director of      32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI

[[Page 524]]

National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       2, XXV; 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, IV
     Administration
National Transportation Safety Board              49, VIII
Natural Resources Conservation Service            7, VI
Natural Resource Revenue, Office of               30, XII
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     2, XX; 5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Ocean Energy Management, Bureau of                30, V
Offices of Independent Counsel                    28, VI
Office of Workers' Compensation Programs          20, VII
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                                       2, XXXVII; 22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
  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 Regulatory 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
Privacy and Civil Liberties Oversight Board       6, X
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
Recovery Accountability and Transparency Board    4, II
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV, L

[[Page 525]]

Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII, L
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                5, XXXIV; 17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 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                                  2, VI; 22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
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                     2, XII; 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; 47, IV; 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                   19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Financial Crimes Enforcement Network            31, X
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, 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
[[Page 526]]

United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
U.S. Copyright Office                             37, II
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       2, VIII; 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 527]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations (CFR) that 
were made by documents published in the Federal Register since January 
1, 2009 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, parts and 
subparts as well as sections for revisions.
For changes to this volume of the CFR prior to this listing, consult the 
annual edition of the monthly List of CFR Sections Affected (LSA). The 
LSA is available at www.fdsys.gov. For changes to this volume of the CFR 
prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 1964-
1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. The 
``List of CFR Sections Affected 1986-2000'' is available at 
www.fdsys.gov.

                                  2009

48 CFR
                                                                   74 FR
                                                                    Page
Chapter 30
3009.104-70 Redesignated as 3009.170...............................58856
    Correctly redesignated as 3009.108-70..........................66584
3009.104-71 Redesignated as 3009.170-1.............................58856
    Correctly redesignated as 3009.108-7001........................66584
3009.104-72 Redesignated as 3009.170-2.............................58856
    Correctly redesignated as 3009.108-7002........................66584
3009.104-73 Redesignated as 3009.170-3.............................58856
    Correctly redesignated as 3009.108-7003........................66584
3009.104-74 Redesignated as 3009.170-4.............................58856
    Correctly redesignated as 3009.108-7004........................66584
3009.104-75 Redesignated as 3009.170-5.............................58856
    Correctly redesignated as 3009.108-7005........................66584
3009.108-70 Correctly redesignated from 3009.104-70................66584
3009.108-7001 Correctly redesignated from 3009.104-71..............66584
3009.108-7002 Correctly redesignated from 3009.104-72..............66584
3009.108-7003 Correctly redesignated from 3009.104-73..............66584
3009.108-7004 Correctly redesignated from 3009.104-74..............66584
3009.108-7005 Correctly redesignated from 3009.104-75..............66584
3009.170 Redesignated from 3009.104-70.............................58856
3009.170-1 Redesignated from 3009.104-71...........................58856
3009.170-2 Redesignated from 3009.104-72...........................58856
3009.170-3 Redesignated from 3009.104-73...........................58856
3009.170-4 Redesignated from 3009.104-74...........................58856
3009.170-5 Redesignated from 3009.104-75...........................58856
3009.171 Added.....................................................58856
3009.171-1 Added...................................................58856
3009.171-2 Added...................................................58856
3009.171-3 Added...................................................58856
3009.171-4 Added...................................................58856
3009.171-5 Added...................................................58856
3009.171-6 Added...................................................58856
3009.171-7 Added...................................................58856
3009.171-8 Added...................................................58856
3009.171-9 Added...................................................58856
3025 Added; interim................................................41349
3052.209-76 Added..................................................58856
    Clause correctly amended.......................................66584
3052.225-70 Added; interim.........................................41350
Chapter 61
Chapter 61 Heading revised.........................................66584
6101.1 (a) amended.................................................66585

[[Page 528]]

                                  2010

48 CFR
                                                                   75 FR
                                                                    Page
Chapter 30
3002 Authority citation revised....................................41098
3002.102 Amended; interim..........................................41099
3007 Authority citation revised....................................41098
3007 Added; interim................................................41099
3009 Authority citation revised....................................41098
3009.570 Added; interim............................................41099
3009.570-1 Added; interim..........................................41099
3009.570-2 Added; interim..........................................41099
3009.570-3 Added; interim..........................................41099
3009.570-4 Added; interim..........................................41099
3016 Authority citation revised....................................41098
3016.170 (Subpart 3016.1) Added; interim...........................41100
3025 Regulation at 74 FR 41349 confirmed...........................32681
3034 Authority citation revised....................................41098
3034 Added; interim................................................41100
3035 Authority citation revised....................................41098
3035.008 Added; interim............................................41100
3052 Authority citation revised....................................41098
3052.209-74 Added; interim.........................................41100
3052.209-75 Added; interim.........................................41100
3052.225-70 Regulation at 74 FR 41350 confirmed....................32681

                                  2011

48 CFR
                                                                   76 FR
                                                                    Page
Chapter 30
3009 Authority citation revised....................................70660
3009.108-7001 Correctly revised....................................70661
3009.108-7004 (a) correctly revised................................70661
3052 Authority citation revised....................................70661
3052.209-70 Introductory text correctly revised; clause correctly 
        amended....................................................70661
Chapter 34
Chapter 34 revised.................................................12797
Chapter 61
6101 Authority citation revised....................................50927
6101.1 (b)(5)(iii) added; (f) amended..............................50927
6101.2 (a)(1)(ii)(C), (D) and (2)(ii)(C) revised...................50927
6101.5 (c) revised.................................................50928
6101.25 (a)(1) amended.............................................50928
6103 Authority citation revised....................................50928
6103.302 (a)(1) revised; (b) amended...............................50928
6103.306 Amended...................................................50928
6104 Authority citation revised....................................50928
6104.402 (a)(1)(i) and (ii) revised; (a)(3) amended................50928
6104.406 Amended...................................................50928
6105 Authority citation revised....................................50928
6105.502 (a)(2)(iii)(A) and (B) revised; (a)(2)(iv) amended........50928
6105.505 Amended...................................................50928
Chapter 99
9901.306 Revised; interim..........................................40819
    Regulation at 76 FR 40819 confirmed............................79547
9903 Authority citation revised....................................49368
9903.201-1 (b)(2) revised; interim.................................40819
    (b)(14) removed; eff. 10-11-11.................................49368
    Regulation at 76 FR 40819 confirmed............................79547
9903.201-2 (c)(3) and (5) revised; interim.........................40819
    Regulation at 76 FR 40819 confirmed............................79547
9903.201-3 Clause amended; interim.................................40819
    Regulation at 76 FR 40819 confirmed............................79547
9903.201-4 Clause amended; interim.................................40819
    Regulation at 76 FR 40819 confirmed............................79547
9903.202-1 (c) introductory text, (f)(2)(i), (3)(i), (ii) and 
        (iii) revised; interim.....................................40820
    Regulation at 76 FR 40820 confirmed............................79547
9904.412-30 (a)(1), (8), (9) and (23) revised......................81309
9904.412-40 (b)(3) added...........................................81309
9904.412-50 (a)(2), (4), (6), (b)(5), (c)(1), (2) and (5) revised; 
        (b)(7) added...............................................81310
9904.412-60 (b)(2), (3), (c)(1) through (6), (13) and (d)(4) 
        revised....................................................81311

[[Page 529]]

9904.412-60.1 Added................................................81312
9904.412-63 Revised................................................81319
9904.412-64.1 Added................................................81319
9904.413-30 (a)(1) and (16) revised................................81323
9904.413-40 (c) revised............................................81323
9904.413-50 (a)(2), (c)(1)(i), (7), (8) and (9) revised; (b)(6) 
        and (c)(12)(viii) added....................................81323
9904.413-60 (a), (c)(12) and (18) revised; (b)(3) and (c)(26) 
        added......................................................81324
9904.413-63 Revised................................................81325
9904.413-64.1 Added................................................81325

                                  2012

48 CFR
                                                                   77 FR
                                                                    Page
Chapter 30
3001 Authority citation revised....................................50632
3001.103 Added.....................................................50632
3001.105-2 Revised.................................................50632
3001.105-3 Revised.................................................50632
3001.301 (a)(1) revised............................................50632
3001.301-70 (a) introductory text amended..........................50632
3001.301-71 (c) revised............................................50632
3001.303 (a)(3) revised............................................50633
3001.304 (a) amended...............................................50633
3001.403 Amended...................................................50633
3001.602-3 Amended.................................................50633
3002 Authority citation revised....................................50632
3002.101 Amended...................................................50633
3002.270 Amended...................................................50633
3003 Authority citation revised....................................50632
3003.101-3 Revised.................................................50633
3003.204 Revised...................................................50633
3003.1003--3003.1004 (Subpart 3003.10) Added.......................50633
3004 Authority citation revised....................................50632
3004.470-2 (a) revised.............................................50634
3004.470-3 (b) amended.............................................50634
3004.804-1 Removed.................................................50634
3004.804-570 (a)(1), (2) and (3) revised...........................50634
3005 Authority citation revised....................................50632
3005.470 Added.....................................................50634
3005.470-1 Added...................................................50634
3005.470-2 Added...................................................50634
3006 Authority citation revised....................................50632
3006.302-1 Added...................................................50634
3006.302-270 Added.................................................50634
3006.303 Added.....................................................50634
3006.303-270 Added.................................................50634
3006.304 Added.....................................................50634
3006.304-70 Added..................................................50634
3012 Added.........................................................50635
3018 Added.........................................................50635
3022 Authority citation revised....................................50632
3022.406-9 (c)(1) amended..........................................50635
3023 Authority citation revised....................................50632
3023 Heading revised...............................................50635
3023.1002 Removed..................................................50635
3023.1004 Added....................................................50635
3033 Authority citation revised....................................50632
3033.102--3033.102-90 (Subpart 3033.1) Added.......................50635
3035 Authority citation revised....................................50632
3035.70-1 Added....................................................50635
3035.70-2 Added....................................................50635
3035.7000 Removed..................................................50635
3036 Authority citation revised....................................50632
3036.201 Removed...................................................50635
3042 Authority citation revised....................................50632
3042.202--3042.202-70 (Subpart 3042.2) Removed.....................50635
3042.1502 Revised..................................................50635
3045 Authority citation revised....................................50632
3045 Removed.......................................................50636
3052.101 Note added................................................50636
3052.203-70 Added..................................................50636
    Clause corrected...............................................54836
3052.204-71 Clause and Alternate I amended.........................50636
    Clause and Alternate I corrected...............................54836
3052.205-70 Added..................................................50636
    Clause and Alternate I corrected...............................54836
3052.212-70 Added..................................................50636
    Clause corrected...............................................54836
3052.212-71 Clause corrected.......................................54836
3052.216-71 Clause amended.........................................50637
3052.235-70 Introductory text amended..............................50637
3052.242-71 Removed................................................50637
3052.245-70 Removed................................................50637
3053 Authority citation revised....................................50632

[[Page 530]]

3053.204-70 (a), (b) and (c) revised...............................50637
3053.222-70 Amended................................................50637
3053.303 Table amended.............................................50637
3053.245-70 Removed................................................50637
Chapter 34
3415.605 (d) correctly revised; CFR correction.....................59343
3415.606 Correctly added; CFR correction...........................59343
Chapter 99
9904.412-60 (b)(2)(i) Table 3 and (c)(3)(ii) correctly amended.....43543
9904.412-63 (b) correctly amended..................................43543
9904.412-64.1 (c)(1)(i)(B) and (C) correctly amended...............43543
9904.413-60 (b)(3) correctly amended...............................43543
9904.413-63 (b) correctly amended..................................43543

                                  2013

                       (No regulations published)

                                  2014

  (Regulations published from January 1, 2014, through October 1, 2014)

48 CFR
                                                                   79 FR
                                                                    Page
Chapter 30
3002 Regulation at 75 FR 41098 confirmed...........................56662
    Authority citation revised.....................................56663
3002.102 Regulation at 75 FR 41099 confirmed.......................56662
3007 Regulation at 75 FR 41098 confirmed...........................56662
    Authority citation revised.....................................56663
3009 Regulation at 75 FR 41098 confirmed...........................56662
    Authority citation revised.....................................56663
3009.570 Regulation at 75 FR 41099 confirmed.......................56662
3009.570-1 Regulation at 75 FR 41099 confirmed.....................56662
3009.570-2 Regulation at 75 FR 41099 confirmed.....................56662
3009.570-3 Regulation at 75 FR 41099 confirmed.....................56662
3009.570-4 Regulation at 75 FR 41099 confirmed.....................56662
3016 Regulation at 75 FR 41098 confirmed...........................56662
    Authority citation revised.....................................56663
3016.170 Regulation at 75 FR 41100 confirmed.......................56662
3034 Regulation at 75 FR 41098 confirmed...........................56662
    Regulation at 75 FR 41100 confirmed............................56662
    Authority citation revised.....................................56663
3035 Regulation at 75 FR 41098 confirmed...........................56662
    Authority citation revised.....................................56663
3035.008 Regulation at 75 FR 41100 confirmed.......................56662
3052 Regulation at 75 FR 41098 confirmed...........................56662
    Authority citation revised.....................................56663
3052.209-74 Regulation at 75 FR 41100 confirmed....................56662
3052.209-75 Regulation at 75 FR 41100 confirmed....................56662


                                  [all]