[Federal Register Volume 59, Number 172 (Wednesday, September 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21611]
[[Page Unknown]]
[Federal Register: September 7, 1994]
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DEPARTMENT OF DEFENSE
Department of the Navy
48 CFR Parts 5232 and 5252
Navy Acquisition Procedures Supplement; Payments Under
Shipbuilding Contracts
AGENCY: Department of the Navy, DOD.
ACTION: Proposed rule.
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SUMMARY: The Department of the Navy is proposing to revise the
shipbuilding progress payments clauses to incorporate several
provisions covering standard Federal Acquisition Regulation progress
payment clause protections, clarifications and expansions.
DATES: Public comments are solicited and should be received by October
7, 1994.
ADDRESSES: Interested parties should submit written comments to: Office
of the Assistant Secretary of the Navy (Research Development &
Acquisition), ATTN: Mr. Clarence Belton, APIA(PP-CP), 2211 Jefferson
Davis Highway, Arlington, VA 22244-5104.
FOR FURTHER INFORMATION CONTACT: Mr. Clarence Belton, OASN(RDA)APIA(PP-
CP), (703) 602-2357.
SUPPLEMENTARY INFORMATION:
A. Background
The Department of the Navy has adopted procurement policies and
procedures that implement and supplement the Federal Acquisition
Regulations (FAR) [48 CFR] and the Defense Federal Acquisition
Regulation Supplement (DFARS). The policies and procedures are known
collectively as the Navy Acquisition Procedures Supplement (NAPS).
Pursuant to FAR 32.500(b), the Navy developed a shipbuilding progress
payments clause for use in fixed price (FP) and fixed price incentive
(FI) contracts for construction or for shipbuilding or ship conversion,
alteration, or repair, when the contracts provide for progress payments
based on a percentage or stage of completion. The shipbuilding progress
payments clauses are being revised primarily with the intent of
incorporating controls, terms and provisions consistent with those
found in the clause at FAR 52.232-16, Progress Payments.
B. Summary of Major Revisions
(1) Definitions. Consolidates the FI clause definitions.
(2) Computation of Payments. The proposed rule modifies the payment
limitation of 100% of allowable costs to include unliquidated progress
payments made to subcontractors.
(3) Invoices. The proposed rule modifies the invoicing provision by
requiring contractor certification of the amount of unliquidated
progress payments made to subcontractors.
(4) Physical Progress and Weighting Factors. The proposed rule
modifies the physical progress and weighting factors provision to give
the Contracting Officer the unilateral right to establish the weighting
factors if the contractor and the Contracting Officer cannot reach
agreement.
(5) Incurred Costs. The proposed rule adds to the list of incurred
costs exclusions, costs incurred by subcontractors and suppliers; and
capitalized costs and interim payments to subcontractors and suppliers.
This provides consistency with the FAR progress payments clause. The
proposed rule also removes the small business provision that allows for
billing of material costs not paid for by the contractor.
(6) Progress Payments to Subcontractors. The proposed rule adds a
new section containing provisions from the FAR progress payments clause
that govern payments to subcontractors.
(7) Liens and Title. A proposed provision is added which references
Liens and Title provisions found elsewhere in the contract.
(8) Reduction and Suspension. The proposed rule adds a new section
incorporating provisions from the FAR progress payments clause that
govern reductions and suspension of progress payments.
(9) Limitations on Undefinitized Contract Actions. A proposed new
section is added incorporating provisions from the FAR progress
payments clause that govern limitations on Undefinitized Contract
Actions.
(10) Special Terms Regarding Default. A proposed new section is
added incorporating provisions from the FAR progress payments clause
that govern treatment of progress payments in a contract default.
C. Paperwork Reduction Act
The proposed rule contains no new information collection or
recordkeeping requirement under the Paperwork Reduction Act of 1980 (44
U.S.C. 3501 et seq.). Supporting data requirements identified in the
proposed rule include only data already required to be maintained by
shipbuilding contractors.
D. Regulatory Flexibility Act Information
The proposed rule will have no economic impact upon small entities
within the meaning of the Regulatory Flexibility Act of 1980, 5 U.S.C.
601 et seq. The shipbuilding progress payment clauses have been
incorporated into applicable contracts since the early 1980's,
affecting all shipbuilders, large and small. The proposed NAPS rule
will benefit the Navy and its shipbuilding contractors by insuring
uniform application and administration of progress payments. Therefore,
no regulatory flexibility analysis has been performed.
List of Subjects in 48 CFR Chapter 52
Government procurement.
For the reasons stated in the Preamble, 48 CFR Chapter 52 is
proposed to be amended as follows:
1. Part 5232 is added to read as follows:
PART 5232--CONTRACT FINANCING
Authority: 5 U.S.C. 301, 10 U.S.C. 2202, DOD Directive 5000.35.
5232.1-5232.499 [Reserved]
5232.500 Scope of part.
The contracting officer shall insert the provision at 48 CFR
5252.232-9100, Payments (FP), or 48 CFR 5252.232-9105, Payments (FI),
as appropriate, in all solicitations and contracts for shipbuilding or
ship conversion, alteration, or repair, when progress payments are
based on a percentage or stage of completion.
PART 5252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES [AMENDED]
2. The authority citation for part 5252 continues to read as
follows:
Authority: 5 U.S.C. 301, 10 U.S.C. 2405, DOD Directive 5000.35,
and DFARS subparts 201.3 and 243.1.
3. Part 5252 is amended by adding sections 5252.232-9100 and
5252.232-9105 to read as follows:
5252.232-9100 Payments (FP).
As prescribed in 32 CFR 5232.500, insert the following clause in
fixed price solicitations and contracts for shipbuilding or ship
conversion, alteration, or repair, when progress payments are based on
a percentage or stage of completion:
(Beginning of Clause)
5252.232-9100 PAYMENTS (FP) (DEC 1992)
(a) Computation of payments.
(1) Until such time as physical progress in the performance of
work on a vessel is fifty percent (50%) complete, the Government,
upon submission by the Contractor of invoices certified by the
Contractor as hereinafter provided, will promptly make payments, on
account of the total contract price, of ninety percent (90%) of the
amount determined by multiplying the total contract price of such
vessel by the percentage of physical progress accomplished in the
performance of work on such vessel as certified by the Contractor
subject to the approval of the Supervisor; provided, that no such
payment shall be made in an amount which when added to the total of
all payments previously made with respect to such vessel under (i)
paragraph (a) of this requirement and (ii) the ``COMPENSATION
ADJUSTMENTS (LABOR AND MATERIAL)'' requirement exceeds one hundred
percent (100%) of the allowable costs certified by the Contractor on
the related invoice to have been incurred in the performance of work
on such vessel plus any unliquidated progress payments paid to
subcontractors.
(2) After the percentage of physical progress in the performance
of work on a vessel has reached fifty percent (50%), the Government,
upon submission by the Contractor of invoices certified by the
Contractor as hereinafter provided, will promptly make payments, on
account of the total contract price, of one hundred percent (100%)
of the amount determined by: (i) multiplying the total contract
price of such vessel by the percentage of physical progress in the
performance of work on such vessel as certified by the Contractor
subject to the approval of the supervisor, and (ii) subtracting from
that product five percent (5%) of the total contract price of such
vessel; provided, that no such payment shall be made in an amount
which when added to the total of all payments made previously with
respect to such vessel under paragraph (a) of this requirement and
the ``COMPENSATION ADJUSTMENTS (LABOR AND MATERIAL)'' requirement
exceeds one hundred five percent (105%) of the allowable costs
certified by the Contractor on the related invoice to have been
incurred in the performance of work on such vessel plus any
unliquidated progress payments paid to subcontractors; provided,
further, that the Contractor furnishes data on actual cumulative
costs and estimated future costs acceptable to the Supervisor which
demonstrates to the satisfaction of the Supervisor that the
Contractor will make a profit of at least five percent (5%) on
completion of the contract, and the Contractor provides updated
information on a quarterly basis. If updated data indicate the
Contractor will not make a profit of at least five percent (5%) on
completion of the contract, the progress payments shall be adjusted
retroactively so that the total of all payments made with respect to
the vessel under paragraph (a) of this requirement and the
``COMPENSATION ADJUSTMENTS (LABOR AND MATERIAL)'' requirement shall
not exceed one hundred percent (100%) of the allowable costs
certified by the Contractor on the related invoice to have been
incurred in the performance of work on such vessel plus any
unliquidated progress payments paid to subcontractors or 100% of
total contract price, whichever is less.
(b) Invoices. Invoices may be submitted every two weeks, but not
more frequently; provided, however, that if after contract award
more frequent progress payments are approved by cognizant Government
authority, this requirement shall be modified accordingly without
additional consideration by the Contractor to the Government for
such modification. No payment will be required to be made upon
invoices aggregating less than five thousand dollars ($5,000). The
Contractor shall certify on each invoice:
(1) The percentage of physical progress in the performance of
work on the vessel as a decimal carried to four places; and
(2) The allowable costs incurred in the performance of the work
on the vessel plus any unliquidated progress payments paid to
subcontractors as of the date the invoice is submitted. Such
certification shall provide for cost category reporting in
accordance with the Contractor's normal accounting system and shall
be broken down into direct material, direct labor, and indirect
costs.
(c) Physical progress and weighting factors.
(1) Within sixty (60) days after contract award, the Contractor
shall submit a progressing system description for review and
approval by the Contracting Officer. Upon approval of such system,
progress payments shall be in accordance with the approved system.
Subsequent revisions to the approved system shall be submitted to
the Contracting Officer for approval prior to implementation.
(2) The mutually agreed upon weighting factors for the
categories of labor and material for each vessel are set forth in
Attachment------ to this contract. The weighting factors shall be
revised quarterly. Notwithstanding the above, revision of weighting
factors may be requested by either party when factual data indicate
that the weighting factors then in use are no longer representative
of the actual labor and material distribution. Revisions of
weighting factors shall be supported by detailed de-escalated
(estimated final) direct material, direct labor, and indirect costs
and additional data concerning the cause of the change in the
weighting factors. In the event that the parties fail to agree on
the establishment of, or a revision to the weighting factors, the
Contracting Officer may establish on a unilateral basis the
weighting factors to be used in the administration of this
provision. Any change in the weighting factors shall be set forth in
a Standard Form 30, ``Amendment of Solicitation/Modification of
Contract''.
(d) Incurred costs. For the purpose of this requirement,
``incurred costs'' are those costs identified through the use of the
accrual method of accounting, as supported by the records maintained
by the Contractor and which are allowable in accordance with Part 31
of the Federal Acquisition Regulation (FAR) and Part 231 of the
Department of Defense FAR Supplement (DFARS) in effect on the
effective date of this contract and include only:
(1) The costs of supplies and services purchased by the
Contractor directly for this contract may be included only after
payment by cash, check, or other form of actual payment.
(2) Costs for the following may be included when incurred even
if before payment, when the Contractor is not delinquent in payment
of costs of contract performance in the ordinary course of business:
(i) Materials issued from the Contractor's stores inventory and
placed in the production process for use on this contract;
(ii) Direct labor, direct travel, and other direct inhouse cost;
(iii) Properly allocable and allowable indirect costs.
(3) Accrued costs of Contractor contributions under employee
pension or other post-retirement benefit, profit sharing, and stock
ownership plans shall not be considered incurred until actually paid
unless--
(i) The Contractor's practice is to contribute to the plans
quarterly or more frequently; and
(ii) The contribution does not remain unpaid 30 days after the
end of the applicable quarter or shorter payment period. (Any
contributions remaining unpaid shall be excluded from the
Contractor's total cost for progress payment limitations until
paid.)
(4) Incurred costs shall not include:
(i) Any costs that are required under any requirement of this
contract (other than the ``COMPENSATION ADJUSTMENTS (LABOR AND
MATERIAL)'' requirement) to be reimbursed or paid by the Government
to the Contractor or by the Contractor to the Government other than
through an equitable adjustment in the contract price;
(ii) Costs incurred by subcontractors or suppliers;
(iii) Costs ordinarily capitalized and subject to depreciation
or amortization except for the properly depreciated or amortized
portion of such costs;
(iv) Payments made or amounts payable to subcontractors or
suppliers, except for--(A) Completed work, including partial
deliveries, to which the Contractor has acquired title; and (B) Work
under cost-reimbursement or time-and-material subcontracts to which
the Contractor has acquired title.
(5) If an overpayment is made relative to this paragraph (d),
interest shall be charged at the prevailing per annum rate
established by the Secretary of the Treasury, pursuant to Public Law
92-41, from the date such overpayment is made (date of Government
check) until the date the overpayment if fully recovered.
(e) Progress payments to subcontractors. Progress payments made
by the Contractor to its subcontractors shall be the unliquidated
progress payments that are mentioned in (a)(1) and (a)(2) above
shall be all progress payments to subcontractors or divisions, if
the following conditions are met:
(1) The amounts included are limited to the unliquidated
remainder of progress payments made.
(2) The subcontract or interdivisional order is expected to
involve a minimum of approximately six months between the beginning
of work and the first delivery, or, if the subcontractor is a small
business concern, four months.
(3) The terms of the subcontract or interdivisional order
concerning progress payments--
(i) Are substantially similar to the terms of this provision or
to the clause at 52.232-16, Progress Payments, for any subcontractor
that is a large business concern, or that clause with its Alternate
I for any subcontractor that is a small business concern;
(ii) Are at least as favorable to the Government as the terms of
this clause;
(iii) Are not more favorable to the subcontractor or division
than the terms of this clause are to the Contractor;
(iv) Are substantially in conformance with the requirements of
paragraph 32.504(e) of the Federal Acquisition Regulation; and
(v) Subordinate all subcontractor rights concerning property to
which the Government has title under the subcontract to the
Government's right to require delivery of the property to the
Government if (A) the Contractor defaults or (B) the subcontractor
becomes bankrupt or insolvent.
(4) The progress payment rate in the subcontract is the
customary rate used by the Contracting Agency, depending on whether
the subcontractor is or is not a small business concern.
(5) The parties agree concerning any proceeds received by the
Government for property to which title has vested in the Government
or against which a lien has been placed in favor of the Government
under the subcontract terms, that the proceeds shall be applied to
reducing any unliquidated progress payments by the Government to the
Contractor under this contract.
(6) If no unliquidated progress payments to the Contractor
remain, but there are unliquidated progress payments that the
Contractor has made to any subcontractor, the Contractor shall be
subrogated to all the rights the Government obtained through the
terms required by this clause to be in any subcontract, as if all
such rights had been assigned and transferred to the Contractor.
(7) To facilitate small business participation in subcontracting
under this contract, the Contractor agrees to provide progress
payments to small business concerns, in conformity with the
standards for customary progress payments stated in subpart 32.5 of
the Federal Acquisition Regulation. The Contractor further agrees
that the need for such progress payments shall not be considered as
a handicap or adverse factor in the award of subcontracts.
(f) Retentions.
(1) Upon preliminary acceptance of each vessel and upon the
submission of properly certified invoices, the Government will pay
to the Contractor the amount withheld under paragraph (a) of this
requirement in respect of that vessel in excess of (i) a performance
reserve in the amount of one and one-half percent (1.5%) of the
total contract price for such vessel, or (ii) one hundred thousand
dollars ($100,000), whichever is greater. If at any time it shall
appear to the Government that the amount of performance reserve may
be insufficient to meet the cost to the Government of finishing any
unfinished work under the contract for which the Contractor is
responsible, or of correcting defects for which the Contractor is
responsible which are discovered prior to preliminary acceptance or
during the guaranty period of any vessel, the Government may, in
making payments under this requirement, deduct or withhold such
additional amounts as it may determine to be necessary to render
such reserve adequate; provided, that any additional amounts
deducted or withheld on account of defects which are discovered
during the guaranty period of the vessel shall not exceed the limit
of the Contractor's liability as set forth in the requirement
entitled LIMITATION OF CONTRACTOR'S LIABILITY FOR CORRECTION OF
DEFECTS'', reduced by the amounts of the cost incurred by the
Contractor for work on such vessel because of Contractor responsible
deficiencies which are discovered during the guaranty period of the
vessel.
(2) The Government may, in its discretion, make payments prior
to final settlement on account of the reserves established under
this requirement, subject to such conditions precedent as the
Contracting Officer may prescribe.
(3) The Government shall, at the time of final settlement, in
accordance with the provisions of the requirement entitled ``FINAL
SETTLEMENT'', pay the Contractor the balance owing to it under the
contract promptly after the amount of such balance shall have been
determined.
(g) Liens and title. For liens and title provisions, see the
requirement of this contract entitled ``LIENS AND TITLE''.
(h) Certifications and audits. At any time or times prior to
final payment under this contract, the Contracting Officer may have
any invoices and statements or certifications of costs audited. The
Contracting Officer may require the Contractor to submit, or make
available for examination by the Contracting Officer or his
designated representative, the supporting documentation upon which
invoices, statements or certifications of costs are based. Each
payment theretofore made shall be subject to reduction as necessary
to reflect the exclusion of amounts included in the invoices or
statements or certifications of costs which are found by the
Contracting Officer, on the basis of such audit, not to constitute
allowable costs. Any payment may be reduced for overpayments, or
increased for underpayments on preceding invoices.
(i) Reduction or suspension. The Contracting Officer may reduce
or suspend progress payments after finding on substantial evidence
of any of the following conditions:
(1) The Contractor failed to comply with any material
requirement of this contract.
(2) Performance of this contract is endangered by the
Contractor's (i) failure to make progress or (ii) unsatisfactory
financial condition.
(3) Inventory allocated to this contract substantially exceeds
reasonable requirements.
(4) The Contractor is delinquent in payment of the costs of
performing this contract in the ordinary course of business.
(5) The Contractor fails to maintain an efficient and reliable
accounting system and controls adequate for the proper
administration of progress payments.
(j) Limitations on undefinitized contract actions.
Notwithstanding any other progress payment provisions in this
contract, progress payments may not exceed 90 percent of costs
incurred on work accomplished under undefinitized contract actions.
A ``contract action'' is any action resulting in a contract, as
defined in subpart 2.1, including contract modifications for
additional supplies or services, but not including contract
modifications that are within the scope and under the terms of the
contract, such as contract modifications issued pursuant to the
``CHANGES'' clause, or funding and other administrative changes.
This limitation shall apply to the costs incurred, as computed in
accordance with paragraph (d) of this clause, and shall remain in
effect until the contract action is definitized. Costs incurred
which are subject to this limitation shall be segregated on
Contractor progress payment requests and invoices from those costs
eligible for higher progress payment rates. For purposes of progress
payment liquidation, progress payments for undefinitized contract
actions shall be liquidated at 90 percent of the amount invoiced for
work performed under the undefinitized contract action as long as
the contract action remains undefinitized. The amount of
unliquidated progress payments for undefinitized contract actions
shall not exceed 90 percent of the maximum liability of the
Government under the undefinitized contract action or such lower
limit specified elsewhere in the contract. Separate limits may be
specified for separate actions.
(k) Special terms regarding default. If this contract is
terminated under the ``DEFAULT'' clause, (i) the Contractor shall,
on demand, repay to the Government the amount of unliquidated
progress payments and (ii) title shall vest in the Contractor, on
full liquidation of progress payments, for all property for which
the Government elects not to require delivery under the ``DEFAULT''
clause. The Government shall be liable for no payment except as
provided by the ``DEFAULT'' clause.
(End of Clause)
Sec. 5252.232-9105 Payments (FI).
As prescribed in Sec. 5232.500, insert the following clause in
fixed price incentive solicitations and contracts for shipbuilding or
ship conversion, alteration, or repair, when progress payments are
based on a percentage or stage of completion:
(Beginning of Clause)
5252.232-9105 PAYMENTS (FI) (DEC 1992)
(a) Definitions. For purposes of this contract requirement, the
following definitions apply:
(1) Total contract price--the sum of the contract prices
including, adjustments as set forth in paragraphs (a)(4) (i) or (ii)
of this clause and paragraph (c) of this clause, for each item in
this contract subject to the requirement entitled, ``INCENTIVE PRICE
REVISION--FIRM TARGET''.
(2) Original unit target price--the target price of each item in
this contract subject to the requirement entitled, ``INCENTIVE PRICE
REVISION--FIRM TARGET'', that was established at the time of
contract award.
(3) Original total target price--the sum of the target prices of
each item in this contract subject to the requirement entitled,
``INCENTIVE PRICE REVISION--FIRM TARGET'', that were established at
the time of contract award.
(4) Allocated total contract price--that portion of the total
contract price which is assigned to an item in the contract subject
to the requirement entitled, ``INCENTIVE PRICE REVISION-- FIRM
TARGET''. The allocated total contract price of each item shall be
established by multiplying the total contract price by a percentage,
expressed as a decimal carried to four decimal places, equal to that
fraction whose numerator is the original unit target price of the
vessel and whose denominator is the original total target price. The
resulting dollar amount shall be rounded to the nearest one hundred
thousand dollar ($100,000), upward or downward; provided that in no
event shall the sum of the allocated total contract price of the
items exceed the total contract price. The aforesaid percentages of
each item shall be revised, by contract modification, in the event
that either:
(i) Equitable adjustments to the unit target prices of the items
result in unit target prices of a substantially different proportion
to the total target prices than previously provided for under this
subparagraph (a)(4); or
(ii) Incurred costs indicate that a revision to the percentages
is appropriate; provided, however, any such revision shall not be
made more frequently than at the end of a calendar quarter unless
the total contract price is limited to the contract ceiling price
and the contract ceiling price is adjusted during the calendar
quarter.
(b) Computation of payments.
(1) Until such time as physical progress in the performance of
work on a vessel is fifty percent (50%) complete, the Government,
upon submission by the Contractor of invoices certified by the
Contractor as hereinafter provided, will promptly make payments, on
account of the total contract price, of ninety percent (90%) of the
amount determined by multiplying the allocated total contract price
of such vessel by the percentage of physical progress accomplished
in the performance of work on such vessel as certified by the
Contractor subject to the approval of the Supervisor; provided, that
no such payment shall be made in an amount which when added to the
total of all payments previously made with respect to such vessel
under (i) paragraph (b) of this requirement and (ii) the
``COMPENSATION ADJUSTMENTS (LABOR AND MATERIAL)'' requirement
exceeds one hundred percent (100%) of the allowable costs certified
by the Contractor on the related invoice to have been incurred in
the performance of work on such vessel plus any unliquidated
progress payments paid to subcontractors.
(2) After the percentage of physical progress in the performance
of work on a vessel has reached fifty percent (50%), the Government,
upon submission by the Contractor of invoices certified by the
Contractor as hereinafter provided, will promptly make payments, on
account of the total contract price, at one hundred percent (100%)
of the amount determined by: (i) multiplying the allocated total
contract price of such vessel by the percentage of physical progress
accomplished in the performance of work on such vessel as certified
by the Contractor subject to the approval of the Supervisor, and
(ii) subtracting from that product five percent (5%) of the
allocated total contract price of such vessel; provided, that no
such payment shall be made in an amount which when added to the
total of all payments made previously with respect to such vessel
under paragraph (b) of this requirement and the ``COMPENSATION
ADJUSTMENTS (LABOR AND MATERIAL)'' requirement exceeds one hundred
five percent (105%) of the allowable costs certified by the
Contractor on the related invoice to have been incurred in the
performance of work on such vessel plus any unliquidated progress
payments paid to subcontractors; provided, further, that the
Contractor furnishes data on actual cumulative costs and estimated
future costs acceptable to the Supervisor which demonstrate to the
satisfaction of the Supervisor that the Contractor will make a
profit of at least five percent (5%) on completion of the contract,
and the Contractor provides updated information on a quarterly
basis. If updated data indicate the Contractor will not make a
profit of at least five percent (5%) on completion of the contract,
the progress payments shall be adjusted retroactively so that the
total of all payments made with respect to the vessel under
paragraph (b) of this requirement and the ``COMPENSATION ADJUSTMENTS
(LABOR AND MATERIAL)'' requirement shall not exceed one hundred
percent (100%) of the allowable costs certified by the Contractor on
the related invoice to have been incurred in the performance of work
on such vessel plus any unliquidated progress payments paid to
subcontractors or 100% of the total contract price, whichever is
less.
(c) Billing price.
(1) For the purpose of this requirement, until the establishment
of the total final price in accordance with paragraph (d) of the
``INCENTIVE PRICE REVISION (FIRM TARGET)'' requirement, the term
``total contract price'' means the billing price; initially the
billing price shall be the initial total contract target price, and
thereafter the billing price shall be revised as provided in
paragraph (c)(2) below. After establishment of the total final price
in accordance with paragraph (d) of the ``INCENTIVE PRICE REVISION
(FIRM TARGET)'' requirement, the billing price shall be the total
final price so established.
(2) Within fifteen (15) days after each calendar quarter, the
Contractor shall submit in writing a proposed revised billing price
which shall be established as follows:
(i) The Contractor shall certify to the Contracting Officer the
percentage of physical progress in the performance of the contract
as a whole as of the end of the calendar quarter. Such percentage of
physical progress shall be expressed as a decimal carried to four
decimal places and shall be subject to the approval of the
Supervisor.
(ii) The revised billing price shall be the sum of a projected
final cost, and a projected profit, computed as follows:
(A) A projected final cost shall be computed by (1) determining
the cumulative sum of the base costs as of the end of the calendar
quarter, established in accordance with the ``COMPENSATION
ADJUSTMENTS (LABOR AND MATERIAL)'' requirement, and (2) dividing the
sum thereof by the percentage of physical progress certified and
approved as set forth in subparagraph (i) above.
(B) A projected profit shall be determined by applying, to the
projected final cost, the incentive formula set forth in paragraph
(d)(2) of the ``INCENTIVE PRICE REVISION--FIRM TARGET'' requirement;
provided, that in no event shall the revised billing price exceed
the ceiling price of the contract.
(iii) The revised billing price determined as stated above shall
be set forth separately in a supplemental agreement to this
contract, which also shall set forth the computations upon which the
revision of the billing price is based.
(iv) Any revision of the billing prices shall not affect the
determination of the total final price under paragraph (d) of the
``INCENTIVE PRICE REVISION--FIRM TARGET'' requirement. After
execution of the contract modification referred to in paragraph
(d)(3) of said requirement, the total amount paid or to be paid on
all invoices or vouchers shall be adjusted to reflect the total
final price, and any additional payments, refunds or credits
resulting therefrom shall be promptly made.
(d) Invoices. Invoices may be submitted every two weeks, but not
more frequently; provided, however, that if after contract award
more frequent progress payments are approved by cognizant Government
authority, this provision shall be modified accordingly without
additional consideration by the Contractor to the Government for
such modification. No payment will be required to be made upon
invoices aggregating less than five thousand dollars ($5,000). The
Contractor shall certify on each invoice:
(1) the percentage of physical progress in the performance of
work on the vessel as a decimal carried to four places; and
(2) the allowable costs incurred in the performance of the work
on the vessel plus any unliquidated progress payments paid to
subcontractors as of the date the invoice is submitted. Such
certification shall provide for cost category reporting in
accordance with the Contractor's normal accounting system and shall
be broken down into direct material, direct labor, and indirect
costs.
(e) Physical progress and weighting factors.
(1) Within sixty (60) days after contract award, the Contractor
shall submit a progressing system description for review and
approval by the Contracting Officer. Upon approval of such system,
progress payments shall be in accordance with the approved system.
Subsequent revisions to the approved system shall be submitted to
the Contracting Officer for approval prior to implementation.
(2) The mutually agreed upon weighting factors for the
categories of labor and material for each vessel are set forth in
Attachment ________ to this contract. The weighting factors shall be
revised quarterly concurrent with the billing price revisions
specified in paragraph (c). Notwithstanding the above, revision of
weighting factors may be requested by either party when factual data
indicate that the weighting factors then in use are no longer
representative of the actual labor and material distribution.
Revisions of weighting factors shall be supported by detailed de-
escalated (estimated final) direct material, direct labor, and
indirect costs and additional data concerning the cause of the
change in the weighting factors. In the event that the parties fail
to agree on the establishment of, or a revision to the weighting
factors, the Contracting Officer may establish on a unilateral basis
the weighting factors to be used in the administration of this
provision. Any change in the weighting factors shall be set forth in
a Standard Form 30, ``Amendment of Solicitation/Modification of
Contract''.
(f) Incurred costs. For the purpose of this requirement,
``incurred costs'' are those costs identified through the use of the
accrual method of accounting, as supported by the records maintained
by the Contractor and which are allowable in accordance with Part 31
of the Federal Acquisition Regulation (FAR) and Part 231 of the
Department of Defense FAR Supplement (DFARS) in effect on the
effective date of this contract and include only:
(1) The costs of supplies and services purchased by the
Contractor directly for this contract may be included only after
payment by cash, check, or other form of actual payment.
(2) Costs for the following may be included when incurred even
if before payment, when the Contractor is not delinquent in payment
of the costs of contract performance in the ordinary course of
business:
(i) Materials issued from the Contractor's stores inventory and
placed in the production process for use on this contract;
(ii) Direct labor, direct travel, and other direct in-house
costs;
(iii) Properly allocable and allowable indirect costs.
(3) Accrued costs of Contractor contributions under employee
pension or other post-retirement benefit, profit sharing, and stock
ownership plans shall not be considered incurred until actually paid
unless--
(i) the Contractor's practice is to contribute to the plans
quarterly or more frequently; and
(ii) the contribution does not remain unpaid 30 days after the
end of the applicable quarter or shorter payment period. (Any
contributions remaining unpaid shall be excluded from the
Contractor's total cost for progress payment limitations until
paid.)
(4) Incurred costs shall not include:
(i) Any costs that are required under any requirement of this
contract (other than the ``COMPENSATION ADJUSTMENTS (LABOR AND
MATERIAL)'' requirement) to be reimbursed or paid by the Government
to the Contractor or by the Contractor to the Government other than
through an equitable adjustment in the contract price;
(ii) Costs incurred by subcontractors or suppliers;
(iii) Costs ordinarily capitalized and subject to depreciation
or amortization except for the properly depreciated or amortized
portion of such costs;
(iv) Payments made or amounts payable to subcontractors or
suppliers, except for--(A) Completed work, including partial
deliveries, to which the Contractor has acquired title; and (B) Work
under cost-reimbursement or time-and-material subcontracts to which
the Contractor has acquired title.
(5) If an overpayment is made relative to this paragraph (f),
interest shall be charged at the prevailing per annum rate
established by the Secretary of the Treasury, pursuant to Public Law
92-41, from the date such overpayment is made (date of Government
check) until the date the overpayment is fully recovered.
(g) Progress payments to subcontractors. Progress payments made
by the Contractor to its subcontractors shall be the unliquidated
progress payments paid to subcontractors that are mentioned in
(b)(1) and (b)(2), if the following conditions are met:
(1) The amounts included are limited to the unliquidated
remainder of progress payments made.
(2) The subcontract or interdivisional order is expected to
involve a minimum of approximately six months between the beginning
of work and the first delivery, or, if the subcontractor is a small
business concern, four months.
(3) The terms of the subcontract or interdivisional order
concerning progress payments--
(i) Are substantially similar to the terms of this provision or
to the clause at FAR 52.232-16, Progress Payments, for any
subcontractor that is a large business concern, or that clause with
its Alternate I for any subcontractor that is a small business
concern;
(ii) Are at least as favorable to the Government as the terms of
this requirement;
(iii) Are not more favorable to the subcontractor or division
than the terms of this requirement are to the Contractor;
(iv) Are substantially in conformance with the requirements of
paragraph 32.504(e) of the Federal Acquisition Regulation; and
(v) Subordinate all subcontractor rights concerning property to
which the Government has title under the subcontract to the
Government's right to require delivery of the property to the
Government if (A) the Contractor defaults or (B) the subcontractor
becomes bankrupt or insolvent.
(4) The progress payment rate in the subcontract is the
customary rate used by the Contracting Agency, depending on whether
the subcontractor is or is not a small business concern.
(5) The parties agree concerning any proceeds received by the
Government for property to which title has vested in the Government
or against which a lien has been placed in favor of the Government
under the subcontract terms, that the proceeds shall be applied to
reducing any unliquidated progress payments by the Government to the
Contractor under this contract.
(6) If no unliquidated progress payments to the Contractor
remain, but there are unliquidated progress payments that the
Contractor has made to any subcontractor, the Contractor shall be
subrogated to all the rights the Government obtained through the
terms required by this requirement to be in any subcontract, as if
all such rights had been assigned and transferred to the Contractor.
(7) To facilitate small business participation in subcontracting
under this contract, the Contractor agrees to provide progress
payments to small business concerns, in conformity with the
standards for customary progress payments stated in subpart 32.5 of
the Federal Acquisition Regulation. The Contractor further agrees
that the need for such progress payments shall not be considered as
a handicap or adverse factor in the award of subcontracts.
(h) Retentions.
(1) Upon preliminary acceptance of each vessel and upon the
submission of properly certified invoices, the Government will pay
to the Contractor the amount withheld under paragraph (b) of this
requirement in respect of that vessel in excess of (i) a performance
reserve in the amount of one and one-half percent (1.5%) of the
allocated total contract price for such vessel, or (ii) one hundred
thousand dollars ($100,000), whichever is greater. If at any time it
shall appear to the Government that the amount of performance
reserve may be insufficient to meet the cost to the Government of
finishing any unfinished work under the contract for which the
Contractor is responsible, or of correcting defects for which the
Contractor is responsible which are discovered prior to preliminary
acceptance or during the guaranty period of any vessel, the
Government may, in making payments under this requirement, deduct or
withhold such additional amounts as it may determine to be necessary
to render such reserve adequate; provided, that any additional
amounts deducted or withheld on account of defects which are
discovered during the guaranty period of the vessel shall not exceed
the limit of the Contractor's liability as set forth in the
requirement entitled ``LIMITATION OF CONTRACTOR'S LIABILITY FOR
CORRECTION OF DEFECTS'', reduced by the amounts of the cost incurred
by the Contractor for work on such vessel because of Contractor
responsible deficiencies which are discovered during the guaranty
period of the vessel.
(2) The Government may, at its discretion, make payments prior
to final settlement on account of the reserves established under
this requirement, subject to such conditions precedent as the
Contracting Officer may prescribe.
(3) The Government shall, at the time of final settlement, in
accordance with the provisions of the requirement entitled ``FINAL
SETTLEMENT'', pay the Contractor the balance owing to it under the
contract promptly after the amount of such balance shall have been
determined.
(i) Liens and title. For liens and title provisions, see the
requirement of this contract entitled ``LIENS AND TITLE''.
(j) Certifications and audits. At any time or times prior to
final payment under this contract, the Contracting Officer may have
any invoices and statements or certifications of costs audited. The
Contracting officer may require the Contractor to submit, or make
available for examination by the Contracting Officer or his
designated representative, the supporting documentation upon which
invoices, statements or certifications of costs are based. Each
payment theretofore made shall be subject to reduction as necessary
to reflect the exclusion of amounts included in the invoices or
statements or certifications of costs which are found by the
Contracting Officer, on the basis of such audit, not to constitute
allowable costs. Any payment may be reduced for overpayments, or
increased for underpayments on preceding invoices.
(k) Reduction or suspension. The Contracting Officer may reduce
or suspend progress payments after finding on substantial evidence
of any of the following conditions:
(1) The Contractor failed to comply with any material
requirement of this contract.
(2) Performance of this contract is endangered by the
Contractor's (i) failure to make progress or (ii) unsatisfactory
financial condition.
(3) Inventory allocated to this contract substantially exceeds
reasonable requirements.
(4) The Contractor is delinquent in payment of the costs of
performing this contract in the ordinary course of business.
(5) The Contractor fails to maintain an efficient and reliable
accounting system and controls adequate for the proper
administration of progress payments.
(l) Limitations on Undefinitized Contract Actions.
Notwithstanding any other progress payment provisions in this
contract, progress payments may not exceed 90 percent of costs
incurred on work accomplished under undefinitized contract actions.
A ``contract action'' is any action resulting in a contract, as
defined in subpart 2.1, including contract modifications for
additional supplies or services, but not including contract
modifications that are within the scope and under the terms of the
contract, such as contract modifications issued pursuant to the
CHANGES clause, or funding and other administrative changes. This
limitation shall apply to the costs incurred, as computed in
accordance with paragraph (f) of this requirement, and shall remain
in effect until the contract action is definitized. Costs incurred
which are subject to this limitation shall be segregated on
Contractor progress payment requests and invoices from those costs
eligible for higher progress payments rates. For purposes of
progress payment liquidation, progress payments for undefinitized
contract actions shall be liquidated at 90 percent of the amount
invoiced for work performed under the undefinitized contract action
as long as the contract action remains undefinitized. The amount of
unliquidated progress payments for undefinitized contract actions
shall not exceed 90 percent of the maximum liability of the
Government under the undefinitized contract action or such lower
limit specified elsewhere in the contract. Separate limits may be
specified for separate actions.
(m) Special terms regarding default. If this contract is
terminated under the ``DEFAULT'' clause, (1) the Contractor shall,
on demand, repay to the Government the amount of unliquidated
progress payments and (2) title shall vest in the Contractor, on
full liquidation of progress payments, for all property for which
the Government elects not to require delivery under the ``DEFAULT''
clause. The Government shall be liable for no payment except as
provided by the ``DEFAULT'' clause.
(End of Clause)
Dated: August 19, 1994.
Lewis T. Booker, Jr.,
LCDR, JAGC, USN, Federal Register Liaison Officer.
[FR Doc. 94-21611 Filed 9-6-94; 8:45 am]
BILLING CODE 3810-AE-P