[Federal Register Volume 61, Number 210 (Tuesday, October 29, 1996)]
[Rules and Regulations]
[Pages 55765-55774]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26338]



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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1828, 1829, 1830, 1831, 1832, 1833 and 1852


Rewrite of the NASA FAR Supplement (NFS)

AGENCY: Office of Procurement, National Aeronautics and Space 
Administration (NASA).

ACTION: Final rule.

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SUMMARY: As part of the National Performance Review initiative to 
streamline and clarify regulations, NASA is issuing a rewrite of those 
regulations in its Federal Acquisition Regulations Supplement relating 
to bonds and insurance (part 1828); taxes (part 1829); cost accounting 
standards (part 1830); contract cost principles and procedures (part 
1831); contract financing (part 1832); and protests, disputes, and 
appeals (part 1833). In addition, conforming amendments are made to 
solicitation provisions and contract clauses (part 1852) regarding 
aircraft ground and flight risk and other provisions.

EFFECTIVE DATE: This rule is effective October 29, 1996.

FOR FURTHER INFORMATION CONTACT: Mr. Thomas O'Toole, (202) 358-0478; 
Mr. Bruce King, (202) 358-0461.

SUPPLEMENTARY INFORMATION: 

Background

    The National Performance Review urged agencies to streamline and 
clarify their regulations. The NFS rewrite initiative was established 
to pursue these goals by conducting a section by section review of the 
NFS to verify its accuracy, relevancy, and validity. The NFS will be 
rewritten in blocks of parts and issued through Procurement Notices 
(PNs). Upon completion of all parts, the NFS will be reissued in a new 
edition.

Impact

    NASA certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities under the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). This rule does not 
impose any reporting or record keeping requirements subject to the 
Paperwork Reduction Act.

List of Subjects in 48 CFR Parts 1828, 1829, 1830, 1831, 1832, 
1833, and 1852

    Government procurement.
Tom Luedtke,
Deputy Associate Administrator for Procurement.
    Accordingly, 48 CFR chapter 18 is amended as follows:
    1.-2. Part 1828 is revised to read as follows:

PART 1828--BONDS AND INSURANCE

Sec.

Subpart 1828.1  Bonds

1828.101  Bid guarantees.
1828.101-70  NASA solicitation provision.
1828.103  Performance and payment bonds and alternative payment 
protections for other than construction contracts.
1828.103-70  Subcontractors performing construction work under 
nonconstruction contracts.
1828.103-71  Solicitation requirements and contract clauses.
1828.106  Administration.
1828.106-6  Furnishing information.

Subpart 1828.2  Sureties

1828.202  Acceptability of corporate sureties.
1828.203  Acceptability of individual sureties.

Subpart 1828.3  Insurance

1828.307  Insurance under cost-reimbursement contracts.
1828.307-1  Group insurance plans.
1828.307-2  Liability.
1828.307-70  Insurance of industrial facilities.
1828.311  Solicitation provision and contract clause on liability 
insurance under cost-reimbursement contracts.
1828.311-1  Contract clause.
1828.311-2  Agency solicitation provisions and contract clauses.
1828.370  Fixed-price contract clauses.
1828.371  Clauses for cross-waivers of liability for Space Shuttle 
services, Expendable Launch Vehicle (ELV) launches, and Space 
Station activities.
1828.372  Clause for minimum insurance coverage.

    Authority: 42 U.S.C. 2473(c)(1).

Subpart 1828.1--Bonds


1828.101  Bid guarantees.


1828.101-70  NASA solicitation provision.

    The contracting officer shall insert the provision at 1852.228-73, 
Bid Bond, in construction solicitations where offers are expected to 
exceed $100,000 and a performance bond or a performance and payment 
bond is required (see FAR 28.102 and 28.103). The contracting officer 
may increase the amount of the bid bond to protect the Government from 
loss, as long as the amount does not exceed $3 million.


1828.103  Performance and payment bonds and alternative payment 
protections for other than construction contracts.


1828.103-70  Subcontractors performing construction work under 
nonconstruction contracts.

    (a) The contracting officer shall require prime contractors on 
nonconstruction contracts to obtain the following performance and/or 
payment protection from subcontractors performing construction work:
    (1) Performance and payment bonds when the subcontract construction 
work is in excess of $1000,000 and is determined by NASA to be subject 
to the Miller Act.
    (2) An appropriate payment protection determined according to FAR 
28.102-1(b)(1) when the subcontract construction work is greater than 
$25,000 but not greater than $100,000.
    (b) The contracting officer shall establish the penal amount in 
accordance with FAR 28.102-2 based on the subcontract value.
    (c) The bonds shall be provided on SF 25, Performance Bond, and SF 
25A, Payment Bond. These forms shall be modified to name the NASA prime 
contractor as well as the United States of America as obligees.


1828.103-71  Solicitation requirements and contract clause.

    When performance and payment bonds or alternative payment 
protections are required from subcontractors performing construction 
work under nonconstruction prime contracts, the contracting officer 
shall follow the procedures in FAR 28.102-3. When alternative payment 
protections are required, insert a clause substantially the same as FAR 
52.228-13, Alternative Payment Protections, appropriately modified.


1828.106  Administration.


1828.106-6  Furnishing information. (NASA supplements paragraph (c))

    (c) The contracting officer is the agency head's designee.

Subpart 1828.2--Sureties


1828.202  Acceptability of corporate sureties. (NASA supplements 
paragraph (d))

    (d) Contracting officers may obtain access to Department of 
Treasury Circular 570 through the internet at http://www.ustreas.gov/
treasury/bureaus/finman/c570.html.


1828.203  Acceptability of individual sureties. (NASA supplements 
paragraph (g))

    (g) Notification of suspected criminal or fraudulent activities, 
with all supporting documentation, shall be submitted to the 
Headquarters Office of Procurement (Code HS).

Subpart 1828.3--Insurance


1828.307  Insurance under cost-reimbursement contracts.


1828.307-1  Group insurance plans. (NASA supplements paragraph (a))

    (a) The procurement officer is the approval authority.

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1828.307-2  Liability. (NASA supplements paragraph (b))

    (b)(2)(A) The procurement officer may approve a requirement for 
property damage liability insurance when:
    (a) A commingling of operations permits property damage coverage at 
a nominal cost to NASA under insurance carried by the contractor in the 
course of its commercial operations; or
    (b) The contractor is engaged in the handling of high explosives or 
in extra hazardous research and development activities undertaken in 
populated areas.
    (B) In all other circumstances, the Associate Administrator for 
Procurement (Code HS) is the approval authority.


1828.307-70   Insurance of industrial facilities.

    When industrial facilities are provided by the Government under a 
facilities contract or a lease, the contract or lease shall require 
that during the period of construction, installation, alteration, 
repair, or use, and at any other time as directed by the contracting 
officer, the contractor or lessee shall ensure or otherwise provide 
approved security for liabilities to third persons (including employees 
of the contractor or lessee) in the manner and to the same extent as 
required in FAR 28.307-2.


1828.311   Solicitation provision and contract clause on liability 
insurance under cost-reimbursement contracts.


1828.311-1   Contract clause.

    The contracting officer shall insert the clause at FAR 52.228-7, 
Insurance-Liability to Third Persons, as prescribed in FAR 28.311-1 
unless waived by the procurement officer.


1828.311-2   Agency solicitation provisions and contract clauses.

    The contracting officer shall insert the clause at 1852.228-71, 
Aircraft Flight Risks, in all cost-reimbursement contracts for the 
development, production, modification, maintenance, or overhaul of 
aircraft, or otherwise involving the furnishing of aircraft to the 
contractor, except when the aircraft are covered by a separate 
bailment.


1828.370   Fixed-price contract clauses.

    (a) The contracting officer shall insert the clause at 1852.228-70, 
Aircraft Ground and Flight Risk, in all negotiated fixed-price 
contracts for the development, production, modification, maintenance, 
or overhaul of aircraft, or otherwise involving the furnishing of 
aircraft to the contractor, except as provided in paragraph (b) of this 
section, unless the aircraft are covered by a separate bailment. See 
the clause preface for directions for modifying the clause to 
accommodate various circumstances.
    (b) The Government need not assume the risk of aircraft damage, 
loss, or destruction as provided by the clause at 1852.228-70 if the 
best estimate of premium costs that would be included in the contract 
price for insurance coverage for such damage, loss, or destruction at 
any plant or facility is less than $500. If it is determined not to 
assume this risk, the clause at 1852.228-70 shall not be made a part of 
the contract, and the cost of necessary insurance to be obtained by the 
contractor to cover this risk shall be considered in establishing the 
contract price. In such cases, however, if performance of the contract 
is expected to involve the flight of Government-furnished aircraft, the 
substance of the clause at 1852.228-71, Aircraft Flight Risks, suitably 
adapted for use in a fixed-price contract, shall be used.
    (c) When the clause at 1852.228-70 is used, the term ``Contractor's 
premises'' shall be expressly defined in the contract Schedule and 
shall be limited to places where aircraft may be located during the 
performance of the contract. Contractor's premises may include, but are 
not limited to, those owned or leased by the contractor or those for 
which the contractor has a permit, license, or other right of use 
either exclusively or jointly with others, including Government 
airfields.


1828.371   Clauses for cross-waivers of liability for Space Shuttle 
services, Expendable Launch Vehicle (ELV) launches, and Space Station 
activities.

    (a) In agreements covering Space Shuttle services, certain ELV 
launches, and Space Station activities, NASA and other signatories (the 
parties) agree not to bring claims against each other for any damage to 
property or for injury or death of employees that occurs during the 
time such a cross-waiver is in effect. These agreements involving NASA 
and other parties include, but are not limited to, Memoranda of 
Understanding with foreign Governments, Launch Services Agreements, and 
other agreements for the use of NASA facilities. These agreements 
require the parties to flow down the cross-waiver provisions to their 
related entities so that contractors, subcontractors, customers, and 
other users of each party also waive their right to bring claims 
against other parties and their similarly related entities for damages 
arising out of activities conducted under the agreements. The purpose 
of the clauses prescribed in this section is to flow down the cross-
waivers to NASA contractors and subcontractors.
    (b) The contracting officer shall insert the clause 1852.228-72, 
Cross-waiver of Liability for Space Shuttle Services, in solicitations 
and contracts of $100,000 or more when the work to be performed 
involves ``Protected Space Operations'' (applicable to the Space 
Shuttle) as that term is defined in the clause. If Space Shuttle 
services under the contract are being conducted in support of the Space 
Station program, the contracting officer shall insert the clause 
prescribed by paragraph (d) of this section and designate application 
of the clause to those particular activities.
    (c) The contracting officer shall insert the clause at 1852.228-78, 
Cross-Waiver of Liability for NASA Expendable Launch Vehicle (ELV) 
Launches, in solicitations and contracts of $100,000 or more for the 
acquisition of ELV launch services when the service is being acquired 
by NASA pursuant to an agreement described in paragraph (a) of this 
section. If, under a contract that covers multiple launches, only some 
of the launches are for payloads provided pursuant to such agreements, 
an additional clause shall be inserted in the contract to designate the 
particular launches to which this clause applies. If a payload is being 
launched by use of an ELV in support of the Space Station program, the 
contracting officer shall insert the clause prescribed by paragraph (d) 
of this section and designate application of the clause to that 
particular launch.
    (d) The contracting officer shall insert the clause at 1852.228-76, 
Cross-Waiver of Liability for Space Station Activities, in 
solicitations and contracts of $100,000 or more when the work is to be 
performed involves ``Protected Space Operations'' (relating to the 
Space Station) as that term is defined in the clause.
    (e) At the contracting officer's discretion, the clauses prescribed 
by paragraphs (b), (c), and (d) of this section may be used in 
solicitations, contracts, new work modifications, or extensions, to 
existing contracts under $100,000 involving Space Shuttle activities, 
ELV launch services, or Space Station activities, respectively, in 
appropriate circumstances. Examples of such circumstances are when the 
value of contractor property on a Government installation used in 
performance of the contract is significant, or when it is likely that 
the contractor or subcontractor will have its valuable property exposed 
to risk or damage caused by other participants in the Space Shuttle 
services, ELV launches, or Space Station activities.

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1828.372  Clause for minimum insurance coverage.

    In accordance with FAR 28.306(b) and 28.307, the contracting 
officer may insert a clause substantially as stated at 1852.228-75, 
Minimum Insurance Coverage, in fixed-price solicitations and in cost-
reimbursement contracts. The contracting officer may modify the clause 
to require additional coverage, such as vessel liability, and higher 
limits if appropriate for a particular acquisition.
    3. Part 1829 is revised to read as follows:

PART 1829--TAXES

Sec.

Subpart 1829.1  General

1829.101  Resolving tax problems.

Subpart 1829.2 Federal Excise Taxes

1829.203  Other Federal tax exemptions.
1829.203-70  NASA Federal tax exemptions.

    Authority: 42 U.S.C. 2473(c)(1).

Subpart 1829.1--General


1829.101  Resolving tax problems. (NASA supplements paragraph (a))

    (a)(i) The Headquarters Office of the General Counsel (Code G) is 
the designated legal counsel for all external contacts on FAR part 29 
tax issues, including communications with the Department of Justice, 
other Federal agencies, and any taxing authority.
    (ii) Tax problems that cannot be solved readily by reference to FAR 
Part 29 shall be forwarded to Code G through the installation's Office 
of Chief Counsel. The following material, as applicable, shall be 
forwarded to Code G with a copy to the Associate Administrator for 
Procurement (Code HS):
    (A) A comprehensive statement of pertinent facts, including 
documents and correspondence.
    (B) A copy of the contract.
    (C) A thorough review of the legal issues involved and recommended 
action.
    (D) If appropriate, a statement of the problem's effects on 
acquisition policies and procedures, with recommendations.

Subpart 1829.2--Federal Excise Taxes


1829.203  Other Federal tax exemptions.


1829.203.70  NASA Federal tax exemptions.

    (a) The Associate Administrator for Procurement has obtained a 
permit from the Bureau of Alcohol, Tobacco, and Firearms (Treasury 
Department) enabling NASA and its contractors to purchase spirits 
(e.g., specially denatured spirits) tax-free for nonbeverage Government 
use. Installations can obtain copies of the permit from the 
Headquarters Office of Procurement (Code HS).
    (b) When purchasing spirits for use by NASA personnel, the 
contracting officer shall attach a copy of the permit to the contract. 
Upon receipt of the spirits, the permit shall be returned to the 
contracting officer unless future orders are anticipated.
    (c) When a NASA contractor requires spirits to perform a NASA 
contract, the contracting officer shall furnish the contractor a copy 
of the permit to provide its vendor. Upon receipt of the spirits, the 
contractor shall return the permit to the contracting officer unless 
future orders are anticipated. In any event, the permit shall be 
returned upon completion of the contract.
    (d) The contracting officer shall post a copy of the permit for 
inspection.
    4. Part 1830 is revised to read as follows:

PART 1830--COST ACCOUNTING STANDARDS

Sec.

Subpart 1830.2  CAS Program Requirements

1830.201-5  Waiver.
Subpart 1830.70  Facilities Capital Employed for Facilities in Use and 
For Facilities Under Construction
1830.7001  Facilities capital employed for facilities in use.
1830.7001-1  Contract facilities capital estimates.
1830.7001-2  DD Form 1861 completion instructions.
1830.7001-3  Preaward FCCOM applications.
1830.7001-4  Postaward FCCOM applications.
1830.7002  Facilities capital employed for facilities under 
construction.
1830.7002-1  Definitions.
1830.7002-2  Cost of money calculations.
1830.7002-3  Representative investment calculations.
1830.7002-4  Determining imputed cost of money.

    Authority: 42 U.S.C. 2473(c)(1).

Subpart 1830.2--CAS Program Requirements


1830.201-5   Waiver.

    The procurement officer shall forward all requests for waiver of 
CAS requirements to the Associate Administrator for Procurement (Code 
HC).

Subpart 1830.70--Facilities Capital Employed for Facilities in Use 
and for Facilities Under Construction


1830.7001   Facilities capital employed for facilities in use.


1830.7001-1   Contract facilities capital estimates.

    To estimate facilities capital cost of money (FCCOM), the 
contracting officer shall use DD Form 1861, Contract Facilities Capital 
Cost of Money, after evaluating the contractor's cost proposal, 
establishing cost of money factors, and developing a prenegotiation 
cost objective.


1830.7001-2   DD For 1861 completion instructions.

    (a) List overhead pools and direct-charging services centers (if 
used) in the same structure as they appear on the contractor's cost 
proposal and Form CASB-CMF. The structure and allocation base units-of-
measure must be compatible on all three displays.
    (b) Extract appropriate contract overhead allocation base data, by 
year, from the evaluated cost breakdown or prenegotiation cost 
objective, and list them against each overhead pool and direct-charging 
service center.
    (c) Multiply each allocation base by its corresponding cost of 
money factor to compute the FCCOM estimated to be incurred each year. 
The sum of these products represents the estimated contract FCCOM for 
the year's effort.
    (d) Add the yearly estimates to calculate the total contract FCCOM.


1830.7001-3   Preaward FCCOM applications.

    Apply FCCOM in establishing cost and price objectives as follows:
    (a) Cost objective. Us the FCCOM with normal, booked costs in 
establishing a cost objective or the target cost of an incentive type 
contract. Do not subsequently adjust these target costs when actual 
cost of money rates become available during the contract performance 
period.
    (b) Profit/fee objective. Do not include FCCOM in the cost base 
when establishing a prenegotiation profit/fee objective. Use only 
normal, booked costs in this cost base.


1830.7001-4  Postaward FCCOM applications.

    (a) Interim billings based on costs incurred. (1) The contractor 
may include FCCOM in cost reimbursement and progress payment invoices. 
To determine the amount that qualifies as cost incurred, multiply the 
incurred portions of the overhead pool allocation bases by the latest 
available cost of

[[Page 55768]]

money factors. These FCCOM calculations are interim estimates subject 
to adjustment.
    (2) As actual cost of money factors are finalized, use the new 
factors to calculate FCCOM for the next accounting period.
    (b) Final settlements. (1) Contract FCCOM for final cost 
determination or repricing is based on each year's final cost of money 
factors determined under CAS 414 and supported by separate Forms CASB-
CMF.
    (2) Separately compute contract FCCOM in a manner similar to yearly 
final overhead rates. As in overhead rates, include in the final 
settlement an adjustment from interim to final contract FCCOM. Do not 
adjust the contract estimated or target cost.


1830.7002  Facilities capital employed for facilities under 
construction.


1830.7002-1  Definitions.

    (a) Cost of money rate is either--
    (1) The interest rate determined by the Secretary of the Treasury 
under Public Law 92-41 (85 Stat. 97); or
    (2) The time-weighted average of such rates for each cost 
accounting period during which the capital asset is being constructed, 
fabricated, or developed.
    (b) Representative investment is the calculated amount considered 
invested by the contractor during the cost accounting period to 
construct, fabricate, or develop the capital asset.


1830.7002-2  Cost of money calculations.

    (a) The interest rate referenced in 1830.7002-1(a)(1) is 
established semi-annually and published in the Federal Register during 
the fourth week of December and June.
    (b) To calculate the time-weighted average interest rate referenced 
in 1830.7002-1(a)(2), multiply the rates in effect during the months of 
construction by the number of months each rate was in effect, and then 
divide the sum of the products by the total number of months.


1830.7002-3  Representative investment calculations.

    (a) The calculation of the representative investment requires 
consideration of the rate or expenditure pattern of the costs to 
construct, fabricate, or develop a capital asset.
    (b) If the majority of the costs were incurred toward the 
beginning, middle, or end of the cost accounting period, the contractor 
shall either:
    (1) Determine a representative investment for the cost accounting 
period by calculating the average of the month-end balances for that 
cost accounting period; or
    (2) Treat month-end balances as individual representative 
investments.
    (c) If the costs were incurred in a fairly uniform expenditure 
pattern throughout the construction, fabrication, or development 
period, the contractor may either:
    (1) Determine a representative investment for the cost accounting 
period by averaging the beginning and ending balances of the 
construction, fabrication, or development cost account for the cost 
accounting period; or
    (2) Treat month-end balances as individual representative 
investments.
    (d) The method chosen by the contractor to determine the 
representative investment amount may be different for each capital 
asset being constructed, fabricated, or developed, provided the method 
fits the expenditure pattern of the costs incurred.


1830.7002-4  Determining imputed cost of money.

    (a) Determine the imputed cost of money for an asset under 
construction, fabrication, or development by applying a cost of money 
rate (see 1830.7002-2) to the representative investment (see 1830.7002-
3).
    (1) When a representative investment is determined for a cost 
accounting period in accordance with 1830.7002-3(b)(1) or 1830.7002-
3(c)(1), the cost of money rate shall be the time-weighted average 
rate.
    (2) When a monthly representative investment is used in accordance 
with 1830.7002-3(b)(2) or 1830.7002-3(c)(2), the cost of money rate 
shall be that in effect each month. Under this method, the FCCOM is 
determined monthly, and the total for the cost accounting period is the 
sum of the monthly calculations.
    (b) The imputed cost of money will be capitalized only once in any 
cost accounting period, either at the end of the accounting period or 
the end of the construction, fabrication, or development period, 
whichever comes first.
    (c) When the construction, fabrication, or development of an asset 
takes more than one accounting period, the cost of money capitalized 
for the first accounting period will be included in determining the 
representative investment for any future cost accounting periods.
    5. Part 1831 is revised to read as follows:

PART 1831--CONTRACT COST PRINCIPLES AND PROCEDURES

Sec.

Subpart 1831.2  Contracts With Commercial Organizations

1831.205  Selected costs.
1831.205-18  Independent research and development and bid and 
proposal costs.
1831.205-32  Precontract costs.
1831.205-70  Contract clause.

    Authority: 42 U.S.C. 2473(c)(1).

Subpart 1831.2--Contracts with Commercial Organizations


1831.205  Selected costs.


1831.205-18  Independent research and development and bid and proposal 
costs. (NASA supplements paragraph (e))

    (e) A class deviation exists to permit costs contributed by a 
contractor under a cooperative arrangement with NASA to be considered 
as allowable IR & D costs if the work performed would have been allowed 
as contractor IR & D had there been no cooperative arrangement. This 
deviation does not apply to costs contributed by the contractor under 
cost-sharing contracts described in FAR 16.303 and 1816.303.


1831.205-32  Precontract costs.

    (1) Precontract costs are applicable only to sole source awards, 
except those resulting in firm-fixed price or fixed-price with economic 
price adjustment contracts.
    (2) The procurement officer is the approval authority for the use 
of precontract costs. Authorization shall be in writing and shall 
address the following:
    (i) The necessity for the contractor to initiate work prior to 
contract award;
    (ii) The start date of such contractor effort;
    (iii) The total estimated time of the advanced effort; and
    (iv) The cost limitation.
    (3) Authorization to incur precontract costs shall be provided to 
the contractor in writing and shall include the following:
    (i) The start date for incurrence of such costs;
    (ii) The limitation on the total amount of precontract costs which 
may be incurred;
    (iii) A statement that the costs are allowable only to the extent 
they would have been if incurred after formal contract award; and
    (iv) A statement that the Government is under no obligation to 
reimburse the contractor for any costs unless a contract is awarded.


1831.205-70  Contract clause.

    The contracting officer shall insert the clause at 1852.231-70, 
Precontract

[[Page 55769]]

Costs, in contracts for which specific coverage of precontract costs is 
authorized under 1831.205-32.
    6. Part 1832 is revised to read as follows:

PART 1832--CONTRACT FINANCING

Sec.
1832.006-2  Definitions.

Subpart 1832.1  Non-Commercial Item Purchase Financing

1832.111  Contract clauses for non-commercial purchases.
1832.111-70  NASA contract clause.

Subpart 1832.2  Commercial Item Purchase Financing

1832.202-1  Policy.
1832.206  Solicitation provisions and contract clauses.

Subpart 1832.4  Advance Payments For Non-Commercial Items

1832.402  General.
1832.406  Letters of credit.
1832.407  Interest.
1832.409  Contracting officer action.
1832.409-1  Recommendation for approval.
1832.409-170  NASA procedure for approval.
1832.410  Findings, determination, and authorization.
1832.412  Contract clause.

Subpart 1832.5  Progress Payments Based on Costs

1832.501  General.
1832.501-1  Customary progress payment rates.
1832.501-2  Unusual progress payments.
1832.502  Preaward matters.
1832.502-2  Contract finance office clearance.
1832.502-4  Contract clauses.
1832.502-470  NASA contract clause.
1832.504  Subcontracts.

Subpart 1832.7  Contract Funding

1832.702  Policy.
1832.702-70  NASA policy.
1832.704  Limitation of cost or funds.
1832.704-70  Incrementally funded fixed-price contracts.
1832.705  Contract clauses.
1832.705-2  Clauses for limitation of cost or funds.
1832.705-270  NASA clauses for limitation of cost or funds.

Subpart 1832.9  Prompt Payment

1832.903  Policy.
1832.906  Contract financing payments.
1832.908  Contract clauses.
1832.970  Payments to Canadian Commercial Corporation.

Subpart 1832.10  Performance-Based Payments

1832.1004  Procedures.
1832.1005  Contract clauses.
1832.1006  Agency approvals.
1832.1009  Title.

    Authority: 42 U.S.C. 2473(c)(1).


1832.006-2  Definitions.

    The Associate Administrator for Procurement is the Agency remedy 
coordination official.

Subpart 1832.1--Non-Commercial Item Purchase Financing


1832.111  Contract clauses for non-commercial purchases.


1832.111-70  NASA contract clause.

    The contracting officer shall insert the clause at 1852.232-79, 
Payment for On-Site Preparatory Costs, in solicitations and contracts 
for construction on a fixed-price basis when progress payments are 
contemplated and pro rata payment of on-site preparatory costs to the 
contractor is appropriate.

Subpart 1832.2--Commercial Item Purchase Financing


1832.202-1  Policy. (NASA supplements paragraph (b))

    (b)(6) Advance payment limitations do not apply to expendable 
launch vehicle (ELV) service contracts. (see 1832.402).


1832.206  Solicitation provisions and contract clauses. (NASA 
supplements paragraph (g))

    (g)(2) The installment payment rate shall be that which is common 
in the commercial marketplace for the purchased item. If there is no 
commonly used rate, the contracting officer shall determine the 
appropriate rate. In no case shall the rate exceed that established in 
the clause at FAR 52.232-30.

Subpart 1832.4--Advance Payments for Non-Commercial Items


1832.402  General. (NASA supplements paragraph (e))

    (e)(1) The Director of the Headquarters Office of Procurement 
Analysis Division (Code HC) is the approval authority for all advance 
payments except the following:
    (A) The procurement officer is the approval authority for non-fee 
bearing contracts with domestic entities when the cumulative contract 
value is $25,000,000 or less, and for all increases to such contracts 
over $25,000,000 previously approved by Code HC as long as the advance 
payment amount outstanding at any time is not increased.
    (B) The contracting officer is the approval authority for the 
following actions. In these cases, a findings and determination (see 
FAR 32.410) is not required.
    (a) Small Business Innovation Research (SBIR) and Small Business 
Technology Transfer (STTR) Phase I contracts. A class deviation has 
been signed, effective through September 30, 2000 (for SBIRs) and 
September 30, 1997 (for STTRs), authorizing use of advance payments on 
these contracts. The contracting officer shall annotate the contract 
file that the deviation is on file at the NASA Headquarters Office of 
Procurement (Code HC).
    (b) Expendable launch vehicle (ELV) service contracts. 42 U.S.C. 
2459c authorize advance payments for these contracts. The contracting 
officer shall document the contract file with the rationale for 
approving the use of advance payments.
    (e)(2) All advance payment authorization requests, except those 
authorized by 1832.402(e)(1)(B), shall be coordinated with the 
installation Deputy Chief Financial Officer.


1832.406  Letters of credit. (NASA supplements paragraph (b))

    (b)(1) Each installation is considered a contracting agency for the 
purposes of this requirement.


1832.407  Interest. (NASA supplements paragraph (d))

    (d)(1) Advance payments without interest are authorized.


1832.409  Contracting officer action.


1832.409-1  Recommendation for approval.


1832.409-170  NASA procedure for approval.

    In addition to the items listed in FAR 32.409-1, requests for 
Headquarters approval of advance payments (see 1832.402(e)(1)) shall 
include the following information:
    (a) Name of the cognizant NASA Headquarters program or staff 
office;
    (b) Name and phone number of the contracting officer or negotiator;
    (c) A copy of the proposed advance payments clause;
    (d) If a profit/fee is contemplated, the factors considered in 
determining the profit/fee (see subpart 1815.9);
    (5) Information justifying the adequacy of security to cover the 
maximum advance payment amount at any time outstanding.


1832.410  Findings, determination, and authorization. (NASA supplements 
paragraph (b))

    (b) Generally, the format in FAR 32.410 should be used, tailored as 
follows:
    (i) In format subparagraph (a)(2), use the phrase ``Advance 
payments (In an amount not to exceed $* * * at any time outstanding)'' 
in all determinations and findings. The phrase means the maximum 
unliquidated dollar amount a contractor would need in advance

[[Page 55770]]

payments at any point in time for the particular contract. The amount 
would not usually be the full contract value. The amount inserted 
should be based on an analysis of the contractor's financing needs 
(monthly or other appropriate period) for the specific contract 
involved.
    (ii) In the second sentence of format subparagraph (a)(4), delete 
the reference to a special bank account if no special bank account is 
required.
    (iii) Use format subparagraph (a)(6), and not (a)(7) or (a)(8).
    (iv) At the end of format paragraph (b), use ``is in the public 
interest.''
    (v) In format paragraph (c), use the phrase ``(the amount at any 
time outstanding)'' in all determinations and findings.


1832.412  Contract clause. (NASA supplements paragraphs (a), (e) and 
(f))

    (a) When the clause at FAR 52.232-12, Advance Payments, is used, 
make the following modifications:
    (i) In the ``Maximum Payment'' paragraph (either paragraph (d) or 
(e)), in the sentence that begins ``When the sum of'', change the word 
``When'' to lower case and insert before it: ``Unliquidated advance 
payments shall not exceed $. * * * at any time outstanding. In addition 
* * *''.
    (ii) In paragraph (m)(1) delete ``in the form prescribed by the 
administering office'' and substitute ``on Standard Form 272, Federal 
Cash Transactions Report, and, if appropriate, Standard Form 272-A, 
Federal Cash Transactions Report Continuation''.
    (iii) Annotate the clause ``as modified by NASA (October 1996)''.
    (e) See 1832.412(f).
    (f) The contracting officer shall use Alternates IV and V when 
advance payments are provided on Phase I contracts of the Small 
Business Innovation Research (SBIR or Small Business Technology 
Transfer (STTR) programs. Annotate the clause ``as modified by NASA 
(October 1996)'', delete paragraph (a) of Alternate V, and substitute 
the following:

    (f) Requirements for payment. Advance payments will be made 
under this contract upon receipt of invoices from the Contractor. 
Invoices should be clearly marked ``Small Business Innovation 
Research Contract'' or ``Small Business Technology Transfer 
Contract,'' as appropriate, to expedite payment processing. One-
third of the total contract price will be available to be advanced 
to the contractor immediately after award, another one-third will be 
advanced three months after award, and the final one-third will be 
paid upon acceptance by NASA of the Contractor's final report. By 
law, full payment must be made no later than 12 months after the 
date that contract requirements are completed. The Contractor shall 
flow down the terms of this clause to any subcontractor requiring 
advance payments.

Subpart 1832.5--Progress Payments Based on Costs


1832.501  General.


1832.501-1  Customary progress payment rates. (NASA supplements 
paragraph (a))

    (a) The customary progress payment rate for all NASA contracts is 
85 percent for large business, 90 percent for small business, 95 
percent for small disadvantaged business, and 100 percent for Phase II 
contracts in the Small Business Innovation Research (SBIR) and Small 
Business Technology Transfer (STTR) programs. The contracting officer 
shall insert the applicable percentage in paragraphs (a) and (b) of the 
clause at FAR 52.232-16.


1832.501-2  Unusual progress payments.

    The Director of the Headquarters Office of Procurement Analysis 
Division (Code HC) is the approval authority for the use of unusual 
progress payments.


1832.502  Preaward matters.


1832.502-2  Contract finance office clearance.

    The Director of the Headquarters Office of Procurement Analysis 
Division (Code HC) is the approval authority for the actions in FAR 
32.502-2, except the Associate Administrator for Procurement (Code HC) 
is the approval authority for any deviations addressed in FAR 32.502-
2(b).


1832.502-4  Contract clauses.


1832.502-470  NASA contract clause.

    The contracting officer may insert a clause substantially as stated 
at 1852.232-82, Submission of Requests for Progress Payments, in fixed-
price solicitations and contracts that provide for progress payments. 
The recipient of the requests and number of copies may be changed as 
required.


1832.504  Subcontracts. (NASA supplements paragraph (c))

    (c) Unusual progress payments to subcontractors shall be approved 
in accordance with 1832.501-2.

Subpart 1832.7--Contract Funding


1832.702  Policy.


1832.702-70  NASA policy.

    (a) Cost-reimbursement contracts may be incrementally funded only 
if all the following conditions are met (except that, for cost-
reimbursement R&D contracts under which no supplies are deliverable, 
only the condition in paragraph (a)(3) of this section applies):
    (1) The total value of the contract (including options as defined 
in FAR subpart 17.2) is $1,000,000 or more.
    (2) The period of performance under the contract overlaps the 
succeeding fiscal year.
    (3) The funds are not available to fund the total contract value 
fully at award.
    (b) Fixed-price contracts, other than those for research and 
development, shall not be incrementally funded.
    (c)(1) Fixed-price contracts for research and development may be 
incrementally funded if the conditions in 1832.702-70(a) (1) through 
(3) are met and the initial funding of the contract is not less than 50 
percent of the total fixed price.
    (2) Incrementally funded fixed-price contracts shall be fully 
funded as soon as adequate funding becomes available.
    (d) The procurement officer, with the concurrence of the 
installation Comptroller, may waive any of the conditions set forth in 
paragraphs 1832.702-70 (a) through (c). The procurement officer shall 
maintain a record of all such approvals during the fiscal year.
    (e) A class deviation from the conditions set forth in paragraphs 
1832.702-70 (a) through (c) exists to permit incremental funding of 
contracts under Phase II of the Small Business Innovation Research 
(SBIR) Program (through September 30, 2000) and Phase II of the Small 
Business Technology Transfer (STTR) program (through September 30, 
1997). This deviation exists with the understanding that the contracts 
will be fully funded when funds become available.


1832.704  Limitation of cost or funds.


1832.704-70  Incrementally funded fixed-price contracts.

    (a) Upon receipt of the contractor's notice under paragraph (c)(1) 
of the clause at 1852.232-77, Limitation of Funds (Fixed Price 
Contract), the contracting officer shall promptly provide written 
notice to the contractor that the Government is--
    (1) Allotting additional funds in a specified amount for continued 
performance;
    (2) Terminating the contract; or
    (3) Considering whether to allot additional funds; and
    (i) The contractor is entitled to stop work in accordance with 
paragraph (b) of the clause at 1852.232-77, Limitation of Funds; and
    (ii) Any costs expended beyond the amount specified in paragraph 
(a) of the clause at 1852.232-77, Limitation of

[[Page 55771]]

Funds, are incurred at the contractor's risk.
    (b) Upon determining that the contract will receive no further 
funds, the contracting officer shall promptly give notice of the 
Government's decision and terminate for the convenience of the 
Government.


1832.705  Contract clauses.


1832.705-2  Clauses for limitation of cost or funds.


1832.705-270  NASA clauses for limitation of cost or funds.

    (a) The contracting officer shall insert the clause at 1852.232-77, 
Limitation of Funds (Fixed-Price Contract), in solicitations and 
contracts for fixed-price incrementally funded research and 
development.
    (b) The contracting officer shall insert a clause substantially as 
stated at 1852.232-81, Contract Funding, in Section B of solicitations 
and contracts containing the clause at FAR 52.232-22, Limitation of 
Funds. Insert the amounts of funds available for payment, the items 
covered, and the applicable period of performance. The amount obligated 
for fee in paragraph (b) of the clause should always be sufficient to 
pay fee anticipated to be earned for the work funded by the amount in 
paragraph (a) of the clause.

Subpart 1832.9--Prompt Payment


1832.903  Policy.

    Invoice and contractor financing payments for contracts (other than 
Fixed-Price Architect-Engineer Contracts, Construction Contracts, and 
contracts for meats, perishables and dairy products) with the Canadian 
Commercial Corporation (CCC) shall be made earlier than the standard 
contract payment due dates. (See 1832.970).


1832.906  Contract financing payments. (NASA supplements paragraph (a))

    (a) Except as authorized in 1832.903, it is NASA's policy to make 
contract financing payments on the 30th day after the designated 
billing office has received a proper request. However the due date for 
making contract financing payments for a specific contract may be 
earlier than the 30th day, but not earlier than 7 days, after the 
designated billing office has received a proper request, provided that:
    (i) The contractor provides consideration whose value is determined 
to be greater than the cost to the United States Treasury of interest 
on funds paid prior to the 30th day, calculated using the Current Value 
of Funds Rate published annually in the Federal Register (subject to 
quarterly revision);
    (ii) The contracting officer approves the payment date change, with 
the concurrence of the installation Financial Management Officer; and
    (iii) The contract file includes documentation regarding the value 
of the consideration and the analysis determining that value.


1832.908  Contract clauses. (NASA supplements paragraphs (c) and (d))

    (c) When the clause at FAR 52.232-25, Prompt Payment, is used in 
contracting with the CCC subject to the conditions at 1832.903, make 
the following modifications:
    (i) Insert ``17'' in lieu of ``30'' in paragraphs (a)(2) (i) and 
(a)(2) (ii); and
    (ii) Insert ``17th'' in paragraph (b) (2).
    (iii) Annotate the clause ``as modified by NASA (October 1960''.
    (d) When a clause at FAR 52.232-25, 52.232-26 or 52.232-27 is used, 
the clause at 52.232-28 shall be used, modified as follows:
    (i) Delete the words ``and contract number'' from paragraph (d).
    (ii) Insert the following language in lieu of paragraph (b)(4):

    ``The Contractor shall submit a Standard Form 3881 to the 
installation awarding this contract. If a Standard Form 3881 
previously submitted to the installation awarding this contract is 
still valid, resubmittal is not necessary, unless requested by 
NASA.''

    (iii) Annotate the clause ``as modified by NASA (October 1996)''.


1832.970   Payments to Canadian Commercial Corporation.

    As authorized by FAR 32.903, the phrase ``the 17th day'' shall be 
used in lieu of the ``the 30th day'' at FAR 32.905(a)(1), 32.905(a)(2) 
and 32.906(a).

Subpart 1832.10--Performance-Based Payments


1832.1004   Procedure. (NASA supplements paragraph (b))

    (b) (2) In determining the amount of performance-based payments, 
contracting officers shall ensure that the payments will not result in 
an unreasonably low or negative level of contractor investment. To make 
this assessment, contracting officers shall request the contractor to 
submit with its proposal a numeric and graphic funding profile showing 
the cash flow and contractor investment in the contract.


1832.1005   Contract clauses. (NASA supplements paragraph (a))

    (a) If the contract is for launch services, the contracting officer 
shall delete paragraph (f) of the clause at FAR 52.232-32 in accordance 
with 1832.1009.


1832.1006   Agency approvals.

    Performance-based payments shall be approved in accordance with 
field installation procedures.


1832.1009   Title.

    In accordance with 42 U.S.C. 2465d, NASA shall not take title to 
launch vehicles under contracts for launch services unless one of the 
exceptions in the law applies. However, the law does not eliminate 
NASA's right to take title to other property acquired or produced by 
the contractor under a contract containing a title provision.
    7. Part 1833 is revised to read as follows:

PART 1833--PROTESTS, DISPUTES, AND APPEALS

Sec.

Subpart 1833.1--Protests

1833.103  Protests to the agency.
1833.104  Protest to GAO.
1833.106  Solicitation provision and contract clause.

Subpart 1833.2--Disputes and Appeals

1833.209  Suspected fraudulent claims.
1833.211  Contracting officer's decision.
1833.215  Contract clause.

    Authority: 42 U.S.C. 2473(c)(1).

Subpart 1833.1--Protests


1833.103  Protests to the agency. (NASA supplements paragraph (b))

    (b)(1) Protests received at NASA offices or locations other than 
that of the cognizant contracting officer shall be immediately referred 
to the contracting officer for disposition (see 1833.106(a)). The 
contracting officer shall advise the Headquarters Officer of the 
General Counsel (Code GK) of the receipt of the protest and the planned 
and actual dispositions.


1833.104   Protests to GAO. (NASA supplements paragraphs (a), (b), (c), 
and (f))

    The Associate Administrator for Procurement is the sole authority 
for deciding whether to defend a protest to GAO or to direct remedial 
action. NASA personnel shall take no action to respond to or resolve 
any protest filed with GAO other than in accordance with this part and 
other guidance provided by NASA Headquarters.
    (a)(2) The Headquarters Office of Procurement (Code HS) shall 
notify the contracting officer of protest receipt, and the contracting 
officer shall immediately give notice of the protest to all interested 
parties. Oral contracting officer notices shall be subsequently 
confirmed in writing, and the

[[Page 55772]]

contracting officer shall also send a copy of the written confirmation 
to Code HS, the Headquarters Office of the General Counsel (Code GK), 
and the installation Chief Counsel.
    (3)(i) The contracting officer shall send four copies of the 
protest report, consisting of the protest file, the contracting 
officer's statement of facts, and a draft memorandum of law to Code GK 
within 20 days after GAO notification of protest receipt. Also include 
a copy of the file index in electronic format. The contracting officer 
shall retain a minimum of two copies of the protest file.
    (ii) When an actual or prospective offeror requests access to a 
protest file, the contracting officer shall take the following actions, 
except the actions defined in paragraph (a)(3)(ii) (a) and (b) are not 
required if already accomplished:
    (a) Send a copy of the protest file index to Code GK within 10 days 
of receipt of the request.
    (b) Send a copy of the protest file to Code GK within 15 days of 
receipt of the request.
    (c) With Code GK concurrence, send the protest file and index to 
the requesting party to ensure delivery within 20 days after receipt of 
the request.
    (iii) Code GK shall submit the protest file to GAO.
    (4)(i) Code GK shall provide copies of the report to the 
protestor(s), any intervenors, and the installation Chief Counsel.
    (b)(1) The Associate Administrator for Procurement (Code HS) is the 
approval authority for contract award.
    (c)(1) The contracting officer shall consult Code HS before 
terminating a protested contract.
    (2) See 1833.104(b)(1).
    (f) The Agency may request GAO reconsideration of its decision 
within 10 days of issuance. If reconsideration is appropriate, the 
installation Chief Counsel shall forward a draft request for 
reconsideration, with any additional supporting documentation, to Code 
GK within 6 days of issuance of the GAO decision.


1833.106  Solicitation provision and contract clause. (NASA supplements 
paragraph (a))

    (a) The contracting officer shall be the designated recipient of 
Agency protests in paragraph (a) of the provision at FAR 52.233-2.

Subpart 1833.2--Disputes and Appeals


1833.209  Suspected fraudulent claims.

    The contracting officer shall report suspected fraudulent claims to 
the Headquarters Officers of Inspector General (Code W) and the General 
Counsel (Code G).


1833.211  Contracting officer's decision. (NASA supplements paragraph 
(a))

    (a)(4)(v) The Armed Services Board of Contract Appeals is the NASA 
Administrator's authorized representative for hearing appeals of 
contracting officer final decisions. Accordingly, contracting officers 
shall cite that fact in the final decision letter, provide the Board's 
mailing address (Armed Services Board of Contract Appeals, Skyline Six, 
5109 Leesburg Pike, Falls Church, VA 22041-3208), and include a 
notification that the Board's operating procedures appear in Title 48, 
Code of Federal Regulations, Chapter 2, Appendix A.


1833.215  Contract clause.

    The contracting officer shall use the clause at FAR 52.233-1, 
Disputes, with its Alternate I whenever continued performance is vital 
to national security, the public health and welfare, important agency 
programs, or other essential supplies or services whose timely 
reprocurement from other sources would be impracticable.

PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


1852.228-70  [Amended]

    8-9. Section 1852.228-70 is revised to read as follows:


1852.228-70   Aircraft Ground and Flight Risk.

    As prescribed in 1828.370(a), insert the following clause. The 
purpose of this clause is to have the Government assume risks that 
generally entail unusually high insurance premiums and are not covered 
by the contractor's contents, work-in-process, and similar insurance. 
Since the definitions in the clause may not cover every situation that 
should be covered to achieve this purpose, the clause may be modified 
as follows: If the contract covers helicopters, vertical take-off 
aircraft, lighter-than-air airships, or other nonconventional types of 
aircraft, the definition of ``aircraft'' should be modified to specify 
that the aircraft has reached a point of manufacture comparable to that 
specified in the standard definition, which is written for conventional 
winged aircraft. The definition of ``in the open'' may be modified to 
include ``hush houses,'' test hangars, comparable structures, and other 
designated areas. In addition, clause paragraph (d)(3) may be modified 
to provide for Government assumption of risk of transportation by 
conveyance on streets or highways if the contracting officer determines 
that this transportation is limited to the vicinity of the contractor's 
premises and is merely incident to work being performed under the 
contract.

Aircraft Ground and Flight Risk October 1996

    (a) Notwithstanding any other provisions of this contract, 
except as may be specifically provided in the Schedule as an 
exception to this clause, the Government, subject to the definitions 
and limitations of this clause, assumes the risk of damage to, or 
loss or destruction of, aircraft in the open, during operation, or 
in flight and agrees that the Contractor shall not be liable to the 
Government for any such damage, loss, or destruction.
    (b) For the purposes of this clause, the following definitions 
apply:
    (1) Unless otherwise specifically provided in the Schedule, 
``aircraft'' includes--
    (i) Aircraft (including both complete aircraft and aircraft in 
the course of being manufactured, disassembled, or reassembled; 
provided that an engine, wing, or a portion of a wing is attached to 
the fuselage) to be furnished to the Government under this contract 
(whether before or after Government acceptance); and
    (ii) Aircraft (regardless of whether in a state of disassembly 
or reassembly) furnished by the Government to the Contractor under 
this contract, including all property installed in, being installed 
in, or temporarily removed from them, unless the aircraft and 
property are covered by a separate bailment agreement.
    (2) ``In the open'' means located wholly outside of buildings on 
the Contractor's premises, or at such other places as may be 
described in the Schedule as being in the open for the purposes of 
this clause, except that aircraft furnished by the Government are 
considered to be in the open at all times while in the Contractor's 
possession, care, custody, or control.
    (3) ``Flight'' includes any flight demonstration, flight test, 
taxi test, or other flight made in the performance of this contract, 
or for the purpose of safeguarding the aircraft, or previously 
approved in writing by the Contracting Officer.
    (i) With respect to land-based aircraft, flight commences with 
the taxi roll from a flight line on the Contractor's premises and 
continues until the aircraft has completed the taxi roll in 
returning to a flight line on the Contractor's premises.
    (ii) With respect to seaplanes, flight commences with the 
launching from a ramp on the Contractor's premises and continues 
until the aircraft has completed its landing run upon return and is 
beached at a ramp on the Contractor's premises.
    (iii) With respect to helicopters, flight commences upon 
engagement of the rotors for the purpose of take-off from the 
Contractor's premises and continues until the aircraft has returned 
to the ground on the Contractor's premises and the rotors are 
disengaged.

[[Page 55773]]

    (iv) With respect to vertical take-off aircraft, flight 
commences upon disengagement from any launching platform or device 
on the Contractor's premises and continues until the aircraft has 
been re-engaged to any launching platform or device on the 
Contractor's premises; provided, however, that aircraft off the 
Contractor's premises shall be deemed to be in flight when on the 
ground or water only during periods of reasonable duration following 
emergency landing, other landings made in the performance of this 
contract, or landings approved by the Contracting Officer in 
writing.
    (4) ``Contractor's premises'' means those premises designated as 
such in the Schedule or in writing by the Contracting Officer, and 
any other place to which aircraft are moved for the purpose of 
safeguarding the aircraft.
    (5) ``Operation'' means operations and tests, other than on any 
production line, of aircraft not in flight, whether or not the 
aircraft is in the open or in motion. It includes operations and 
tests of equipment, accessories, and power plants only when 
installed in aircraft.
    (6) ``Flight crew members'' means the pilot, copilot, and, 
unless otherwise specifically provided in the Schedule, the flight 
engineer and navigator when requirement or assigned to their 
respective crew positions to conduct any flight on behalf of the 
Contractor.
    (7) ``Contractor's managerial personnel'' means the Contractor's 
directors, officers, and any managers, superintendents, or 
equivalent representatives who have supervision or direction of all 
or substantially all of the Contractor's business or of the 
Contractor's operations at any one plant, a separate location at 
which this contract is performed, or a separate and complete major 
industrial operation in connection with the performance of this 
contract.
    (c)(1) The Government's assumption of risk under this clause, as 
to aircraft in the open, shall continue in effect unless terminated 
pursuant to paragraph (c)(3) of this clause. If the Contracting 
Officer finds that an aircraft is in the open under unreasonable 
conditions, the Contracting Officer shall notify the Contractor in 
writing of the conditions found to be unreasonable and require the 
Contractor to correct them within a reasonable time.
    (2) Upon receipt of this notice, the Contractor shall act 
promptly to correct these conditions, regardless of whether it 
agrees that they are in fact unreasonable. To the extent that the 
Contracting Officer may later determine that they were not in fact 
unreasonable, an equitable adjustment shall be made in the contract 
price to compensate the Contractor for any additional costs incurred 
in correcting them, and the contract shall be modified in writing 
accordingly.
    (3)(i) If the Contracting Officer finds that the Contractor has 
failed to act promptly to correct unreasonable conditions or has 
failed to correct them within a reasonable time, the Contracting 
Officer may by written notice terminate the Government's assumption 
of risk under this clause for any aircraft which is in the open 
under those conditions. This termination shall be effective at 12:01 
A.M. on the 15th day following the day of receipt by the Contractor 
of the notice.
    (ii) If the Contracting Officer later determines that the 
Contractor acted promptly to correct the conditions or that the time 
taken by the Contractor was not in fact unreasonable, an equitable 
adjustment shall, notwithstanding paragraph (g) of this clause, be 
made to compensate the Contractor for any additional costs incurred 
as a result of the termination, and the contract shall be modified 
in writing accordingly.
    (4) If the Government's assumption of risk under this clause is 
terminated in accordance with paragraph (c)(3) of this clause, the 
risk of loss with respect to Government-furnished property shall be 
determined in accordance with the Government property clause of this 
contract, if any, until the Government's assumption of risk is 
reinstated in accordance with paragraph (c)(5) of this clause.
    (5)(i) When unreasonable conditions have been corrected, the 
Contractor shall promptly notify the Government. The Government may 
or may not elect to reassume the risks and relieve the Contractor of 
liabilities as provided in this clause, and the Contracting Officer 
shall notify the Contractor of the Government's election.
    (ii) If, after correction of the conditions, the Government 
elects to reassume the risks and relieve the Contractor of 
liabilities, the Contractor shall be entitled to an equitable 
adjustment for any costs of insurance extending from the end of the 
third working day after the Contractor notifies the Government of 
the correction until the Government notifies the Contractor of that 
election.
    (iii) If the Government elects not to reassume the risks and the 
conditions have in fact been corrected, the Contractor shall be 
entitled to an equitable adjustment for any costs of insurance 
extending after the third working day referred to in paragraph 
(c)(5)(ii) of this clause.
    (d) The Government's assumption of risk shall not extend to 
damage to, or loss or destruction of aircraft--
    (1) Resulting from failure of the Contractor, due to willful 
misconduct or lack of good faith of any of the Contractor's 
managerial personnel, to maintain and administer a program for 
protecting and preserving aircraft in the open and during operation, 
in accordance with sound industrial practice;
    (2) Sustained during flight if the flight crew members 
conducting the flight have not been approved in writing by the 
Contracting Officer;
    (3) While in the course of transportation by rail or by 
conveyance on public streets, highways, or waterways, except for 
Government-furnished property;
    (4) The extent that the damage, loss, or destruction is in fact 
covered by insurance;
    (5) Consisting of wear and tear, deterioration (including rust 
and corrosion), freezing, or mechanical, structural, or electrical 
breakdown or failure, unless this damage is the result of other 
loss, damage, or destruction covered by this clause (except that, in 
the case of Government-furnished property, if the damage consists of 
reasonable wear and tear or deterioration or results from an 
inherent defect in such property, this exclusion shall not apply); 
or
    (6) Sustained while the aircraft is being worked upon and 
directly resulting from the work, including but not limited to any 
repairing, adjusting, servicing, or maintenance operation, unless 
the damage, loss, or destruction is of a type that would be covered 
by insurance that would customarily have been maintained by the 
Contractor at the time of the damage, loss, or destruction, but for 
the Government's assumption of risk under this clause.
    (e)(1) With the exception of damage to, or loss or destruction 
of, aircraft in flight, the Government's assumption of risk under 
this clause shall not extend to the first $1,000 of loss or damage 
resulting from each separately occurring event. The Contractor 
assumes the risk of and shall be responsible for the first $1,000 of 
loss of or damage to aircraft in the open or during operation 
resulting from each separately occurring event, except for 
reasonable wear and tear and except to the extent the loss or damage 
is caused by negligence of Government personnel.
    (2) If the Government elects to require that the aircraft be 
replaced or restored by the Contractor to its condition immediately 
prior to the damage, the equitable adjustment in the price 
authorized by paragraph (i) of this clause shall not include the 
dollar amount of the risk assumed by the Contractor under this 
paragraph (e). If the Government does not elect repair or 
replacement, the Contractor agrees to credit the contract price or 
pay the Government $1,000 (or the amount of the loss if smaller) as 
directed by the Contracting Officer.
    (f) No subcontractor may be relieved from liability for damage 
to, or loss or destruction of, aircraft while in its possession or 
control, except to the extent that the subcontract, with the 
Contracting Officer's prior written approval, provides for relief of 
the subcontractor from that liability. In the absence of such 
approval, the subcontract shall require the return of the aircraft 
in as good condition as when received, except for reasonable wear 
and tear or for the utilization of the property in accordance with 
the provisions of this contract. If a subcontractor has not been 
relieved from liability and any damage, loss, or destruction occurs, 
the Contractor shall enforce the liability of the subcontractor for 
that damage to, or loss or destruction of, the aircraft for the 
benefit of the Government.
    (g) The Contractor warrants that the contract price does not and 
will not include, except as this clause may otherwise authorize, any 
charge or contingency reserve for insurance (including self-
insurance funds or reserves) covering any damage to, or loss or 
destruction of, aircraft while in the open, during operation, or in 
flight, the risk of which has been assumed by the Government under 
this clause, whether or not such assumption may be terminated as to 
aircraft in the open.
    (h)(1) In the event of damage to, or loss or destruction of, 
aircraft in the open, during operation, or in flight, the Contractor 
shall take all reasonable steps to protect the aircraft from further 
damage, separate damaged and undamaged aircraft, and put all

[[Page 55774]]

aircraft in the best possible order. Further, except in cases 
covered by paragraph (e) of this clause, the Contractor should 
furnish to the Contracting Officer a statement of--
    (i) The damaged, lost, or destroyed aircraft;
    (ii) The time and origin of the damage, loss, or destruction;
    (iii) All known interests in commingled property of which 
aircraft are a part; and
    (iv) Any insurance covering any part of the interest in the 
commingled property.
    (2) Except in cases covered by paragraph (e) of this clause, an 
equitable adjustment shall be made in the amount due under this 
contract for expenditures made by the Contractor in performing its 
obligations under this paragraph (h), and this contract shall be 
modified in writing accordingly.
    (i)(1) If, before delivery and acceptance by the Government, any 
aircraft is damaged, lost, or destroyed and the Government has under 
this clause assumed the risk of that damage, loss, or destruction, 
the Government shall either
    (i) Require that the aircraft be replaced or restored by the 
Contractor to its condition immediately prior to the damage or
    (ii) Terminate this contract with respect to that aircraft.
    (2) If the Government requires that the aircraft be replaced or 
restored, an equitable adjustment shall be made in the amount due 
under this contract and in the time required for its performance, 
and the contract shall be modified in writing accordingly.
    (3) If this contract is terminated under this paragraph 
(i)(1)(ii) with respect to the aircraft, and under this clause the 
Government has assumed the risk of the damage, loss, or destruction, 
the Contractor shall be paid the contract price for the aircraft 
(or, if applicable, any work to be performed on the aircraft) less 
any amounts the Contracting Officer determines (i) that it would 
have cost the Contractor to complete the aircraft (or any work to be 
performed on it), together with any anticipated profit on the 
uncompleted work and (ii) to be the value, if any, of the damaged 
aircraft or any remaining portion of it retained by the Contractor. 
The Contracting Officer shall have the right to prescribe the manner 
of disposition of the damaged, lost, or destroyed aircraft or any 
remaining parts of it, and, if the Contractor incurs additional 
costs as a result of such disposition, a further equitable 
adjustment shall be made in the amount due to the Contractor.
    (j)(1) If the Contractor is at any time reimbursed or 
compensated by any third person for any damage, loss, or destruction 
of any aircraft, the risk of which has been assumed by the 
Government under this clause and for which the Contractor has been 
compensated by the Government, it shall equitably reimburse the 
Government.
    (2) The Contractor shall do nothing to prejudice the 
Government's rights to recover against third parties for any such 
damage, loss, or destruction and, upon the request of the 
Contracting Officer, shall at the Government's expense furnish to 
the Government all reasonable assistance and cooperation (including 
the prosecution of suits and the execution of instruments of 
assignment or subrogation in favor of the Government) in obtaining 
recovery.


1852.228-71  [Amended]

    10. In the introductory text to section 1852.228-71, the citation 
``1828.311-270'' is revised to read ``1828.311-2''.


1852.228-74, 1852.228-77  [Removed]

    11. Sections 1852.228-74 and 1852.228-77 are removed.


1852.231-71  [Removed]

    12. Section 1852.231-71 is removed.


1852.232-12, 1852.232-70, 1852.232-83, 1852.232-84  [Removed]

    13. Sections 1852.232-12, 1852.232-70, 1852.232-83, and 1852.232-84 
are removed.
[FR Doc. 96-26338 Filed 10-28-96; 8:45 am]
BILLING CODE 7510-01-M