[Federal Register Volume 64, Number 5 (Friday, January 8, 1999)]
[Proposed Rules]
[Pages 1344-1390]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7]



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_______________________________________________________________________

Part IV





Department of Health and Human Services





_______________________________________________________________________



Office of the Secretary



_______________________________________________________________________



48 CFR Chapter 3



Acquisition Regulation; Proposed Rule

  Federal Register / Vol. 64, No. 5 / Friday, January 8, 1999 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

48 CFR Chapter 3


Acquisition Regulation

AGENCY: Department of Health and Human Services (HHS).

ACTION: Proposed rule with request for comments.

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

SUMMARY: The Department of Health and Human Services is republishing 
its acquisition regulation (HHSAR), Title 48 Code of Federal 
Regulations, Chapter 3, to streamline and simplify it in accordance 
with the tenets of the National Performance Review. In doing so, the 
Department believes it has eliminated some procedural guidance which is 
too encumbering for a simplified system while attempting to empower the 
appropriate levels of management and contracting personnel with the 
authorities required for them to successfully accomplish their mission 
with the least amount of resistance and oversight.

DATES: Comments must be received by March 9, 1999.

ADDRESSES: Comments should be sent to Mr. E. S. Lanham, Office of 
Acquisition Management, 200 Independence Avenue, Southwest--Room 517 D, 
Washington, D.C. 20201.

FOR FURTHER INFORMATION CONTACT: E. S. Lanham, Office of Acquisition 
Management, telephone (202) 690-7590.

SUPPLEMENTARY INFORMATION: The Department emphasizes that it is not 
making significant amendments to the existing HHSAR. The amendments 
being made to the HHSAR concern internal procedural matters which are 
administrative in nature, and will not have a major effect on the 
general public, or to contractors or offerors of the Department. The 
majority of the amendments eliminate procedural guidance no longer 
deemed necessary, or change contracting review and approval authorities 
to situate them at levels more appropriate to simplification, 
streamlining, and empowerment. The Department has also updated HHSAR to 
bring it in line with the latest amendments made to the Federal 
Acquisition Regulation (FAR).
    The Department of Health and Human Services certifies this document 
will not have a significant economic effect on a substantial number of 
small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.); therefore, no regulatory flexibility statement has been 
prepared. Since this rule conveys existing acquisition policies or 
procedures and does not promulgate any new policies or procedures which 
would impact the public, it has been determined that this rule will not 
have a significant economic effect on a substantial number of small 
entities, and, thus, a regulatory flexibility analysis was not 
performed.
    Furthermore, this document does not contain new information 
collection requirements needing approval by the Office of Management 
and Budget under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et 
seq.). Existing approvals cited in 48 CFR section 301.106 remain in 
effect. The provisions of this regulation are issued under 5 U.S.C. 
301; 40 U.S.C. 486 (c).

List of Subjects in 48 CFR Chapter 3

    Government procurement.

    Under the authority of 5 U.S.C. 301; 40 U.S.C. 486(c), the 
Department of Health and Human Services revises 48 CFR Chapter 3 as set 
forth below.

    Dated: November 24, 1998.
John J. Callahan,
Assistant Secretary for Management and Budget.

CHAPTER 3--HEALTH AND HUMAN SERVICES

Table of Contents

Subchapter A--General

Part

301--HHS Acquisition Regulation System
302--Definitions of Words and Terms
303--Improper Business Practices and Personal Conflicts of Interest
304--Administrative Matters

Subchapter B--Competition and Acquisition Planning

305--Publicizing Contract Actions
306--Competition Requirements
307--Acquisition Planning
309--Contractor Qualifications

Subchapter C--Contracting Methods and Contract Types

313--Simplified Acquisition Procedures
314--Sealed Bidding
315--Contracting by Negotiation
316--Types of Contracts
317--Special Contracting Methods

Subchapter D--Socioeconomic Programs

319--Small Business Programs
323--Environment, Conservation, Occupational Safety, and Drug-Free 
Workplace
324--Protection of Privacy and Freedom of Information
325--Foreign Acquisition

Subchapter E--General Contracting Requirements

328--Bonds and Insurance
330--Cost Accounting Standards Administration
332--Contract Financing
333--Protests, Disputes, and Appeals

Subchapter F--Special Categories of Contracting

334--Major System Acquisition
335--Research and Development Contracting

Subchapter G--Contract Management

342--Contract Administration

Subchapter H--Clauses and Forms

352--Solicitation Provisions and Contract Clauses
353--Forms

Subchapter T--HHS Supplementations

370--Special Programs Affecting Acquisition

SUBCHAPTER A--GENERAL

PART 301--HHS ACQUISITION REGULATION SYSTEM

Subpart 301.1--Purpose, Authority, Issuance

Sec.
301.101  Purpose.
301.103  Authority.
301.106  OMB approval under the Paperwork Reduction Act.

Subpart 301.2--Administration

301.270  Executive Committee for Acquisition.

Subpart 301.4--Deviations from the FAR

301.403  Individual deviations.
301.404  Class deviations.
301.470  Procedure.

Subpart 301.6--Career Development, Contracting Authority, and 
Responsibilities

301.602  Contracting officers.
301.602-3  Ratification of unauthorized commitments.
301.603  Selection, appointment, and termination of appointment.
301.603-1  General.
301.603-2  Selection.
301.603-3  Appointment.
301.603-4  Termination.
301.603-70  Delegation of contracting officer responsibilities.

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

Subpart 301.1--Purpose, Authority, Issuance


301.101   Purpose.

    (a) The Department of Health and Human Services Acquisition 
Regulation (HHSAR) is issued to establish uniform acquisition policies 
and procedures for the Department of Health and Human Services (HHS) 
which conform to the Federal Acquisition Regulation (FAR) System.
    (b) The HHSAR implements and supplements the FAR. (Implementing 
material expands upon or indicates the manner of compliance with 
related FAR material. Supplementing material is new material which has 
no counterpart in the FAR.)

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    (c) The HHSAR contains all formal departmental policies and 
procedures that govern the acquisition process or otherwise control 
contracting relationships between the Department's contracting offices 
and contractors.


301.103   Authority.

    (b) The HHSAR is prescribed by the Assistant Secretary for 
Management and Budget under the authority of 5 U.S.C. 301 and Section 
205 (c) of the Federal Property and Administrative Services Act of 
1949, as amended (40 U.S.C. 486(c)), as delegated by the Secretary.
    (c) The HHSAR is issued in the Code of Federal Regulations (CFR) as 
Chapter 3 of Title 48, Department of Health and Human Services 
Acquisition Regulation. It may be referenced as ``48 CFR Chapter 3.''


301.106   OMB approval under the Paperwork Reduction Act.

    The following OMB control numbers apply to the information 
collection and record keeping requirements contained in this 
regulation:

------------------------------------------------------------------------
                                                             OMB control
                       HHSAR segment                             No.
------------------------------------------------------------------------
315.4......................................................    0990-0139
324.70.....................................................    0990-0136
342.7101...................................................    0990-0131
352.224-70.................................................    0990-0136
352.233-70.................................................    0990-0133
352.270-1..................................................    0990-0129
352.270-2..................................................    0990-0129
352.270-3..................................................    0990-0129
352.270-5..................................................    0990-0130
370.1......................................................    0990-0129
370.2......................................................    0990-0129
------------------------------------------------------------------------

    The OMB control number ``OMB No. 0990-0115'' is to be included in 
the upper right corner of the first page of all solicitations, purchase 
orders, and contracts issued by departmental contracting activities. 
The number represents approval of the HHS acquisition process and 
covers record keeping and reporting requirements which are unique to 
individual acquisitions (e.g., requirements contained in 
specifications, statements of work, etc.).

Subpart 301.2--Administration


301.270   Executive Committee for Acquisition.

    (a) The Deputy Assistant Secretary for Grants and Acquisition 
Management has established the Executive Committee for Acquisition 
(ECA) to assist and facilitate the planning and development of 
departmental acquisition policies and procedures and to assist in 
responding to other agencies and organizations concerning policies and 
procedures impacting the Federal acquisition process.
    (b) The ECA consists of members and alternates from the Office of 
Acquisition Management, Administration for Children and Families, 
Health Care Financing Administration, Program Support Center, Centers 
for Disease Control and Prevention, Food and Drug Administration, 
Health Resources and Services Administration, Indian Health Service, 
National Institutes of Health, and Substance Abuse and Mental Health 
Services Administration. The ECA is chaired by the Director, Office of 
Acquisition Management. All meetings will be held at the call of the 
Chairman, and all activities will be carried out under to direction of 
the Chairman.
    (c) The ECA, to facilitate the planning, development, and 
coordination of governmentwide and departmentwide acquisition policies 
and procedures, is to:
    (1) Advise and assist the Chairman concerning major acquisition 
policy matters;
    (2) Review and appraise, at appropriate intervals, the overall 
effectiveness of existing policies and procedures; and
    (3) Review and appraise the impact of new major acquisition 
policies, procedures, regulations, and development on current 
acquisition policies and procedures.
    (d) The Chairman will periodically issue a list of current members 
and alternates specifying the name, title, organization, address, and 
telephone number of each. The member organizations are responsible for 
apprising the Chairman whenever a new member or alternate is to be 
appointed to the ECA.

Subpart 301.4--Deviations from the FAR


301.403   Individual deviations.

    Requests for individual deviations to either the FAR or HHSAR shall 
be prepared in accordance with 301.470 and forwarded through 
administrative channels to the Director, Office of Acquisition 
Management for review and approval.


301.404   Class deviations.

    Requests for class deviations to either the FAR or HHSAR shall be 
prepared in accordance with 301.470 and forwarded through 
administrative channels to the Deputy Assistant Secretary for Grants 
and Acquisition Management for review and approval.


301.470   Procedure.

    (a) When a contracting office determines that a deviation is 
needed, it shall prepare a deviation request in memorandum form and 
forward it through administrative channels to the official designated 
in 301.403 or 301.404. In an exigency situation, the contracting office 
may request a deviation verbally, through normal acquisition channels, 
but is required to confirm the request in writing as soon as possible.
    (b) A deviation request shall clearly and precisely set forth the:
    (1) Nature of the needed deviation;
    (2) Identification of the FAR or HHSAR citation from which the 
deviation is needed;
    (3) Circumstances under which the deviation would be used;
    (4) Intended effect of the deviation;
    (5) Time-frame; and
    (6) Reasons which will contribute to complete understanding and 
support of the requested deviation. A copy of pertinent background 
papers such as a form or contractor's request should accompany the 
deviation request.

Subpart 301.6--Career Development, Contracting Authority, and 
Responsibilities


301.602   Contracting officers.


301.602-3   Ratification of unauthorized commitments.

    (b) Policy. (1) The Government is not bound by agreements or 
contractual commitments made to prospective contractors by persons to 
whom contracting authority has not been delegated. However, execution 
of otherwise proper contracts made by individuals without contracting 
authority, or by contracting officers in excess of the limits of their 
delegated authority, may be later ratified. The ratification must be in 
the form of a written document clearly stating that ratification of a 
previously unauthorized act is intended and must be signed by the head 
of the contracting activity (HCA).
    (2) The HCA is the official authorized to ratify an unauthorized 
commitment (but see (b)(3) of this section).
    (3) Ratification authority for actions up to $25,000 may be 
redelegated by the HCA to the chief of the contracting office (CCO). No 
other redelegations are authorized.
    (c) Limitations. (5) The concurrence of legal counsel concerning 
the payment issue is optional.
    (e) Procedures. (1) The individual who made the unauthorized 
contractual commitment shall furnish the reviewing contracting officer 
all records and documents concerning the commitment and a complete 
written statement of facts, including, but not limited to: a

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statement as to why the contracting office was not used, a statement as 
to why the proposed contractor was selected, a list of other sources 
considered, a description of work to be performed or products to be 
furnished, the estimated or agreed contract price, a citation of the 
appropriation available, and a statement whether the contractor has 
commenced performance.
    (2) The contracting officer will review the submitted material, and 
prepare the ratification document if he/she determines that the 
commitment may be ratifiable. The contracting officer shall forward the 
ratification document and the submitted material to the HCA or CCO with 
any comments or information which should be considered in evaluation of 
the request for ratification. If legal review is desirable, the HCA or 
CCO will coordinate the request for ratification with the Office of 
General Counsel, Business and Administrative Law Division.
    (3) If ratification is authorized by the HCA or CCO, the file will 
be returned, along with the ratification document, to the contracting 
officer for issuance of a purchase order or contract, as appropriate.


301.603  Selection, appointment, and termination of appointment.


301.603-1  General.

    (a) The appointment and termination of appointment of contracting 
officers shall be made by the head of the contracting activity (HCA). 
This authority is not delegable.
    (b) The contracting officer appointment document for personnel in 
the GS-1101, 1102, and 1105 series, as well as personnel in any other 
series who will obligate the Government to the expenditure of funds in 
excess of the micro-purchase threshold, shall be the Standard Form 
(SF)--1402, Certificate of Appointment. The HCA may determine an 
alternative appointment document for appointments below that threshold. 
Changes to appointments shall be made by issuing a new appointment 
document. Each appointment document shall be prepared and maintained in 
accordance with FAR 1.603-1 and shall state the limits of the 
individual's authority.
    (c) An individual must be certified under the HHS Acquisition 
Certification Program as a prerequisite to being appointed as a 
contracting officer with authority to obligate funds in excess of the 
micro-purchase threshold (see 301.603-3(a)). The HCA will determine and 
require appropriate training for individuals appointed as contracting 
officers at lower dollar levels. An individual shall be appointed as a 
contracting officer only in instances where a valid organizational need 
can be demonstrated. Factors to be considered in assessing the need for 
an appointment of a contracting officer include volume of actions, 
complexity of work, and structure of the organization.


301.603-2  Selection.

    Nominations for appointment of contracting officers shall be 
submitted to the HCA through appropriate organizational channels for 
review. The nomination package, which is usually initiated by the 
prospective contracting officer's immediate supervisor, shall normally 
include the nominee's current personal qualifications statement or job 
history, including the information required by FAR 1.603-2, a copy of 
his/her most recent performance appraisal, and a copy of the 
certificate issued under the HHS Acquisition Certification Program 
indicating the nominee's current certification level, if applicable. 
The HCA will determine the documentation required, consistent with FAR 
1.603-2, when the resulting appointment and authority will not exceed 
the micro-purchase threshold.


301.603-3  Appointment.

    (a) Contracting officer appointments shall be made at levels 
commensurate with nominees' certification levels as follows:
    (1) Level I--Purchasing Agent--Required for all personnel in the 
GS-1102 and 1105 series having signature authority for simplified 
acquisitions, including orders from GSA sources over the micro-purchase 
threshold.
    (2) Level II--Acquisition Official--Required for all personnel in 
the GS-1102 series. Sufficient for delegation of contracting officer 
authority up to $500,000.
    (3) Level III--Senior Acquisition Official--Required for all 
personnel in the GS-1102 series for delegation of contracting officer 
authority above $500,000.
    (4) Level IV--Acquisition Manager--Required for delegation of 
preaward review and approval authority as specified in Subpart 304.71.
    (b) If it is essential to appoint an individual who does not fully 
meet the certification requirements of this section for the contracting 
officer authority sought, an interim appointment may be granted by the 
HCA. Interim appointments may not exceed one (1) year in total, and 
shall not be granted unless the individual can meet the certification 
requirements within one year from the date of appointment. If the 
certification requirements are not met by that date, the appointment 
will automatically terminate and cannot be renewed.


301.603-4  Termination.

    Termination of contracting officer appointments shall be 
accomplished in accordance with FAR 1.603-4.


301.603-70  Delegation of contracting officer responsibilities.

    (a) Contracting officer responsibilities which do not involve the 
obligation (or deobligation) of funds or result in establishing or 
modifying contractual provisions may be delegated by the contracting 
officer by means of a written memorandum which clearly delineates the 
delegation and its limits.
    (b) Contracting officers may designate individuals as ordering 
officials to make purchases or place orders under blanket purchase 
agreements, indefinite delivery contracts, or other pre-established 
mechanisms. Ordering officials, including those under NIH's DELPRO, are 
not contracting officers.
    (c) Project officers are required to complete the training 
specified in 307.170, while ordering officials and others should 
receive sufficient instruction from the contracting officer to ensure 
the appropriate exercise of the responsibilities and knowledge of their 
limitations.

PART 302--DEFINITIONS OF WORDS AND TERMS

Subpart 302.1--Definitions

Sec.
302.101  Definitions.

Subpart 302.2--Definitions Clause

302.201  Contract clause.

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

Subpart 302.1--Definitions


302.101  Definitions.

    Chief of the contracting office (CCO) is a mid-level management 
official in charge of a contracting office who controls and oversees 
the daily contracting operation of an Operating Division (OPDIV) or 
major component of an OPDIV. The CCO is subordinate to the head of the 
contracting activity, and is located at a management level above other 
contracting personnel, usually as a branch chief or division director.
    Head of the agency or agency head, unless otherwise specified, 
means the head of the Operating Division (OPDIV) for ACF, HCFA, PSC, 
CDCP, FDA, HRSA, IHS, NIH, and SAMHSA, or the Assistant Secretary for 
Management and Budget (ASMB) for the Office of the Secretary (OS).

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    Head of the contracting activity (HCA) is defined in terms of 
certain organizational positions within the Office of Grants and 
Acquisition Management (OGAM), Administration for Children and Families 
(ACF), Health Care Financing Administration (HCFA), Program Support 
Center (PSC), Centers for Disease Control and Prevention (CDCP), Food 
and Drug Administration (FDA), Health Resources and Services 
Administration (HRSA), Indian Health Service (IHS), National Institutes 
of Health (NIH), and Substance Abuse and Metal Health Services 
Administration (SAMHSA), as follows:

OGAM-OS--Director, Office of Acquisition Management
ACF--Director, Division of Acquisition Management
HCFA--Director, Office of Acquisition and Grants
PSC--Director, Division of Acquisition Management
CDCP--Director, Procurement and Grants Office
FDA--Director, Office of Facilities, Acquisition, and Central Services
HRSA--Director, Division of Grants and Procurement Management
IHS--Director, Division of Contracts and Grants Policy
NIH--Director, Office of Contracts and Grants Management
SAMHSA--Director, Division of Contracts Management

    In addition, the Deputy Assistant Secretary for Grants and 
Acquisition Management (DASGAM) is designated as an HCA. Each HCA is 
responsible for conducting an effective and efficient acquisition 
program. Adequate controls shall be established to assure compliance 
with applicable laws, regulations, procedures, and the dictates of good 
management practices. Periodic reviews shall be conducted and evaluated 
by qualified personnel, preferably assigned to positions other than in 
the contracting office being reviewed, to determine the extent of 
adherence to prescribed policies and regulations, and to detect a need 
for guidance and/or training. The HCA shall be certified, or be 
certifiable, at Level IV of the HHS Acquisition Certification Program. 
Individuals appointed as HCA's who do not meet the Level IV 
requirements shall have one year from the date of appointment to obtain 
Level IV certification. The heads of contracting activities may 
redelegate their HCA authorities to the extent that redelegation is not 
prohibited by the terms of their respective delegations of authority, 
by law, by the Federal Acquisition Regulation, by the HHS Acquisition 
Regulation, or by other regulations. However, HCA and other contracting 
approvals and authorities shall not be redelegated below the levels 
specified in the HHS Acquisition Regulation or, in the absence of 
coverage in the HHS Acquisition Regulation, the Federal Acquisition 
Regulation. To ensure proper control of redelegated acquisition 
authorities, HCA's shall maintain a file containing successive 
delegations of HCA authority through and including the contracting 
officer level. Personnel delegated responsibility for acquisition 
functions must possess a level of experience, training, and ability 
commensurate with the complexity and magnitude of the acquisition 
actions involved.

Subpart 302.2--Definitions Clause


302.201  Contract clause.

    The FAR clause, Definitions, at 52.202-1 shall be used as 
prescribed in FAR 2.201, except as follows:
    (a) Paragraph (a) at 352.202-1 shall be used in place of paragraph 
(a) of the FAR clause.
    (b) Paragraph (h), or its alternate, at 352.202-1 shall be added to 
the end of the FAR clause. Use paragraph (h) when a fixed-priced 
contract is anticipated; use the alternate to paragraph (h) when a 
cost-reimbursement contract is anticipated.

PART 303--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF 
INTEREST

Subpart 303.1--Safeguards

Sec.
303.101  Standards of conduct.
303.101-3  Agency regulations.

Subpart 303.2--Contract Gratuities to Government Personnel

303.203  Reporting suspected violations of the Gratuities clause.

Subpart 303.3--Reports of Suspected Antitrust Violations

303.303  Reporting suspected antitrust violations.

Subpart 303.4--Contingent Fees

303.405  Misrepresentations or violations of the Covenant Against 
Contingent Fees.

Subpart 303.6--Contracts With Government Employees or Organizations 
Owned or Controlled by Them

303.602  Exceptions.

Subpart 303.7--Voiding and Rescinding Contracts

303.704  Policy.

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

Subpart 303.1--Safeguards


301.101  Standards of conduct.


303.101-3  Agency regulations.

    The Department of Health and Human Services' Standards of Conduct 
are prescribed in Part 73 of Title 45.

Subpart 303.2--Contractor Gratuities to Government Personnel


303.203  Reporting suspected violations of the Gratuities clause.

    Departmental personnel shall report suspected violations of the 
Gratuities clause in accordance with Subpart M, Reporting Violations, 
of 45 CFR Part 73. Refer to Subpart B, Gifts from Outside Sources, (5 
CFR 2635.201) for an explanation regarding what is prohibited and what 
is permitted.

Subpart 303.3--Reports of Suspected Antitrust Violations


303.303  Reporting suspected antitrust violations.

    A copy of each report of suspected antitrust violations submitted 
to the Attorney General by the HCA shall also be submitted to the 
Director, Office of Acquisition Management.

Subpart 303.4--Contingent Fees


303.405  Misrepresentations or violations of the Covenant Against 
Contingent Fees.

    (c) Reports shall be made promptly to the contracting officer.
    (d)(4) Suspected fraudulent or criminal matters to be reported to 
the Department of Justice shall be prepared in letter format and 
forwarded through acquisition channels to the head of the contracting 
activity for signature. The letter must contain all pertinent facts and 
background information considered by the contracting officer and chief 
of the contracting office that led to the decision that fraudulent or 
criminal matters may be present. A copy of the signed letter shall be 
sent to the Director, Office of Acquisition Management.

Subpart 303.6--Contracts With Government Employees or Organizations 
Owned or Controlled by Them


303.602  Exceptions.

    Approval of an exception to the policy stated in FAR 3.601 shall be 
made by the HCA (not delegable).

Subpart 303.7--Voiding and Rescinding Contracts


303.704  Policy.

    For purposes of implementing FAR Subpart 3.7, the authorities 
granted to

[[Page 1348]]

the ``agency head or designee'' shall be exercised by the HCA (not 
delegable).

PART 304--ADMINISTRATIVE MATTERS

Subpart 304.6--Contract Reporting

Sec.
304.602  Federal Procurement Data System.

Subpart 304.8--Government Contract Files

304.804-70  Contract closeout audits.

Subpart 304.70--Acquisition Instrument Identification Numbering System

304.7000  Scope of subpart.
304.7001  Numbering acquisitions.

Subpart 304.71--Review and Approval of Proposed Contract Awards

304.7100  Policy.
304.7101  Procedures.

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

Subpart 304.6--Contracting Reporting


304.602  Federal Procurement Data System (FPDS).

    The Departmental Contracts Information System (DCIS) represents the 
Department's implementation of the FPDS. All departmental contracting 
activities are required to participate in the DCIS and follow the 
procedures stated in the Enhanced Departmental Contracts Information 
System Manual and amendments to it. The HCA (not delegable) shall 
ensure that all required contract information is collected, submitted, 
and received into the DCIS on or before the 15th of each month for all 
appropriate contract and contract modifications award of the prior 
month.

Subpart 304.8--Government Contract Files


304.804-70  Contract closeout audits.

    (a) Contracting officers shall rely, to the maximum extent 
possible, on non-Federal single audits to close physically completed 
cost-reimbursement contracts with colleges and universities, hospitals, 
non-profit firms, and State and local governments. In addition, where 
appropriate, a sample of these contractors may be selected for audit, 
in accordance with the decision-making process set forth in the 
following paragraph (b).
    (b) Contracting officers shall request contract closeout audits on 
physically completed, cost-reimbursement, for-profit contracts as 
follows:
    (1) Decisions on: the need for and allocation of contract audit 
resources and services; the selection of contracts or contractors to be 
audited; the identification of the audit agency to perform the audit; 
and the type or scope of closeout audit to be conducted, shall be made 
by the Office of Inspector General (OIG) and Office of Grants and 
Acquisition Management, in consultation with the Department's Contract 
Audit Users Work Group. These decisions shall be based upon the needs 
of the customer, risk analysis, return on investment, and the 
availability of audit resources. When an audit is warranted prior to 
closing a contract, the contracting officer shall submit the audit 
request to the OIG's Office of Audit via the appropriate OPDIV 
representative on the Contract Audit Users Work Group.
    (2) Except where a contracting officer suspects misrepresentation 
or fraud, contract closeout field audits shall not be requested if the 
cost of performance is likely to exceed the potential cost recovery. 
Contracts that are not selected for a field audit may be closed on the 
basis of a desk review, subject to any later on-site audit findings. 
The release executed by the contractor shall contain the following 
statement:

    The Contractor agrees, pursuant to the clause in this contract 
entitled ``Allowable Cost'' or ``Allowable Cost and Fixed Fee'' (as 
appropriate), that the amount of any sustained audit exceptions 
resulting from any audit made after final payment shall be refunded 
to the Government.''

Subpart 304.70--Acquisition Instrument Identification Numbering 
System


304.7000  Scope of subpart.

    This subpart prescribes policy and procedures for assigning 
identifying numbers to contracts and related instruments, including 
solicitation documents, purchase orders, and delivery orders. The HCA 
(not delegable) is responsible for establishing the numbering system 
within the OPDIV.


304.7001  Numbering acquisitions.

    (a) Acquisitions which require numbering. The following 
acquisitions shall be numbered in accordance with the system prescribed 
in paragraph (b) of this section:
    (1) Contracts, including letter contracts and task orders under 
basis ordering agreements, which involve the payment of $2,500 or more 
for the acquisition of personal property or nonpersonal services. (The 
number assigned to a letter contract shall be assigned to the 
superseding definitized contract).
    (2) Contracts which involve the payment of $2,000 or more for 
construction (including renovation or alteration).
    (3) Contracts which involve more than one payment regardless of 
amount.
    (4) Requests for proposals and invitations for bids.
    (5) Purchase and delivery orders.
    (6) Requests for quotations.
    (7) Basic ordering agreements.
    (b) Numbering system for contracts. All contracts which require 
numbering shall be assigned a number consisting of the following:
    (1) The three digit identification code assigned to the contracting 
office by the Office of Financial Operations, Program Support Center.
    (2) A two digit fiscal year designation; and
    (3) A four digit serial number. For example, the initial contract 
executed by the Office of Acquisition Management, OS, for fiscal year 
1996 would be numbered 100-96-0001. While it is required that a 
different series of four digit serial numbers be used for each fiscal 
year, serial numbers assigned need not be sequential.
    (c) Numbering system for other acquisitions. The HCA is responsible 
for developing a numbering system for the acquisitions other than 
contracts listed in HHSAR 304.7001 (a)(4) through (a)(7), and any other 
types of acquisitions that may be used.
    (d) Assignment of identification codes. Each contracting office of 
the Department shall be assigned a three digit identification code by 
the Office of Financial Operations. Requests for the assignment of 
codes for newly established contracting offices shall be submitted by 
the headquarters acquisition staff office of the contracting activity 
to the Office of Financial Operations must be notified. A listing of 
the contracting office identification codes currently in use is 
contained in the Enhanced Departmental Contracts Information System 
Manual.

Subpart 304.71--Review and Approval of Proposed Contract Awards


304.7100  Policy.

    This subpart requires each HCA (not delegable) to establish review 
and approval procedures for proposed contracts actions to ensure that:
    (a) Contract awards are in conformance with law, established 
policies and procedures, and sound business practices;
    (b) Contractual documents properly reflect the mutual understanding 
of the parties; and
    (c) The contracting officer is informed of deficiencies and items 
of questionable acceptability, and corrective action is taken.


304.7101  Procedures.

    (a) All contractual documents, regardless of dollar value, are to 
be

[[Page 1349]]

reviewed by the contracting officer prior to award.
    (b) The HCA is responsible for establishing review and approval 
procedures and designating acquisition officials to serve as reviewers. 
Each HCA is responsible for determining the criterion (criteria) to be 
used in determining which contracts are to be reviewed, and that a 
sampling of proposed contracts not included in the ``to be reviewed'' 
group are reviewed and approved.
    (c) Officials assigned responsibility for review and approval of 
contract actions must possess qualifications in the field of 
acquisition commensurate with the level of review performed, and, at a 
minimum, possess those acquisition skills expected of a contracting 
officer. However, if any official is to serve as the contracting 
officer and sign the contractual document, the review and approval 
function shall be performed by an appropriate official at least one 
level above.

PART 305--PUBLICIZING CONTRACT ACTIONS

Subpart 305.2--Synopsis of Proposed Contract Actions

Sec.
305.202  Exceptions.

Subpart 305.3--Synopsis of Contract Awards

305.303  Announcement of contract awards.

Subpart 305.5--Paid Advertisements

305.502  Authority.

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

Subpart 305.2--Synopsis of Proposed Contract Actions


305.202  Exceptions.

    (b) When a contracting office believes that it has a situation 
where advance notice is not appropriate or reasonable, it shall prepare 
a memorandum citing all pertinent facts and details and send it, 
through normal acquisition channels, to the Deputy Assistant Secretary 
for Grants and Acquisition Management (DASGAM) requesting relief from 
synopsizing. The DASGAM shall review the request and decide whether an 
exception to synopsizing is appropriate or reasonable. If it is, the 
DASGAM shall take the necessary coordinating actions required by FAR 
5.202(b). Whatever the decision is on the request, the DASGAM shall 
promptly notify the contracting office when a determination has been 
made.

Subpart 305.3--Synopses of Contract Awards


305.303  Announcement of contract awards.

    (a) Public announcement. Any contract, contract modification, or 
delivery order in the amount of $3 million or more shall be reported by 
the contracting officer to the Office of the Deputy Assistant Secretary 
for Legislation (Congressional Liaison), Room 406G, Hubert H. Humphrey 
Building. Notification shall be accomplished by providing a copy of the 
contract or award document face page to the referenced office prior to 
the day of award, or in sufficient time to allow for an announcement to 
be made by 5:00 p.m. Washington, DC time on the day of award.

Subpart 305.5--Paid Advertisements


305.502  Authority.

    The contracting officer is authorized to publish advertisements, 
notices, and contract proposals in newspapers and periodicals in 
accordance with the requirements and conditions referenced in FAR 
Subpart 5.5.

PART 306--COMPETITION REQUIREMENTS

Subpart 306.2--Full and Open Competition After Exclusion of Sources

Sec.
306.202  Establishing or maintaining alternative sources.

Subpart 306.3--Other Than Full and Open Competition

306.302  Circumstances permitting other than full and open 
competition.
306.302-1  Only one responsible source and no other supplies or 
services will satisfy agency requirements.
306.302-7  Public interest.
306.303  Justification.
306.303-1  Requirements
306.303-2  Content.
306.304  Approval of the justification.

Subpart 306.5--Competition Advocates

306.501  Requirement.

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

Subpart 306.2--Full and Open Competition After Exclusion of Sources


306.202  Establishing or maintaining alternative sources.

    (a) The reference to the agency head in FAR 6.202(a) shall mean the 
appropriate competition advocate cited in 306.501.
    (b)(1) The required determination and findings (D&F) shall be 
prepared by the contracting officer based on the data provided by 
program personnel, and shall be signed by the appropriate competition 
advocate. The D&F signatory is not delegable.

Subpart 306.3--Other Than Full and Open Competition


306.302  Circumstances permitting other than full and open competition.


306.302-1  Only one responsible source and no other supplies or 
services will satisfy agency requirements.

    (a)(2)(ii) Follow-on contracts for the continuation of major 
research and development studies on long-term social and health 
programs, major research studies, or clinical trials may be deemed to 
be available only from the original source when it is likely that award 
to any other source would result in unacceptable delays in fulfilling 
the Department's or OPDIV's requirements.
    (b) Application. (4) When the head of the program office has 
determined that a specific item of technical equipment or parts must be 
obtained to meet the activity's program responsibility to test and 
evacuate certain kinds and types of products, and only one source is 
available. (This criterion is limited to testing and evaluation 
purposes only and may not be used for initial outfitting or repetitive 
acquisitions. Project officers should support the use of this criterion 
with citations from their agency's legislation and the technical 
rationale for the item of equipment required.)


306.302-7  Public interest.

    (a) Authority. (2) Agency head, in this instance, means the 
Secretary.
    (b) Limitations. An ``approval package'' must be prepared by the 
contracting officer and staffed through departmental acquisition 
channels to the Secretary. The package shall include a determination 
and findings for the Secretary to sign that contains all pertinent 
information to support justification for exercising the exemption to 
competition, and a letter for the Secretary to sign notifying Congress 
of the determination to award a contract under the authority of 41 
U.S.C. 253(c)(7).


306.303  Justifications.


306.303-1  Requirements.

    (b) Preliminary arrangements or agreements with the proposed 
contractor shall have no effect on the rationale used to support an 
acquisition for other than full and open competition.
    (f) When a program office desires to obtain certain goods or 
services by contract without full and open competition, it shall, at 
the time of

[[Page 1350]]

forwarding the requisition or request for contract, furnish the 
contracting office a justification explaining why full and open 
competition is not feasible. All justifications shall be initially 
reviewed by the contracting officer.
    (1) Justifications in excess of the simplified acquisition 
threshold shall be in the form of a separate, self-contained document, 
prepared in accordance with FAR 6.303 and 306.303, and called a 
``JOFOC'' (Justification for Other Than Full and Open Competition). 
Justifications at or below the simplified acquisition threshold may be 
in the form of a paragraph or paragraphs contained in the requisition 
or request for contract.
    (2) Justifications, whether over or under the simplified 
acquisition threshold, shall fully describe what is to be acquired, 
offer reasons which go beyond inconvenience, and explain why it is not 
feasible to obtain competition. The justifications shall be supported 
by verifiable facts rather than mere opinions. Documentation in the 
justification should be sufficient to permit an individual with 
technical competence in the area to follow the rationale.


306.303-2  Content.

    (a)(1) The program office and name, address, and telephone number 
of the project officer shall also be included.
    (2) This item shall include project identification such as the 
authorizing program legislation, to include citations or other internal 
program identification data such as title, contract number, etc.
    (3) The description may be in the form of a statement of work, 
purchase description, or specification. A statement is to be included 
to explain whether the acquisition is an entity in itself, whether it 
is one in a series, or part of a related group of acquisitions.
    (c) Each JOFOC shall conclude with at least signature lines for the 
project officer, project officer's immediate supervisor, contracting 
officer, and approving official.


306.304  Approval of the Justification.

    (a)(2) The competition advocates are listed in 306.501. This 
authority is not delegable.
    (3) The competition advocate shall exercise this approval 
authority, except where the individual designated as the competition 
advocate does not meet the requirements of FAR 6.304(a)(3)(ii). This 
authority is not delegable.
    (4) The senior procurement executive of the Department is the 
Assistant Secretary for Management and Budget.
    (c) A class justification shall be processed the same as an 
individual justification.

Subpart 306.5--Competition Advocates


306.501  Requirement.

    The Department's competition advocate is the Deputy Assistant 
Secretary for Grants and Acquisition Management. The competition 
advocates for the Department's primary contracting officers are as 
follows:

ACF--Director, Office of Management Services
HCFA--Associate Administrator for Operations and Resource Management
OS--Deputy Assistant Secretary for Grants and Acquisition Management
PSC--Director, Administrative Services Center
AHCPR--Executive Officer
CDCP--Director, Office of Program Support
FDA--Associate Commissioner for Management
HRSA--Associate Administrator for Operations and Management
IHS--Associate Director, Office of Administration and Management
NIH--(R&D)--Associate Director for Extramural Affairs (Other than 
R&D)--Associate Director for Intramural Affairs
SAMHSA--Associate Administrator for Management

PART 307--ACQUISITION PLANNING

Subpart 307.1--Acquisition Plans

Sec.
307.104  General procedures.
307.105  Contents of written acquisition plans.
307.170  Program training requirements.
307.170-1  Policy exceptions.
307.170-2  Training course prerequisites.

Subpart 307.3--Contractor Versus Government Performance

307.302   General.
307.303  Determining availability of private commercial sources.
307.304  Procedures.
307.307  Appeals.

Subpart 307.70--Considerations in Selecting an Award Instrument

307.7000  Scope of subpart.
307.7001  Distinction between acquisition and assistance.
307.7002  Procedures.

Subpart 307.71--Requests for Contract

307.7100  Scope of subpart.
307.7101  General.
307.7102  Procedures.
307.7103  Responsibilities.
307.7104  Transmittal.
307.7105  Format and content.
307.7106  Statement of work.
307.7107  Review.

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

Subpart 307.1--Acquisition Planning


307.104  General procedures.

    (c) If use of other than full and open competition is anticipated, 
see 307.104(h).
    (d) Each contracting activity shall prepare an Annual Acquisition 
Plan (AAP). The AAP is a macro plan, containing a list of anticipated 
contract actions over the simplified acquisition threshold and their 
associated funding, as well as the aggregate planned dollars for 
simplified acquisitions by quarter, developed for each fiscal year. The 
AAP shall conform to reasonable budget expectations and shall be 
reviewed at least quarterly and modified as appropriate. The chief of 
the contracting office (CCO) shall obtain this information from the 
program planning/budget office of the contracting activity and use the 
AAP to provide necessary reports and monitor the workload of the 
contracting office. For contract actions, the plan shall contain, at a 
minimum:
    (1) A brief description (descriptive title, perhaps one or two 
sentences if necessary);
    (2) Estimated award amount;
    (3) Requested award date;
    (4) Name and phone number of contact person (usually the project 
officer);
    (5) Other information required for OPDIV needs.
    (e) Once the AAP is obtained, the contracting officer/contract 
specialist shall initiate discussions with the assigned project officer 
for each planned negotiated acquisition over $100,000 except for:
    (1) Acquisitions made under interagency agreements, and
    (2) Contract modifications which exercise options, make changes 
authorized by the Changes clause, or add funds to an incrementally 
funded contract. (The HCA may prescribe procedures for contract actions 
not covered by this subpart.)
    (f) The purpose of the discussions between the contracting and 
project officers is to develop an individual acquisition planning 
schedule and to address the things that will need to be covered in the 
request for contract (RFC), including clearances, acquisition strategy, 
sources, etc. The project officer must either have a statement of work 
(SOW) ready at this time or must discuss in more detail the nature of 
the services/supplies that will be required.
    (g) Standard lead-times for processing various types of 
acquisitions and deadlines for submission of acceptable RFCs (that is, 
RFCs which include all

[[Page 1351]]

required elements such as clearances, funding documents, and an 
acceptable SOW) for award in a given fiscal year shall be established 
by the HCA or designee not lower that the CCO.
    (h) The outcome of the discussions referenced in 307.104 (f) 
between the project officer and the contracting officer/contracting 
specialist will be an agreement concerning the dates of significant 
transaction-specific acquisition milestones, including the date of 
submission of the RFC to the contracting officer. This milestone 
schedule document will be prepared with those dates and will be signed 
by the project officer and the contracting officer. The milestones 
cannot be revised except by mutual agreement of these same individuals. 
If the planning schedule indicates the need to obtain approval of a 
Justification for Other than Full and Open Competition, the CCO must 
sign the milestone agreement. This document shall be retained in the 
contract file. All other considerations that will affect the 
acquisition (technical, business, management) shall be addressed in the 
RFC (see 307.71).
    (A) RFCs submitted after the established deadline in paragraph (g) 
of this section or the agreed-upon milestone for RFC submission in 
paragraph (h) of this section will be accepted for processing on a 
case-by-case basis.


307.105  Contents of written acquisition plans.

    The written acquisition plan required by FAR 7.105 is contained in 
the request for contract, as specified in Subpart 307.71, and is the 
final product of the planning process.


307.170  Program training requirements.

    (a) All program personnel selected to serve as project officer for 
an HHS contract shall have successfully completed either the 
Department's appropriate ``Basic Project Officer'' course, or an 
equivalent course (see paragraph (c) of this section).
    (b) At least fifty percent of the HHS program personnel performing 
the function of technical proposal evaluator on a technical evaluation 
team or panel for any competitively solicited HHS contract shall have 
successfully completed the appropriate ``Basic Project Officer'' 
course, or an equivalent course (see paragraph (c) of this section). 
This requirement applies to the initial technical proposal evaluation 
and any subsequent technical evaluations that may be required.
    (c) Determination of course equivalency shall be made by the HCA 
(not delegable) of the cognizant contracting activity. The contracting 
officer is responsible for ensuring that the project officer and 
technical proposal evaluators have successfully completed the required 
training discussed in 307.170-2.


307.170-1  Policy exceptions.

    In the event there is an urgent requirement for a specific 
individual to serve as a project officer and that individual has not 
successfully completed the prerequisite training course, the HCA (not 
delegable) may waive the training requirement and authorize the 
individual to perform the project duties, provided that:
    (a) The individual first meets with the cognizant contracting 
officer to review the ``DHHS Project Officers' Contracting Handbook,'' 
and to discuss the important aspects of the contracting--program office 
relationship as appropriate to the circumstances; and
    (b) The individual attends the next scheduled and appropriate 
``Basic Project Officer'' course.


307.170-2  Training course prerequisites.

    (a) Project officers. (1) Newly appointed project officers, and 
project officers with less than three years experience and no previous 
related training, are required to take the appropriate ``Basic Project 
Officer'' course. (The grade level for project officers attending the 
course should be GS-7 and above.) All project officers are encouraged 
to take the appropriate ``Writing Statements of Work'' course.
    (2) Project officers with more than three years experience, and 
project officers with less than three years experience who have 
successfully completed the appropriate basic course, are qualified (and 
encouraged) to take the ``Advanced Project Officer'' course.
    (3) Additional information on prerequisites for attendance of these 
courses may be found in the ``DHHS Acquisition Training and 
Certification Handbook.''
    (b) Technical proposal evaluators. Technical proposal evaluators, 
regardless of experience, are required to take the appropriate ``Basic 
Project Officer'' course. Upon successful completion of the basic 
course, it is recommended that they take the appropriate ``Advanced 
Project Officer'' course.

Subpart 307.3--Contractor Versus Government Performance


307.302  General.

    (a) GAM Chapter 18-10, Commercial-Industrial Activities of the 
Department of Health and Human Services Providing Products or Services 
for Government Use, assigns responsibilities for making method-of-
performance decisions (contract vs. in-house performance) to various 
management levels within the Department depending on the dollar amount 
of capital investment or annual operating costs. It also requires that 
each operating division (OPDIV) and staff division (STAFFDIV) designate 
a ``Commercial-Industrial Control Officer'' (CICO) to be responsible 
for ensuring compliance with the requirements of the Chapter.
    (d) Besides contracts with annual operating costs under $100,000, 
contracts with annual operating costs under an authorized acquisition 
set-aside for small business concerns and contracts made pursuant to 
section 8(a) of the Small Business Act are exempted from the 
requirements of FAR Subpart 7.3, GAM Chapter 18-10, and OMB Circular 
No. A-76.


307.303  Determining availability of private commercial sources.

    In accordance with the provisions of GAM Chapter 18-10, OPDIVs and 
STAFFDIVs must prepare and maintain a complete inventory of all 
individual commercial or industrial activities, including those 
conducted under contracts in excess of $100,000 annually. They must 
also conduct periodic reviews of each activity and contract in the 
inventory to determine if the existing performance, in-house or by 
contract, continues to be in accordance with the policy guidelines of 
GAM Chapter 18-10.


307.304  Procedures.

    Contracting officers shall ensure that no acquisition action 
involving a commercial-industrial activity is initiated unless it is in 
compliance with the requirements of GAM Chapter 18-10. The contracting 
officer must check each request for contract expected to result in a 
contract in excess of $100,000 to ensure that it contains a statement 
as to whether the proposed contract is or is not subject to review 
under GAM Chapter 18-10 requirements. If the contracting officer has 
any questions regarding the determination of applicability or 
nonapplicability, or if the required statement is missing, the program 
office submitting the request for contract should be contacted and the 
situation rectified. If the issue cannot be resolved with the program 
office, the contracting office shall refer the matter to the CICO for a 
final determination. The HCA is responsible for ensuring that 
contracting activities are in full compliance with FAR Subpart 7.3.

[[Page 1352]]

307.307  Appeals.

    The review and appeals procedure discussed in FAR 7.307 are 
addressed in GAM Chapter 18-10.

Subpart 307.70--Considerations in Selecting an Award Instrument


307.7000  Scope of subpart.

    This subpart provides guidance on the appropriate selection of 
award instruments consistent with the Federal Grant and Cooperative 
Agreement Act of 1977 (41 U.S.C. 501). This subpart explains the use of 
the contract as the award instrument for acquisition relationships, and 
the grant or cooperative agreement as the instrument for assistance 
relationships. This subpart provides guidance for determining whether 
to use the acquisition or assistance process to fulfill program needs. 
Detailed guidance on assistance instruments may be found in Chapter 1-
02 of the Grants Administration Manual.


307.7001  Distinction between acquisition and assistance.

    (a) The Federal Grant and Cooperative Agreement Act of 1977 
requires the use of contracts to acquire property or services for the 
direct benefit or use of the Government and grants or cooperative 
agreements to transfer money, property, services, or anything of value 
to recipients to accomplish a public purpose of support or stimulation 
authorized by Federal statute.
    (b) A contract is to be used as the legal instrument to reflect a 
relationship between the Federal Government and a recipient whenever:
    (1) The principal purpose of the instrument is the acquisition, by 
purchase, lease, or barter, of property or services for the direct 
benefit or use of the Federal Government; or
    (2) The Department determines in a specific instance that the use 
of a type of contract is appropriate. That is, it is determined in a 
certain situation that specific needs can be satisfied best by using 
the acquisition process. However, this authority does not permit 
circumventing the criteria for use of acquisition or assistance 
instruments. Use of this authority is restricted to extraordinary 
circumstances and only with the prior approval of the Deputy Assistant 
Secretary for Grants and Acquisition Management (DASGAM).
    (c) A grant or cooperative agreement is to be used as the legal 
instrument to reflect a relationship between the Federal Government and 
a recipient whenever the principal purpose of the relationship is the 
transfer of money, property, services, or anything of value to the 
recipient to accomplish a public purpose of support or stimulation 
authorized by Federal statute.
    (1) A grant is the legal instrument to be used when no substantial 
involvement is anticipated between the Department and the recipient 
during performance of the contemplated activity.
    (2) A cooperative agreement is the legal instrument to be used when 
substantial involvement is anticipated between the Department and the 
recipient during performance of the contemplated activity.
    (d) As a general rule, contracts are to be used for the following 
purposes:
    (1) Evaluation (including research of an evaluative nature) of the 
performance of Government programs or projects or grantee activity 
initiated by the funding agency for its direct benefit or use.
    (2) Technical assistance rendered to the Government, or on behalf 
of the Government, to any third party, including those receiving grants 
or cooperative agreements.
    (3) Surveys, studies, and research which provide specific 
information desired by the Government for its direct activities, or for 
dissemination to the public.
    (4) Consulting services or professional services of all kinds if 
provided to the Government or, on behalf of the Government, to any 
third party.
    (5) Training projects where the Government selects the individuals 
or specific groups whose members are to be trained or specifies the 
content of the curriculum (not applicable to fellowship awards.)
    (6) Planning for Government use.
    (7) Production of publications or audiovisual materials required 
primarily for the conduct of the direct operations of the Government.
    (8) Design or development of items for Government use or pursuant 
to agency definition or specifications.
    (9) Conferences conducted on behalf of the Government.
    (10) Generation of management information or other data for 
Government use.


307.7002  Procedures.

    (a) OPDIV program officials should use existing budget and program 
planning procedures to propose new activities and major changes in 
ongoing programs. It is the responsibility of these program officials 
to meet with the HCA and the principal grants management official, or 
their designees, to distinguish the relationships and determine whether 
award is to be made through the acquisition process or assistance 
process. This determination should be made prior to the time when the 
annual acquisition plan is reviewed and approved so that the plan will 
reflect all known proposed contract actions. The cognizant contracting 
officer will confirm the appropriateness of the use of the contract 
instrument when reviewing the request for contract.
    (b) Shifts from one award instrument to another must be fully 
documented in the appropriate files to show a fundamental change in 
program purpose that unequivocally justifies the rationale for the 
shift.
    (c) OPDIVs must ensure that the choice of instrument is determined 
in accordance with the Federal Grant and Cooperative Agreement Act of 
1977 and applicable departmental policies. If, however, there are major 
individual transactions or programs which contain elements of both 
acquisition and assistance in such a way that they cannot be 
characterized as having a principal purpose of one or the other, 
guidance should be obtained from the DASGAM, through normal channels, 
before proceeding with a determination.
    (d) Any public notice, program announcement, solicitation, or 
request for applications or proposals must indicate whether the 
intended relationship will be one of acquisition or assistance and 
specify the award instrument to be used.

Subpart 307.71--Requests for Contract


307.7100  Scope of subpart.

    This subpart prescribes the format and contents of the request for 
contract (RFC) and provides procedures for its preparation and 
submission.


307.7101  General.

    The program office's preparation of the RFC and submission to the 
contracting office completes the presolicitation phase of the 
acquisition planning process and commences the solicitation phase. The 
RFC is the formal document which initiates the preparation of the 
request for proposals (RFP) by the contracting office and sets the 
acquisition process in motion. It is the result of the planning by the 
project officer and contracting officer and contains much of the 
pertinent information necessary for the development of a sound, 
comprehensive RFP.


307.7102  Procedures.

    The program office should submit the RFC to the contracting office 
no later than the date agreed to by the contracting officer and the 
project officer in the milestone schedule (see

[[Page 1353]]

307.104(h)), unless a revised due date has been established by mutual 
agreement.


307.7103  Responsibilities.

    (a) It is the responsibility of the project officer to prepare the 
RFC so that it complies with the requirements of this subpart and any 
OPDIV guidance issued in accordance with this subpart.
    (b) Prior to the submission of the RFC to the contracting office, 
the head of the program office sponsoring the project shall review the 
RFC to ensure that all required information is provided in the 
prescribed format, and a technical review of the statement of work has 
been made. The level and extent of the technical review is to be 
commensurate with the estimated cost, importance, and complexity of the 
proposed acquisition, and must be thorough enough to ensure that vague 
and ambiguous language is eliminated, the statement of work is 
structured by phases or tasks, if appropriate, and methods are 
available for assessing the contractor's technical, cost, and delivery 
performance.


307.7104  Transmittal.

    The RFC must be conveyed to the contracting office by use of a 
covering memorandum or other form of transmittal. The transmittal 
document must be signed by the head of the sponsoring program office 
and include both a statement attesting to the conclusiveness of the 
review described in 307.7103(b) and a list identifying all attachments 
to the RFC.


307.7105  Format and content.

    The Department does not prescribe a standard format for the RFC. A 
format similar to what is in this section is recommended. However, any 
document or group of documents will be acceptable as an RFC as long as 
all of the required information (paragraph (a) of this section), and as 
much of the optional information (paragraph (b) of this section) as is 
relevant, is included.
    (a) The RFC must include:
    (1) Purpose of the contract. A brief, general description of the 
requirement, including the citation of the legislation which authorizes 
the program or project, and a statement as to the intended purpose/use 
of the proposed contract.
    (2) Period of performance. The number of months (or other time 
period) required for total performance and, if applicable, for each 
phase of work indicated in the statement of work, as well as the 
proposed starting date.
    (3) Estimated cost and funds citation. An estimate of the total 
cost of the proposed contract and, if applicable, the estimate for each 
phase indicated in the statement of work. The project officer must 
provide a cost breakdown of all contributing cost factors, an estimate 
of the technical staff hours, direct material, subcontracting, travel, 
etc., and may consult with contracting and cost advisory personnel in 
developing this information. This section must include the 
certification of funds availability for the proposed acquisition, along 
with the appropriation and accounting information citations. When funds 
for the proposed acquisition are not currently available for obligation 
but are anticipated, a statement of intent to commit funds from the 
financial management officer shall be included in lieu of the 
certification of funds availability. (Contracts cannot be awarded 
unless funds are available, but see FAR 32.703-2).
    (4) Specification, purchase description, or statement or work. A 
description of the work to be performed that may be in the form of a 
specification, purchase description, or statement of work. Guidance 
concerning the statement of work and its contents is contained in 
307.7106. Specifications and purchase descriptions are not used to a 
great extent in this Department. Use of the specification is primarily 
limited to supply or service contracts where the material end item or 
service to be delivered is well defined by the Government.
    (5) Schedule of deliverables/reporting requirements. A description 
of what is to be delivered, including, if applicable, technical and 
financial progress reports and any final report, and the required date 
of delivery for each deliverable. Reporting requirements should be 
tailored to the instant acquisition and should not be unnecessarily 
extensive or detailed. All delivery and reporting requirements shall 
include the quantities, the place of delivery, and time of delivery.
    (6) Sources for solicitation. A list of known potential sources by 
name and mailing address. The project officer is encouraged to use 
trade and professional journals and publications to identify new 
prospective sources to supplement the list of known sources. Efforts to 
identify set-aside possibilities, i.e., small disadvantaged, and women-
owned small businesses must be explained.
    (7) Project officer and alternate. The project officer's name, 
title, organization, mailing address, and telephone number, along with 
the same data for the project officer's alternate, and a statement that 
these individuals have completed the Department's project officer 
training course (see 307.170)
    (b) The RFC must include, if applicable to the acquisition:
    (1) Background and need. The background, history, and necessity for 
the proposed contract. This section is to include prior, present, and 
planned efforts by the program office in the same or related areas, and 
a description of efforts by other departmental activities and Federal 
agencies in the same or related program areas, if known. In addition, 
specific project information, such as the relevance or contribution to 
overall program objectives, reasons for the need, priority, and project 
overlap are to be provided.
    (2) Reference materials. A list, by title and description, of study 
reports, plans, drawings, and other data to be made available to 
prospective offerors for use in preparation of proposals and/or the 
contractor for use in performance of the contract. The project officer 
must indicate whether this material is currently available or when it 
will be available.
    (3) Technical evaluation criteria and instructions. Technical 
evaluation criteria, which have been developed based on the 
requirements of the specific project, and any instructions and 
information which will assist in the preparation of prospective 
offerors' technical proposals. Evaluation factors may include 
understanding of the problem, technical approach, experience, 
personnel, facilities, etc. Criteria areas discussed in the statement 
of work and the relative order of importance or weights assigned to 
each of these areas for technical evaluation purposes must be 
identified.
    (4) Special program clearances or approvals. Any required clearance 
or approval. The following special program clearances or approvals 
should be reviewed for applicability to each acquisition. The ones 
which are applicable should be addressed during the planning 
discussions between the project officer and contracting officer/
contract specialist (see 307.104(f)) and immediate action should be 
initiated by the project officer to obtain the necessary clearances or 
approvals. Comprehensive checklists of these and any OPDIV special 
approvals, clearances, and requirements shall be provided for reference 
purposes to program offices by the servicing contracting activity. If 
the approval or clearance has been requested and is being processed at 
the time of RFC submission, a footnote to this effect, including all 
pertinent details, must be included in this section.

[[Page 1354]]

    (i) Commercial activities. (OMB Circular No. A-76). A request for 
contract (RFC) must contain a statement as to whether the proposed 
solicitation is or is not to be used as part of an OMB Circular No. A-
76 cost comparison. (See General Administrative Manual (GAM) Chapter 
18-10; FAR Subpart 7.3, Subpart 307.3; OMB Circular No. A-76.)
    (ii) Printing. The acquisition of printing and high volume 
duplicating by contract is prohibited unless it is authorized by the 
Joint Committee on Printing of the U.S. Congress. Procedures to be 
followed are contained in the ``Government Printing and Binding 
Regulations'' and the HHS Printing Management Manual and FAR Subpart 
8.8.
    (iii) Paperwork Reduction Act. Under the Paperwork Reduction Act of 
1995, a Federal agency shall not collect information or sponsor the 
collection of information from ten or more persons (other than Federal 
employees acting within the scope of their employment) unless, in 
advance, the agency has submitted a request for Office of Management 
and Budget (OMB) review, to the OMB, and the OMB has approved the 
proposed collection of information. Procedures for the approval may be 
obtained by contacting the OPDIV reports clearance officer. (See Title 
5 CFR Part 1320).
    (iv) Publications. All projects that will result in contracts which 
include more than one publication require review and approval by the 
Office of the Assistant Secretary for Public Affairs (OASPA). Form HHS-
524, Request for Communications Contract Clearance, should be forwarded 
to OASPA through the OPDIV public affairs officer. Publications are 
defined in Chapter 5-00-15 of the Public Affairs Management Manual.
    (v) Public affairs services. Projects for the acquisition of public 
affairs services in excess of $5,000 require review and approval by the 
Office of the Assistant Secretary for Public Affairs (OASPA). Form HHS-
524, Request for Communications Contract Clearance, should be forwarded 
to OASPA through the OPDIV public affairs officer. Public affairs 
services are defined in Chapter 8-00-20 of the Public Affairs 
Management Manual.
    (vi) Audiovisual. Any proposed acquisition of an audiovisual 
production requires the submission of a Standard Form 282, Mandatory 
Title Check, to the National Audiovisual Center (NAC). When the results 
of this title check have been reviewed by the project office and if a 
determination is made that existing materials are not adequate to 
fulfill the requirements, a statement to that effect shall be prepared 
by the project office. Audiovisuals are defined in Chapter 6-00-15 of 
the Public Affairs Management Manual. For acquisitions in excess of 
$5,000, a copy of that statement and Form HHS-524A, Audiovisual 
Clearance Request, shall be submitted through the OPDIV public affairs 
officer to the Office of the Assistant Secretary for Public Affairs 
(OASPA) for review and approval. An approval copy of the Form HHS-524A 
will be returned to the OPDIV for transmission to the contract 
negotiator.
    (vii) Privacy Act (Pub. L. 93-579). Whenever the Department 
contracts for the design, development, operation, or maintenance of a 
system of records on individuals on behalf of the Department to 
accomplish a departmental function, the Privacy Act is applicable. The 
program official, after consultation with the activity's Privacy Act 
Coordinator and the Office of General Counsel, as necessary, shall 
include a statement in the request for contract as to the applicability 
of the Act. Whenever an acquisition is subject to the Act, the program 
official prepares a ``system notice'' and has it published in the 
Federal Register. (See HHS Privacy Act regulation, 45 CFR 5b; FAR 
Subpart 24.1 and Subpart 324.1.)
    (viii) Foreign research. All foreign research contract projects to 
be conducted in a foreign country and financed by HHS funds (U.S. 
dollars) must have clearance by the Department of State with respect to 
consistency with foreign policy objectives. This clearance should be 
obtained prior to negotiation. Procedures for obtaining this clearance 
are set forth in the HHS General Administration Manual, Chapter 20-60.
    (5) Identification and disposition of data. Identification of the 
data expected to be generated by the acquisition and an indication of 
whether the data are to be delivered to the Department or to be 
retained by the contractor. The project officer must also include 
information relative to the use, maintenance, disclosure, and 
disposition of data. The project officer must include a statement as to 
whether or not another acquisition, based upon the data generated by 
the proposed acquisition, is anticipated.
    (6) Government property. If known, the type of Government property, 
individual items, and quantities of Government property to be furnished 
to, or allowed to be acquired by, the resultant contractor. The project 
officer must specify when the Government property is to be made 
available. Refer to HHS Publication (OS) 686, ``Contractor's Guide for 
Control of Government Property (1990).''
    (7) Special terms and conditions. Any suggested special terms and 
conditions not already covered in the statement of work or the 
applicable contract general provisions.
    (8) Justification for other than full and open competition. If the 
proposed acquisition is to be awarded using other than full and open 
competition, a justification prepared in accordance with FAR Subpart 
6.3 and Subpart 306.3.


307.7106  Statement of work.

    (a) General. A statement of work (SOW) differs from a 
specifications and purchase description primarily in that it describes 
work or services to be performed in reaching an end result rather than 
a detailed, well defined description or specification of the end 
product. The SOW may enumerate or describe the methods (statistical, 
clinical, laboratory, etc.) that will be used. However, it is 
preferable for the offeror to propose the method of performing the 
work. The SOW should specify the desired results, functions, or end 
items without telling the offeror what has to be done to accomplish 
those results unless the method of performance is critical or required 
for the successful performance of the contract. The SOW should be clear 
and concise and must completely define the responsibilities of the 
Government and the contractor. The SOW should be worded so as to make 
more than one interpretation virtually impossible because it has to be 
read and interpreted by persons of varied backgrounds, such as 
attorneys, contracting personnel, cost estimators, accountants, 
scientists, educators, functional specialists, etc. The SOW must 
clearly define the obligations of both the contractor and the 
Government so as to protect the interests of both. Ambiguous statements 
of work can create unsatisfactory performance, delays, and disputes, 
and can result in higher costs.
    (b) Term (level of effort) vs. completion work statement. Careful 
distinctions must be drawn between term (level of effort) SOWs, which 
essentially require the furnishing of technical effort and a report 
thereof, and completion type work statements, which require development 
of tangible items designed to meet specific performance 
characteristics. (See FAR 16.306(d) for distinction).
    (1) Term (or level of effort). A term or level of effort type SOW 
is appropriate to research where one seeks to discover the feasibility 
of later development, or to gather general information. A term or level 
of effort type SOW may only specify that some number of labor-hours

[[Page 1355]]

be expended on a particular course of research, or that a certain 
number of tests be run, without reference to any intended conclusion.
    (2) Completion. A completion type SOW is appropriate to development 
work where the feasibility of producing an end item is already known. A 
completion type SOW may describe what is to be achieved through the 
contracted effort, such as development of new methods, new end items, 
or other tangible results.
    (c) Phasing. Individual research, development, or demonstration 
projects frequently lie well beyond the present state of the art and 
entail procedures and techniques of great complexity and difficulty. 
Under these circumstances, a contractor, no matter how carefully 
selected, may be unable to deliver the desired result. Moreover, the 
job evaluating the contractor's progress is often difficult. Such a 
contract is frequently phased and often divided into stages of 
accomplishment, each of which must be completed and approved before the 
contractor may proceed to the next. Phasing makes it necessary to 
develop methods and controls, including reporting requirements for each 
phase of the contract and criteria for evaluation of the report 
submitted, that will provide, at the earliest possible time, 
appropriate data for making decisions relative to future phases. A 
phased contract may include stages of accomplishment such as research, 
development, and demonstration. Within each phase, there may be a 
number of tasks which should be included in the SOW. When phases of 
work can be identified, the SOW will provide for phasing and the 
request for proposals will require the submission of proposed costs by 
phases. The resultant contract will reflect costs by phases, require 
the contractor to identify incurred costs by phases, establish delivery 
schedules by phase, and require the written acceptance of each phase. 
The provisions of the Limitation of Cost clause shall apply to the 
estimated cost of each phase. Contractors shall not be allowed to incur 
costs for phases which are dependent upon successful completion of 
earlier phases until written acceptance of the prior work is obtained 
from the contracting officer.
    (d) Elements of the SOW. The elements of the SOW will vary with the 
objective, complexity, size, and nature of the acquisition. In general, 
it should cover the following matters as appropriate.
    (1) A general description of the required objectives and desired 
results. Initially, a broad, nontechnical statement of the nature of 
the work to be performed. This should summarize the actions to be 
performed by the contractor and the results that the Government 
expects.
    (2) Background information helpful to a clear understanding of the 
requirements and how they evolved. Include a brief historical summary 
as appropriate and the relationship to overall program objectives.
    (3) A detailed description of the technical requirements. A 
comprehensive description of the work to be performed to provide 
whatever details are necessary for prospective offerors to submit 
meaningful proposals.
    (4) Subordinate tasks or types of work. A listing of the various 
tasks or types of work (it may be desirable in some cases to indicate 
that this is not all-inclusive). The degree of task breakout is 
directly dependent on the size and complexity of the work to be 
performed and the logical groupings. A single cohesive task should not 
be broken out merely to conform to a format. Indicate whether the tasks 
are sequential or concurrent for offeror planning purposes.
    (5) Reference material. All reference material to be used in the 
conduct of the project that tells how the work is to be carried out 
must be identified. Applicability should be explained, and a statement 
made as to where the material can be obtained.
    (6) Level of effort. When a level of effort is required, the number 
and type of personnel required should be stated. If known, the type and 
degree of expertise should be specified.
    (7) Special requirements. (as applicable). An unusual or special 
contractual requirement, which would impact on contract performance, 
should be included as a separate section.
    (8) Deliverables reporting requirements. All deliverables and/or 
reports must be clearly and completely described.


307.7101  Review.

    Upon receipt of the RFC, the contracting officer shall review its 
contents to ensure that all pertinent information has been provided by 
the program office and that it includes an acceptable SOW. If pertinent 
information is missing or the SOW is inadequate, the contracting 
officer shall obtain or clarify the information as soon as possible so 
that the acquisition schedule can be met. If the program office delays 
furnishing the information or clarification, the contracting officer 
should notify the head of the sponsoring program office, in writing, of 
the possible slippage in the acquisition schedule and the need for an 
expeditious remedy. The contracting officer should also notify the 
chief of the contracting office. A program office's or project 
officer's continued failure to adhere to agreed on milestones should 
also be reported to the head of the contracting activity.

PART 309--CONTRACTOR QUALIFICATIONS

Subpart 309.4--Debarment, Suspension, and Ineligibility

Sec.
309.403  Definitions.
309.404  List of parties excluded from Federal procurement and 
nonprocurement programs.
309.405  Effect of listing.
309.406  Debarment.
309.406-3  Procedures.
309.407  Suspension.
309.407-3  Procedures.
309.470  Reporting of suspected causes of debarment, suspension, or 
the taking of evasive actions.
309.470-1  Situations where reports are required.
309.470-2  Contents of reports.

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

Subpart 309.4--Debarment, Suspension, and Ineligibility


309.403  Definitions.

    Acquiring agency's head or designee, as used in the FAR, shall 
mean, unless otherwise stated in this subpart, the head of the 
contracting activity. Acting in the capacity of the acquiring agency's 
head, the head of the contracting activity may make the required 
justifications or determinations, and take the necessary actions, 
specified in FAR 9.405, 9.406 and 9.407 for his or her respective 
activity, but only after obtaining the approval of the debarring or 
suspending official, as the case may be.
    Debarring official means the Assistant Secretary for Management and 
Budget, or his/her designee.
    Initiating official means either the contracting officer, the head 
of the contracting activity, the Deputy Assistant Secretary for Grants 
and Acquisition Management, or the Inspector General.
    Suspending official means the Assistant Secretary for Management 
and Budget, or his/her designee.


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

    (c) The Office of Grants and Acquisition Management (OGAM) shall 
perform the actions required by FAR 9.404(c).
    (4) OGAM shall maintain all documentation submitted by the

[[Page 1356]]

initiating official recommending the debarment or suspension action and 
all correspondence and other pertinent documentation generated during 
the OGAM review.


309.405  Effect of listing.

    (a) The head of the contracting activity (HCA) (not delegable) may, 
with the concurrence of the debarring or suspending official, make the 
determinations referenced in FAR 9.405(a), regarding contracts for 
their respective activities.
    (1) If a contracting officer considers it necessary to award a 
contract, or consent to a subcontract with a debarred or suspended 
contractor, the contracting officer shall prepare a determination, 
including all pertinent documentation, and submit it through 
acquisition channels to the head of the contracting activity. The 
documentation must include the date by which approval is required and a 
compelling reason for the proposed action. Some examples of 
circumstances that may constitute a compelling reason for the award to, 
or consent to a subcontract with, a debarred or suspended contractor 
include:
    (i) The property or services to be acquired are available only from 
the listed contractor;
    (ii) The urgency of the requirement dictates that the Department 
deal with the listed contractor; or
    (iii) There are other compelling reasons which require business 
dealings with the listed contractor.
    (2) If the HCA decides to approve the requested action, he/she 
shall request the concurrence of the debarring or suspending official 
and, if given, shall inform the contracting officer in writing of the 
decision within the required time period.


309.406  Debarment.


309.406-3  Procedures.

    (a) Investigation and referral. Whenever an apparent cause for 
debarment becomes known to an initiating official, that person shall 
prepare a report incorporating the information required by 309.470-2, 
if known, and forward it through appropriate channels with a written 
recommendation, to the debarring official. Contracting officers shall 
forward their reports in accordance with 309.470-1. The debarring 
official shall initiate an investigation through such means as he/she 
deems appropriate.
    (b) Decisionmaking process. The debarring official shall review the 
results of the investigation, if any, and make a written determination 
whether or not debarment procedures are to be commenced. A copy of the 
determination shall be promptly sent through appropriate channels to 
the initiating official, and the contracting officer, if necessary. If 
the debarring official determines to commence debarment procedures, he/
she shall, after consultation with the Office of the General Counsel, 
notify the contractor in accordance with FAR 9.406-3(c). If the 
proposed action is not based on a conviction or judgement and the 
contractor's submission in response to the notice raises a genuine 
dispute over facts material to the proposed debarment, the debarring 
official shall arrange for fact-finding hearings and take the necessary 
action specified in FAR 406-3(b)(2). The debarring official shall also 
ensure that written findings of facts are prepared, and shall base the 
debarment decisions on the facts as found, after considering 
information and argument submitted by the contractor and any other 
information in the administrative record. The Office of the General 
Counsel shall represent the Department at any fact-finding hearing and 
may present witnesses for HHS and question any witnesses presented by 
the contractor.


309.407  Suspension.


309.407-3  Procedures.

    (a) Investigation and referral. Whenever an apparent cause for 
suspension becomes known to an initiating official, that person shall 
prepare a report incorporating the information required by 309.470-2, 
if known, and forward it through appropriate channels, with a written 
recommendation, to the suspending official. Contracting officers shall 
forward their reports in accordance with 309.470-1. The suspending 
official shall initiate an investigation through such means as he/she 
deems appropriate.
    (b) Decisionmaking process. The suspending official shall review 
the results of the investigation, if any, and make a written 
determination whether or not suspension should be imposed. A copy of 
this determination shall be promptly sent through appropriate channels 
to the initiating official and the contracting officer, if necessary. 
If the suspending official determines to impose suspension, he/she 
shall, after consultation with the Office of the General Counsel, 
notify the contractor in accordance with FAR 9.407-3(c). If the action 
is not based on an indictment, and, subject to the provisions of FAR 
9.407-3(b)(2), the contractor's submission in response to the notice 
raises a genuine dispute over facts material to the suspension, the 
suspending official shall, after suspension has been imposed, arrange 
for fact-finding hearings and take the necessary actions specified in 
FAR 9.407-3(b)(2).


309.470  Reporting of suspected causes for debarment or suspension, or 
the taking of evasive actions.


309.470-1  Situations where reports are required.

    A report incorporating the information required by 309.470-2 shall 
be forwarded, in duplicate, by the contracting officer through 
acquisition channels to OGAM when:
    (a) A contractor has committed, or is suspected of having 
committed, any of the acts described in FAR 9.406-2 or FAR 9.407-2; or
    (b) A contractor is suspected of attempting to evade the 
prohibitions of debarment or suspension imposed under this regulation, 
or any other comparable regulation, by changes of address, multiple 
addresses, formation of new companies, or by other devices.


309.470-2  Contents of reports.

    Each report prepared under 309.470-1 shall be coordinated with the 
Office of the General Counsel and shall include the following 
information, where available:
    (a) Name and address of contractor.
    (b) Name of the principal officers, partners, owners, or managers.
    (c) All known affiliates, subsidiaries, or parent firms, and the 
nature of the affiliation.
    (d) Description of the contract or contracts concerned, including 
the contract number, and office identifying numbers or symbols, the 
amount of each contract, the amount paid the contractor and the amount 
still due, and the percentage of work completed and to be completed.
    (e) The status of vouchers.
    (f) Whether contract funds have been assigned pursuant to the 
Assignment of Claims Act, as amended, (31 U.S.C. 3727, 41 U.S.C. 15), 
and, if so assigned, the name and address of the assignee and a copy of 
the assignment.
    (g) Whether any other contracts are outstanding with the contractor 
or any affiliates, and, if so, the amount of the contracts, whether 
these funds have been assigned pursuant to the Assignment of Claims 
Act, as amended, (31 U.S.C. 3727, 41 U.S.C. 15), and the amounts paid 
or due on the contracts.
    (h) A complete summary of all available pertinent evidence.
    (i) A recommendation as to the continuation of current contracts.

[[Page 1357]]

    (j) An estimate of damages, if any, sustained by the Government as 
a result of the action of the contractor, including an explanation of 
the method used in making the estimate.
    (k) The comments and recommendations of the contracting officer and 
statements regarding whether the contractor should be suspended or 
debarred, whether any limitations should be applied to the action, and 
the period of any proposed debarment.
    (l) As an enclosure, a copy of the contract(s) or pertinent 
excerpts therefrom, appropriate exhibits, testimony or statements of 
witnesses, copies of assignments, and other relevant documentation or a 
written summary of any information for which documentation is not 
available.

PART 313--SIMPLIFIED ACQUISITION PROCEDURES

Subpart 313.3--Simplified Acquisition Methods

Sec.
313.303  Blanket purchase agreements (BPAs).
313.303-5  Purchases under BPAs.
313.305  Imprest funds and third party drafts.
313.305-1  General.
313.306  SF 44, Purchase Order--Invoice--Voucher.

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

Subpart 313.3--Simplified Acquisition Methods.


313.303  Blanket Purchase Agreements (BPAs).


313.303-5  Purchase under BPAs.

    (e)(5) Delivery documents, invoices, etc., signed by the Government 
employee receiving the item or service will be forwarded to the fiscal 
office or other paying office as designated by the OPDIV. Payment will 
be made on the basis of the signed document, invoice, etc. Contracting 
offices will ensure that established procedures allowing for 
availability of funds are in effect prior to placement of orders.


313.305  Imprest funds and third party drafts.


313.305-1  General.

    Requests to establish imprest funds shall be made to the 
responsible fiscal office. At larger activities where the cashier may 
not be conveniently located near the purchasing office, a Class C 
Cashier may be installed in the purchasing office. Documentation of 
cash purchases shall be in accordance with instructions contained in 
the HHS Voucher Audit Manual Part 1, Chapter 1-10.


313.306  SF 44, Purchase Order--Invoice--Voucher.

    (d) Since the Standard Form (SF) 44 is an accountable form, a 
record shall be maintained of serial numbers of the form, to whom 
issued, and date issued. SF 44's shall be kept under adequate lock and 
key to prevent unauthorized use. A reservation of funds shall be 
established to cover total anticipated expenditures prior to use of the 
SF 44.

PART 314--SEALED BIDDING

Subpart 314.2--Solicitation of Bids

Sec.
314.202  General rules for solicitation of bids.
314.202-7  Facsimile bids.
314.213  Annual submission of representations and certifications.

Subpart 314.4--Opening of Bids and Award of Contract

314.404  Rejection of bids.
314.404-1  Cancellation of invitations after opening.
314.407  Mistakes in bids.
314.407-3  Other mistakes disclosed before award.
314.407-4  Mistakes after award.

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

Subpart 314.2--Solicitation of Bids


314.202  General rules for solicitation of bids.


314.202-7  Facsimile bids.

    If the head of the contracting activity (HCA) (not delegable) has 
determined that the contracting activity will allow use of facsimile 
bids and proposals, the HCA shall prescribe internal procedures, in 
accordance with the FAR, to ensure uniform processing and control.


314.213  Annual submission of representations and certifications.

    Each HCA (not delegable) shall determine whether the contracting 
activity will allow use of the annual submission of representations and 
certifications by bidders.

Subpart 314.4--Opening of Bids and Award of Contract


314.404  Rejection of bids.


314.404-1  Cancellation of invitations after opening.

    (c) The chief of the contracting office (CCO) (not delegable) shall 
make the determination required by FAR 14.404-1(c).


314.407  Mistakes in bids.


314.407-3  Other mistakes disclosed before award.

    (e) Authority has been delegated to the Departmental Protest 
Control Officer, Office of Acquisition Management, Office of Grants and 
Acquisition Management to make administrative determinations in 
connection with mistakes in bid alleged after opening and before award. 
This authority may not be redelegated.
    (f) Each proposed determination shall have the concurrence of the 
Chief, Business Law Branch, Business and Administrative Law Division, 
Office of General Counsel.
    (i) Doubtful cases shall not be submitted by the contracting 
officer directly to the Comptroller General, but shall be submitted to 
the Departmental Protest Control Officer.


314.407-4  Mistakes after award.

    (c) Authority has been delegated to the Departmental Protest 
Control Officer to make administrative determinations in connection 
with mistakes in bid alleged after award. This authority may not be 
redelegated.
    (d) Each proposed determination shall have the concurrence of the 
Chief, Business Law Branch, Business and Administrative Law Division, 
Office of General Counsel.

PART 315--CONTRACTING BY NEGOTIATION

Subpart 315.2--Solicitation and Receipt of Proposals and Information

Sec.
315.204  Contract format.
315.204-5  Part IV--Representations and instructions.
315.208  Submission, modification, revision, and withdrawal of 
proposals.
315.209  Solicitation provisions and contract clauses.

Subpart 315.3--Source Selection

315.305  Proposal evaluation.
315.306  Exchanges with offerors after receipt of proposals.
315.307  Final proposal revisions.
315.370  Finalization of details with the selected source.
315.371  Contract preparation and award.
315.372  Preparation of negotiation memorandum.

Subpart 315.4--Contract Pricing

315.404  Proposal analysis.
315.404-2  Information to support proposal analysis.
315.404-4  Profit.

Subpart 315.6--Unsolicited Proposals

315.605  Content of unsolicited proposals.
315.606  Agency procedures.
315.606-1  Receipt and initial review.
315.609  Limited use of data.

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

[[Page 1358]]

Subpart 315.2--Solicitation and Receipt of Proposals and 
Information


315.204  Contract format.


315.204-5  Part IV--Representations and instructions.

    (a) Section K, Representations, certifications, and other 
statements of offerors.
    (1) This section shall begin with the following and continue with 
the applicable representations and certifications:

    To Be Completed by the Offeror: (The Representations and 
Certifications must be executed by an individual authorized to bind 
the offeror.) The offeror makes the following Representations and 
Certifications as part of its proposal (check or complete all 
appropriate boxes or blanks on the following pages).

(Name of Offeror)------------------------------------------------------

(RFP No.)--------------------------------------------------------------

(Signature of Authorized Individual)-----------------------------------

----------------------------------------------------------------------

(Date)-----------------------------------------------------------------

(Typed Name of Authorized Individual)----------------------------------

----------------------------------------------------------------------

    Note: The penalty for making false statements in offers is 
prescribed in 18 U.S.C. 1001.

    (c) Section M, Evaluation factors for award.
    (1) General. (i) The evaluation criteria must be developed by the 
project officer and submitted to the contracting officer in the request 
for contract (RFC) for inclusion in the request for proposal (RFP). 
Development of these criteria and the assignment of the relative 
importance or weight to each criterion require the exercise of 
judgement on a case-by-case basis because they must be tailored to the 
requirements of the individual acquisition. Since the criteria will 
serve as a standard against which all proposals will be evaluated, it 
is imperative that they be chosen carefully to emphasize those factors 
considered to be critical in the selection of a contractor.
    (ii) The finalized evaluation criteria and indications of their 
relative importance or weight, as included in the RFP, cannot be 
changed except by a formal amendment to the RFP issued by the 
contracting officer. No factors other than those set forth in the RFP 
shall be used in the evaluation of proposals.
    (2) Review of evaluation criteria.
    (i) The evaluation criteria should be reviewed by the contracting 
officer in terms of the work statement. This review is not intended to 
dictate technical requirements to the program office or project 
officer, but rather to ensure that the evaluation criteria are clear, 
concise, and fair so that all potential offerors are fully aware of the 
bases for proposal evaluation and are given an equal opportunity to 
compete.
    (ii) The project officer and the contracting officer should then 
review the evaluation criteria together to ascertain the following:
    (A) The criteria are described in sufficient detail to provide the 
offerors (and evaluators) with a total understanding of the factors to 
be involved in the evaluation process;
    (B) The criteria address the key programmatic concerns which the 
offerors must be aware of in preparing proposals;
    (C) The criteria are specifically applicable to the instant 
acquisition and are not merely restatements of criteria from previous 
acquisitions which are not relevant to this acquisition; and
    (D) The criteria are selected to represent only the significant 
areas of importance which must be emphasized rather than a multitude of 
factors. (All criteria tend to lose importance if too many are 
included. Using too many criteria will prove as detrimental as using 
too few.)
    (3) Examples of topics that form a basis for evaluation criteria. 
Typical examples of topics that form a basis for the development of 
evaluation criteria are listed in the following paragraphs. These 
examples are intended to assist in the development of actual evaluation 
criteria for a specific acquisition and should only be used if they are 
applicable to that acquisition. They are not to be construed as actual 
examples of evaluation criteria to be included in the RFP.
    (i) Understanding of the problem and statement of work;
    (ii) Method of accomplishing the objectives and intent of the 
statement of work;
    (iii) Soundness of the scientific or technical approach for 
executing the requirements of the statement of work (to include, when 
applicable, preliminary layouts, sketches, diagrams, other graphic 
representations, calculations, curves, and other data necessary for 
presentation, substantiation, justification, or understanding of the 
approach);
    (iv) Special technical factors, such as experience or pertinent 
novel ideas in the specific branch of science or technology involved;
    (v) Feasibility and/or practicality of successfully accomplishing 
the requirements (to include a statement and discussion of anticipated 
major difficulties and problem areas and recommended approaches for 
their resolution);
    (vi) Availability of required special research, test, and other 
equipment or facilities;
    (vii) Managerial capability (ability to achieve delivery or 
performance requirements as demonstrated by the proposed use of 
management and other personnel resources, and to successfully manage 
the project, including subcontractor and/or consultant efforts, if 
applicable, as evidenced by the management plan and demonstrated by 
previous experience);
    (viii) Availability, qualifications, experience, education, and 
competence of professional, technical, and other personnel, to include 
proposed subcontractors and consultants (as evidenced by resumes, 
endorsements, and explanations of previous efforts); and
    (ix) Soundness of the proposed staff time or labor hours, propriety 
of personnel classifications (professional, technical, others), 
necessity for type and quantity of material and facilities proposed, 
validity of proposed subcontracting, and necessity of proposed travel.
    (4) Relative importance or weight.
    (i) A statement or indication of the relative importance or weight 
must be assigned to each evaluation criterion (significant factor) to 
inform prospective offerors (and evaluators) of the specific 
significance of each criterion in comparison to the other criteria. 
Similarly, if a criterion (factor) is subdivided into parts, each of 
the parts (subfactors) must be assigned a statement or indication of 
the relative importance or weight.
    (ii) Cost or price is not generally included as one of the 
evaluation criteria and is not assigned an indication of relative 
importance or weight. However, a statement must be included in the RFP 
to reflect the relationship of cost or price in comparison to the other 
criteria. (See FAR 15.304(e)). The contracting officer and project 
officer should work together in arriving at the final determination 
regarding the relationship.


315.208  Submission, modification, revision, and withdrawal of 
proposals.

    (b) When the head of the contracting activity (HCA) for a health 
agency determines that certain classes of biomedical or behavioral 
research and development acquisitions should be subject to conditions 
other than those specified in FAR 52.215-1(c)(3), the HCA may authorize 
the use of the provision at 352.215-70 in addition to the provision at 
FAR 52.215-1.
    (2) When the provision at 352.215-70 is included in the 
solicitation and a

[[Page 1359]]

proposal is received after the exact time specified for receipt, the 
contracting officer, with the assistance of cost and technical 
personnel, shall make a written determination as to whether the 
proposal meets the requirements of the provision at 352.215-70 and, 
therefore, can be considered.


315.209  Solicitation provisions and contract clauses.

    (a) Paragraph (e) of the provision at 352.215-1 shall be used in 
place of that specified at FAR 52.215-1(e).
    (g) If the head of the contracting activity (HCA)(not delegable) 
has determined that the contracting activity will allow the use of the 
annual submission of representations and certifications by offerors, 
the provisions of FAR 14.213 shall be followed.

Subpart 315.3--Source Selection


315.305  Proposal evaluation.

    (a) (1) Cost or price evaluation. The contracting officer shall 
evaluate business proposals adhering to the requirements for cost or 
price analysis included in FAR 15.404. The contracting officer must 
determine the extent of analysis in each case depending on the amount 
of the proposal, the technical complexity and related cost or price, 
and cost realism. The contracting officer should request the project 
officer to analyze items such as the number of labor hours proposed for 
various labor categories; the mix of labor hours and categories of 
labor in relation to the technical requirements of the project; the 
kinds and quantities of material, equipment, and supplies; types, 
numbers and hours/days of proposed consultants; logic of proposed 
subcontracting; analysis of the travel proposed including number of 
trips, locations, purpose, and travelers; and kinds and quantities of 
data processing. The project officer shall provide his/her opinion as 
to whether these elements are necessary and reasonable for efficient 
contract performance. Exceptions to proposed elements shall be 
supported by adequate rationale to allow for effective negotiations or 
award if discussions are not conducted. The contracting officer should 
also request the assistance of a cost/price analyst when considered 
necessary. In all cases, the negotiation memorandum must include the 
rationale used in determining that the price or cost is fair and 
reasonable.
    (3) Technical evaluation.
    (i) Technical evaluation plan.
    (A) A technical evaluation plan may be required by the contracting 
officer, at his/her discretion, when an acquisition is sufficiently 
complex as to warrant a formal plan.
    (B) The technical evaluation plan should include at least the 
following:
    (1) A list of recommended technical evaluation panel members, their 
organizations, a list of their major consulting clients (if 
applicable), their qualifications, and curricula vitae (if applicable);
    (2) A justification for using non-Government technical evaluation 
panel members. (Justification is not required if non-Government 
evaluators will be used in accordance with standard contracting 
activity procedures or policies);
    (3) A statement that there is no apparent or actual conflict of 
interest regarding any recommended panel member;
    (4) A copy of each rating sheet, approved by the contracting 
officer, to be used to assure consistency with the evaluation criteria; 
and
    (5) A brief description of the general evaluation approach.
    (C) The technical evaluation plan must be signed by an official 
within the program office in a position at least one level above the 
project officer, or in accordance with contracting activity procedures.
    (D) The technical evaluation plan should be submitted to the 
contracting officer for review and approval before the solicitation is 
issued. The contracting officer shall make sure that the principal 
factors relating to the evaluation are reflected in the evaluation 
criteria when conducting the review of the plan.
    (ii) Technical evaluation panel.
    (A) General. (1) A technical evaluation panel is required for all 
acquisitions applicable to this subpart which are expected to exceed 
$500,000 and in which technical evaluation is considered a key element 
in the determination of making an award . The contracting officer has 
the discretion to require a technical evaluation panel for acquisitions 
not exceeding $500,000 based on the complexity of the acquisition.
    (2) The technical evaluation process requires careful consideration 
regarding the size, composition, expertise, and function of the 
technical evaluation panel. The efforts of the panel can result in the 
success or failure of the acquisition.
    (B) Role of the project officer. (1) The project officer is the 
contracting officer's technical representative for the acquisition 
action. The project officer may be a voting member of the technical 
evaluation panel, and may also serve as the chairperson of the panel, 
unless he/she is prohibited by law or contracting activity procedures 
to do so.
    (2) The project officer is responsible for recommending panel 
members who are knowledgeable in the technical aspects of the 
acquisition and who are competent to identify strengths and weaknesses 
of the various proposals. The program training requirements specified 
in 307.170 must be adhered to when selecting prospective panel members 
(government employees).
    (3) The project officer shall ensure that persons possessing 
expertise and experience in addressing issues relative to sex, race, 
national origin, and handicapped discrimination be included as panel 
members in acquisitions which address those issues. The intent is to 
balance the composition of the panel so that qualified and concerned 
individuals may provide insight to other panel members regarding ideas 
and approaches to be taken in the evaluation of proposals.
    (4) The project officer is to submit the recommended list of panel 
members to an official within the program office in a position at least 
one level above the project officer, or in accordance with contracting 
activity procedures. This official will review the recommendations and 
select the chairperson.
    (5) The project officer shall arrange for adequate and secure 
working space for the panel.
    (C) Role of the contracting officer. (1) The term ``contracting 
officer,'' as used in this subpart, may be the contracting officer or 
his/her designated representative within the contracting office.
    (2) The contracting officer shall not serve as a member of the 
technical evaluation panel but should be available to:
    (i) Address the initial meeting of the technical evaluation panel;
    (ii) Provide assistance to the evaluators as required; and
    (iii) Ensure that the scores adequately reflect the written 
technical report comments.
    (D) Conflict of interest. (1) If a panel member has an actual or 
apparent conflict of interest related to a proposal under evaluation, 
he/she shall be removed from the panel and replaced with another 
evaluator. If a suitable replacement is not available, the panel shall 
perform the review without a replacement.
    (2) For the purposes of this subpart, conflicts of interest are 
defined in the Standards of Ethical Conduct for Employees of the 
Executive Branch (5 CFR 2635), Supplemental Standards of Ethical 
Conduct for Employees of the

[[Page 1360]]

Department of Health and Human Services (5 CFR Part 5501), and the 
Procurement Integrity Act. For outside evaluators serving on the 
technical evaluation panel, see paragraph (F), (315.305(a)(3)(ii)(F)).
    (E) Continuity of evaluation process. (1) The technical evaluation 
panel is responsible for evaluating the original proposals, making 
recommendations to the chairperson regarding weaknesses and 
deficiencies of proposals, and, if required by the contracting officer, 
assisting the contracting officer during communications and 
discussions, and reviewing supplemental, revised and/or final proposal 
revisions. To the extent possible, the same evaluators should be 
available throughout the entire evaluation and selection process to 
ensure continuity and consistency in the treatment of proposals. The 
following are examples of circumstances when it would not be necessary 
for the technical evaluation panel to evaluate revised proposals 
submitted during the acquisition:
    (i) The answers to questions do not have a substantial impact on 
the proposal;
    (ii) Final proposal revisions are not materially different from the 
original proposals; or
    (iii) The rankings of the offerors are not affected because the 
revisions to the proposals are relatively minor.
    (2) The chairperson, with the concurrence of the contracting 
officer, may decide not to have the panel evaluate the revised 
proposals. Whenever this decision is made, it must be fully documented 
by the chairperson and approved by the contracting officer.
    (3) When technical evaluation panel meetings are considered 
necessary by the contracting officer, the attendance of evaluators is 
mandatory. When the chairperson determines that an evaluator's failure 
to attend the meetings is prejudicial to the evaluation, the 
chairperson shall remove and/or replace the individual after discussing 
the situation with the contracting officer and obtaining his/her 
concurrence and the approval of the official responsible for appointing 
the panel members.
    (4) Whenever continuity of the evaluation process is not possible, 
and either new evaluators are selected or a reduced panel is decided 
upon, each proposal which is being reviewed at any stage of the 
acquisition shall be reviewed at that stage by all members of the 
revised panel unless it is impractical to do so because of the receipt 
of an unusually large number of proposals.
    (F) Use of outside evaluators. (1) The National Institutes of 
Health (NIH) and the Substance Abuse and Mental Health Services 
Administration (SAMHSA) are required to have a peer review of research 
and development contracts in accordance with Public Law (Pub. L.) 93-
352 as amended by Pub. L. 94-63; 42 U.S.C. 289 1-4. This legislation 
requires peer review of projects and proposals, and not more than one-
fourth of the members of a peer review group may be officers or 
employees of the United States. NIH and SAMHSA are therefore exempt 
from the provisions of 315.305(a)(3)(ii) to the extent that 42 U.S.C. 
289 1-4 applies. Conflicts of interest are addressed in the Scientific 
Peer Review of Research Grant Applications and Research and Development 
Contract Projects (42 CFR Part 52 h).
    (2) In general, decisions to disclose proposals outside the 
Government for evaluation purposes shall be made by the official 
responsible for appointing panel members for the acquisition, after 
consultation with the contracting officer and in accordance with 
operating division procedures. The decision to disclose either a 
solicited or unsolicited proposal outside the Government for the 
purpose of obtaining an evaluation shall take into consideration the 
avoidance of organizational conflicts of interest and any competitive 
relationship between the submitter of the proposal and the prospective 
evaluator(s).
    (3) When it is determined to disclose a solicited proposal outside 
the Government for evaluation purposes, the following or similar 
conditions shall be included in the written agreement with evaluator(s) 
prior to disclosure:

Conditions for Evaluating Proposals

    The evaluator agrees to use the data (trade secrets, business 
data, and technical data) contained in the proposal only for 
evaluation purposes.
    The requirement does not apply to data obtained from another 
source without restriction.
    Any notice or legend placed on the proposal by either the 
Department or the submitter of the proposal shall be applied to any 
reproduction or abstract provided to the evaluator or made by the 
evaluator. Upon completion of the evaluation, the evaluator shall 
return the Government furnished copy of the proposal or abstract, 
and all copies thereof, to the Departmental office which initially 
furnished the proposal for evaluation.
    Unless authorized by the Department's initiating office, the 
evaluator shall not contact the submitter of the proposal concerning 
any aspects of its contents.
    The evaluator will be obligated to obtain commitments from its 
employees and subcontractors, if any, to effect the purposes of 
these conditions.

    (iii) Receipt of proposals.
    (A) After the closing date set by the solicitation for the receipt 
of proposals, the contracting officer will use a transmittal memorandum 
to forward the technical proposals to the project officer or 
chairperson for evaluation. The business proposals will be retained by 
the contracting officer for evaluation.
    (B) The transmittal memorandum shall include at least the 
following:
    (1) A list of the names of the organizations submitting proposals;
    (2) A reference to the need to preserve the integrity of the source 
selection process;
    (3) A statement that only the contracting officer is to conduct 
discussions.
    (4) A requirement for a technical evaluation report in accordance 
with 315.305(a)(3)(vi); and
    (5) The establishment of a date for receipt of the technical 
evaluation report.
    (iv) Convening the technical evaluation panel.
    (A) Normally, the technical evaluation panel will convene to 
evaluate the proposals. However, there may be situations when the 
contracting officer determines that it is not feasible for the panel to 
convene. Whenever this decision is made, care must be taken to assure 
that the technical review is closely monitored to produce acceptable 
results.
    (B) When a panel is convened, the chairperson is responsible for 
the control of the technical proposals provided to him/her by the 
contracting officer for use during the evaluation process. The 
chairperson will generally distribute the technical proposals prior to 
the initial panel meeting and will establish procedures for securing 
the proposals whenever they are not being evaluated to insure their 
confidentiality. After the evaluation is complete, all proposals must 
be returned to the contracting officer by the chairperson.
    (C) The contracting officer shall address the initial meeting of 
the panel and state the basic rules for conducting the evaluation. The 
contracting officer shall provide written guidance to the panel if he/
she is unable to attend the initial panel meeting. The guidance should 
include:
    (1) Explanation of conflicts of interest;
    (2) The necessity to read and understand the solicitation, 
especially the statement of work and evaluation criteria, prior to 
reading the proposals;
    (3) The need for evaluators to restrict the review to only the 
solicitation and the contents of the technical proposals;
    (4) The need for each evaluator to review all the proposals;

[[Page 1361]]

    (5) The need to watch for ambiguities, inconsistencies, errors, and 
deficiencies which should be surfaced during the evaluation process;
    (6) An explanation of the evaluation process and what will be 
expected of the evaluators throughout the process;
    (7) The need for the evaluators to be aware of the requirement to 
have complete written documentation of the individual strengths and 
weaknesses which affect the scoring of the proposals; and
    (8) An instruction directing the evaluators that, until the award 
is made, information concerning the acquisition must not be disclosed 
to any person not directly involved in the evaluation process.
    (v) Rating and ranking of proposals. The evaluators will 
individually read each proposal, describe tentative strengths and 
weaknesses, and develop preliminary scores in relation to each 
evaluation criterion set forth in the solicitation. After this has been 
accomplished, the evaluators shall discuss in detail the individual 
strengths and weakness described by each evaluator and, if possible, 
arrive at a common understanding of the major strengths and weaknesses 
and the potential for correcting each offeror's weakness(es). Each 
evaluator will score each proposal, and then the technical evaluation 
panel will collectively rank the proposals. Generally, ranking will be 
determined by adding the numerical scores assigned to the evaluation 
criteria and finding the average for each offeror. The evaluators 
should then identify whether each proposal is acceptable or 
unacceptable. Predetermined cutoff scores shall not be employed.
    (vi) Technical evaluation report. A technical evaluation report 
shall be prepared and furnished to the contracting officer by the 
chairperson and maintained as a permanent record in the contract file. 
The report must reflect the ranking of the proposals and identify each 
proposal as acceptable or unacceptable. The report must also include a 
narrative evaluation specifying the strengths and weaknesses of each 
proposal, a copy of each rating sheet, and any reservations, 
qualifications, or areas to be addressed that might bear upon the 
selection of sources for negotiation and award. Concrete technical 
reasons supporting a determination of unacceptability with regard to 
any proposal must be included. The report should also include specific 
points and questions which are to be raised in discussions or 
negotiations.


315.306  Exchanges with offerors after receipt of proposals.

    (c) Competitive range. (1) Some of the factors which the 
contracting officer should consider in determining the competitive 
range are:
    (i) The relative importance of cost or price as compared to 
technical factors;
    (ii) The susceptibility of significantly reducing a proposal with 
an unreasonable high price or cost without undermining the technical 
merit if the offeror otherwise has a reasonable chance to receive an 
award; and
    (iii) The likelihood of reducing cost or price of a proposal which 
exceeds the Government's requirements.
    (2) The contracting officer shall conduct a thorough review of the 
technical evaluation report to be assured that:
    (i) All determinations of unacceptability are supported by concrete 
and comprehensive statements that are factual and convincing and are 
consistent with the evaluation criteria set forth in the solicitation. 
Every statement should be reviewed carefully to eliminate any doubts as 
to the unacceptability of a proposal;
    (ii) All recommendations to exclude proposals from the competitive 
range are supported by persuasive rationale and sufficient facts to 
substantiate a judgment that meaningful discussions are not possible or 
there is no reasonable chance of the proposal being selected for award;
    (iii) Those cases where only one organization is found to be 
technically acceptable are fully scrutinized; and
    (iv) Unacceptable proposals contain ``information'' deficiencies 
which are so material as to preclude any possibility of upgrading the 
proposal to a competitive level except through major revisions and 
additions which would be tantamount to the submission of another 
proposal.
    (d) Exchanges with offerors after establishment of the competitive 
range. The contracting officer and project officer should discuss the 
uncertainties and/or deficiencies that are included in the technical 
evaluation report for each proposal in the competitive range. Technical 
questions should be developed by the project officer and/or the 
technical evaluation panel and should be included in the technical 
evaluation report. The management and cost or price questions should be 
prepared by the contracting officer with assistance from the project 
officer and/or panel as required. The method of requesting offerors in 
the competitive range to submit the additional information will vary 
depending on the complexity of the questions, the extent of additional 
information requested, the time needed to analyze the responses, and 
the time frame for making the award. However, to the extent 
practicable, all questions and answers should be in writing. Each 
offeror in the competitive range shall be given an equitable period of 
time for preparation of responses to questions to the extent 
practicable. The questions should be developed so as to disclose the 
ambiguities, uncertainties, and deficiencies of the offeror.


315.307  Final proposal revisions.

    (b) Final proposal revisions are subject to a final evaluation of 
price or cost and other salient factors by the contracting officer and 
project officer with assistance from a cost/price analyst, and an 
evaluation of technical factors by the technical evaluation panel, as 
necessary. Proposals may be technically rescored and reranked by the 
technical evaluation panel and a technical evaluation report prepared. 
To the extent practicable, the evaluation shall be performed by the 
same evaluators who reviewed the original proposals.


315.370  Finalization of details with the selected source.

    (a) After selection of the successful proposal, finalization of 
details with the selected offeror may be conducted if deemed necessary. 
However, no factor which could have any effect on the selection process 
may be introduced after the common cutoff date for receipt of final 
proposal revisions. The finalization process shall not in any way 
prejudice the competitive interest or rights of the unsuccessful 
offerors. Finalization of details with the selected offeror shall be 
restricted to definitizing the final agreement on terms and conditions, 
assuming none of these factors were involved in the selection process.
    (b) Caution must be exercised by the contracting officer to insure 
that the finalization process is not used to change the requirements 
contained in the solicitation, nor to make any other changes which 
would impact on the source selection decision. Whenever a material 
change occurs in the requirements, the competition must be reopened and 
all offerors submitting final proposal revisions must be given an 
opportunity to resubmit proposals based on the revised requirements. 
Whenever there is a question as to whether a change is material, the 
contracting officer should obtain the advice of technical personnel and 
legal counsel before reopening the competition. Significant changes in 
the

[[Page 1362]]

offeror's cost proposal may also necessitate a reopening of competition 
if the changes alter the factors involved in the original selection 
process.
    (c) Should finalization details beyond those specified in paragraph 
(a) of this section be required for any reason, discussions must be 
reopened with all offerors submitting final proposal revisions.
    (d) Upon finalization of details, the contracting officer should 
obtain a confirmation letter from the successful offeror which includes 
any revisions to the technical proposal, the agreed to price or cost, 
and, as applicable, a certificate of current cost or pricing data.


315.371  Contract preparation and award.

    (a) The contracting officer must perform the following actions 
after finalization details have been completed:
    (1) Prepare the negotiation memorandum in accordance with 315.372;
    (2) Prepare the contract containing all agreed to terms and 
conditions and clauses required by law or regulation;
    (3) Include in the contract file the pertinent documents referenced 
in FAR 4.803; and
    (4) Obtain the appropriate approval of the proposed contract 
award(s) in accordance with Subpart 304.71 and contracting activity 
procedures.
    (b) After receiving the required approvals, the contract should be 
transmitted to the prospective contractor for signature. The 
prospective contractor must be informed that the contract is not 
effective until accepted by the contracting officer.
    (c) The contract shall not be issued until the finance office 
certifies that the funds are available for obligation.


315.372  Preparation of negotiation memorandum.

    The negotiation memorandum or summary of negotiations is a complete 
record of all actions leading to award of a contract and is prepared by 
the contract negotiator to support the source selection decision 
discussed in FAR 15.308. It should be in sufficient detail to explain 
and support the rationale, judgments, and authorities upon which all 
actions were predicated. The memorandum will document the negotiation 
process and reflect the negotiator's actions, skills, and judgments in 
concluding a satisfactory agreement for the Government. Negotiation 
memorandums shall contain discussion of the following or a statement of 
nonapplicability; however, information already contained in the 
contract file need not be reiterated. A reference to the document which 
contains the required information is acceptable.
    (a) Description of articles and services and period of performance. 
A description of articles and services, quantity, unit price, total 
contract amount, and period of contract performance should be set forth 
( if Supplemental Agreement--show previous contract amount as revised, 
as well as information with respect to the period of performance).
    (b) Acquisition planning. Summarize or reference any acquisition 
planning activities that have taken place.
    (c) Synopsis of acquisition. A statement as to whether the 
acquisition has or has not been publicized in accordance with FAR 
Subpart 5.2. A brief statement of explanation should be included with 
reference to the specific basis for exemption under the FAR, if 
applicable.
    (d) Contract type. Provide sufficient detail to support the type of 
contractual instrument recommended for the acquisition. If the contract 
is a cost-sharing type, explain the essential cost-sharing features.
    (e) Extent of competition. The extent to which full and open 
competition was solicited and obtained must be discussed. The 
discussion shall include the date of solicitation, sources solicited, 
and solicitation results. If a late proposal was received, discuss 
whether or not the late proposal was evaluated and the rationale for 
the decision.
    (f) Technical evaluation. Summarize or reference the results 
presented in the technical evaluation report.
    (g) Business evaluation. Summarize or reference results presented 
in the business report.
    (h) Competitive range (if applicable). Describe how the zone of 
consideration or competitive range was determined and state the 
offerors who were included in the competitive range and the ones who 
were not.
    (i) Cost breakdown and analysis. Include a complete cost breakdown 
together with the negotiator's analysis of the estimated cost by 
individual cost elements. The negotiator's analysis should contain 
information such as:
    (1) A comparison of cost factors proposed in the instant case with 
actual factors used in earlier contracts, using the same cost centers 
of the same supplier or cost centers of other sources having recent 
contracts for the same or similar item.
    (2) Any pertinent Government-conducted audit of the proposed 
contractor's record of any pertinent cost advisory report.
    (3) Any pertinent technical evaluation inputs as to necessity, 
allocability and reasonableness of labor, material and other direct 
expenses.
    (4) Any other pertinent information to fully support the basis for 
and rationale of the cost analysis.
    (5) If the contract is an incentive type, discuss all elements of 
profit and fee structure.
    (6) A justification of the reasonableness of the proposed 
contractor's estimated profit or fixed fee, considering the 
requirements of FAR 15.404-4 and HHSAR 315.404-4.
    (j) Cost realism. Describe the cost realism analysis performed on 
proposals.
    (k) Government-furnished property and Government-provided 
facilities. With respect to Government-furnished or Government-provided 
facilities, equipment, tooling, or other property, include the 
following:
    (1) Where no property is to be provided, a statement to that 
effect.
    (2) Where property is to be provided, a full description, the 
estimated dollar value, the basis of price comparison with competitors, 
and the basis of rental charge, if rental is involved.
    (3) Where the furnishing of any property or the extent has not been 
determined and is left open for future resolution, a detailed 
explanation.
    (l) Negotiations. Include a statement as to the date and place 
negotiations were conducted, and identify members of both the 
Government and contractor negotiating teams by area of responsibility. 
Include negotiation details relative to the statement of work, terms 
and conditions, and special provisions. The results of cost or price 
negotiations must include the information required by FAR 31.109 and 
15.406-3. In addition, if cost or pricing data was required to be 
submitted and certified, the negotiation record must also contain the 
extent to which the contracting officer relied upon the factual cost or 
pricing data submitted and used in negotiating the cost or price.
    (m) Other considerations. Include coverage of areas such as:
    (1) Financial data with respect to a contractor's capacity and 
stability.
    (2) Determination of contractor responsibility.
    (3) Details as to why the method of payment, such as progress 
payment, advance payment, etc., is necessary. Also cite any required D 
& F's.
    (4) Information with respect to obtaining of a certificate of 
current cost or pricing data.

[[Page 1363]]

    (5) Other required special approvals.
    (6) If the contract represents an extension of previous work, the 
status of funds and performance under the prior contract(s) should be 
reflected. Also, a determination should be made that the Government has 
obtained enough actual or potential value from the work previously 
performed to warrant continuation with the same contractor. (Project 
officer should furnish the necessary information.)
    (7) If the contract was awarded by full and open competition, state 
where the unsuccessful offerors' proposals are filed.
    (8) State that equal opportunity provisions of the proposed 
contract have been explained to the contractor, and it is aware of its 
responsibilities. Also state whether or not a clearance is required.
    (9) If the contract is for services, a statement must be made, in 
accordance with FAR 37.103, that the services to be acquired are 
nonpersonal in nature.
    (n) Terms and conditions. Identify the general and special clauses 
and conditions that are contained in the contract, such as option 
arrangements, incremental funding, anticipatory costs, deviations from 
standard clauses, etc. The basis and rationale for inclusion of any 
special terms and conditions must be stated and, where applicable, the 
document which granted approval for its use identified.
    (o) Recommendation. A brief statement setting forth the 
recommendations for award.
    (p) Signature. The memorandum must be signed by the contract 
negotiator who prepared the memorandum.

Subpart 315.4--Contract Pricing


315.404  Proposal analysis.


315.404-2  Information to support proposal analysis.

    (a)(2) When some or all information sufficient to determine the 
reasonableness of the proposed cost or price is already available or 
can be obtained by phone from the cognizant audit agency, contracting 
officers may request less-than-complete field pricing support 
(specifying in the request the information needed) or may waive in 
writing the requirement for audit and field pricing support by 
documenting the file to indicate what information is to be used instead 
of the audit report and the field pricing report.
    (3) When initiating audit and field pricing support, the 
contracting officer shall do so by sending a request to the cognizant 
administrative contracting officer (ACO), with an information copy to 
the cognizant audit office. When field pricing support is not 
available, the contracting officer shall initiate an audit by sending, 
in accordance with agency procedures, two (2) copies of the request to 
the OIG Office of Audits' Regional Audit Director. In both cases, the 
contracting officer shall, in the request:
    (i) Prescribe the extent of the support needed;
    (ii) State the specific areas for which input is required;
    (iii) Include the information necessary to perform the review (such 
as the offeror's proposal and the applicable portions of the 
solicitation, particularly those describing requirements and delivery 
schedules);
    (iv) Provide the complete address of the location of the offeror's 
financial records that support the proposal;
    (v) Identify the office having audit responsibility if other than 
the HHS Regional Audit Office; and
    (vi) Specify a due date for receipt of a verbal report to be 
followed by a written audit report. (If the time available is not 
adequate to permit satisfactory coverage of the proposal, the auditor 
shall so advise the contracting officer and indicate the additional 
time needed.) One copy of the audit request letter that was submitted 
to the Regional Audit Director and a complete copy of the contract 
price proposal shall be submitted to OIG/OA/DAC. Whenever an audit 
review has been conducted by the Office of Audits, two (2) copies of 
the memorandum of negotiation shall be forwarded to OIG/OA/DAC by the 
contracting officer.


315.404-4  Profit.

    (b) Policy. (1) The structured approach for determining profit or 
fee (hereafter referred to as profit) provides contracting officers 
with a technique that will ensure consideration of the relative value 
of the appropriate profit factors described in 315.404-4(d) in the 
establishment of a profit objective for the conduct of negotiations. 
The contracting officer's analysis of these profit factors is based on 
information available to him/her prior to negotiations. The information 
is furnished in proposals, audit data, assessment reports, preaward 
surveys and the like. The structured approach also provides a basis for 
documentation of this objective, including an explanation of any 
significant departure from this objective in reaching an agreement. The 
extent of documentation should be directly related to the dollar value 
and complexity of the proposed acquisition. Additionally, the 
negotiation process does not require agreement on either estimated cost 
elements or profit elements. The profit objective is a part of an 
overall negotiation objective which, as a going-in objective, bears a 
distinct relationship to the cost objective and any proposed sharing 
arrangement. Since profit is merely one of several interrelated 
variables, the Government negotiator generally should not complete the 
profit negotiation without simultaneously agreeing on the other 
variables. Specific agreement on the exact weights or values of the 
individual profit factors is not required and should not be attempted.
    (ii) The profit-analysis factors set forth at FAR 15.404-4(d) shall 
be used for establishing profit objectives under the following listed 
circumstances. Generally, it is expected that this method will be 
supported in a manner similar to that used in the structured approach 
(profit factor breakdown and documentation of the profit objective); 
however, factors within FAR 15.404-4(d) considered inapplicable to the 
acquisition will be excluded from the profit objective.
    (A) Contracts not expected to exceed $100,000;
    (B) Architect-engineer contracts;
    (C) Management contracts for operations and/or maintenance of 
Government facilities;
    (D) Construction contracts;
    (E) Contracts primarily requiring delivery of material supplies by 
subcontractors;
    (F) Termination settlements; and
    (G) Cost-plus-award-fee contracts (However, contracting officers 
may find it advantageous to perform a structured profit analysis as an 
aid in arriving at an appropriate fee arrangement). Other exceptions 
may be made in the negotiation of contracts having unusual pricing 
situations, but shall be justified in writing by the contracting 
officer in situations where the structured approach is determined to be 
unsuitable.
    (c) Contracting officer responsibilities. A profit objective is 
that part of the estimated contract price objective or value which, in 
the judgment of the contracting officer, constitutes an appropriate 
amount of profit for the acquisition being considered. This objective 
should realistically reflect the total overall task to be performed and 
the requirements placed on the contractor. Development of a profit 
objective should not begin until a thorough review of proposed contract 
work has been made; a review of all available knowledge regarding the 
contractor pursuant to FAR Subpart 9.1, including audit data, preaward 
survey reports and financial statements, as appropriate, has been 
conducted; and an

[[Page 1364]]

analysis of the contractor's cost estimate and comparison with the 
Government's estimate or projection of cost has been made.
    (d) Profit--analysis factors--(1) Common factors. The following 
factors shall be considered in all cases in which profit is to be 
negotiated. The weight ranges listed after each factor shall be used in 
all instances where the structured approach is used.

------------------------------------------------------------------------
              Profit factors                   Weight ranges (percent)
------------------------------------------------------------------------
Contractor effort:
    Material acquisition..................  1 to 5.
    Direct labor..........................  4 to 15.
    Overhead..............................  4 to 9.
    General management (G&A)..............  4 to 8.
    Other costs...........................  1 to 5.
Other factors:
    Cost risk.............................  0 to 7.
    Investment............................  -2 to +2.
    Performance...........................  -1 to +1.
    Socioeconomic programs................  -.5 to +.5.
    Special situations....................
------------------------------------------------------------------------

    (i) Under the structured approach, the contracting officer shall 
first measure ``Contractor Effort'' by the assignment of a profit 
percentage within the designated weight ranges to each element of 
contract cost recognized by the contracting officer. The amount 
calculated for the cost of money for facilities capital is not to be 
included for the computation of profit as part of the cost base. The 
suggested categories under ``Contractor Effort'' are for reference 
purposes only. Often individual proposals will be in a different 
format, but since these categories are broad and basic, they provide 
sufficient guidance to evaluate all other items of cost.
    (ii) After computing a total dollar profit for ``Contractor 
Effort,'' the contracting officer shall then calculate the specific 
profit dollars assigned for cost risk, investment, performance, 
socioeconomic programs, and special situations. This is accomplished by 
multiplying the total Government Cost Objective, exclusive of any cost 
of money for facilities capital, by the specific weight assigned to the 
elements within the ``Other Factors'' category. Form HHS-674, 
Structured Approach Profit/Fee Objective, should be used, as 
appropriate, to facilitate the calculation of this profit objective. 
Form HHS-674 is illustrated in 353.370-674.
    (iii) In making a judgment of the value of each factor, the 
contracting officer should be governed by the definition, description, 
and purpose of the factors together with considerations for evaluating 
them.
    (iv) The structured approach was designed for arriving at profit 
objectives for other than nonprofit organizations. However, if 
appropriate adjustments are made to reflect differences between profit 
and nonprofit organizations, the structured approach can be used as a 
basis for arriving at profit objectives for nonprofit organizations. 
Therefore, the structured approach, as modified in paragraph 
(d)(1)(iv)(B) of this section, shall be used to establish profit 
objectives for nonprofit organizations.
    (A) For purposes of this section, nonprofit organizations are 
defined as those business entities organized and operated exclusively 
for charitable, scientific, or educational purposes, no part of the net 
earnings of which inure to the benefit of any private shareholder or 
individual, and which are exempt from Federal income taxation under 
Section 501 of the Internal Revenue Code.
    (B) For contracts with nonprofit organizations where profit is 
involved, an adjustment of up to 3 percentage points will be subtracted 
from the total profit objective percentage. In developing this 
adjustment, it will be necessary to consider the following factors;
    (1) Tax position benefits;
    (2) Granting of financing through advance payments; and
    (3) Other pertinent factors which may work to either the advantage 
or disadvantage of the contractor in its position as a nonprofit 
organization.
    (2) Contractor effort. Contractor effort is a measure of how much 
the contractor is expected to contribute to the overall effort 
necessary to meet the contract performance requirement in an efficient 
manner. This factor, which is apart from the contractor's 
responsibility for contract performance, takes into account what 
resources are necessary and what the contractor must do to accomplish a 
conversion of ideas and material into the final service or product 
called for in the contract. This is a recognition that within a given 
performance output, or within a given sales dollar figure, necessary 
efforts on the part of individual contractors can vary widely in both 
value and quantity, and that the profit objective should reflect the 
extent and nature of the contractor's contribution to total 
performance. A major consideration, particularly in connection with 
experimental, developmental, or research work, is the difficulty or 
complexity of the work to be performed, and the unusual demands of the 
contract, such as whether the project involves a new approach unrelated 
to existing technology and/or equipment or only refinements to these 
items. The evaluation of this factor requires an analysis of the cost 
content of the proposed contract as follows:
    (i) Material acquisition. (Subcontracted items, purchased parts, 
and other material.) Analysis of these cost items shall include an 
evaluation of the managerial and technical effort necessary to obtain 
the required subcontracted items, purchased parts, material or 
services. The contracting officer shall determine whether the 
contractor will obtain the items or services by routine order from 
readily available sources or by detailed subcontracts for which the 
prime contractor will be required to develop complex specifications. 
Consideration shall also be given to the managerial and technical 
efforts necessary for the prime contractor to select subcontractors and 
to perform subcontract administration functions. In application of this 
criterion, it should be recognized that the contribution of the prime 
contractor to its purchasing program may be substantial. Normally, the 
lowest unadjusted weight for direct material is 2 percent. A weighting 
of less than 2 percent would be appropriate only in unusual 
circumstances when there is a minimal contribution by the contractor.
    (ii) Direct Labor. (Professional, service, manufacturing and other 
labor). Analysis of the various labor categories of the cost content of 
the contract should include evaluation of the comparative quality and 
quantity of professional and semiprofessional talents, manufacturing 
and service skills, and experience to be employed. In evaluating 
professional and semiprofessional labor for the purpose of assigning 
profit dollars, consideration should be given to the amount of notable 
scientific talent or unusual or scarce talent needed in contrast to 
nonprofessional effort. The assessment should consider the contribution 
this talent will provide toward the achievement of contract objectives. 
Since nonprofessional labor is relatively plentiful and rather easily 
obtained by the contractor and is less critical to the successful 
performance of contract objectives, it cannot be weighted nearly as 
high as professional or semiprofessional labor. Service contract labor 
should be evaluated in a like manner by assigning higher weights to 
engineering or professional type skills required for contract 
performance. Similarly, the variety of manufacturing and other 
categories of labor skills required and the contractor's manpower 
resources for meeting these requirements should be considered. For 
purposes of evaluation, categories of labor (i.e., quality control, 
receiving and

[[Page 1365]]

inspection, etc.) which do not fall within the definition for 
professional, service or manufacturing labor may be categorized as 
appropriate. However, the same evaluation considerations as outlined 
above will be applied.
    (iii) Overhead and general management (G&A). (A) Analysis of these 
overhead items of cost should include the evaluation of the makeup of 
these expenses and how much they contribute to contract performance. To 
the extent practicable, analysis should include a determination of the 
amount of labor within these overhead pools and how this labor should 
be treated if it were considered as direct labor under the contract. 
The allocable labor elements should be given the same profit 
considerations that they would receive if they were treated as direct 
labor. The other elements of these overhead pools should be evaluated 
to determine whether they are routine expenses, such as utilities and 
maintenance, and hence given lesser profit consideration, or whether 
they are significant contributing elements. The composite of the 
individual determinations in relation to the elements of the overhead 
pools will be the profit consideration given the pools as a whole. The 
procedure for assigning relative values to these overhead expenses 
differs from the method used in assigning values of the direct labor. 
The upper and lower limits assignable to the direct labor are absolute. 
In the case of overhead expenses, individual expenses may be assigned 
values outside the range as long as the composite ratio is within the 
range.
    (B) It is not necessary that the contractor's accounting system 
break down overhead expenses within the classifications of research 
overhead, other overhead pools, and general administrative expenses, 
unless dictated otherwise by Cost Accounting Standards (CAS). The 
contractor whose accounting system reflects only one overhead rate on 
all direct labor need not change its system (if CAS exempt) to 
correspond with the above classifications. The contracting officer, in 
an evaluation of such a contractor's overhead rate, could break out the 
applicable sections of the composite rate which could be classified as 
research overhead, other overhead pools, and general and administrative 
expenses, and follow the appropriate evaluation technique.
    (C) Management problems surface in various degrees and the 
management expertise exercised to solve them should be considered as an 
element of profit. For example, a contract for a new program for 
research or an item which is on the cutting edge of the state of the 
art will cause more problems and require more managerial time and 
abilities of a higher order than a follow-on contract. If new contracts 
create more problems and require a higher profit weight, follow-ons 
should be adjusted downward because many of the problems should have 
been solved. In any event, an evaluation should be made of the 
underlying managerial effort involved on a case-by-case basis.
    (D) It may not be necessary for the contracting officer to make a 
separate profit evaluation of overhead expenses in connection with each 
acquisition action for substantially the same project with the same 
contractor. Where an analysis of the profit weight to be assigned to 
the overhead pool has been made, that weight assigned may be used for 
future acquisitions with the same contractor until there is a change in 
the cost composition of the overhead pool or the contract 
circumstances, or the factors discussed in paragraph (d)(2)(iii)(C) of 
this section are involved.
    (iv) Other costs. Analysis of this factor should include all other 
direct costs associated with contractor performance (e.g., travel and 
relocation, direct support, and consultants). Analysis of these items 
of cost should include, the significance of the cost of contract 
performance, nature of the cost, and how much they contribute to 
contract performance. Normally, travel costs require minimal 
administrative effort by the contractor and, therefore, usually receive 
a weight no greater than 1%. Also, the contractor may designate 
individuals as ``consultants'' but in reality these individuals may be 
obtained by the contractor to supplement its workforce in the 
performance of routine duties required by contract. These costs would 
normally receive a minimum weight. However, there will be instances 
when the contractor may be required to locate and obtain the services 
of consultants having expertise in fields such as medicine or human 
services. In these instances, the contractor will be required to expend 
greater managerial and technical effort to obtain these services and, 
consequently, the costs should receive a much greater weight.
    (3) Other factors--(i) Contract cost risk. The contract type 
employed basically determines the degree of cost risk assumed by the 
contractor. For example, where a portion of the risk has been shifted 
to the Government through cost-reimbursement provisions, unusual 
contingency provisions, or other risk-reducing measures, the amount of 
profit should be less than where the contractor assumes all the risk.
    (A) In developing the prenegotiation profit objective, the 
contracting officer will need to consider the type of contract 
anticipated to be negotiated and the contractor risk associated 
therewith when selecting the position in the weight range for profit 
that is appropriate for the risk to be borne by the contractor. This 
factor should be one of the most important in arriving at 
prenegotiation profit objective. Evaluation of this risk requires a 
determination of the degree of cost responsibility the contractor 
assumes; the reliability of the cost estimates in relation to the task 
assumed; and the complexity of the task assumed by the contractor. This 
factor is specifically limited to the risk of contract costs. Thus, 
risks on the part of the contractor such as reputation, losing a 
commercial market, risk of losing potential profits in other fields, or 
any risk which falls on the contracting office, such as the risk of not 
acquiring a satisfactory report, are not within the scope of this 
factor.
    (B) The first and basic determination of the degree of cost 
responsibility assumed by the contractor is related to the sharing of 
total risk of contract cost by the Government and the contractor 
through the selection of contract type. The extremes are a cost-plus-a-
fixed-fee contract requiring the contractor to use its best efforts to 
perform a task and a firm fixed-price contract for a service or a 
complex item. A cost-plus-a-fixed-fee contract would reflect a minimum 
assumption of cost responsibility, whereas a firm-fixed-price contract 
would reflect a complete assumption of cost responsibility. Where 
proper contract selection has been made, the regard for risk by 
contract type would usually fall into the following percentage ranges:

------------------------------------------------------------------------
                                                                Percent
------------------------------------------------------------------------
Cost-reimbursement type contracts............................        0-3
Fixed-price type contracts...................................        2-7
------------------------------------------------------------------------

    (C) The second determination is that of the reliability of the cost 
estimates. Sound price negotiation requires well-defined contract 
objectives and reliable cost estimates. Prior experience assists the 
contractor in preparing reliable cost estimates on new acquisitions for 
similar related efforts. An excessive cost estimate reduces the 
possibility that the cost of performance will exceed the contract 
price, thereby reducing the contractor's assumption of contract cost 
risk.
    (D) The third determination is that of the difficulty of the 
contractor's task.

[[Page 1366]]

The contractor's task can be difficult or easy, regardless of the type 
of contract.
    (E) Contractors are likely to assume greater cost risk only if 
contracting officers objectively analyze the risk incident to proposed 
contracts and are willing to compensate contractors for it. Generally, 
a cost-plus-fixed fee contract will not justify a reward for risk in 
excess of 0.5 percent, nor will a firm fixed-price contract justify a 
reward of less than the minimum in the structured approach. Where 
proper contract-type selection has been made, the reward for risk, by 
contract type, will usually fall into the following percentage ranges:
    (1) Type of contract and percentage ranges for profit objectives 
developed by using the structured approach for research and development 
and manufacturing contracts:

------------------------------------------------------------------------
                                                       Percent
------------------------------------------------------------------------
Cost-plus-fixed fee........................  0 to 0.5.
Cost-plus-incentive fee:
    With cost incentive only...............  1 to 2.
    With multiple incentives...............  1.5 to 3.
Fixed-price-incentive:
    With cost incentive only...............  2 to 4.
    With multiple incentives...............  3 to 5.
    Prospective price redetermination......  3 to 5.
    Firm fixed-price.......................  5 to 7.
------------------------------------------------------------------------

    (2) Type of contract and percentage ranges for profit objectives 
developed by using the structured approach for service contracts:

------------------------------------------------------------------------
                                                       Percent
------------------------------------------------------------------------
Cost-plus-fixed-fee........................  0 to 0.5.
Cost-plus-incentive fee....................  1 to 2
Fixed-price incentive......................  2 to 3.
Firm fixed-price...........................  3 to 4.
------------------------------------------------------------------------

    (F) These ranges may not be appropriate for all acquisitions. For 
instance, a fixed-price-incentive contract that is closely priced with 
a low ceiling price and high incentive share may be tantamount to a 
firm fixed-price contract. In this situation, the contracting officer 
may determine that a basis exists for high confidence in the 
reasonableness of the estimate and that little opportunity exists for 
cost reduction without extraordinary efforts. On the other hand, a 
contract with a high ceiling and low incentive formula can be 
considered to contain cost-plus incentive-fee contract features. In 
this situation, the contracting officer may determine that the 
Government is retaining much of the contract cost responsibility and 
that the risk assumed by the contractor is minimal. Similarly, if a 
cost-plus-incentive-fee contract includes an unlimited downward 
(negative) fee adjustment on cost control, it could be comparable to a 
fixed-price-incentive contract. In such a pricing environment, the 
contracting officer may determine that the Government has transferred a 
greater amount of cost responsibility to the contractor than is typical 
under a normal cost-plus-incentive-fee contract.
    (G) The contractor's subcontracting program may have a significant 
impact on the contractor's acceptance or risk under a contract form. It 
could cause risk to increase or decrease in terms of both cost and 
performance. This consideration should be a part of the contracting 
officer's overall evaluation in selecting a factor to apply for cost 
risk. It may be determined, for instance, that the prime contractor has 
effectively transferred real cost risk to a subcontractor and the 
contract cost risk evaluation may, as a result, be below the range 
which would otherwise apply for the contract type being proposed. The 
contract cost risk evaluation should not be lowered, however, merely on 
the basis that a substantial portion of the contract costs represents 
subcontracts without any substantial transfer of contractor's risk.
    (H) In making a contract cost risk evaluation in an acquisition 
action that involves definitization of a letter contract, unpriced 
change orders, and unpriced orders under basic ordering agreements, 
consideration should be given to the effect on total contract cost risk 
as a result of having partial performance before definitization. Under 
some circumstances it may be reasoned that the total amount of cost 
risk has been effectively reduced. Under other circumstances it may be 
apparent that the contractor's cost risk remained substantially 
unchanged. To be equitable, the determination of profit weight for 
application to the total of all recognized costs, both those incurred 
and those yet to be expended, must be made with consideration to all 
attendant circumstances--not just the portion of costs incurred or 
percentage of work completed prior to definitization.
    (I) Time and material and labor hour contracts will be considered 
to be cost-plus-a-fixed-fee contracts for the purpose of establishing 
profit weights unless otherwise exempt under 315.404-4(b)(ii) in the 
evaluation of the contractor's assumption of contract cost risk.
    (ii) Investment. HHS encourages its contractors to perform their 
contracts with the minimum of financial, facilities, or other 
assistance from the Government. As such, it is the purpose of this 
factor to encourage the contractor to acquire and use its own resources 
to the maximum extent possible. The evaluation of this factor should 
include an analysis of the following:
    (A) Facilities. (Including equipment). To evaluate how this factor 
contributes to the profit objective requires knowledge of the level of 
facilities utilization needed for contract performance, the source and 
financing of the required facilities, and the overall cost 
effectiveness of the facilities offered. Contractors who furnish their 
own facilities which significantly contribute to lower total contract 
costs should be provided with additional profit. On the other hand, 
contractors who rely on the Government to provide or finance needed 
facilities should receive a corresponding reduction in profit. Cases 
between the above examples should be evaluated on their merits with 
either positive or negative adjustments, as appropriate, in profit 
being made. However, where a highly facilitized contractor is to 
perform a contract which does not benefit from this facilitization or 
where a contractor's use of its facilities has a minimum cost impact on 
the contract, profit need not be adjusted. When applicable, the 
prospective contractor's computation of facilities capital cost of 
money for pricing purposed under CAS 414 can help the contracting 
officer identify the level of facilities investment to be employed in 
contract performance.
    (B) Payments. In analyzing this factor, consideration should be 
given to the frequency of payments by the Government to the contractor. 
The key to this weighting is to give proper consideration to the impact 
the contract will have on the contractor's cash flow. Generally, 
negative consideration should be given for advance payments and 
payments more frequent than monthly with maximum reduction being given 
as the contractor's working capital approaches zero. Positive 
consideration should be given for payments less frequent than monthly 
with additional consideration given for a capital turn-over rate on the 
contract which is less than the contractor's or the industry's normal 
capital turn-over rate.
    (iii) Performance. (Cost-control and other past accomplishments.) 
The contractor's past performance should be evaluated in such areas as 
quality of service or product, meeting performance schedules, 
efficiency in cost control (including need for and reasonableness of 
cost incurred), accuracy and reliability of previous cost estimates, 
degree of cooperation by the contractor (both business and technical), 
timely processing of changes and compliance with other contractual 
provisions, and management of subcontract programs. Where a contractor 
has consistently

[[Page 1367]]

achieved excellent results in the foregoing areas in comparison with 
other contractors in similar circumstances, this performance merits a 
proportionately greater opportunity for profit. Conversely, a poor 
record in this regard should be reflected in determining what 
constitutes a fair and reasonable profit.
    (iv) Federal socioeconomic programs. This factor, which may apply 
to special circumstances or particular acquisitions, relates to the 
extent of a contractor's successful participation in Government 
sponsored programs such as small business, small disadvantaged 
business, women-owned small business, and energy conservation efforts. 
The contractor's policies and procedures which energetically support 
Government socioeconomic programs and achieve successful results should 
be given positive considerations. Conversely, failure or unwillingness 
on the part of the contractor to support Government socioeconomic 
programs should be viewed as evidence of poor performance for the 
purpose of establishing a profit objective.
    (v) Special situations--(A) Inventive and developmental 
contributions. The extent and nature of contractor-initiated and 
financed independent development should be considered in developing the 
profit objective, provided that the contracting officer has made a 
determination that the effort will benefit the contract. The importance 
of the development in furthering health and human services purposes, 
the demonstrable initiative in determining the need and application of 
the development, the extent of the contractor's cost risk, and whether 
the development cost was recovered directly or indirectly from 
Government sources should be weighed.
    (B) Unusual pricing agreements. Occasionally, unusual contract 
pricing arrangements are made with the contractor wherein it agrees to 
cost ceilings, e.g., a ceiling on overhead rates for conditions other 
than those discussed at FAR 42.707. In these circumstances, the 
contractor should receive favorable consideration in developing the 
profit objective.
    (C) Negative factors. Special situations need not be limited to 
those which only increase profit levels. A negative consideration may 
be appropriate when the contractor is expected to obtain spin-off-
benefits as a direct result of the contract (e.g., products or services 
with commercial application).
    (4) Facilities capital cost of money. When facilities capital cost 
of money (cost of capital committed to facilities) is included as an 
item of cost in the contractor's proposal, a reduction in the profit 
objective shall be made in an amount equal to the amount of facilities 
capital cost of money allowed in accordance with the Facilities Capital 
Cost-of Money Cost Principal. If the contractor does not propose this 
cost, a provision must be inserted in the contract that facilities 
capital cost of money is not an allowable cost.

Subpart 315.6--Unsolicited Proposals


315.605  Content of unsolicited proposals.

    (d) Certification by offeror--To ensure against contracts between 
Department employees and prospective offerors which would exceed the 
limits of advance guidance set forth in FAR 15.604 resulting in an 
unfair advantage to an offeror, the contracting officer shall ensure 
that the following certification is furnished to the prospective 
offeror and the executed certification is included as part of the 
resultant unsolicited proposal:

Unsolicited Proposal

Certification by Offeror

    This is to certify, to the best of my knowledge and belief, 
that:
    (a) This proposal has not been prepared under Government 
supervision.
    (b) The methods and approaches stated in the proposal were 
developed by this offeror.
    (c) Any contact with employees of the Department of Health and 
Human Services has been within the limits of appropriate advance 
guidance set forth in FAR 15.604.
    (d) No prior commitments were received from departmental 
employees regarding acceptance of this proposal.
Date:------------------------------------------------------------------
Organization:----------------------------------------------------------
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
    (This certification shall be signed by a responsible official of 
the proposing organization or a person authorized to contractually 
obligate the organization.)


315.606  Agency procedures.

    (a) The HCA is responsible for establishing procedures to comply 
with FAR 15.606(a).
    (b) The HCA or his/her designee shall be the point of contract for 
coordinating the receipt and handling of unsolicited proposals.


315.606-1  Receipt and initial review.

    (d) An unsolicited proposal shall not be refused consideration 
merely because it was initially submitted as a grant application. 
However, contracts shall not be awarded on the basis of unsolicited 
proposals which have been rejected for grant support on the grounds 
that they lack scientific merit.


315.609  Limited use of data.

    The legend, Use and Disclosure of Data, prescribed in FAR 15.609(a) 
is to be used by the offeror to restrict the use of data for evaluation 
purposes only. However, data contained within the unsolicited proposal 
may have to be disclosed as a result of a request submitted pursuant to 
the Freedom of Information Act. Because of this possibility, the 
following notice shall be furnished to all prospective offerors of 
unsolicited proposals whenever the legend is provided in accordance 
with FAR 15.604(a) (7):

    The Government will attempt to comply with the ``Use and 
Disclosure of Data'' legend. However, the Government may not be able 
to withhold a record (data, document, etc.) nor deny access to a 
record requested by an individual (the public) when an obligation is 
imposed on the Government under the Freedom of Information Act, 5 
U.S.C. 552, as amended. The Government determination to withhold or 
disclose a record will be based upon the particular circumstances 
involving the record in question and whether the record may be 
exempted from disclosure under the Freedom of Information Act. 
Records which the offeror considers to be trade secrets and 
commercial or financial information and privileged or confidential 
must be identified by the offeror as indicated in the referenced 
legend.

PART 316--TYPES OF CONTRACTS

Subpart 316.3--Cost-Reimbursement Contracts

Sec.
316.307  Contract clauses.

Subpart 316.6--Time-and-Materials, Labor-Hour, and Letter Contracts

316.603  Letter contracts.
316.603-3  Limitations.
316.603-70  Information to be furnished when requesting authority to 
issue a letter contract.
316.603-71  Approval for modifications to letter contracts.

Subpart 316.7--Agreements

316.770  Unauthorized types of agreements.
316.770-1  Letter of intent.
316.770-2  Memorandums of understanding.

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

Subpart 316.3--Cost-Reimbursement Contracts


316.307  Contract clauses.

    (a) If the contract is with a hospital (profit or nonprofit), 
modify the ``Allowable Cost and Payment'' clause at FAR 52.216-7 by 
deleting from paragraph (a) the words ``Subpart 31.2 of the Federal 
Acquisition Regulation (FAR)'' and substituting ``45 CFR Part 74 
Appendix E.''
    (j) The contracting officer shall insert the clause at 352.216-72, 
Additional

[[Page 1368]]

Cost Principles, in all solicitations and resultant cost-reimbursement 
contracts.

Subpart 316.6--Time-and-Materials, Labor-Hour, and Letter Contracts


316.603  Letter contracts.


316.603-3  Limitations.

    An official one level above the contracting officer shall execute 
the prescribed written statement.


316.603-70  Information to be furnished when requesting authority to 
issue a letter contract.

    The following information should be included by the contracting 
officer in any memorandum requesting approval to issue a letter 
contract:
    (a) Name and address of proposed contractor.
    (b) Location where contract is to be performed.
    (c) Contract number, including modification number, if possible.
    (d) Brief description of work and services to be performed.
    (e) Performance or delivery schedule.
    (f) Amount of letter contract.
    (g) Estimated total amount of definitized contract.
    (h) Type of definitive contract to be executed (fixed price, cost-
reimbursement, etc.)
    (i) Statement of the necessity and advantage to the Government of 
the use of the proposed letter contract.
    (j) Statement of percentage of the estimated cost that the 
obligation of funds represents. In rare instances where the obligation 
represents 50 percent or more of the proposed estimated cost of the 
acquisition, a justification for that obligation must be included which 
would indicate the basis and necessity for the obligation (e.g., the 
contractor requires a large initial outlay of funds for major 
subcontract awards or an extensive purchase of materials to meet an 
urgent delivery requirement). In every case, documentation must assure 
that the amount to be obligated is not in excess of an amount 
reasonably required to perform the work.
    (k) Period of effectiveness of a proposed letter contract. If more 
than 180 days, complete justification must be given.
    (l) Statement of any substantive matters that need to be resolved.


316.603-71  Approval for modifications to letter contracts.

    All letter contract modifications (amendments) must be approved one 
level above the contracting officer. Request for authority to issue 
letter contract modifications shall be processed in the same manner as 
requests for authority to issue letter contracts and shall include the 
following:
    (a) Name and address of the contractor.
    (b) Description of work and services.
    (c) Date original request was approved and indicate approving 
official.
    (d) Letter contract number and date issued.
    (e) Complete justification as to why the letter contract cannot be 
definitized at this time.
    (f) Complete justification as to why the level of funding must be 
increased.
    (g) Complete justification as to why the period of effectiveness is 
increased beyond 180 days, if applicable.
    (h) If the funding of the letter contract is to be increased to 
more than 50 percent of the estimated cost of the acquisition, the 
information required by 316.603-70(j) must be included.

Subpart 316.7--Agreements


316.770  Unauthorized types of agreements.


316.770-1  Letters of intent.

    A letter of intent is an informal unauthorized agreement between 
the Government and a prospective contractor which indicates that 
products or services will be produced after completion of funding and/
or other contractual formalities. Letters of intent are often solicited 
by prospective contractors or may be originated by Government 
personnel. Letters of intent are not authorized by the FAR and are 
prohibited for use by Department personnel.


316.770-2  Memorandums of understanding.

    A ``memorandum of understanding'' is an unauthorized agreement, 
usually drafted during the course of negotiations, to modify mandatory 
FAR and HHSAR provisions in such a manner as to make them more 
acceptable to a prospective contractor. It may be used to bind the 
contracting officer in attempting to exercise rights given the 
Government under the contract, or may contain other matters directly 
contrary to the language of the solicitation or prospective contractual 
document. Use of memorandums of understanding is not authorized. Any 
change in a solicitation or contract shall be made by amendment or 
modification to that document. When a change to a prescribed contract 
clause is considered necessary, a deviation shall be requested.

PART 317--SPECIAL CONTRACTING METHODS

Subpart 317.2--Options

Sec.
317.201  Definition.

Subpart 317.71--Supply and Service Acquisitions Under the Government 
Employees Training Act.

317.7100  Scope of subpart.
317.7101  Applicable regulations.
317.7102  Acquisition of training.

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

Subpart 317.2--Options


317.201  Definitions.

    An option must:
    (a) Identify the supplies or services as a discrete option quantity 
in addition to the basic quantity of supplies or services to be 
delivered under the initial contract award;
    (b) Establish a price or specify a method of calculation which will 
make the price certain;
    (c) Be agreed to and included in the initial contract award; and
    (d) Permit the Government the right to exercise the option 
unilaterally.

Subpart 317.71--Supply and Service Acquisitions Under the 
Government Employees Training Act


317.7100  Scope of subpart.

    This subpart provides alternate methods for obtaining training 
under the Government Employees Training Act (GETA), 5 U.S.C. Chapter 
41.


317.7101  Applicable regulations.

    Basic policy, standards, and delegations of authority to approve 
training are contained in HHS Personnel Manual Instruction 410-1.


317.7102  Acquisition of training.

    (a) Off-the-shelf training, whether for individuals or for groups 
of employees, shall be acquired under the GETA by officials delegated 
authority in HHS Transmittal 95.5, Personnel Manual (3/30/95).
    (b) Training must be acquired through the contracting office if 
there are costs for training course development or for modification of 
off-the-shelf training courses.

PART 319--SMALL BUSINESS PROGRAMS

Subpart 319.2--Policies

Sec.
319.201  General policy.

[[Page 1369]]

Subpart 319.5--Set-Asides for Small Business

319.501  General.
319.505  Rejecting Small Business Administration recommendations.
319.506  Withdrawing or modifying set-asides.

Subpart 319.7--Subcontracting with Small Business, Small Disadvantaged 
Business and Women-Owned Small Business Concerns

319.705  Responsibilities of the contracting officer under the 
subcontracting assistance program.
319.705-5  Awards involving subcontracting plans.

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

Subpart 319.2--Policies


319.201  General policy.

    (b) The functional management responsibilities for the Department's 
small, small disadvantaged, and women-owned small business programs are 
delegated to the Director of the Office of Small and Disadvantaged 
Business Utilization (OSDBU).
    (d) The Head of each OPDIV shall appoint a qualified full-time 
small business specialist (SBS) in the following activities: 
Administration for Children and Families (ACF), Health Care Financing 
Administration (HCFA), Substance Abuse and Mental Health Services 
Administration (SAMHSA), Food and Drug Administration (FDA), Health 
Resources and Services Administration (HRSA), Indian Health Service 
(IHS), National Institutes of Health (NIH), Centers for Disease Control 
and Prevention (CDCP), and Program Support Center (PSC). A SBS shall 
also be appointed for the Office of the Secretary (OS). As deemed 
necessary, additional small business specialists may be appointed in 
larger contracting activities.
    (1) When the volume of contracting does not warrant assignment of a 
full-time SBS, an individual shall be appointed as the specialist on a 
part-time basis. The responsibilities of this assignment shall take 
precedence over other responsibilities. The specialist shall be 
responsible directly to the appointing authority and shall be at an 
organizational level outside the direct acquisition chain of command, 
i.e., should report directly to the head of the contracting activity 
(HCA), where appropriate.
    (2) The Director, OSDBU will exercise functional management 
authority over small business specialists regarding small, small 
disadvantaged, and women-owned small business programs. Appointments of 
SBS's shall only be made after consultation with the Director, OSDBU. A 
copy of each appointment and termination of appointment of specialists 
shall be forwarded to the Director, OSDBU.

Subpart 319.5--Set-Asides for Small Business


319.501  General.

    (c) Prior to the contracting officer's review, the SBS shall review 
each proposed acquisition to determine the feasibility of recommending 
a small business set-aside. The SBS's recommendation shall be entered 
on Form HHS-653, Small Business Set Aside Review Form, with the reasons 
for the type of set-aside recommended, or the reasons for not 
recommending a set-aside, and provided to the contracting officer. Upon 
receipt of the Form HHS-653, the contracting officer shall promptly 
concur or nonconcur with the SBS's recommendation. The contracting 
officer will make the final determination as to whether the proposed 
acquisition will be set-aside or not. If the contracting officer 
approves the SBS's set-aside recommendation, the proposed acquisition 
will be set-aside as specified. However, if the contracting officer 
disapproves the SBS's set-aside recommendation, the reasons must be 
documented on the Form HHS-653, and the form signed. (See 319.505 for 
options available to the SBS regarding the contracting officer's 
disapproval of a set-aside recommendation.) In all cases, the completed 
Form HHS-653 is to be retained by the contracting officer and placed in 
the contract file.


319.505  Rejecting Small Business Administration recommendations.

    (a) If the contracting officer rejects the SBS's recommendation for 
a set-aside and an SBA procurement center representative (PCR) is not 
assigned or available, the SBS may appeal, in writing, to the head of 
the contracting activity (HCA). The SBS shall provide the HCA all the 
pertinent information concerning the set-aside disagreement, and the 
HCA shall respond in writing within seven working days. The HCA's 
decision is final and not appealable. The decision by the HCA shall be 
attached to the Form HHS-653 and placed in the contract file. After 
receipt of a final decision by the HCA, and if the decision approves 
the action of the contracting officer, the SBS shall forward, for 
information and management purposes, complete documentation of the case 
to the OSDBU Director. Documentation transmitted shall include, as a 
minimum, a copy of the appeal memorandum submitted to the HCA, a copy 
of the IFB or RFP, a list of proposed sources, a copy of the Form HHS-
653 and attachments completed by the SBS and the contracting officer, a 
copy of the HCA's decision, and all other written material considered 
by the HCA in arriving at the decision. The SBS's transmittal 
memorandum shall contain an affirmative statement that the attachments 
constitute the complete file reviewed and considered by the HCA in 
making the final decision. If an SBA PCR is assigned or available and 
the SBS refers the case to that person, the SBA PCR may either concur 
with the decision of the contracting officer not to set-aside the 
proposed acquisition or recommend to the contracting officer that it be 
set-aside. For the SBA PCR to make a comprehensive review, at least the 
following should be provided as attachments to the Form HHS-653: the 
statement of work, evaluation criteria, Government cost estimate, 
source list including size of firms, and a copy of any justification 
for other than small business considerations that may be applicable. 
Once the case has been referred to the SBA PCR, no further appeal 
action shall be taken by the SBS. (Refer to FAR 19.505 for the 
procedures available to the SBA PCR if the contracting officer rejects 
the set-aside recommendation.)


319.506  Withdrawing or modifying set-asides.

    (d) Immediately upon notice from the contracting officer, the SBS 
shall provide telephone notification regarding all set-aside 
withdrawals to the OSDBU Director.

Subpart 319.7--Subcontracting with Small Business, Small 
Disadvantaged Business and Women-Owned Small Business Concerns


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


319.705-5  Awards involving subcontracting plans.

    (a)(3) The SBA PCR shall be allowed a period of one to five working 
days to review the contract award package, depending upon the 
circumstances and complexity of the individual acquisition.

PART 323--ENVIRONMENT, CONSERVATION, OCCUPATIONAL SAFETY, AND DRUG-
FREE WORKPLACE

Subpart 323.70--Safety and Health

Sec.
323.7000  Scope of subpart.
323.7001  Policy.
323.7002  Actions required.

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

[[Page 1370]]

Subpart 323.70--Safety and Health


323.7000  Scope of subpart.

    This subpart prescribes the use of a safety and health clause in 
contracts involving hazardous materials or operations, and provides 
procedures for administering safety and health provisions.


323.7001  Policy.

    Various statutes and regulations (e.g. Walsh-Healy Act; Service 
Contract Act) require adherence to minimum safety and health standards 
by contractors engaged in potentially hazardous work. The guidance 
contained in FAR Subpart 23.3 shall be used for hazardous materials as 
the primary reference. When the guidance is judged insufficient or does 
not meet the safety and health situation in the instant acquisition, 
this subpart shall be followed.


323.7002  Actions required.

    (a) Contracting activities. Contracting activities shall use the 
clause set forth in 352.223-70, or a clause reading substantially the 
same, in prospective contracts and subcontracts involving hazardous 
materials or operations for the following:
    (1) Services or products;
    (2) Research, development, or test projects;
    (3) Transportation of hazardous materials; and
    (4) Construction, including construction of facilities on the 
contractor's premises.
    (b) Safety officers. OPDIV safety officers shall advise and assist 
initiators of acquisition requests and contracting officers in:
    (1) Determining whether safety and health provisions should be 
included in a prospective contract;
    (2) Evaluating a prospective contractor's safety and health 
programs; and
    (3) Conducting post-award reviews and surveillance to the extent 
deemed necessary.
    (c) Initiators. Initiators of acquisition requests for items 
described in paragraph (a) of this section shall:
    (1) During the preparation of a request for contract, and in the 
solicitation, ensure that hazardous materials and operations to be used 
in the performance of the contract are clearly identified; and
    (2) During the period of performance:
    (i) Apprise the contracting office of any noncompliance with safety 
and health provisions identified in the contract; and
    (ii) Cooperate with the safety officer in conducting review and 
surveillance activities.

PART 324--PROTECTION OF PRIVACY AND FREEDOM OF INFORMATION

Subpart 324.1--Protection of Individual Privacy

Sec.
324.100  Scope of subpart.
324.102  General.
324.103  Procedures.

Subpart 324.2--Freedom of Information Act

324.202  Policy.

Subpart 324.70--Confidentiality of Information

324.7001  General.
324.7002  Policy.
324.7003  Applicability.
324.7004  Required clause.

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

Subpart 324.1--Protection of Individual Privacy


324.100  Scope of subpart.

    This subpart implements 45 CFR Part 5b, Privacy Act Regulations, 
and FAR Subpart 24.1, Protection of Individual Privacy, which 
implements the Privacy Act of 1974 (Pub. L. 93-579, December 31, 1974; 
5 U.S.C. 552a) and OMB Circular No. A-108, July 9, 1975.


324.102  General.

    (a) It is the Department's policy to protect the privacy of 
individuals to the maximum possible extent while permitting the 
exchange of records required to fulfill the Department's administrative 
and program responsibilities and its responsibilities for disclosing 
records to which the general public is entitled under the Freedom of 
Information Act (5 U.S.C. 552). The Privacy Act of 1974 and the 
Department's implementation under 45 CFR Part 5b apply ``when an agency 
provides by a contract for the operation by or on behalf of the agency 
of a system of records to accomplish any agency function * * *'' The 
key factor is whether a departmental function is involved. Therefore, 
the Privacy Act requirements apply to a departmental contract when, 
under the contract, the contractor must maintain or operate a system of 
records to accomplish a departmental function.
    (e) The program official, and, as necessary, the official 
designated as the activity's Privacy Act Coordinator and the Office of 
General Counsel, shall determine the applicability of the Act to each 
proposed acquisition. The program official is required to include a 
statement in the request for contract indicating whether the Privacy 
Act is or is not applicable to the proposed acquisition.
    (f) Whenever the contracting officer is informed that the Privacy 
Act is not applicable, but the resultant contract will involve the 
collection of individually identifiable personal data by the 
contractor, the contracting officer shall include provisions to protect 
the confidentiality of the records and the privacy of individuals 
identified in the records (see Subpart 324.70).


324.103  Procedures.

    (a) All requests for contract shall be reviewed by the contracting 
officer to determine whether the Privacy Act requirements are 
applicable. If applicable, the contracting officer shall include the 
solicitation notification and contract clause required by FAR 24.104 in 
the solicitation, and the contract clause in the resultant contract. In 
addition, the contracting officer shall ensure that the solicitation 
notification, contract clause, and other pertinent information 
specified in this subpart are included in any contract modification 
which results in the Privacy Act requirements becoming applicable to a 
contract.
    (b)(1) The contracting officer shall identify the system(s) of 
records on individuals in solicitations, contracts, and contract 
modifications to which the Privacy Act and the implementing regulations 
are applicable.
    (2) The contracting officer shall include a statement in the 
contract notifying the contractor that the contractor and its employees 
are subject to criminal penalties for violations of the Act (5 U.S.C. 
552a(i)) to the same extent as employees of the Department. The 
statement shall require that the contractor assure that each contractor 
employee knows the prescribed rules of conduct, and each contractor 
employee is aware that he/she can be subjected to criminal penalties 
for violations of the Act. The contracting officer shall provide the 
contractor with a copy of the rules of conduct and other requirements 
set forth in 45 CFR 5b.
    (c) The contracting officer shall include in the contract the 
disposition to be made of the system(s) of records on individuals upon 
completion of performance of the contract. For example, the contract 
may require the contractor to completely destroy the records, to remove 
personal identifiers, to turn the records over to the Department, or to 
keep the records but take certain measures to keep the records 
confidential and protect the individuals' privacy.
    (d) Whenever an acquisition is determined to be subject to the 
Privacy

[[Page 1371]]

Act requirements, a ``system notice,'' prepared by the program official 
and describing the Department's intent to establish a new system of 
records on individuals, to make modifications to an existing system, or 
to disclose information in regard to an existing system, is required to 
be published in the Federal Register. A copy of the ``system notice'' 
shall be attached to the request for contract or purchase request. If a 
``system notice'' is not attached, the contracting officer shall 
inquire about its status and shall obtain a copy from the program 
official for inclusion in the contract file. If a ``system notice'' has 
not been published in the Federal Register, the contracting officer may 
proceed with the acquisition but shall not award the contract until the 
``system notice'' is published, and publication is verified by the 
contracting officer.

Subpart 324.2--Freedom of Information Act


324.202  Policy.

    (a) The Department's regulation implementing the Freedom of 
Information Act (FOIA), 5 U.S.C. 552, as amended, is set forth in 45 
CFR Part 5.
    (b) The contracting officer, upon receiving a FOIA request, shall 
follow Department and operating division procedures. As necessary, 
actions should be coordinated with the cognizant Freedom of Information 
(FOI) Officer and the Business and Administrative Law Division of the 
Office of General Counsel. The contracting officer must remember that 
only the FOI Officer has the authority to release or deny release of 
records. While the contracting officer should be familiar with the 
entire FOIA regulation in 45 CFR Part 5, particular attention should be 
focused on sections 5.65 and 5.66; also of interest are sections 5.32, 
5.33, and 5.35.

Subpart 324.70--Confidentiality of Information


324.7001  General.

    In performance of certain HHS contracts, it is necessary for the 
contractor to generate data, or be furnished data by the Government, 
which is about individuals, organizations, or Federal programs. This 
subpart and the accompanying contract clause require contractors to 
prudently handle disclosure of certain types of information not subject 
to the Privacy Act or the HHS human subject regulations set forth in 45 
CFR Part 46. This subpart and contract clause address the kinds of data 
to be generated by the contractor and/or data to be furnished by the 
Government that are considered confidential and how it should be 
treated.


324.7002  Policy.

    It is the policy of HHS to protect personal interests of 
individuals, corporate interests of non-governmental organizations, and 
the capacity of the Government to provide public services when 
information from or about individuals, organizations, or Federal 
agencies is provided to or obtained by contractors in performance of 
HHS contracts. This protection depends on the contractor's recognition 
and proper handling of the information. As a result, the 
``Confidentiality of Information'' contract clause was developed.


324.7003  Applicability.

    (a) The ``Confidentiality of Information'' clause, set forth in 
352.224-70, should be used in solicitations and resultant contracts 
whenever the need exists to keep information confidential. Examples of 
situations where the clause may be appropriate include:
    (1) Studies performed by the contractor which generate information 
or involve Government-furnished information that is personally 
identifiable, such as medical records, vital statistics, surveys, and 
questionnaires;
    (2) Contracts which involve the use of salary structures, wage 
schedules, proprietary plans or processes, or confidential financial 
information of organizations other than the contractor's; and
    (3) Studies or research which may result in preliminary or 
invalidated findings which, upon disclosure to the public, might create 
erroneous conclusions which, if acted upon, could threaten public 
health or safety.
    (b) With regard to protecting individuals, this subpart and 
contract clause are not meant to regulate or control the method of 
selecting subjects and performing studies or experiments involving 
them. These matters are dealt with in the HHS regulation entitled 
``Protection of Human Subjects,'' 45 CFR Part 46. If a system of 
records under contract, or portions thereof, is determined to be 
subject to the requirements of the Privacy Act, in accordance with FAR 
24.1 and 324.1 and Title 45 CFR Part 5b, the procedures cited in those 
references are applicable and the Privacy Act contract clause shall be 
included in the contract. If the contract also involves confidential 
information, as described herein, which is not subject to the Privacy 
Act, the contract shall include the ``Confidentiality of Information'' 
clause in addition to the Privacy Act clause.


324.7004  Required clause.

    The clause set forth in 352.224-70 shall be included in any RFP and 
resultant contract(s) where it has been determined that confidentiality 
of information provisions may apply. Any RFP announcing the intent to 
include this clause in any resultant contract(s) shall indicate, as 
specifically as possible, the types of data which would be covered and 
requirements for handling the data.

PART 325--FOREIGN ACQUISITION

Subpart 325.1--Buy American Act--Supplies

Sec.
325.102  Policy.
325.108  Excepted articles, materials, and supplies.

Subpart 325.3--Balance of Payments Program

325.302  Policy.

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

Subpart 325.1--Buy American Act--Supplies


325.102  Policy.

    (b) The head of the contracting activity (not delegable) shall make 
the determinations required by FAR 25.102(a)(1) through (5) and 
25.102(b)(2).


325.108  Excepted articles, materials, and supplies.

    (b) Articles, materials, and supplies not listed in FAR 25.108(d) 
may be excepted only after a written determination has been made by the 
head of the contracting activity (not delegable). These determinations 
are required only in instances where it has been determined that only 
suppliers of foreign source end items shall be solicited. However, 
approvals and determinations covering individual acquisitions in the 
following categories may be made by the contracting officer:
    (1) Acquisition of spare and replacement parts for foreign 
manufactured items, if the acquisition must be restricted to the 
original manufacturer or its supplier; and
    (2) Acquisition of foreign drugs when it has been determined, in 
writing, by the responsible program official, that only the requested 
foreign drug will fulfill the requirement.

[[Page 1372]]

Subpart 325.3--Balance of Payments Program


325.302  Policy.

    All determinations addressed in FAR 25.302 shall be made by the 
head of the contracting activity (not delegable).

PART 328--BONDS AND INSURANCE

Subpart 328.3--Insurance

Sec.
328.301  Policy.
328.311  Solicitation provision and contract clause on liability 
insurance under cost-reimbursement contracts.
328.311-2  Agency solicitation provisions and contract clauses.

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

Subpart 328.3--Insurance


328.301   Policy.

    It is Department policy to limit the Government's reimbursement of 
its contractors' liability to third persons for claims not covered by 
insurance in cost-reimbursement contracts to the Limitations of Funds 
or Limitation of Cost clause of the contract. In addition, the amount 
of the Government's reimbursement will be limited to final judgments or 
settlements approved in writing by the Government.


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


328.311-2   Agency solicitation provisions and contract clauses.

    The contracting officer shall insert the clause at 352.228-7, 
Insurance--Liability to Third Persons, in all solicitations and 
resulting cost-reimbursement contracts, in lieu of the clause at FAR 
52.228-7 required by FAR 28.311-1.

PART 330--COST ACCOUNTING STANDARDS

Subpart 330.2--CAS Program Requirements

Sec.
330.201  Contract requirements.
330.201-5  Waiver.

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

Subpart 330.2--CAS Program Requirements


330.201   Contract requirements.


330.201-5   Waiver.

    (c) The requirements of FAR 30.201-5 shall be exercised by the 
Director, Office of Acquisition Management (DOAM). Requests for waivers 
shall be forwarded through normal acquisition channels to the DOAM.

PART 332--CONTRACT FINANCING

Subpart 332.4--Advance Payments

Sec.
332.402  General.
332.403  Applicability.
332.407  Interest.
332.409  Contracting officer action.
332.409-1  Recommendation for approval.

Subpart 332.5--Progress Payments Based on Cost

332.501  General.
332.501-2  Unusual progress payments.

Subpart 332.7--Contract Funding

332.702  Policy.
332.703  Contract funding requirements.
332.703-1  General.
332.704  Limitations of cost or funds.
332.705  Contract clauses.
332.705-2  Clauses for limitation of costs or funds.

Subpart 332.9--Prompt Payment

332.902  Definitions.

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

Subpart 332.4--Advance Payments


332.402   General.

    (e) The determination that the making of an advance payment is in 
the public interest (see FAR 32.402(c)(1)(iii)(A)) shall be made by the 
respective chief of the contracting office (CCO) (not delegable).


332.403   Applicability.

    All contracts for research work with educational institutions 
located in the United States shall provide for financing by use of 
advance payments, in reasonable amounts, unless otherwise prohibited by 
law.


332.407   Interest.

    (d) The HCA (not delegable) is authorized to make the 
determinations in FAR 32.407(d) and as follows. In addition to the 
interest-free advance payments for the types of contracts listed in FAR 
32.407(d), advance payments without interest may be approved for 
nonprofit contracts which are without fee with educational institutions 
and other nonprofit organizations, whether public or private, which are 
for the performance of work involving health services, educational 
programs, or social service programs, including, but not limited to, 
programs such as:
    (1) Community health representative services for an Indian Tribe or 
Band;
    (2) Narcotic addict rehabilitative services;
    (3) Comprehensive health care service program for Model 
Neighborhood programs;
    (4) Planning and development of health maintenance organizations;
    (5) Dissemination of information derived from educational research;
    (6) Surveys or demonstrations in the field of education;
    (7) Producing or distributing educational media for handicapped 
persons including captioned films for the hearing impaired;
    (8) Operation of language or area centers;
    (9) Conduct of biomedical research and support services;
    (10) Research surveys or demonstrations involving the training and 
placement of health manpower and health professionals, and 
dissemination of related information; and
    (11) Surveys or demonstrations in the field of social service.


332.409   Contracting officer action.


332.409-1   Recommendation for approval.

    The information in FAR 32.409-1 (or FAR 32.409-2) shall be 
transmitted to the HCA in the form of a briefing memorandum.

Subpart 332.5--Progress Payments Based on Cost


332.501   General.


332.501-2   Unusual progress payments.

    (a)(3) The approval of an unusual progress payment shall be made by 
the head of the contracting activity (HCA) (not delegable).

Subpart 332.7--Contract Funding


332.702   Policy.

    An incrementally funded contract is a contract in which the total 
work effort is to be performed over multiple time periods and funds are 
allotted to cover discernible phases or increments of performance.
    (a) Incremental funding may be applied to cost-reimbursement type 
contracts for the acquisition of research and development and other 
types of nonpersonal, nonseverable services. It shall not be applied to 
contracts for construction services, architect-engineer services, or 
severable services. Incremental funding allows nonseverable cost-
reimbursement contracts, awarded for more than one year, to be funded 
from succeeding fiscal years.
    (b) It is departmental policy that contracts for projects of 
multiple year duration be fully funded, whenever possible, to cover the 
entire project. However, incrementally funded contracts may be used 
when:
    (1) A project, which is part of an approved program, is anticipated 
to be of multiple year duration, but funds are

[[Page 1373]]

not currently available to cover the entire project;
    (2) The project represents a valid need for the fiscal year in 
which the contract is awarded and of the succeeding fiscal years of the 
project's duration, during which additional funds may be obligated by 
increasing the allotment to the contract;
    (3) The project is so significant to the approved program that 
there is reasonable assurance that it will command a high priority for 
proposed appropriations to cover the entire multiple year duration; and
    (4) The statement of work is specific and is defined by separate 
phases or increments so that, at the completion of each, progress can 
be effectively measured.


332.703   Contract funding requirements.


332.703-1   General.

    (b) The following general guidelines are applicable to 
incrementally funded contracts:
    (1) The estimated total cost of the project (all planned phases or 
increments) is to be taken into consideration when determining the 
requirements which must be met before entering into the contract; i.e., 
justification for noncompetitive acquisition, approval or award, etc.
    (2) The RFP and resultant contract are to include a statement of 
work which describes the total project covering the proposed multiple 
year period of performance and indicating timetables consistent with 
planned phases or increments and corresponding allotments of funds.
    (3) Offerors will be expected to respond to RFPs with technical and 
cost proposals for the entire project indicating distinct break-outs of 
the planned phases or increments, and the multiple year period of 
performance.
    (4) Negotiations will be conducted based upon the total project, 
including all planned phases or increments, and the multiple year 
period of performance.
    (5) Sufficient funds must be obligated under the basic contract to 
cover no less than the first year of performance, unless the 
contracting officer determines it is advantageous to the Government to 
fund the contract for a lesser period. In that event, the contracting 
officer shall ensure that the obligated funds are sufficient to cover a 
complete phase or increment of performance representing a material and 
measurable part of the total project, and the contract period shall be 
reduced accordingly.
    (6) Because of the magnitude of the scope of work and multiple year 
period of performance under an incrementally funded contract, there is 
a critical need for careful program planning. Program planning must 
provide for appropriate surveillance of the contractor's performance 
and adequate controls to ensure that projected funding will not impinge 
on the program office's ability to support, within anticipated 
appropriations, other equally important contract or grant programs.
    (7) An incrementally funded contract must contain precise 
requirements for progress reports to enable the project officer to 
effectively monitor the contract. The project officer should be 
required to prepare periodic performance evaluation reports to 
facilitate the program office's ultimate decision to allot additional 
funds under the contract.


332.704   Limitation of cost or funds.

    For detailed instruction regarding administrative actions in 
connection with anticipated cost overruns, see Subpart 342.71.


332.705   Contract clauses.


332.705-2   Clauses for limitation of costs or funds.

    (c)(1) When using the Limitation of Funds clause (FAR 52.232-22) in 
the solicitation and resultant incrementally funded contract, the 
contracting officer shall insert the following legend between the 
clause title and the clause text:

(This clause supersedes the Limitation of Cost clause found in the 
General Provisions of this contract)

    (2) The contracting officer shall also include a clause reading 
substantially as that shown in 352.232-74 in the Special Provisions of 
the resultant incrementally funded contract.
    (3) The request for proposals must inform prospective offerors of 
the Department's intention to enter into an incrementally funded 
contract. Therefore, the contracting officer shall include the 
provision at 352.232-75 in the request for proposals whenever the use 
of incremental funding is contemplated.

Subpart 332.9--Prompt Payment


332.902   Definitions.

    Fiscal office means the office responsible for: determining whether 
interest penalties are due a contractor and, if so, the amount; 
determining whether an invoice offers a financially advantageous 
discount; maintaining records for and submission of prompt payment 
reports to the Deputy Assistant Secretary, Finance (DASF), ASMB, OS; 
and processing payments to the Treasury Department to allow for payment 
to a contractor when due. The fiscal office shall fulfill the roles of 
the ``designated billing office'' and the ``designated payment 
office.''

PART 333--PROTESTS, DISPUTES, AND APPEALS

Subpart 333.1--Protests

Sec.
333.102  General.
333.103  Protests to the agency.
333.104  Protests to GAO.

Subpart 333.2--Disputes and Appeals

333.203  Applicability.
333.209  Suspected fraudulent claims.
333.211  Contracting officer's decision.
333.212  Contracting officer's duties upon appeal.
333.212-70  Formats.
333.213  Obligation to continue performance.

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

Subpart 333.1--Protests


333.102   General.

    (a) Contracting officers shall consider all protests or objections 
regarding the award of a contract, whether submitted before or after 
award, provided the protests are filed in a timely manner and are 
submitted by interested parties. To be considered timely, protests 
based on alleged improprieties in any type of solicitation which are 
apparent before bid opening or the closing date for receipt of 
proposals shall be filed prior to bid opening or the closing date for 
receipt of proposals. In the case of negotiated acquisitions, alleged 
improprieties which do not exist in initial solicitations, but which 
are subsequently incorporated by amendment, must be protested not later 
than the next closing date for receipt of proposals following the 
incorporation. In other cases, protests shall be filed not later than 
ten (10) calendar days after the basis for protest is known or should 
have been known, whichever is earlier. Provided a protest has been 
filed initially with the contracting officer, any subsequent protest to 
the Secretary or GAO filed within ten (10) calendar days of 
notification of adverse action will be considered. Written confirmation 
of all oral protests shall be requested from protestants and must be 
timely filed.
    (d)(1) The Office of Acquisition Management (OAM) has been 
designated as the headquarters office to serve as the liaison for 
protests lodged with GAO. Within the OAM, the Departmental Protest 
Control Officer (DPCO) has been designated as the individual to be 
contacted by GAO.

[[Page 1374]]

    (3) Each contracting activity shall designate a protest control 
officer to serve as an advisor to the contracting officer and to 
monitor protests from the time of initial notification until the 
protest has been resolved. The protest control officer should be a 
senior acquisition specialist in the headquarters acquisition staff 
office. In addition, contracting activities should designate similar 
officials within their principal components to the extent practicable 
and feasible. A copy of each appointment and termination of appointment 
of protest control officers shall be forwarded to the Director, OAM.


333.103   Protests to the agency.

    (a)(2) The contracting officer is authorized to make the 
determination, using the criteria in FAR 33.103(a), to award a contract 
notwithstanding the protest after obtaining the concurrence of the 
contracting activity's protest control officer and the Office of 
General Council--Business and Administrative Law Division (OGC-BAL). If 
the protest has been lodged with the Secretary, is addressed to the 
Secretary, or requests referral to the Secretary, approval shall also 
be obtained from the Director, OAM before making the award.
    (3) The contracting officer shall require written confirmation of 
any oral protest. To be considered timely, the written confirmation 
must be filed in accordance with the applicable provisions in 
333.102(a). In the following cases, written protests received by the 
contracting officer before award shall be forwarded, through 
acquisition channels, to the DPCO for processing. Files concerning 
these protests shall be submitted in duplicate, by the most expeditious 
means, marked ``IMMEDIATE ACTION--PROTEST BEFORE AWARD'', and contain 
the documentation referenced in 333.104(a)(3).
    (i) The protestant requests referral to the Secretary of Health and 
Human Services;
    (ii) The protest is known to have been lodged with the Comptroller 
General or the Secretary, or is addressed to either; or
    (iii) The contracting officer entertains some doubt as to the 
proper action regarding the protest or believes it to be in the best 
interest of the Government that the protest be considered by the 
Secretary or the Comptroller General. Otherwise, protests addressed to 
the contracting officer may be answered by the contracting officer, 
with the concurrence of the contracting activity's protest control 
officer and OGC-BAL.
    (4) Protests received after award shall be treated as indicated in 
333.103(a)(3).


333.104   Protests to GAO.

    (a) General. (3) Protests lodged with GAO, whether before or after 
award, shall be processed by the DPCO. Protest files shall be prepared 
by the contracting office and distributed as follows: two copies to the 
DPCO, one copy to the contracting activity's protest control officer, 
and one copy to OGC-BAL. Files shall include the following 
documentation:
    (i) The contracting officer's statement of facts and circumstances, 
including a discussion of the merits of the protest, and conclusions 
and recommendations, including documentary evidence on which they are 
based.
    (ii) A copy of the IFB or RFP.
    (iii) A copy of the abstract of bids or proposals.
    (iv) A copy of the bid or proposal of the successful offeror to 
whom award has been made or is proposed to be made.
    (v) A copy of the bid or proposal of the protestant, if any.
    (vi) The current status of award. When award has been made, this 
shall include whether performance has commenced, shipment or delivery 
has been made, or a stop work order has been issued.
    (vii) A copy of any mutual agreement to suspend work on a no-cost 
basis, when appropriate (see FAR 33.104(c)(4)).
    (viii) Copies of the notice of protest given offerors and other 
parties when the notice is appropriate (see FAR 33.104 (a)(4)).
    (ix) A copy of the technical evaluation report, when applicable, 
and a copy of each evaluator's rating for all proposals.
    (x) A copy of the negotiation memorandum, when applicable.
    (xi) The name and telephone number of the person in the contracting 
office who may be contacted for information relevant to the protest.
    (xii) A copy of the competitive range memorandum. and
    (xiii) Any document which is referred to in the contracting 
officer's statement of facts. The files shall be assembled in an 
orderly manner and shall include an index of enclosures.
    (4) The contracting officer is responsible for making the necessary 
notifications referenced in FAR 33.104 (a)(4). Copies of the views of 
interested parties submitted in response to the notification shall be 
immediately provided to the DPCO upon receipt by the contracting 
officer.
    (5) The contracting officer shall furnish the protest file 
containing the documentation specified in 333.104(a)(3), except item 
(a)(3)(i), to the DPCO within fourteen (14) calendar days from receipt 
of the protest. The contracting officer shall provide the documentation 
required by item (a)(3)(i) of 333.104 to the DPCO within twenty-one 
(21) calendar days from receipt of the protest. Since the statute 
allows only a short time period in which to respond to protests lodged 
with GAO, the contracting officer shall handle each protest on a 
priority basis. The DPCO shall prepare the report and submit it and the 
protest file to GAO in accordance with FAR 33.104(a)(5).
    (6)(i) Take DPCO shall take the necessary actions specified in FAR 
33.104(a)(6)(i) after receiving all the documentation required by 
333.104(a)(3) from the contracting officer.
    (ii) Since the DPCO will furnish the report to GAO, the protestor, 
and other interested parties, comments on the report from the protestor 
and other interested parties will be requested to be sent to the DPCO.
    (7) The Office of Acquisition Management (OAM) has been designated 
as the headquarters office, and the DPCO as the individual, that GAO 
should contract concerning all protests lodged with GAO.
    (b) Protests before award. (1) To make an award notwithstanding a 
protest, the contracting officer shall prepare a finding using the 
criteria in FAR 33.104(b)(1), have it executed by the head of the 
contracting activity (HCA)(not delegable), and forward it, along with a 
written request for approval to make the award, to the Director, OAM.
    (2) If the request to make an award notwithstanding the protest is 
approved by the Director, OAM, the DPCO shall notify GAO. Whether the 
request is approved or not, the DPCO shall telephonically notify the 
contracting activity's protest control officer of the decision of the 
Director, OAM, and the contracting activity's protest control officer 
shall immediately notify the contracting officer. The DPCO shall 
confirm the decision by memorandum to the contracting activity's 
protest control officer.
    (4) The contracting officer shall prepare the protest file in 
accordance with 333.104(a)(3), and forward it, in duplicate, to the 
DPCO (see 333.104(a)(5)).
    (c) Protests after award. (2) If the contracting officer believes 
performance should be allowed to continue notwithstanding the protest, 
a finding shall be prepared by the contracting officer, executed by the 
HCA (not

[[Page 1375]]

delegable), and forwarded, along with a written request for approval, 
to the Director, OAM. The same procedures for notification stated in 
333.104(b)(2) shall be followed.
    (6) The contracting officer shall prepare the protest file in 
accordance with 333.104(a)(3), and forward it, in duplicate, to the 
DPCO (see 333.104 (a)(5)).
    (d) Findings and notice. The contracting officer shall perform the 
actions required by FAR 33.104 (d); however, notification to GAO shall 
be made by the DPCO.
    (g) Notice to GAO. The Deputy Assistant Secretary for Grants and 
Acquisition Management shall be the official to comply with the 
requirements of FAR 33.104 (g).
    (i) Express option. When GAO invokes the express option, the 
contracting officer shall prepare the complete protest file as 
described in 333.104 (a)(3), to include item (a)(3)(i), and deliver it 
(hand-carry, if necessary) to the DPCO in time to meet the submittal 
date established by GAO. The DPCO will notify the contracting officer 
of the submittal date after GAO has finalized its requirements.

Subpart 333.2--Disputes and Appeals


333.203  Applicability.

    (c) The Armed Services Board of Contract Appeals (ASBCA) has been 
designated by the Secretary as the authorized ``Board'' to hear and 
determine disputes for the Department.


333.209  Suspected fraudulent claims.

    The contracting officer shall submit any instance of a contractor's 
suspected fraudulent claim to the Office of the Inspector General for 
investigation.


333.211  Contracting officer's decision.

    (a)(2) The contracting officer shall refer a proposed final 
decision to the Office of General Counsel, Business and Administrative 
Law Division (OGC-BAL), for advice as to the legal sufficiency and 
format before sending the final decision to the contractor. The 
contracting officer shall provide OGC-BAL with the pertinent documents 
with the submission of each proposed final decision.
    (a)(4)(v) When using the paragraph in FAR 33.211 (a)(4)(v), the 
contracting officer shall insert the words ``Armed Services'' before 
each mention of the term ``Board of Contract Appeals''.
    (h) At any time within the period of appeal, the contracting 
officer may modify or withdraw his/her final decision. If an appeal 
from the final decision has been taken to the ASBCA, the contracting 
officer will forward his/her recommended action to OGC-BAL with the 
supplement to the contract file which supports the recommended 
correction or amendment.


333.212  Contracting officer's duties upon appeal.

    (a) Appeals shall be governed by the rules set forth in the ``Rules 
of the Armed Services Board of Contract Appeals'', or by the rules 
established by the U.S. Court of Federal Claims, as appropriate.
    (b) OGC-BAL is designated as the Government Trial Attorney to 
represent the Government in the defense of appeals before the ASBCA. A 
decision by the ASBCA will be transmitted by the Government Trial 
Attorney to the appropriate contracting officer for compliance in 
accordance with the ASBCA's decision.
    (c) If an appeal is filed with the ASBCA, the contracting officer 
shall assemble a file within 30 days of receipt of an appeal, or advice 
that an appeal has been filed, that consists of all documents pertinent 
to the appeal, including:
    (1) The decision and findings of fact from which the appeal is 
taken;
    (2) The contract, including specifications and pertinent 
modifications, plans and drawings;
    (3) All correspondence between the parties pertinent to the appeal, 
including the letter or letters of claim in response to which the 
decision was issued;
    (4) Transcripts of any testimony taken during the course of 
proceedings, and affidavits or statements of any witness on the matter 
in dispute made prior to the filing of the notice of appeal with the 
Board; and
    (5) Any additional information considered pertinent. The 
contracting officer shall furnish the appeal file to the Government 
Trial Attorney for review and approval. After approval, the contracting 
officer shall prepare four copies of the file, one for the ASBCA, one 
for the appellant, one for the Government Trial Attorney, and one for 
the contracting office.
    (d) At all times after the filing of an appeal, the contracting 
officer shall render whatever assistance is requested by the Government 
Trial Attorney. When an appeal is set for hearing, the concerned 
contracting officer, acting under the guidance of the Government Trial 
Attorney, shall be responsible for arranging for the presence of 
Government witnesses and specified physical and documentary evidence at 
both the pre-hearing conference and hearing.
    (e) If a contractor which has filed an appeal with the ASBCA elects 
to accept fully the decision from which the appeal was taken, or any 
modification to it, and gives written notification of acceptance to the 
Government Trial Attorney or the concerned contracting officer, the 
Government Trial Attorney will notify the ASBCA of the disposition of 
the dispute in accordance with Rule 27 of the ASBCA.
    (f) If the contractor has elected to appeal to the U.S. Court of 
Federal Claims, the U.S. Department of Justice will represent the 
Department. However, the contracting officer shall still coordinate all 
actions through OGC-BAL.


333.212-70  Formats.

    (a) The following format is suggested for use in transmitting 
appeal files to the ASBCA:

Your reference: ____________-------------------------------------------
                (Docket No.)
(Name)

Recorder, Armed Services Board of Contract Appeals
Skyline Six
5109 Leesburg Pike
Falls Church, Virginia 22041

    Dear (Name):
    Transmitted herewith are documents relative to the appeal under 
Contract No. ____________ with the (name of contractor) in 
accordance with the procedures under Rule 4.
    The Government Trial Attorney for this case is (Insert Division 
of Business and Administrative Law, Office of General Counsel, 
Department of Health and Human Services, 330 Independence Avenue, 
S.W., Washington, D.C. 20201).
    The request for payment of charges resulting from the processing 
of this appeal should be addressed to:
----------------------------------------------------------------------
(Insert name and address of cognizant finance office.)
----------------------------------------------------------------------
      Sincerely yours,
      Contracting Officer
    Enclosures

    (b) The following format is suggested for use in notifying the 
appellant that the appeal file was submitted to the ASBCA:

(Contractor Address)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Dear ____________:-----------------------------------------------------
    An appeal file has been compiled relative to the appeal under 
Contract No. ________, and has been submitted to the Armed Services 
Board of Contract Appeals (ASBCA). The enclosed duplicate of the 
appeal file is identical to that submitted to the Board, except that 
contract documents which you already have been excluded. You may 
furnish or suggest any additional information deemed pertinent to 
the appeal to the Armed

[[Page 1376]]

Services Board of Contract Appeals according to their rules.
    The ASBCA will provide you with further information concerning 
this appeal.
      Sincerely yours,
      Contracting Officer
    Enclosure


333.213  Obligation to continue performance.

    (a) The Disputes clause at FAR 52.233-1 shall be used without the 
use of Alternate I. However, if the contracting officer determines that 
the Government's interest would be better served by use of paragraph 
(i) in Alternate I, he/she must request approval for its use from the 
chief of the contracting office.

PART 334--MAJOR SYSTEM ACQUISITION

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


334.003  Agency head responsibilities.

    The Department's implementation of OMB Circular No. A-109 may be 
found in Chapter 1-150 of the General Administration Manual.

PART 335--RESEARCH AND DEVELOPMENT CONTRACTING

Sec.
335.070  Cost-sharing.
335.070-1  Policy.
335.070-2  Amount of cost-sharing.
335.070-3  Method of cost-sharing.
335.070-4  Contract award.
335.071  Special determinations and findings affecting research and 
development contracting.

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

335.070  Cost-sharing.


335.070-1  Policy.

    (a) The use of cost-sharing type contracts should be encouraged to 
contribute to the cost of performing research where there is a 
probability that the contractor will receive present or future benefits 
from participation, such as, increased technical know-how, training to 
employees, acquisition of equipment, use of background knowledge in 
future contracts, etc. Cost-sharing is intended to serve the mutual 
interests of the Government and the performing organization by helping 
to assure efficient utilization of the resources available for the 
conduct of research projects and by promoting sound planning and 
prudent fiscal policies by the performing organization. Encouragement 
should be given to organizations to contribute to the cost of 
performing research under contracts unless the contracting officer 
determines that a request for cost-sharing would not be appropriate 
because of the following circumstances:
    (1) The particular research objective or scope of effort for the 
project is specified by the Government rather than proposed by the 
performing organization. This would usually include any formal 
Government request for proposals for a specific project.
    (2) The research effort has only minor relevance to the non-Federal 
activities of the performing organization, and the organization is 
proposing to undertake the research primarily as a service to the 
Government.
    (3) The organization has little or no non-Federal sources or funds 
from which to make a cost contribution. Cost-sharing should generally 
not be requested if cost-sharing would require the Government to 
provide funds through some other means (such as fees) to enable the 
organization to cost-share. It should be recognized that those 
organizations which are predominantly engaged in research and 
development and have little or no production or other service 
activities may not be in a favorable position to make a cost 
contribution.
    (b) The responsibility for negotiating cost-sharing is that of the 
contracting office. Each research contract file should show whether the 
contracting officer considered cost-sharing appropriate for that 
particular contract and in what amount. If cost-sharing was not 
considered appropriate, the file must indicate the factual basis for 
that decision, e.g., ``Because the contractor will derive no benefits 
from this award that can be applied to its commercial activities, cost-
sharing is not considered appropriate.'' The contracting officer may 
wish to coordinate with the project officer before documenting this 
decision.
    (c) If the contracting officer considers cost-sharing to be 
appropriate for a research contract and the contractor refuses to 
accept this type of contract, the award may be made without cost-
sharing, if the contracting officer concludes that payment of the full 
cost of the research effort is necessary in order to obtain the 
services of that particular contractor.


335.070-2  Amount of cost-sharing.

    When cost-sharing is determined to be appropriate, the following 
guidelines shall be utilized in determining the amount of cost 
participation by the contractor.
    (a) The amount of cost participation should depend to a large 
extent on whether the research effort or results are likely to enhance 
the performing organization's capability, expertise, or competitive 
position, and the value of this enhancement to the performing 
organization. It should be recognized that those organizations which 
are predominantly engaged in research and development have little or no 
production or other service activities and may not be in a favorable 
position to derive a monetary benefit from their research under Federal 
agreements. Therefore, contractor cost participation could reasonably 
range from as little as 1 percent or less of the total project cost, to 
more than 50 percent of the total project cost. Ultimately, the 
contracting officer should bear in mind that cost-sharing is a 
negotiable item. As such, the amount of cost-sharing should be 
proportional to the anticipated value of the contractor's gain.
    (b) If the performing organization will not acquire title or the 
right to use inventions, patents, or technical information resulting 
from the research project, it would generally be appropriate to obtain 
less cost-sharing than in cases in which the performer acquires these 
rights.
    (c) A fee or profit will usually not be paid to the performing 
organization if the organization is to contribute to the cost of the 
research effort, but the amount of cost-sharing may be reduced to 
reflect the fact that the organization is foregoing its normal fee or 
profit in the research. However, if the research is expected to be of 
only minor value to the performing organization and if cost-sharing is 
not required by statute, it may be appropriate for the performer to 
make a contribution in the form of a reduced fee or profit rather than 
sharing costs of the project.
    (d) The organization's participation may be considered over the 
total term of the project so that a relatively high contribution in one 
year may be offset by a relatively low contribution in another.
    (e) A relatively low degree of cost-sharing may be appropriate if, 
in the view of the operating divisions or their subordinate elements, 
an area of research requires special stimulus in the national interest.


335.070-3  Method of cost-sharing.

    Cost-sharing on individual contracts may be accomplished either by 
a contribution of part or all of one or more elements of allowable cost 
of the work being performed, or by a fixed amount or stated percentage 
of the total allowable costs of the project. Costs so contributed may 
not be charged to the Government under any other grant or contract 
(including allocations to other grants or contracts as part of any

[[Page 1377]]

independent research and development program).


335.070-4  Contract award.

    In consonance with the Department's objectives of competition and 
support of the small business program, award of contracts should not be 
made solely on the basis of ability or willingness to cost-share. 
Awards should be made primarily on the contractor's competence and only 
after adequate competition has been obtained among large and small 
business organizations whenever possible. The offeror's willingness to 
share costs should not be considered in the technical evaluation 
process but as a business consideration, which is secondary to 
selecting the best qualified source.


335.071  Special determinations and findings affecting research and 
development contracting.

    OPDIV heads for health agencies shall sign individual and class 
determinations and findings for:
    (a) Acquisition or construction of equipment or facilities on 
property not owned by the United States pursuant to 42 U.S.C. 
241(a)(7); and
    (b) Use of an indemnification provision in a research contract 
pursuant to 42 U.S.C. 241(a)(7).

PART 342--CONTRACT ADMINISTRATION

Subpart 342.7--Indirect Cost Rates

342.705  Final indirect cost rates.

Subpart 342.70--Contract Monitoring

342.7001  Purpose.
342.7002  Contract monitoring responsibilities.
342.7003  Withholding of contract payments.
342.7003-1  Policy.
342.7003-2  Procedures.
342.7003-3  Withholding payments.

Subpart 342.71--Administrative Actions for Cost Overruns

342.7001  Scope of subpart.
342.7101  Contract administration.
342.7101-1  General.
342.7101-2  Procedures.
342.7102  Contract modifications.

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

Subpart 342.7--Indirect Cost Rates


342.705  Final indirect cost rates.

    The Director, Division of Cost Allocation of the Program Support 
Center within the servicing HHS regional office has been delegated the 
authority to establish indirect cost rates, research patient care 
rates, and, as necessary, fringe benefit, computer, and other special 
costing rates for use in contracts and grants awarded to State and 
local governments, colleges and universities, hospitals, and other 
nonprofit organizations.

Subpart 342.70--Contract Monitoring


342.7001  Purpose.

    Contract monitoring is an essential element of contract 
administration and the acquisition process. This subpart describes the 
Department's operating concepts regarding contract monitoring, 
performed jointly by the project officer and the contracting officer, 
to ensure that the required monitoring is performed, timely remedial 
action is taken when necessary, and a determination is made that 
contract objectives have been met.


342.7002  Contract monitoring responsibilities.

    (a) Upon execution of the contract, the mutual obligations of the 
Government and the contractor are established by, and limited to, the 
written stipulations in the contract. Unless authorized by the 
contracting officer, HHS personnel shall not direct or request the 
contractor to assume any obligation or take any actions not 
specifically required by the contract. Only the contracting officer may 
impose a requirement which will result in a change to the contract. All 
contract changes must be directed in writing or confirmed in writing by 
the contracting officer.
    (b) The contracting officer is responsible for assuring compliance 
with all terms of the contract, especially the statutory, legal, 
business, and regulatory provisions. Whether or not a postaward 
conference is held, the contracting officer shall inform the contractor 
by letter (if not already stipulated by contract provisions) of the 
authorities and responsibilities of the Government personnel with whom 
the contractor will be dealing throughout the life of the contract.
    (c) The contracting officer must depend on program, technical, and 
other personnel for assistance and advice in monitoring the 
contractor's performance, and in other areas of postaward 
administration. The contracting officer must assure that 
responsibilities assigned to these personnel are understood and carried 
out. The individual roles and corresponding responsibilities typically 
involve, but are not limited to, the following:
    (1) The role of program and technical personnel in monitoring the 
contract to assist or advise the contracting officer (or act as his/her 
representative when so designated by the contracting officer) in 
activities such as:
    (i) Providing technical monitoring during contract performance, and 
issuing letters to the contractor and contracting officer relating to 
delivery, acceptance, or rejection in accordance with the terms of the 
contract;
    (ii) Assessing contractor performance, including inspection and 
testing of products and evaluation of reports and data;
    (iii) Recommending necessary changes to the schedule of work and 
period of performance in order to accomplish the objectives of the 
contract. This shall be accomplished by a written request to the 
contracting officer, together with an appropriate justification and 
funds availability citation;
    (iv) Reviewing invoices/vouchers and recommending approval/
disapproval action by the contracting officer, to include comments 
regarding anything unusual discovered in the review;
    (v) Reviewing and recommending approval or disapproval of 
subcontractors, overtime, travel, and key personnel changes; and
    (vi) Participating, as necessary, in various phases of the contract 
closeout process.
    (2) The role of the project officer in performing required aspects 
of the contract monitoring process. In addition to those applicable 
activities set forth in paragraph (c)(1) of this section, the project 
officer shall:
    (i) Submit periodic reports to the contracting officer that 
concisely explain the status of the contract, and include recommended 
actions for any problems reported. Provide the contracting officer with 
written notification of evaluation and approval/disapproval of contract 
deliverables and of completion of tasks or phases. The contracting 
officer will, in turn, provide the contractor with written notification 
of approval or disapproval unless the responsibility has been delegated 
by the contracting officer, in which case the person responsible for 
such action will notify the contractor and provide a copy to the 
contracting officer for inclusion in the contract file;
    (ii) Monitor the technical aspects of the contractor's business and 
technical progress, identify existing and potential problems that 
threaten performance, and immediately inform the contracting officer of 
deviations from contract objectives, or from any technical or delivery 
requirements, so that remedial measures may be instituted accordingly;
    (iii) Provide immediate notification to the head of the program 
office responsible for the program whenever it is determined that 
program objectives are not being met, together with specific

[[Page 1378]]

recommendations of action to be taken. A copy of the project officer's 
report and recommendation shall be transmitted to the contracting 
officer for appropriate action;
    (iv) Submit, within 120 days after contract completion, a final 
assessment report to the contracting officer. The report should include 
analysis of the contractor's performance, including the contract and 
program objectives achieved and misses. A copy of the final assessment 
report shall be forwarded to the head of the program office responsible 
for the program for management review and follow-up, as necessary; and
    (v) Accompany and/or provide, when requested, technical support to 
the HHS auditor in the conduct of floor checks.
    (3) The role of the contract administrator, auditor, cost analyst, 
and property administrator in assisting or advising the contracting 
officer in postaward administration activities such as:
    (i) Evaluation of contractor systems and procedures, to include 
accounting policies and procedures, purchasing policies and practices, 
property accounting and control, wage and salary plans and rate 
structures, personnel policies and practices, etc.;
    (ii) Processing of disputes under the Disputes clause and any 
resultant appeals;
    (iii) Modification or termination of the contract; and
    (iv) Determination of the allowability of cost charges to incentive 
or cost-reimbursement type contracts and progress payments under fixed-
price contracts. This is especially important when award is made to new 
organizations or those with financial weaknesses.
    (d) The contracting officer is responsible for assuring that 
contractor performance and contract monitoring are carried out in 
conformance with contract provisions. If performance is not 
satisfactory or if problems are anticipated, it is essential that the 
contracting officer take immediate action to protect the Government's 
rights under the contract. The contracting officer shall notify his/her 
immediate supervisor of problems that cannot be resolved within 
contract limitations and whenever contract or program objectives are 
not met. The notification shall include a statement of action being 
take by the contracting officer.


342.7003  Withholding of contract payments.


342.7003-1  Policy.

    (a) All solicitations and resultant contracts shall contain a 
withholding of contract payments clause and an excusable delays clause, 
or a clause which incorporates the definition of excusable delays.
    (b) The transmittal letter used to convey the contract to each 
contractor shall contain a notice which highlights the contractor's 
agreement with the withholding of contract payments clause.
    (c) No contract payment shall be made when any report required to 
be submitted by the contractor is overdue, or the contractor fails to 
perform or deliver work or services as required by the contract.
    (d) The contracting officer shall issue a ten-day cure notice or 
initiate appropriate termination action for any failure in the 
contractor's performance as stated in the preceding paragraph (c).


342.7003-2  Procedures.

    (a) The contracting officer is responsible for initiating immediate 
action to protect the Government's rights whenever the contractor fails 
to comply with either the delivery or reporting provisions of the 
contract. Compliance with the reporting provisions includes those 
reports to be submitted directly to the payment office. If such a 
report is not submitted on time, the contracting officer is to be 
notified promptly by the payment officer.
    (b) When the contract contains a termination for default clause, 
the contractor's failure to either submit any required report when due 
or perform or deliver services or work when required by the contract is 
to be considered a default in performance. In either circumstance, the 
contracting officer is to immediately issue a formal ten-day cure 
notice pursuant to the default clause. The cure notice is to follow the 
format prescribed in FAR 49.607 and is to include a statement to the 
effect that contract payments will be withheld if the default is not 
cured or is not determined to be excusable.
    (1) If the default is cured or is determined to be excusable, the 
contracting officer is not to initiate the withholding action.
    (2) If the default is not determined to be excusable or a response 
is not received within the allotted time, the contracting officer is to 
initiate withholding action on all contract payments and is to 
determine whether termination for default or other action would be in 
the best interest of the Government.
    (c) When the contract does not contain a termination for default 
clause, the contractor's failure to either submit any required report 
when due or perform or deliver services or work when required by the 
contract is to be considered a failure to perform. In either 
circumstance, the contracting officer is to immediately issue a written 
notice to the contractor specifying the failure and providing a period 
of ten days, or longer period as determined necessary by the 
contracting officer, in which the contractor is to cure the failure or 
establish an excusable delay. The contracting officer is to include a 
statement in the written notice to the effect that contract payments 
will be withheld if the failure is not cured or is not determined to be 
excusable.
    (1) If the failure is cured or is determined to be excusable, the 
contracting officer is not to initiate the withholding action.
    (2) If the failure is not determined to be excusable or a response 
is not received within the allotted time, the contracting officer is to 
initiate withholding action on all contract payments and is to 
determine whether termination for convenience or other action would be 
in the best interest of the Government.
    (d) The contracting officer should consult FAR Subpart 49.4 for 
further guidance before taking any of the actions described in this 
section.


342.7003-3  Withholding payments.

    (a) When making the determination that contract payments should be 
withheld in accordance with the Withholding of Contract Payments 
clause, the contracting officer is to immediately notify the servicing 
finance office in writing of the determination to suspend payments. The 
notice of suspension is to contain all elements of information required 
by the payment office to properly identify the contract and the 
applicable accounts involved.
    (b) The contracting officer is to immediately notify the contractor 
in writing that payments have been suspended until the default or 
failure is cured.
    (c) When the contractor cures the default or failure, the 
contracting officer is to immediately notify, in writing, all 
recipients of the notice of suspension that the suspension is to be 
lifted and contract payments are to be resumed.
    (d) When exercising actions regarding the withholding of payment 
procedures, the contracting officer must be careful not to waive any of 
the Government's rights when corresponding with the

[[Page 1379]]

contractor or when taking any other actions.

Subpart 342.71--Administrative Actions for Cost Overruns


342.7100  Scope of subpart.

    This subpart sets forth the procedures to be followed when a cost 
overrun is anticipated; i.e., the allowable actual cost of performing a 
cost-reimbursement type contract is expected to exceed the total 
estimated cost specified in the contract.


342.7101  Contract administration.


342.7101-1  General.

    Upon receipt of information that a contractor's accumulated cost 
and projected expenditures will exceed the limit of funds obligated by 
the contract, the contracting officer shall coordinate immediately with 
the appropriate program office to determine whether the contract should 
be modified or terminated. If the contracting officer receives 
information from a source other than the contractor that a cost overrun 
is anticipated, the contracting officer shall verify the information 
with the contractor, and remind the contractor of the notification 
requirements of the Limitation of Cost clause.


342.7101-2  Procedures.

    (a) Upon notification that a cost overrun is anticipated, the 
contracting officer shall inform the contractor to submit a request for 
additional funds which is to include:
    (1) Name and address of contractor.
    (2) Contract number and expiration date.
    (3) Contract item(s) and amount(s) creating overrun.
    (4) The elements of cost which changed from the original estimate 
(i.e., labor, material, travel, overhead, etc.) to be furnished in the 
following format:
    (i) Original estimate,
    (ii) Costs incurred to date,
    (iii) Estimated cost to completion,
    (iv) Revised estimate, and
    (v) Amount of adjustment.
    (5) The factors responsible for the increase, i.e., error in 
estimate, changed conditions, etc.
    (6) The latest date by which funds must be available for commitment 
to avoid contract slippage, work stoppage, or other program impairment.
    (b) When the contractor submits a notice of an impending overrun, 
the contracting officer shall:
    (1) Immediately advise the appropriate program office and furnish a 
copy of the notice and any other data received;
    (2) Request audit or cost advisory services, and technical support, 
as necessary, for evaluation of information and data received; and
    (3) Maintain continuous follow-up with the program office to obtain 
a timely decision as to whether the work under the contract should be 
continued and additional funds provided, or the contract terminated. 
The decision of the program office must be supported by an appropriate 
written statement and funding authority, or a formal request for 
termination, when applicable. After a programming and funding decision 
is received from the program office, the contracting officer shall 
promptly notify the contractor in writing that:
    (i) A specified amount of additional funds has been allotted to the 
contract by a contractual instrument; or
    (ii) Work will be discontinued when the funds allotted to the 
contract have been exhausted, and that any work performed after that 
date is at the contractor's risk; or
    (iii) The Government is considering whether additional funds should 
be allotted to the contract and will notify the contractor as soon as 
possible, but that any work performed after the funds then allocated to 
the contract have been exhausted is at the contractor's risk. Timely, 
formal notification of the Government's intention is essential in order 
to preclude loss of contractual rights in the event of dispute, 
termination, or litigation.
    (c) If program requirements permit, contracting officers should 
refrain from issuing any contractual documents which will require new 
work or an extension of time, pending resolution of an overrun or 
additional fund request.


342.7102  Contract modifications.

    (a) Modifications to contracts containing the Limitation of Cost 
clause shall include either:
    (1) A provision increasing the estimated or ceiling amount referred 
to in the Limitation of Cost clause of the contract and stating that 
the clause will thereafter apply in respect to the increased amount; or
    (2) A provision stating that the estimated or ceiling amount 
referred to in the contract is not changed by the modification and that 
the Limitation of Cost clause will continue to apply with respect to 
the amount in effect prior to the modification.
    (b) A fixed-fee provided in a contract shall not be changed when 
funding a cost overrun. Changes in fixed-fee will be made only to 
reflect changes in the scope of work which justify an increase or 
decrease in fee.

PART 352--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

Subpart 352.2--Texts of Provisions and Clauses

Sec.
352.202-1  Definitions.
352.215-1  Instructions to offerors--Competitive acquisition.
352.215-70  Late proposals and revisions.
352.216-72  Additional cost principles.
352.223-70  Safety and health.
352.224-70  Confidentiality of information.
352.228-7  Insurance--Liability to third persons.
352.232-9  Withholding of contract payments.
352.232-74  Estimated cost and fixed fee--Incrementally funded 
contract.
352.232-75  Incremental funding.
352.233-70  Litigation and claims.
352.242-71  Final decisions on audit findings.
352.249-14  Excusable delays.
352.270-1  Accessibility of meetings, conferences, and seminars to 
persons with disabilities.
352.270-2  Indian preference.
352.270-3  Indian preference program.
352.270-4  Pricing of adjustments.
352.270-5  Key personnel.
352.270-6  Publications and publicity.
352.270-7  Paperwork Reduction Act.
352.270-8  Protection of human subjects.
352.270-9  Care of laboratory animals.

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

Subpart 352.2--Texts of Provisions and Clauses


352.202-1  Definitions.

    As prescribed in 302.201, the FAR Definitions clause at 52.202-1 is 
to be used as modified:

Definitions (Jan 1997)

    (a) Substitute the following as paragraph (a):
    ``(a) The term ``Secretary'' or ``Head of the Agency'' (also 
called ``Agency Head'') means the Secretary, Under Secretary, or any 
Assistant Secretary, Administrator or Commissioner of the Department 
of Health and Human Services; and the term ``his/her duly authorized 
representative'' means any person, persons, or board authorized to 
act for the Secretary.''
    (b) Add the following paragraph (h) or its alternate, as 
appropriate:
    (h) The term ``Project Officer'' means the person representing 
the Government for the purpose of technical monitoring of contract 
performance. The Project Officer is not authorized to issue any 
instructions or directions which effect any increases or decreases 
in the scope of work or which would result in the increase or 
decrease of the price of this contract or a change in the delivery 
dates or performance period of this contract.''
    or
    Alternate:
    ``(h) The term ``Project Officer'' means the person representing 
the Government for the

[[Page 1380]]

purpose of technical monitoring of contract performance. The Project 
Officer is not authorized to issue any instructions or directions 
which effect any increases or decreases in the scope of work or 
which would result in the increase or decrease of the cost of this 
contract or a change in performance period of this contract. In 
addition, the Project Officer is not authorized to receive or act 
upon the Contractor's notification of a revised cost estimate 
pursuant to the Limitation of Cost or Limitation of Funds clause of 
this contract.''


352.215-1  Instructions to offerors--Competitive acquisition.

    Insert the following paragraph (e) in place of paragraph (e) of the 
provision at FAR 52.215-1:

    (e) Restriction on disclosure and use of data. (1) The proposal 
submitted in response to this request may contain data (trade 
secrets; business data, e.g., commercial information, financial 
information, and cost and pricing data; and technical data) which 
the offeror, including its prospective subcontractor(s), does not 
want used or disclosed for any purpose other than for evaluation of 
the proposal. The use and disclosure of any data may be so 
restricted; provided, that the Government determines that the data 
is not required to be disclosed under the Freedom of Information 
Act, 5 U.S.C. 552, as amended, and the offeror marks the cover sheet 
of the proposal with the following legend, specifying the particular 
portions of the proposal which are to be restricted in accordance 
with the conditions of the legend. The Government's determination to 
withhold or disclose a record will be based upon the particular 
circumstances involving the record in question and whether the 
record may be exempted from disclosure under the Freedom of 
Information Act. The legend reads:
    Unless disclosure is required by the Freedom of Information Act, 
5 U.S.C. 552, as amended, (the Act) as determined by Freedom of 
Information (FOI) officials of the Department of Health and Human 
Services, data contained in the portions of this proposal which have 
been specifically identified by page number, paragraph, etc. by the 
offeror as containing restricted information shall not be used or 
disclosed except for evaluation purposes.
    The offeror acknowledges that the Department may not be able to 
withhold a record (data, document, etc.) nor deny access to a record 
requested pursuant to the Act and that the Department's FOI 
officials must make that determination. The offeror hereby agrees 
that the Government is not liable for disclosure if the Department 
has determined that disclosure is required by the Act.
    If a contract is awarded to the offeror as a result of, or in 
connection with, the submission of this proposal, the Government 
shall have right to use or disclose the data to the extent provided 
in the contract. Proposals not resulting in a contract remain 
subject to the Act.
    The offeror also agrees that the Government is not liable for 
disclosure or use of unmarked data and may use or disclose the data 
for any purpose, including the release of the information pursuant 
to requests under the Act.
    The data subject to this restriction are contained in pages 
(insert page numbers, paragraph designations, etc. or other 
identification).

    (2) In addition, the offeror should mark each page of data it 
wishes to restrict with the following statement:

    ``Use or disclosure of data contained on this page is subject to 
the restriction on the cover sheet of this proposal or quotation.''

    (3) Offerors are cautioned that proposals submitted with 
restrictive legends or statements differing in substance from the above 
legend may not be considered for award. The Government reserves the 
right to reject any proposal submitted with a nonconforming legend.


352.215-70  Late proposals and revisions.

    As prescribed in 315.208, the following provision may be included 
in the solicitation:

Late Proposals and Revisions (Nov 1986)

    Notwithstanding the procedures contained in FAR 52.215-1(c)(3) 
of the provision of this solicitation entitled Instructions to 
Offerors--Competitive Acquisition, a proposal received after the 
date specified for receipt may be considered if it offers 
significant cost or technical advantages to the Government; and it 
was received before proposals were distributed for evaluation, or 
within five calendar days after the exact time specified for 
receipt, whichever is earlier.

(End of provision)


352.216-72  Additional cost principles.

    As prescribed in 316.307(j), insert the following clause in all 
solicitations and resultant cost-reimbursement contracts:

Additional Cost Principles (Oct 90)

    (a) Bid and proposal costs. (1) Bid and proposal costs are the 
immediate costs of preparing bids, proposals, and applications for 
potential Federal and non-Federal contracts, grants, and agreements, 
including the development of scientific, cost, and other data needed 
to support the bids, proposals, and applications.
    (2) Bid and proposal costs of the current accounting period are 
allowable as indirect costs.
    (3) Bid and proposal costs of past accounting periods are 
unallowable in the current period. However, if the organization's 
established practice is to treat these costs by some other method, 
they may be accepted if they are found to be reasonable and 
equitable.
    (4) Bid and proposal costs do not include independent research 
and development costs covered by the following paragraph, or 
preaward costs covered by paragraph 33 of Attachment B to OMB 
Circular A-122.
    (b) Independent research and development costs. (1) Independent 
research and development is research and development conducted by an 
organization which is not sponsored by Federal or non-Federal 
contracts, grants, or other agreements.
    (2) Independent research and development shall be allocated its 
proportionate share of indirect costs on the same basis as the 
allocation of indirect costs to sponsored research and development.
    (3) The cost of independent research and development, including 
its proportionate share of indirect costs, are unallowable.

(End of clause)


352.223-70  Safety and health.

    The following clause, or one reading substantially the same, shall 
be used as prescribed in 323.7002:

Safety and Health (Jan 1998)

    (a) To help ensure the protection of the life and health of all 
persons, and to help prevent damage to property, the Contractor 
shall comply with all Federal, State and local laws and regulations 
applicable to the work being performed under this contract. These 
laws are implemented and/or enforced by the Environmental Protection 
Agency, Occupational Safety and Health Administration and other 
agencies at the Federal, State and local levels (Federal, State and 
local regulatory/enforcement agencies).
    (b) Further, the Contractor shall take or cause to be taken 
additional safety measures as the Contracting Officer, in 
conjunction with the project or other appropriate officers, 
determines to be reasonably necessary. If compliance with these 
additional safety measures results in an increase or decrease in the 
cost or time required for performance of any part of work under this 
contract, an equitable adjustment will be made in accordance with 
the applicable ``Changes'' clause set forth in this contract.
    (c) The Contractor shall maintain an accurate record of, and 
promptly report to the Contracting Officer, all accidents or 
incidents resulting in the exposure of persons to toxic substances, 
hazardous materials or hazardous operations; the injury or death of 
any person; and/or damage to property incidental to work performed 
under the contract and all violations for which the Contractor has 
been cited by any Federal, State or local regulatory/enforcement 
agency. The report shall include a copy of the notice of violation 
and the findings of any inquiry or inspection, and an analysis 
addressing the impact these violations may have on the work 
remaining to be performed. The report shall also state the required 
action(s), if any, to be taken to correct any violation(s) noted by 
the Federal, State or local regulatory/enforcement agency and the 
time frame allowed by the agency to accomplish the necessary 
corrective action.
    (d) If the Contractor fails or refuses to comply with the 
Federal, State or local regulatory/enforcement agency's directive(s) 
regarding any violation(s) and prescribed corrective action(s), the 
Contracting Officer may issue an order stopping all or part of the 
work until satisfactory corrective action (as approved by the 
Federal, State or local regulatory/enforcement agencies) has been 
taken and documented to the Contracting Officer. No part of the time 
lost due to any

[[Page 1381]]

stop work order shall be subject to a claim for extension of time or 
costs or damages by the Contractor.
    (e) The Contractor shall insert the substance of this clause in 
each subcontract involving toxic substances, hazardous materials, or 
hazardous operations. Compliance with the provisions of this clause 
by subcontractors will be the responsibility of the Contractor.

(End of Clause)


352.224-70  Confidentiality of information.

    The following clause is covered by the policy set forth in Subpart 
324.70 and is to be used in accordance with the instructions set forth 
in 324.7004.

Confidentiality of Information (Apr 1984)

    (a) Confidential information, as used in this clause, means 
information or data of a personal nature about an individual, or 
proprietary information or data submitted by or pertaining to an 
institution or organization.
    (b) In addition to the types of confidential information 
described in paragraph (a) of this clause, information which might 
require special consideration with regard to the timing of its 
disclosure may derive from studies or research, during which public 
disclosure of preliminary unvalidated findings could create 
erroneous conclusions which might threaten public health or safety 
if acted upon.
    (c) The Contracting Officer and the Contractor may, by mutual 
consent, identify elsewhere in this contract specific information 
and/or categories of information which the Government will furnish 
to the Contractor or that the Contractor is expected to generate 
which is confidential. Similarly, the Contracting Officer and the 
Contractor may, by mutual consent, identify such confidential 
information from time to time during the performance of the 
contract. Failure to agree will be settled pursuant to the 
``Disputes'' clause.
    (d) If it is established elsewhere in this contract that 
information to be utilized under this contract, or a portion 
thereof, is subject to the Privacy Act, the Contractor will follow 
the rules and procedures of disclosure set forth in the Privacy Act 
of 1974, 5 U.S.C. 552a, and implementing regulations and policies, 
with respect to systems of records determined to be subject to the 
Privacy Act.
    (e) Confidential information, as defined in paragraph (a) of 
this clause, that is information or data of a personal nature about 
an individual, or proprietary information or data submitted by or 
pertaining to an institution or organization, shall not be disclosed 
without the prior written consent of the individual, institution, or 
organization.
    (f) Written advance notice of at least 45 days will be provided 
to the Contracting Officer of the Contractor's intent to release 
findings of studies or research, which have the possibility of 
adverse effects on the public or the Federal agency, as described in 
paragraph (b) of this clause. If the Contracting Officer does not 
pose any objections in writing within the 45-day period, the 
Contractor may proceed with disclosure. Disagreements not resolved 
by the Contractor and the Contracting Officer will be settled 
pursuant to the ``Disputes'' clause.
    (g) Whenever the Contractor is uncertain with regard to the 
proper handling of material under the contract, or if the material 
in question is subject to the Privacy Act or is confidential 
information subject to the provisions of this clause, the Contractor 
should obtain a written determination from the Contracting Officer 
prior to any release, disclosure, dissemination, or publication.
    (h) Contracting Officer determinations will reflect the result 
of internal coordination with appropriate program and legal 
officials.
    (i) The provisions of paragraph (e) of this clause shall not 
apply when the information is subject to conflicting or overlapping 
provisions in other Federal, State or local laws.

(End of clause)


352.228-7  Insurance--Liability to third persons.

    As prescribed in 328.311-2, contracting officers shall include the 
following clause in all cost-reimbursement contracts, in lieu of the 
clause at FAR 52.228-7:

Insurance--Liability to Third Persons (Dec 1991)

    (a)(1) Except as provided in paragraph (a)(2) immediately 
following, or in paragraph (h) of this clause (if the clause has a 
paragraph (h)), the Contractor shall provide and maintain workers' 
compensation, employer's liability, comprehensive general liability 
(bodily injury), comprehensive automobile liability (bodily injury 
and property damage) insurance, and such other insurance as the 
Contracting Officer may require under this contract.
    (2) The Contractor may, with the approval of the Contracting 
Officer, maintain a self-insurance program; provided that, with 
respect to workers' compensation, the Contractor is qualified 
pursuant to statutory authority.
    (3) All insurance required by this paragraph shall be in form 
and amount and for those periods as the Contracting Officer may 
require or approve and with insurers approved by the Contracting 
Officer.
    (b) The Contractor agrees to submit for the Contracting 
Officer's approval, to the extent and in the manner required by the 
Contracting Officer, any other insurance that is maintained by the 
Contractor in connection with performance of this contract and for 
which the Contractor seeks reimbursement.
    (c) Except as provided in paragraph (h) of this clause (if the 
clause has a paragraph (h)), the Contractor shall be reimbursed:
    (1) For that portion of the reasonable cost of insurance 
allocable to this contract, and required or approved under this 
clause; and
    (2) For certain liabilities (and expenses incidental to such 
liabilities) to third persons not compensated by insurance or 
otherwise within the funds available under the Limitation of Cost or 
the Limitation of Funds clause of this contract. These liabilities 
must arise out of the performance of this contract, whether or not 
caused by the negligence of the Contractor or the Contractor's 
agents, servants, or employees, and must be represented by final 
judgements or settlements approved in writing by the Government.
    These liabilities are for:
    (i) Loss of or damage to property (other than property owned, 
occupied, or used by the Contractor, rented to the Contractor, or in 
the care, custody, or control of the Contractor); or
    (ii) Death or bodily injury.
    (d) The Government's liability under paragraph (c) of this 
clause is limited to the amounts reflected in final judgements, or 
settlements approved in writing by the Government, but in no event 
to exceed the funds available under the Limitation of Cost or 
Limitation of Funds clause of this contract. Nothing in this 
contract shall be construed as implying that, at a later date, the 
Government will request, or the Congress will appropriate, funds 
sufficient to meet any deficiencies.
    (e) The Contractor shall not be reimbursed for liabilities (and 
expenses incidental to such liabilities):
    (1) For which the Contractor is otherwise responsible under the 
express terms of any clause specified in the Schedule or elsewhere 
in the contract:
    (2) For which the Contractor has failed to insure or to maintain 
insurance as required by the Contracting Officer; or
    (3) That result from willful misconduct or lack of good faith on 
the part of the Contractor's directors, officers, managers, 
superintendents, or other representatives who have supervision or 
direction of:
    (i) All or substantially all of the Contractor's business;
    (ii) All or substantially all of the Contractor's operations at 
any one plant or separate location in which this contract is being 
performed; or
    (iii) A separate and complete major industrial operation in 
connection with the performance of this contract.
    (f) The provisions of paragraph (e) of this clause shall not 
restrict the right of the Contractor to be reimbursed for the cost 
of insurance maintained by the Contractor in connection with the 
performance of this contract, other than insurance required in 
accordance with this clause; provided, that such cost is allowable 
under the Allowable Cost and Payment clause of this contract.
    (g) If any suit or action is filed or any claim is made against 
the Contractor, the cost and expense of which may be reimbursable to 
the Contractor under this contract, and the risk of which is then 
uninsured or is insured for less than the amount claimed, the 
Contractor shall:
    (1) Immediately notify the Contracting Officer and promptly 
furnish copies of all pertinent papers received;
    (2) Authorize Government representatives to collaborate with 
counsel for the insurance carrier in settling or defending the claim 
when the amount of the liability claimed exceeds the amount of 
coverage; and
    (3) Authorize Government representatives to settle or defend the 
claim and to represent the Contractor in or to take charge of any 
litigation, if required by the Government,

[[Page 1382]]

when the liability is not insured or covered by the bond. The 
Contractor may, at its own expense, be associated with the 
Government representatives in any such claim or litigation.

(End of clause)

    Alternate I (APR 1984). If the successful offeror represents in 
the offer that the offeror is partially immune from tort liability 
as a State agency, add the following paragraph (h) to the basic 
clause:
    (h) Notwithstanding paragraphs (a) and (c) of this clause--
    (1) The Government does not assume any liability to third 
persons, nor will the Government reimburse the Contractor for its 
liability to third persons, with respect to loss due to death, 
bodily injury, or damage to property resulting in any way from the 
performance of this contract or any subcontract under this contract; 
and
    (2) The Contractor need not provide or maintain insurance 
coverage as required by paragraph (a) of this clause; provided, that 
the Contractor may obtain any insurance coverage deemed necessary, 
subject to approval by the Contracting Officer as to form, amount, 
and duration. The Contractor shall be reimbursed for the cost of 
such insurance and, to the extent provided in paragraph (c) of this 
clause, to liabilities to third persons for which the Contractor has 
obtained insurance coverage as provided in this paragraph, but for 
which such coverage is insufficient in amount.

(End of clause)

    Alternate II (APR 1984). If the successful offeror represents in 
the offer that the offeror is totally immune from tort liability as 
a State agency, substitute the following paragraphs (a) and (b) for 
paragraphs (a) and (b) of the basic clause:
    (a) The Government does not assume any liability to third 
persons, nor will the Government reimburse the Contractor for its 
liability to third persons, with respect to loss due to death, 
bodily injury, or damage to property resulting in any way from the 
performance of this contract or any subcontract under this contract.
    (b) If any suit or action is filed, or if any claim is made 
against the Contractor, the cost and expense of which may be 
reimbursable to the Contractor under this contract, the Contractor 
shall immediately notify the Contracting Officer and promptly 
furnish copies of all pertinent papers received by the Contractor. 
The Contractor shall, if required by the Government, authorize 
Government representatives to settle or defend the claim and to 
represent the Contractor in or take charge of any litigation. The 
Contractor may, at its own expense, be associated with the 
Government representatives in any such claims or litigation

(End of clause)


352.232-9  Withholding of contract payments.

    Insert the following clause in all solicitations and contracts 
other than purchase orders:

Withholding of Contract Payments (Apr 1984)

    Notwithstanding any other payment provisions of this contract, 
failure of the Contractor to submit required reports when due or 
failure to perform or deliver required work, supplies, or services, 
will result in the withholding of payments under this contract 
unless such failure arises out of causes beyond the control, and 
without the fault or negligence of the Contractor as defined by the 
clause entitled ``Excusable Delays'' or ``Default'', as applicable. 
The Government shall promptly notify the Contractor of its intention 
to withhold payment of any invoice or voucher submitted.

(End of clause)


352.232-74  Estimated cost and fixed fee-Incrementally funded contract.

    The following clause, or one reading substantially as it, shall 
be included in the Special Provisions of an incrementally funded 
contract:

Consideration-Estimated Cost and Fixed Fee (Apr 1984)

    (a) It is estimated that the total cost to the Government for 
full performance of this contract will be $______, of which the sum 
of $______ represents the estimated reimbursable costs and $______ 
represents the fixed-fee.
    (b) Total funds currently available for payment and allotted to 
this contract are $______, of which $ represents the estimated 
reimbursement costs and $______ represents the fixed-fee. For 
further provisions on funding, see the Limitations of Funds clause.
    (c) It is estimated that the amount currently allotted will 
cover performance of Phase I which is scheduled to be completed by 
(date) ______.
    (d) The Contracting Officer may allot additional funds to the 
contract without the concurrence of the Contractor.

(End of clause)


352.232-75  Incremental funding.

    The following provision shall be included in all requests for 
proposals whenever the use of incremental funding is contemplated:

Incremental Funding (Apr 1984)

    (a) Sufficient funds are not presently available to cover the 
total cost of the complete multiple year project described in this 
solicitation. However, it is the Government's intention to negotiate 
and award a contract using the incremental funding concepts 
described in the clause entitled Limitation of Funds. Under the 
clause, which will be included in the resultant contract, initial 
funds will be obligated under the contract to cover the first year 
of performance. Additional funds are intended to be allotted to the 
contract by contract modification, up to and including the full 
estimated cost of the contract, to accomplish the entire project. 
While it is the Government's intention to progressively fund this 
contract over the entire period of performance up to and including 
the full estimated cost, the Government will not be obligated to 
reimburse the Contractor for costs incurred in excess of the 
periodic allotments, nor will the Contractor be obligated to perform 
in excess of the amount allotted.
    (b) The Limitation of Funds clause to be included in the 
resultant contract shall supersede the Limitation of Cost clause 
found in the General Provisions.

(End of provision)


352.233-70  Litigation and claims.

    Insert the following clause in all solicitations and resultant 
cost-reimbursement contracts:

Litigation and Claims (Apr 1984)

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

[[Page 1383]]

352.242-71  Final decisions on audit findings.

    Insert the following clause in all solicitations and resultant 
cost-reimbursement contracts.

Final Decisions on Audit Findings (Apr 1984)

    For the purpose of issuing final decisions under the Disputes 
clause of this contract concerning monetary audit findings, the 
Contracting Officer shall be that person with ultimate 
responsibility for making that decision in accordance with Chapter 
1-105, Resolution of Audit Findings, of the Department's Grants 
Administration Manual.

(End of clause)


352.249-14  Excusable delays.

    Insert the following clause in all solicitations and resultant 
contracts other than purchase orders which do not have either a default 
or excusable delays clause.

Excusable Delays (Apr 1984)

    (a) Except with respect to failures of subcontractors, the 
Contractor shall not be considered to have failed in performance of 
this contract if such failure arises out of causes beyond the 
control and without the fault or negligence of the Contractor.
    (b) Such causes may include, but are not restricted to, acts of 
God or of the public enemy, acts of the Government in either its 
sovereign or contractual capacity, fires, floods, epidemics, 
quarantine restrictions, strikes, freight embargoes, and unusually 
severe weather, but in every case the failure to perform must be 
beyond the control and without the fault or negligence of the 
Contractor. If the failure to perform is caused by the failure of a 
subcontractor to perform, and if such failure arises out of causes 
beyond the control of both the Contractor and subcontractor, and 
without the fault or negligence of either of them, the Contractor 
shall not be deemed to have failed in performance of the contract, 
unless: the supplies or services to be furnished by the 
subcontractor were obtainable from other sources, the Contracting 
Officer shall have ordered the Contractor in writing to procure such 
supplies or services from such other sources, and the Contractor 
shall have failed to comply reasonably with such order. Upon request 
of the Contractor, the Contracting officer shall ascertain the facts 
and extent of such failure and, if he/she shall determine that any 
failure to perform was occasioned by any one or more of the said 
causes, the delivery schedule shall be revised accordingly, subject 
to the rights of the Government under the termination clause hereof. 
(As used in this clause, the terms ``subcontractor'' and 
``subcontractors'' mean subcontractor(s) at any tier.)

(End of clause)


352.270-1  Accessibility of meetings, conferences, and seminars to 
persons with disabilities.

    The following clause is to be used in accordance with 370.102:

Accessibility of Meetings, Conferences, and Seminars to Persons with 
Disabilities (Jan 1999)

    The Contractor agrees as follows:
    (a) Planning. The Contractor will develop a plan to assure that 
any meeting, conference, or seminar held pursuant to this contract 
will meet or exceed the minimum accessibility standards set forth in 
28 CFR 36.101-36.500 and Appendix A: ADA Accessibility Guidelines 
(ADAAG). The plan shall be submitted to the project officer for 
approval prior to initiating action. ( A consolidated or master plan 
for contracts requiring numerous meetings, conferences, or seminars 
may be submitted in lieu of separate plans.)
    (b) Facilities. Any facility to be utilized for meetings, 
conferences, or seminars in performance of this contract shall be in 
compliance with 28 CFR 36.101-36.500 and Appendix A. The Contractor 
shall determine, by an on-site inspection, that the facility meets 
these requirements.
    (1) Parking. Parking shall be in compliance with 28 CFR 36.101-
36.500 and Appendix A.
    (2) Entrances. Entrances shall be in compliance with 28 CFR 
36.101-36.500 and Appendix A.
    (3) Meeting Rooms. Meeting rooms, including seating 
arrangements, shall be in compliance with 28 CFR 36.101-36.500 and 
Appendix A. In addition, stages, speaker platforms, etc. which are 
to be used by persons in wheelchairs must be accessible by ramps or 
lifts. When used, the ramp may not necessarily be independently 
negotiable if space does not permit. However, any slope over 1:12 
must be approved by the Project Officer and the Contractor must 
provide assistance to negotiate access to the stage or platform.
    (4) Restrooms. Restrooms shall be in compliance with 28 CFR 
36.101-36.500 and Appendix A.
    (5) Eating Facilities. Eating facilities in the meeting facility 
must also comply with 28 CFR 36.101-36.500 and Appendix A.
    (6) Overnight Facilities. If overnight accommodations are 
required, the facility providing the overnight accommodations shall 
also comply with 28 CFR 36.101-36.500 and Appendix A.
    (7) Water Fountains. Water fountains shall comply with 28 CFR 
36.101-36.500 and Appendix A.
    (8) Telephones. Public telephones shall comply with 28 CFR 
36.101-36.500 and Appendix A.
    (c) Provisions of Services for Attendees with Sensory 
Impairments.
    (1) The Contractor, in planning the meeting, conference, or 
seminar, shall include in all announcements and other materials 
pertaining to the meeting, conference, or seminar a notice 
indicating that services will be made available to persons with 
sensory impairments attending the meeting, if requested within five 
(5) days of the date of the meeting, conference, or seminar. The 
announcement(s) and other material(s) shall indicate that persons 
with sensory impairments may contact a specific person(s), at a 
specific address and phone number(s), to make their service 
requirements known. The phone number(s) shall include a 
telecommunication device for the deaf (TDD).
    (2) The Contractor shall provide, at no additional cost to the 
individual, those services required by persons with sensory 
impairments to insure their complete participation in the meeting, 
conference, or seminar.
    (3) As a minimum, when requested in advance, the Contractor 
shall provide the following services:
    (i) For persons with hearing impairments, qualified 
interpreters. Also, the meeting rooms will be adequately illuminated 
so signing by interpreters can be easily seen.
    (ii) For persons with vision impairments, readers and/or 
cassette materials, as necessary, to enable full participation. 
Also, meeting rooms will be adequately illuminated.
    (iii) Agenda and other conference material(s) shall be 
translated into a usable form for persons with sensory impairments. 
Readers, braille translations, large print text, and/or tape 
recordings are all acceptable. These materials shall be available to 
individuals with sensory impairments upon their arrival.
    (4) The Contractor is responsible for making a reasonable effort 
to ascertain the number of individuals with sensory impairments who 
plan to attend the meeting, conference, or seminar. However, if it 
can be determined that there will be no person with sensory 
impairment in attendance, the provision of those services under 
paragraph (c) of this clause for the nonrepresented group, or 
groups, is not required.

(End of clause)


352.270-2  Indian preference.

    The following clause shall be used as prescribed in 370.202(a):

Indian Preference (Apr 1984)

    (a) The Contractor agrees to give preference in employment 
opportunities under this contract to Indians who can perform 
required work, regardless of age (subject to existing laws and 
regulations), sex, religion, or tribal affiliation. To the extent 
feasible and consistent with the efficient performance of this 
contract, the Contractor further agrees to give preference in 
employment and training opportunities under this contract to Indians 
who are not fully qualified to perform regardless of age (subject to 
existing laws and regulations), sex, religion, or tribal 
affiliation. The Contractor also agrees to give preference to Indian 
organizations and Indian-owned economic enterprises in the awarding 
of any subcontracts to the extent feasible and consistent with the 
efficient performance of this contract. The Contractor shall 
maintain statistical records as are necessary to indicate compliance 
with this paragraph.
    (b) In connection with the Indian employment preference 
requirements of this clause, the Contractor shall provide 
opportunities for training incident to such employment. Such 
training shall include on-the-job, classroom or apprenticeship 
training which is designed to increase the vocational effectiveness 
of an Indian employee.
    (c) If the Contractor is unable to fill its employment and 
training opportunities after giving full consideration to Indians as 
required by this clause, those needs may be

[[Page 1384]]

satisfied by selection of persons other than Indians in accordance 
with the clause of this contract entitled ``Equal Opportunity.''
    (d) If no Indian organizations or Indian-owned economic 
enterprises are available under reasonable terms and conditions, 
including price, for awarding of subcontracts in connection with the 
work performed under this contract, the Contractor agrees to comply 
with the provisions of this contract involving utilization of small 
business concerns, small disadvantaged business concerns, and women-
owned small business concerns.
    (e) As used in this clause:
    (1) ``Indian'' means a person who is a member of an Indian 
Tribe. If the Contractor has reason to doubt that a person seeking 
employment preference is an Indian, the Contractor shall grant the 
preference but shall require the individual to provide evidence 
within thirty (30) days from the Tribe concerned that the person is 
a member of the Tribe.
    (2) ``Indian Tribe'' means an Indian Tribe, pueblo, band, 
nation, or other organized group or community, including Alaska 
Native village or regional or village corporation as defined in or 
established pursuant to the Alaska Native Claims Settlement Act (85 
Stat. 688; 43 U.S.C. 1601) which is recognized as eligible for the 
special programs and services provided by the United States to 
Indians because of their status as Indians.
    (3) ``Indian organization'' means the governing body of any 
Indian Tribe or entity established or recognized by such governing 
body in accordance with the Indian Financing Act of 1974 (88 Stat. 
77; 25 U.S.C. 1451); and
    (4) ``Indian-owned economic enterprise'' means any Indian-owned 
commercial, industrial, or business activity established or 
organized for the purpose of profit, provided that such Indian 
ownership shall constitute not less than 51 percent of the 
enterprise, and that ownership shall encompass active operation and 
control of the enterprise.
    (f) The Contractor agrees to include the provisions of this 
clause, including this paragraph (f) of this clause, in each 
subcontract awarded at any tier under this contract.
    (g) In the event of noncompliance with this clause, the 
Contracting Officer may terminate the contract in whole or in part 
or may impose any other sanctions authorized by law or by other 
provisions of the contract.

(End of clause)


352.270-3  Indian preference program.

    The following clause shall be used as prescribed in 370.202(b):

Indian Preference Program (Apr 1984)

    (a) In addition to the requirements of the clause of this 
contract entitled ``Indian Preference,'' the Contractor agrees to 
establish and conduct an Indian preference program which will expand 
opportunities for Indians to receive preference for employment and 
training in connection with the work to be performed under this 
contract, and which will expand the opportunities for Indian 
organizations and Indian-owned economic enterprises to receive a 
preference in the awarding of subcontracts. In this connection, the 
Contractor shall:
    (1) Designate a liaison officer who will maintain liaison with 
the Government and the Tribe(s) on Indian preference matters; 
supervise compliance with the provisions of this clause; and 
administer the Contractor's Indian preference program.
    (2) Advise its recruitment sources in writing and include a 
statement in all advertisements for employment that Indian 
applicants will be given preference in employment and training 
incident to such employment.
    (3) Not more than twenty (20) calendar days after award of the 
contract, post a written notice in the Tribal office of any 
reservations on which or near where the work under this contract is 
to be performed that sets forth the Contractor's employment needs 
and related training opportunities. The notice shall include the 
approximate numbers and types of employees needed; the approximate 
dates of employment; the experience or special skills required for 
employment, if any; training opportunities available; and other 
pertinent information necessary to advise prospective employees of 
any other employment requirements. The Contractor shall also request 
the Tribe(s) on or near whose reservation(s) the work is to be 
performed to provide assistance to the Contractor in filling its 
employment needs and training opportunities. The Contracting Officer 
will advise the Contractor of the name, location, and phone number 
of the Tribal officials to contact in regard to the posting of 
notices and requests for Tribal assistance.
    (4) Establish and conduct a subcontracting program which gives 
preference to Indian organizations and Indian-owned economic 
enterprises as subcontractors and suppliers under this contract. The 
Contractor shall give public notice of existing subcontracting 
opportunities and, to the extent feasible and consistent with the 
efficient performance of this contract, shall solicit bids or 
proposals only from Indian organizations or Indian-owned economic 
enterprises. The Contractor shall request assistance and information 
on Indian firms qualified as suppliers or subcontractors from the 
Tribe(s) on or near whose reservation(s) the work under the contract 
is to be performed. The Contracting Officer will advise the 
Contractor of the name, location, and phone number of the Tribal 
officials to be contacted in regard to the request for assistance 
and information. Public notices and solicitations for existing 
subcontracting opportunities shall provide an equitable opportunity 
for Indian firms to submit bids or proposals by including: A clear 
description of the supplies or services required, including 
quantities, specifications, and delivery schedules which facilitate 
the participation of Indian firms; A statement indicating that 
preference will be given to Indian organizations and Indian-owned 
economic enterprises in accordance with section 7(b) of Public Law 
93-638 (88 Stat. 2205; 25 U.S.C. 450e(b)); Definitions for the terms 
``Indian organization'' and ``Indian-owned economic enterprise'' as 
prescribed under the ``Indian Preference'' clause of this contract; 
A statement to be completed by the bidder or offeror that it is an 
Indian organization or Indian-owned economic enterprise; and A 
closing date for receipt of bids or proposals which provides 
sufficient time for preparation and submission of a bid or proposal. 
If after soliciting bids or proposals from Indian organizations and 
Indian-owned economic enterprises, no responsive bid or acceptable 
proposal is received, the Contractor shall comply with the 
requirements of paragraph (d) of the ``Indian Preference'' clause of 
this contract. If one or more responsible bids or acceptable 
proposals are received, award shall be made to the low responsible 
bidder or acceptable offeror if the price is determined to be 
reasonable. If the low responsive bid or acceptable proposal is 
determined to be unreasonable as to price, the Contractor shall 
attempt to negotiate a reasonable price and award a subcontract. If 
a reasonable price cannot be agreed upon, the Contractor shall 
comply with the requirements of paragraph (d) of the ``Indian 
Preference'' clause of this contract.
    (5) Maintain written records under this contract which indicate: 
The numbers of Indians seeking employment for each employment 
position available under this contract; The number and types of 
positions filled by Indians and non-Indians, and the total number of 
Indians employed under this contract; For those positions where 
there are both Indian and non-Indian applicants, and a non-Indian is 
selected for employment, the reason(s) why the Indian applicant was 
not selected; Actions taken to give preference to Indian 
organizations and Indian-owned economic enterprises for 
subcontracting opportunities which exist under this contract; 
Reasons why preference was not given to Indian firms as 
subcontractors or suppliers for each requirement where it was 
determined by the Contractor that such preference would not be 
consistent with the efficient performance of the contract; and The 
number of Indian organizations and Indian-owned economic enterprises 
contacted, and the number receiving subcontract awards under this 
contract.
    (6) Submit to the Contracting Officer for approval a quarterly 
report which summarizes the Contractor's Indian preference program 
and indicates the number and types of available positions filled by 
Indians and non-Indians, and the dollar amounts of all subcontracts 
awarded to Indian organizations and Indian-owned economic 
enterprises, and to all other firms.
    (7) Maintain records pursuant to this clause and keep them 
available for review by the Government until expiration of one (1) 
year after final payment under this contract, or for such longer 
period as may be required by any other clause of this contract or by 
applicable law or regulation.
    (b) For purposes of this clause, the following definitions of 
terms shall apply:
    (1) The terms ``Indian,'' ``Indian Tribe,'' ``Indian 
Organization,'' and ``Indian-owned economic enterprise'' are defined 
in the clause of this contract entitled ``Indian Preference.''
    (2) ``Indian reservation'' includes Indian reservations, public 
domain Indian

[[Page 1385]]

Allotments, former Indian reservations in Oklahoma, and land held by 
incorporated Native groups, regional corporations, and village 
corporations under the provisions of the Alaska Native Claims 
Settlement Act (85 Stat. 688; 43 U.S.C. 1601 et seq.)
    (3) ``On or near an Indian Reservation'' means on a reservation 
or reservations or within that area surrounding an Indian 
reservation(s) where a person seeking employment could reasonably be 
expected to commute to and from in the course of a work day.
    (c) Nothing in the requirements of this clause shall be 
interpreted to preclude Indian Tribes from independently developing 
and enforcing their own Indian preference requirements. Such 
requirements must not conflict with any Federal statutory or 
regulatory requirement dealing with the award and administration of 
contracts.
    (d) The Contractor agrees to include the provisions of this 
clause, including this paragraph (d), in each subcontract awarded at 
any tier under this contract and to notify the Contracting Officer 
of such subcontracts.
    (e) In the event of noncompliance with this clause, the 
Contracting Officer may terminate the contract in whole or in part 
or may impose any other sanctions authorized by law or by other 
provisions of the contract.

(End of clause)


352.270-4  Pricing of adjustments.

    Insert the following clause in all solicitations and resultant 
fixed-priced contracts other than purchase orders.

Pricing of Adjustments (Apr 1984)

    When costs are a factor in determination of a contract price 
adjustment pursuant to the ``Changes'' clause or any provision of 
this contract, such costs shall be determined in accordance with the 
applicable cost principles and procedures set forth below:

------------------------------------------------------------------------
                Principles                     Types of organizations
------------------------------------------------------------------------
(a) Subpart 31.2 of the Federal             Commercial.
 Acquisition Regulation.
(b) Subpart 31.3 of the Federal             Educational.
 Acquisition Regulation.
(c) Subpart 31.6 of the Federal             State or local governments.
 Acquisition Regulation.
(d) 45 CFR Part 74 Appendix E.............  Hospitals.
(e) Subpart 31.7 of the Federal             Other nonprofit
 Acquisition Regulation.                     institutions.
------------------------------------------------------------------------

(End of clause)


352.270-5  Key personnel.

    Insert the following clause in all solicitations and resultant 
cost-reimbursement contracts.

Key Personnel (Apr 1984)

    The personnel specified in this contract are considered to be 
essential to the work being performed hereunder. Prior to diverting 
any of the specified individuals to other programs, the Contractor 
shall notify the Contracting Officer reasonably in advance and shall 
submit justification (including proposed substitutions) in 
sufficient detail to permit evaluation of the impact on the program. 
No diversion shall be made by the Contractor without the written 
consent of the Contracting Officer; provided, that the Contracting 
Officer may ratify in writing such diversion and such ratification 
shall constitute the consent of the Contracting Officer required by 
this clause. The contract may be modified from time to time during 
the course of the contract to either add or delete personnel, as 
appropriate.

(End of clause)


352.270-6  Publications and Publicity.

    Insert the following clause in all solicitations and resultant 
contracts.

Publications and Publicity (Jul 1991)

    (a) Unless otherwise specified in this contract, the Contractor 
is encouraged to publish the results of its work under this 
contract. A copy of each article submitted by the Contractor for 
publication shall be promptly sent to the Project Officer. The 
Contractor shall also inform the Project Officer when the article or 
other publication is published, and furnish a copy of it as finally 
published.
    (b) The Contractor shall include in any publication resulting 
from work performed under this contract a disclaimer reading as 
follows:
    The content of this publication does not necessarily reflect the 
views or policies of the Department of Health and Human Services, 
nor does mention of trade names, commercial products, or 
organizations imply endorsement by the U.S. Government.''

(End of clause)


352.270-7  Paperwork Reduction Act.

    Insert the following clause in all solicitations and contracts.

Paperwork Reduction Act (Apr 1984)

    (a) In the event that it subsequently becomes a contractual 
requirement to collect or record information calling either for 
answers to identical questions from 10 or more persons other than 
Federal employees, or information from Federal employees which is 
outside the scope of their employment, for use by the Federal 
government or disclosure to third parties, the Paperwork Reduction 
Act of 1995 (Pub. L. 104-13) shall apply to this contract. No plan, 
questionnaire, interview guide or other similar device for 
collecting information (whether repetitive or single-time) may be 
used without first obtaining clearance from the Office of Management 
and Budget (OMB). Contractors and Project Officers should be guided 
by the provisions of 5 CFR Part 1320, Controlling Paperwork Burdens 
on the Public, and seek the advice of the HHS operating division or 
Office of the Secretary Reports Clearance Officer to determine the 
procedures for acquiring OMB clearance.
    (b) The Contractor shall obtain the required OMB clearance 
through the Project Officer before expending any funds or making 
public contracts for the collection of data. The authority to expend 
funds and proceed with the collection of information shall be in 
writing by the Contracting Officer. The Contractor must plan at 
least 120 days for OMB clearance. Excessive delays caused by the 
Government which arises out of causes beyond the control and without 
the fault or negligence of the Contractor will be considered in 
accordance with the Excusable Delays or Default clause of this 
contract

(End of clause)


352.270-8  Protection of human subjects.

    (a) The following provision shall be included in solicitations 
expected to involve human subjects:

Notice to Offerors of Requirements of 45 CFR Part 46, Protection of 
Human Subjects (Jan 1999)

    (a) Copies of the Department of Health and Human Services 
(Department) regulations for the protection of human subjects, 45 
CFR Part 46, are available from the Office for Protection from 
Research Risks (OPRR), National Institutes of Health, Bethesda, 
Maryland 20892. The regulations provide a systematic means, based on 
established ethical principles, to safeguard the rights and welfare 
of individuals who participate as subjects in research activities 
supported or conducted by the Department.
    (b) The regulations define a human subject as a living 
individual about whom an investigator (whether professional or 
student) conducting research contains data through intervention or 
interaction with the individual, or identifiable private 
information. The regulations extend to the use of human organs, 
tissue, and body fluids from individually identifiable human 
subjects as well as to graphic, written, or recorded information 
derived from individually identifiable human subjects. The use of 
autopsy materials is governed by applicable State and local law and 
is not directly regulated by 45 CFR Part 46.
    (c) Activities in which the only involvement of human subjects 
will be in one or more of the categories set forth in 45 CFR 
46.101(b)(1-6) are exempt from coverage.
    (d) Inappropriate designations of the noninvolvement of human 
subjects or of exempt categories of research in a project may result 
in delays in the review of a proposal. The National Institutes of 
Health will make a final determination of whether the proposed 
activities are covered by the regulations or are in an exempt 
category, based on the information provided in the proposal. In 
doubtful cases, prior consultation with OPRR, (telephone: 301-496-
7014), is recommended.
    (e) In accordance with 45 CFR Part 46, prospective Contractors 
being considered for award shall be required to file with OPRR an 
acceptable Assurance of Compliance with the regulations, specifying 
review procedures and assigning responsibilities for the protection 
of human subjects. The initial and continuing review of a research 
project by an institutional review board shall assure that the 
rights and welfare of the human subjects involved are adequately 
protected, that the risks to the subjects are reasonable in relation 
to the potential benefits, if any, to the subjects and the 
importance of the knowledge to be gained, and that informed

[[Page 1386]]

consent will be obtained by methods that are adequate and 
appropriate. Prospective Contractors proposing research that 
involves human subjects shall be contacted by OPRR and given 
detailed instructions for establishing an institutional review board 
and filing an Assurance of Compliance.
    (f) It is recommended that OPRR be consulted for advice or 
guidance concerning either regulatory requirements or ethical issues 
pertaining to research involving human subjects.

(End of provision)

    (b) The following clause shall be included in solicitations and 
resultant contracts involving human subjects:

Protection of Human Subjects (Jan 1999)

    (a) The Contractor agrees that the rights and welfare of human 
subjects involved in research under this contract shall be protected 
in accordance with 45 CFR Part 46 and with the Contractor's current 
Assurance of Compliance on file with the Office for Protection from 
Research Risks (OPRR), National Institutes of Health (NIH), Public 
Health Service. The Contractor further agrees to provide 
certification at least annually that the Institutional Review Board 
has reviewed and approved the procedures, which involve human 
subjects in accordance with 45 CFR Part 46 and the Assurance of 
Compliance.
    (b) The Contractor shall bear full responsibility for the 
performance of all work and services involving the use of human 
subjects under this contract in a proper manner and as safely as is 
feasible. The parties hereto agree that the Contractor retains the 
right to control and direct the performance of all work under this 
contract. Nothing in this contract shall be deemed to constitute the 
Contractor or any subcontractor, agent or employee of the 
Contractor, or any other person, organization, institution, or group 
of any kind whatsoever, as the agent or employee of the Government. 
The Contractor agrees that it has entered into this contract and 
will discharge its obligations, duties, and undertakings and the 
work pursuant thereto, whether requiring professional judgement or 
otherwise, as an independent contractor without imputing liability 
on the part of the Government for the acts of the Contractor or its 
employees.
    (c) If at any time during the performance of this contract, the 
Contracting officer determines, in consultation with the OPRR, NIH, 
that the Contractor is not in compliance with any of the 
requirements and/or standards stated in paragraphs (a) and (b) 
above, the Contracting Officer may immediately suspend, in whole or 
in part, work and further payments under this contract until the 
Contractor corrects the noncompliance. Notice of the suspension may 
be communicated by telephone and confirmed in writing. If the 
Contractor fails to complete corrective action within the period of 
time designated in the Contracting Officer's written notice of 
suspension, the Contracting Officer may, in consultation with OPRR, 
NIH, terminate this contract in whole or in part, and the 
Contractor's name may be removed from the list of those contractors 
with approved Health and Human Services Human Subject Assurances.

(End of clause)


352.270-9  Care of laboratory animals.

    (a) The following provision shall be included in solicitations 
expected to involve vertebrate animals:

Notice to Offerors of Requirement for Adequate Assurance of Protection 
of Vertebrate Animal Subjects (Sep 1985)

    The PHS Policy on Humane Care and Use of Laboratory Animals by 
Awardee Institutions establishes a number of requirements for 
research activities involving animals. Before a PHS award may be 
made to an applicant organization, the organization shall file, with 
the Office for Protection from Research Risks (OPRR), National 
Institutes of Health (NIH), PHS, a written Animal Welfare Assurance 
which commits the organization to comply with the provisions of the 
PHS Policy on Humane Care and Use of Laboratory Animals by Awardee 
Institutions, the Animal Welfare Act, and the Guide for the Care and 
Use of Laboratory Animals prepared by the Institute of Laboratory 
Animal Resources. In accordance with the PHS Policy on Humane Care 
and Use of Laboratory Animals by Awardee Institutions, applicant 
organizations must establish a committee, qualified through the 
experience and expertise of its members, to oversee the 
institution's animal program, facilities and procedures. No PHS 
award involving the use of animals shall be made unless the Animal 
Welfare Assurance has been approved by OPRR. Prior to award, the 
Contracting Officer will notify Contractor(s) selected for projects 
that involve live vertebrate animals that an Animal Welfare 
Assurance is required. The Contracting Officer will request that 
OPRR negotiate an acceptable Animal Welfare Assurance with those 
Contractor(s). For further information, OPRR may be contacted at 
NIH, Bethesda, Maryland 20892 (301-496-7041).

(End of provision)

    (b) The following clause shall be included in all solicitations and 
resultant contracts involving research on vertebrate animals:

Care of Live Vertebrate Animals (Jan 1999)

    (a) Before undertaking performance of any contract involving 
animal related activities, the Contractor shall register with the 
Secretary of Agriculture of the United States in accordance with 7 
U.S.C. 2316 and 9 CFR sections 2.25 through 2.28. The Contractor 
shall furnish evidence of the registration to the Contracting 
Officer.
    (b) The Contractor shall acquire vertebrate animals used in 
research from a dealer licensed by the Secretary of Agriculture 
under 7 U.S.C. 2133 and 9 CFR Sections 2.1-2.11, or from a source 
that is exempt from licensing under those sections.
    (c) The Contractor agrees that the care and use of any live 
vertebrate animals used or intended for use in the performance of 
this contract will conform with the PHS Policy on Humane Care of Use 
of Laboratory Animals, the current Animal Welfare Assurance, the 
Guide for the Care and Use of Laboratory Animals prepared by the 
Institute of Laboratory Animal Resources and the pertinent laws and 
regulations of the United States Department of Agriculture (see 7 
U.S.C. 2131 et seq. and 9 CFR Subchapter A, Parts 1-3). In case of 
conflict between standards, the more stringent standard shall be 
used.
    (d) If at any time during performance of this contract, the 
Contracting Officer determines, in consultation with the Office for 
Protection from Research Risks (OPRR), National Institutes of Health 
(NIH), that the Contractor is not in compliance with any of the 
requirements and/or standards stated in paragraphs (a) through (c) 
above, the Contracting Officer may immediately suspend, in whole or 
in part, work and further payments under this contract until the 
Contractor corrects the noncompliance. Notice of the suspension may 
be communicated by telephone and confirmed in writing. If the 
Contractor fails to complete corrective action within the period of 
time designated in the Contracting Officer's written notice of 
suspension, the Contracting Officer may, in consultation with OPRR, 
NIH, terminate this contract in whole or in part, and the 
Contractor's name may be removed from the list of those contractors 
with approved PHS Animal Welfare Assurances.

    Note: The Contractor may request registration of its facility 
and a current listing of licensed dealers from the Regional Office 
of the Animal and Plant Health Inspection Service (APHIS), USDA, for 
the region in which its research facility is located. The location 
of the appropriate APHIS Regional Office, as well as information 
concerning this program may be obtained by contacting the Animal 
Care Staff, USDA/APHIS, 4700 River Road, Riverdale, Maryland 20737.

(End of Clause)

Part 353--FORMS

Subpart 353.3--Illustrations of Forms

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

Subpart 353.3--Illustrations of Forms


353.370-674  Form HHS 674, Structured Approach Profit/Fee Objective.

    This form is available through local cost advisory personnel. For 
copies of the form, contact the Program Support Center at (301) 443-
6740.

PART 370--SPECIAL PROGRAMS AFFECTING ACQUISITION

Subpart 370.1--Accessibility of Meetings, Conferences, and Seminars to 
Persons with Disabilities

Sec.
370.101  Policy.
370.102  Responsibilities.

Subpart 370.2--Indian Preference in Employment, Training, and 
Subcontracting Opportunities

370.201  Statutory requirements.
370.202  Applicability.
370.203  Definitions.
370.204  Compliance enforcement.
370.205  Tribal preference requirements.

[[Page 1387]]

Subpart 370.3--Acquisitions Involving Human Subjects

370.300  Scope of subpart.
370.301  Policy.
370.302  Types of assurances.
370.303  Notice to offerors.
370.304  Contract clause.

Subpart 370.4--Acquisitions Involving the Use of Laboratory Animals

370.400  Scope of subpart.
370.401  Policy.
370.402  Assurances.
370.403  Notice to offerors.
370.404  Contract clause.

Subpart 370.5--Acquisitions Under the Buy Indian Act

370.500  Scope of subpart.
370.501  Policy.
370.502  Definitions.
370.503  Requirements.
370.504  Competition.
370.505  Responsibility determinations.

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

Subpart 370.1--Accessibility of Meetings, Conferences, and Seminars 
to Persons With Disabilities


370.101  Policy.

    (a) It is the policy of HHS that all meetings, conferences, and 
seminars be accessible to persons with disabilities. For the purpose of 
this policy, accessibility is defined as both physical access to 
meeting, conference, and seminar sites, and aids and services to enable 
individuals with sensory disabilities to fully participate in meetings, 
conferences, and seminars.
    (b) In regard to acquisition, the policy is applicable to all 
contracts where the statement of work requires the contractor to 
conduct meetings, conferences, or seminars that are open to the public 
or involve HHS personnel, but not to ad hoc meetings that may be 
necessary or incidental to contract performance.


370.102  Responsibilities.

    (a) The contracting officer shall include the clause in 352.270-1 
in every solicitation and resulting contract when the statement of work 
requires the contractor to conduct meetings, conferences, or seminars 
in accordance with 370.101(b).
    (b) The project officer shall be responsible for obtaining, 
reviewing, and approving the contractor's plan, which is to be 
submitted in response to paragraph (a) of the contract clause in 
352.270-1. A consolidated or master plan for contracts requiring 
numerous meetings, conferences, or seminars will be acceptable. The 
project officer, prior to approving the plan, should consult with the 
Office of Engineering Services serving the region where the meeting, 
conference, or seminar is to be held, to assure that the contractor's 
plan meets the accessibility requirements of the contract clause. The 
Office of Engineering Services should determine the adequacy of the 
contractor's plan, and notify the project officer, in writing, within 
ten (10) working days of receiving the request from the project 
officer.

Subpart 370.2--Indian Preference in Employment, Training, and 
Subcontracting Opportunities


370.201  Statutory requirements.

    Section 7(b) of the Indian Self-Determination and Education 
Assistance Act, Public Law 93-638, 88 Stat. 2205, 25 U.S.C. 450e(b), 
requires:

    Any contract, subcontract, grant, or subgrant pursuant to this 
Act, the Act of April 16, 1934 (48 Stat. 596), as amended, or any 
other Act authorizing Federal contracts with or grants to Indian 
organizations or for the benefit of Indians, shall require that to 
the greatest extent feasible:
    (1) Preferences and opportunities for training and employment in 
connection with the administration of such contracts or grants shall 
be given to Indians; and
    (b) Preference in the award of subcontracts and subgrants in 
connection with the administration of such contracts or grants shall 
be given to Indian organizations and to Indian-owned economic 
enterprises as defined in section 3 of the Indian Financing Act of 
1974 (88 Stat. 77).


370.202  Applicability.

    The Indian Preference clause set forth in 352.270-2 and the Indian 
Preference Program clause set forth in 352.270-3 have been developed to 
implement section 7(b) of Public Law 93-638 for all activities of the 
Department. The clauses shall be used by any affected departmental 
contracting activity as follows, except solicitations issued and 
contracts awarded pursuant to Title I of Public Law 93-638 (25 U.S.C. 
450 et seq.) are exempted:
    (c) The Indian Preference clause (352.270-2) shall be included in 
each solicitation and resultant contract, regardless of dollar amount:
    (1) When the contract is to be awarded pursuant to an act 
specifically authorizing contracts with Indian organizations; or
    (2) Where the work to be performed under the contract is 
specifically for the benefit of Indians and is in addition to any 
incidental benefits which might otherwise accrue to the general public.
    (b) The Indian Preference Program clause (352.270-3) shall be 
included in each solicitation and resultant contract when:
    (1) The dollar amount of the acquisition is expected to equal or 
exceed $50,000 for nonconstruction work or $100,000 for construction 
work;
    (2) The Indian Preference clause is to be included in the 
solicitation and resultant contract; and
    (3) The determination is made, prior to solicitation, that the work 
to be performed under the resultant contract will take place in whole 
or in substantial part on or near an Indian reservation(s). In 
addition, the Indian Preference Program clause may be included in any 
solicitation and resultant contract below the $50,000 or $100,000 level 
for nonconstruction or construction contracts, respectively, but which 
meet the requirements of paragraphs (b)(2) and (3) of this 370.202, 
and, in the opinion of the contracting activity, offer substantial 
opportunities for Indian employment, training, and subcontracting.


370.203  Definitions.

    For purposes of this subpart 370.2, the following definitions shall 
apply:
    (a) Indian means a person who is a member of an Indian Tribe. If 
the contractor has reason to doubt that a person seeking employment 
preference is an Indian, the contractor shall grant the preference but 
shall require the individual to provide evidence within thirty (30) 
days from the Tribe concerned that the person is a member of the Tribe.
    (b) Indian Tribe means an Indian Tribe, pueblo, band, nation, or 
other organized group or community, including any Alaska Native Village 
or regional or village corporation as defined in or established 
pursuant to the Alaska Native Claims Settlement Act (85 Stat. 688, 43 
U.S.C. 1601) which is recognized as eligible for the special programs 
and services provided by the United States to Indians because of their 
status as Indians.
    (c) Indian organization means the governing body of any Indian 
Tribe or entity established or recognized by such governing body in 
accordance with the Indian Financing Act of 1974 (88 Stat. 77, 25 
U.S.C. 1451).
    (d) Indian-owned economic enterprise means any Indian-owned 
commercial, industrial, or business activity established or organized 
for the purpose of profit, provided that such Indian ownership shall 
constitute not less than 51 percent of the enterprise, and the 
ownership shall encompass active operation and control of the 
enterprise.
    (e) Indian reservation includes Indian reservations, public domain 
Indian allotments, former Indian reservations in Oklahoma, and land 
held by incorporated Native groups, regional corporations, and village 
corporations

[[Page 1388]]

under the provisions of the Alaska Native Claims Settlement Act (85 
Stat. 688, 43 U.S.C. 1601 et seq.)
    (f) On or near an Indian Reservation means on a reservation or 
reservations or within that area surrounding an Indian reservation(s) 
where a person seeking employment could reasonably be expected to 
commute to and from in the course of a work day.


370.204  Compliance enforcement.

    (a) The concerned contracting activity shall be responsible for 
conducting periodic reviews to insure contractor compliance with the 
requirements of the clauses set forth in 352.270-2 and 352.270-3. These 
reviews may be conducted with the assistance of the Indian Tribe(s) 
concerned.
    (b) Complaints of noncomplaince with the requirements of the 
clauses set forth in 352.270-2 and 352.270-3 which are filed in writing 
with the contracting activity shall be promptly investigated and 
resolved by the contracting officer.


370.205  Tribal preference requirements.

    (a) Where the work under a contract is to be performed on an Indian 
reservation, the contracting activity may supplement the clause set 
forth in 352.270-3 by adding specific Indian preference requirements of 
the Tribe on whose reservation the work is to be performed. The 
supplemental requirements shall be jointly developed for the contract 
by the contracting activity and the Tribe. Supplemental preference 
requirements must represent a further implementation of the 
requirements of section 7(b) of Public Law 93-638 and must be approved 
by the affected program director and approved for legal sufficiency by 
the Business and Administrative Law Division, OGC, or a regional 
attorney before being added to a solicitation and resultant contract. 
Any supplemental preference requirements to be added to the clause in 
352.270-3 shall be included in the solicitation and clearly identified 
in order to insure uniform understanding or the additional requirements 
by all prospective bidders or offerors.
    (b) Nothing in this part shall be interpreted to preclude Tribes 
from independently developing and enforcing their own tribal preference 
requirements. Such independently developed tribal preference 
requirements shall not, except as provided in paragraph (a) of this 
section, become a requirement in contracts covered under this Subpart 
370.2, and must not conflict with any Federal statutory or regulatory 
requirement concerning the award and administration of contracts.

Subpart 370.3--Acquisitions Involving Human Subjects


370.300  Scope of subpart.

    This subpart applies to all research and development activities 
involving human subjects conducted under contract (see 45 CFR 46.102(d) 
and (f)).


370.301  Policy.

    It is the policy of the Department of Health and Human Services 
(DHHS) that no contract involving human subjects shall be awarded until 
acceptable assurance has been given that the activity will be subject 
to initial and continuing review by an appropriate Institutional Review 
Board (IRB) as described in DHHS regulations at 45 CFR 46.103. An 
applicable Multiple Project Assurance (MPA) or Single Project Assurance 
(SPA), approved by the Office for Protection from Research Risks 
(OPRR), National Institutes of Health (NIH), shall be required of each 
contractor, subcontractor, or cooperating institution having 
responsibility for human subjects involved in performance of the 
contract. The OPRR, NIH, is responsible for negotiating assurances 
covering all DHHS-supported or DHHS-conducted activities involving 
human subjects. Contracting officers shall be guided by OPRR regarding 
nonaward or termination of a contract due to inadequate assurance or 
breech of assurance for protection of human subjects.


370.302  Types of assurances.

    Assurances may be one of two types:
    (a) Multiple Project Assurance (MPA). An MPA describes the 
oversight procedures applicable to all DHHS-supported human subjects 
activities within an institution having a significant number of 
concurrent projects. An MPA listed in OPRR's current ``List of 
Institutions Which Have an Approved MPA'' will be considered acceptable 
for purposes of this policy.
    (b) Single Project Assurance (SPA). An SPA describes the oversight 
procedures applicable to a single DHHS-supported human subjects 
activity. SPAs may be approved in modified form to meet unusual 
requirements. SPAs are not solicited from institutions with OPRR 
approved MPAs. Copies of proposals selected for negotiation and 
requiring one or more SPAs shall be forwarded to the Human Subjects 
Assurance Branch, OPRR, NIH MSC 7507, 6100 Executive Blvd., Room 3B01, 
Rockville, Maryland 20892, as early as possible so that timely action 
may be taken to secure the SPA(s).


370.303  Notice to offerors.

    (a) Solicitations shall contain the notice to offerors in 352.270-
8(a) whenever contract performance is expected to involve human 
subjects.
    (b) IRB approval of proposals submitted by institutions having an 
OPRR-approved MPA should be certified in the manner required by 
instructions for completion of the contract proposal; or by completion 
of a DHHS Form 310, Protection of Human Subjects Assurance 
Identification/Certification/Declaration; or by letter indicating the 
institution's OPRR-assigned MPA number, the date of IRB review and 
approval, and the type of review (convened or expedited). The date of 
IRB approval must not be more than 12 months prior to the deadline for 
proposal submission.
    (c) SPAs for contractors, subcontractors, or cooperating 
institutions generally will not be requested prior to determination 
that a contract proposal has been selected for negotiation. When an SPA 
is submitted, it provides certification for the initial contract 
period. No additional documentation is required. If the contract 
provides for additional years to complete the project, the 
noncompetitive renewal proposal shall be certified in the manner 
described in the preceding paragraph.


370.304  Contract clause.

    The clause set forth in 352.270-8(b) shall be inserted in all 
solicitations and resultant contracts involving human subjects.

Subpart 370.4--Acquisitions Involving the Use of Laboratory Animals


370.400  Scope of subpart.

    This subpart applies to all research, research training and 
biological testing activities involving live vertebrate animals 
conducted under contract (see Public Health Service Policy on Humane 
Care and Use of Laboratory Animals (PHS Policy), Rev. 1986, Repr. 
1996).


370.401  Policy.

    (a) It is the policy of the Department of Health and Human Services 
(DHHS) and the Public Health Service agencies that no contract 
involving live vertebrate animals shall be awarded until acceptable 
assurance has been given that the activity will be subject to initial 
and continuing review by an appropriate Institutional Animal Care and 
Use Committee (IACUC) as described in the PHS Policy at IV. B. 6.

[[Page 1389]]

and 7. An applicable Full Animal Welfare Assurance or 
Interinstitutional Agreement/Assurance, approved by the Office for 
Protection from Research Risks (OPRR), National Institutes of Health 
(NIH), shall be required of each contractor, subcontractor, or 
cooperating institution having responsibility for animal care and use 
involved in performance of the contract (see PHS Policy II., IV. A., 
And V. B.).
    (b) The OPRR, NIH, is responsible for negotiating assurances 
covering all DHHS/PHS-supported or DHHS/PHS-conducted activities 
involving the care and use of live vertebrate animals. Contracting 
officers shall be guided by OPRR regarding adequate animal care, and 
use, approval, disapproval, restriction, or withdrawal of approval of 
assurances (see PHS Policy V. A.).


370.402  Assurances.

    (a) Assurances may be one of two types:
    (1) Full Animal Welfare Assurance (AWA). An AWA describes the 
institution's complete program for the care and use of animals, 
including but not limited to the facilities, occupational health, 
training, veterinary care, IACUC procedures and lines of authority and 
responsibility. An AWA listed in OPRR's list of institutions which have 
an approved full AWA will be considered acceptable for purposes of this 
policy.
    (2) Interinstitutional Agreement/Assurance (IAA). An IAA describes 
the arrangements between an offeror and usually a subcontractor where 
animal activities will occur. An IAA is limited to the specific award 
or single project.
    (b) Copies of proposals selected for negotiation and requiring an 
assurance shall be forwarded to the Assurance Branch, Division of 
Animal Welfare, OPRR, NIH MSC 7507, 6100 Executive Blvd., Room 3B01, 
Rockville, Maryland 20892, as early as possible in order that timely 
action may be taken to secure the necessary assurances.
    (c) A contractor providing animal care services at an assured 
entity, such as a Government-owned, contractor-operated (GOCO) site, 
does not need a separate assurance because the GOCO site normally 
covers the contractor services in the GOCO site assurance.


370.403  Notice to offerors.

    Solicitations shall contain the notice to offerors in 352.270-9(a) 
whenever contract performance is expected to involve the use of live 
vertebrate animals.
    (a) For offerors having a full AWA on file with OPRR, IACUC 
approval of the use of animals shall be submitted in the manner 
required by instructions for completion of the contract proposal, but 
prior to the technical review of the proposal.

    Note: The date of IACUC review and approval must not be more 
than 36 months prior to the deadline for proposal submission.

    (b) Non-assured offerors are not required to submit assurances or 
IACUC approval with proposals. OPRR will contact contractors, 
subcontractors and cooperating institutions to negotiate necessary 
assurances and verify IACUC approvals when requested by appropriate 
DHHS/PHS staff.


370.404  Contract clause.

    The clause set forth in 352.270-9(b) shall be included in all 
solicitations and resultant contracts involving the care and use of 
live vertebrate animals.

Subpart 370.5--Acquisitions Under the Buy Indian Act


370.500  Scope of subpart.

    This subpart sets forth the policy on preferential acquisition from 
Indians under the negotiation authority of the Buy Indian Act. 
Applicability of this subpart is limited to acquisitions made by or on 
behalf of the Indian Health Service of the Public Health Service.


370.501  Policy.

    (a) The Indian Health Service will utilize the negotiation 
authority of the Buy Indian Act to give preference to Indians whenever 
the use of that authority is authorized and is practicable. The Buy 
Indian Act was enacted as a proviso to section 23 of the Act of June 
25, 1910, Chapter 431, Pub. L. 313, 61st Congress, 36 Stat. 861, and 
prescribes the application of the advertising requirements of section 
3709 of the Revised Statutes to the acquisition of Indian supplies. As 
set out in 25 U.S.C. 47, the Buy Indian Act provides as follows:

    So far as may be practicable Indian labor shall be employed, and 
purchases of the products of Indian industry may be made in open 
market in the discretion of the Secretary of the Interior.

    (b) The functions, responsibilities, authorities, and duties of the 
Secretary of the Interior for maintenance and operation of hospital and 
health facilities for Indians and for the conservation of the health of 
Indians were transferred to the Secretary of Health, Education, and 
Welfare, on July 1, 1955 by Pub. L. 568, 83rd Congress, 42 U.S.C. 2001 
et seq. Accordingly, the Secretary of Health and Human Services is 
authorized to use the Buy Indian Act in the acquisition of products of 
Indian industry in connection with the maintenance and operation of 
hospital and health facilities for Indians and for the conservation of 
the health of Indians. This authority has been delegated exclusively to 
the Indian Health Service and is not available for use by any other HHS 
component (unless that component is making an acquisition on behalf of 
the Indian Health Service).
    (c) Use of the Buy Indian Act negotiation authority has been 
emphasized in subsequent legislation, particularly Pub. L. 94-437 and 
Pub. L. 96-537.


370.502  Definitions.

    Buy Indian contract means any contract involving activities covered 
by the Buy Indian Act that is negotiated under the provisions of 41 
U.S.C. 252(c)(15) and 25 U.S.C. 47 between an Indian firm and a 
contracting officer representing the Indian Health Service.
    Indian means a member of any tribe, pueblo, band, group, village or 
community that is recognized by the Secretary of the Interior as being 
Indian or any individual or group of individuals that is recognized by 
the Secretary of the Interior or the Secretary of Health and Human 
Services. The Secretary of Health and Human Services in making 
determinations may take into account the determination of the tribe 
with which affiliation is claimed.
    Indian firm means a sole enterprise, partnership, corporation, or 
other type of business organization owned, controlled, and operated by 
one or more Indians (including, for the purpose of sections 301 and 302 
of Pub. L. 94-437, former or currently federally recognized Indian 
tribes in the State of New York) or by an Indian firm; or a nonprofit 
firm organized for the benefit of Indians and controlled by Indians 
(see 370.503(a)).
    Product of Indian industry means anything produced by Indians 
through physical labor or by intellectual effort involving the use and 
application of skills by them.


370.503  Requirements.

    (a) Indian ownership. The degree of Indian ownership of an Indian 
firm shall be at least 51 percent during the period covered by a Buy 
Indian contract.
    (b) Joint ventures. An Indian firm may enter into a joint venture 
with other entities for specific projects as long as the Indian firm is 
the managing partner. However, the joint venture must be approved by 
the contracting officer prior to the award of a contract under the Buy 
Indian Act.

[[Page 1390]]

    (c) Bonds. In the case of contracts for the construction, 
alteration, or repair of public buildings or public works, performance 
and payment bonds are required by the Miller Act (40 U.S.C. 270a) and 
FAR Part 28. In the case of contracts with Indian tribes or public 
nonprofit organizations serving as governmental instrumentalities of an 
Indian tribe, bonds are not required. However, bonds are required when 
dealing with private business entities which are owned by an Indian 
tribe or members of an Indian tribe. Bonds may be required of private 
business entities which are joint ventures with, or subcontractors of, 
an Indian tribe or a public nonprofit organization serving as a 
governmental instrumentality of an Indian tribe. A bid guarantee or bid 
bond is required only when a performance or payment bond is required.
    (d) Indian preference in employment, training and subcontracting. 
Contracts awarded under the Buy Indian Act are subject to the 
requirements of section 7(b) of the Indian Self-Determination and 
Education Assistance Act (Pub. L. 93-638), which requires that 
preference be given to Indians in employment, training, and 
subcontracting. The Indian Preference clause set forth in 352.270-2 
shall be included in all Buy Indian solicitations and resultant 
contracts. The Indian Preference Program clause set forth in 352.270-3 
shall be used as specified in 370.202(b). All requirements set forth in 
Subpart 370.2 which are applicable to the instant Buy Indian 
acquisition shall be followed by the contracting officer, e.g., 
sections 370.204 and 370.205.
    (e) Subcontracting. Not more than 50 percent of the work to be 
performed under a prime contract awarded pursuant to the Buy Indian Act 
shall be subcontracted to other than Indian firms. For this purpose, 
work to be performed does not include the provision of materials, 
supplies, or equipment.
    (f) Wage rates. A determination of the minimum wage rates by the 
Secretary of Labor as required by the Davis-Bacon Act (40 U.S.C. 276a-
5) shall be included in all contracts awarded under the Buy Indian Act 
for over $2,000 for construction, alteration, or repair, including 
painting and decorating, of public buildings and public works, except 
contracts with Indian tribes or public nonprofit organizations serving 
as governmental instrumentalities of an Indian tribe. The wage rate 
determination is to be included in contracts with private business 
entities even if they are owned by an Indian tribe or a member of an 
Indian tribe and in connection with joint ventures with, or 
subcontractors of, an Indian tribe or a public nonprofit organization 
serving as a governmental instrumentality of an Indian tribe.


370-504  Competition.

    (a) Contracts to be awarded under the Buy Indian Act shall be 
subject to competition among Indians or Indian concerns to the maximum 
extent that competition is determined by the contracting officer to be 
practicable. When competition is determined not to be practicable, a 
Justification for Other than Full and Open Competition shall be 
prepared in accordance with 306.303 and subsequently retained in the 
contract file.
    (b) Solicitations must be synopsized and publicized in the Commerce 
Business Daily and copies of the synopses sent to the tribal office of 
the Indian tribal government directly concerned with the proposed 
acquisition as well as to Indian concerns and others having a 
legitimate interest. The synopsis should state that the acquisition is 
restricted to Indian firms under the Buy Indian Act.


370.505  Responsibility determinations.

    (a) A contract may be awarded under the Buy Indian Act only if it 
is first determined that the project or function to be contracted for 
is likely to be satisfactorily performed under that contract and the 
project or function is likely to be properly completed or maintained 
under that contract.
    (b) The determination called for by paragraph (a) of this section, 
to be made prior to the award of a contract, will be made in writing by 
the contracting officer reflecting an analysis of the standards set 
forth in FAR 9.104-1.

[FR Doc. 99-7 Filed 1-7-99; 8:45 am]
BILLING CODE 4150-04-P