[Title 48 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2010 Edition]
[From the U.S. Government Printing Office]



[[Page 1]]

          

          48


          Chapter 2 (Parts 201 to 299)

                         Revised as of October 1, 2010


          Federal Acquisition Regulations System
          



________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of October 1, 2010
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 48:
          Chapter 2--Defense Acquisition Regulations System, 
          Department of Defense                                      3
  Finding Aids:
      Table of CFR Titles and Chapters........................     547
      Alphabetical List of Agencies Appearing in the CFR......     567
      List of CFR Sections Affected...........................     577

[[Page iv]]





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

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 48 CFR 201.104 
                       refers to title 48, part 
                       201, section 104.

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

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, October 1, 2010), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

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

OMB CONTROL NUMBERS

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

[[Page vi]]

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

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in eleven separate 
volumes. For the period beginning January 1, 2001, a ``List of CFR 
Sections Affected'' is published at the end of each CFR volume.

``[RESERVED]'' TERMINOLOGY

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

INCORPORATION BY REFERENCE

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

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Authorities 
and Rules. A list of CFR titles, chapters, subchapters, and parts and an 
alphabetical list of agencies publishing in the CFR are also included in 
this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.

[[Page vii]]

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

REPUBLICATION OF MATERIAL

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

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
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the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
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ELECTRONIC SERVICES

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register. The NARA site also contains links to GPO Access.

    Raymond A. Mosley,
    Director,
    Office of the Federal Register.
    October 1, 2010.







[[Page ix]]



                               THIS TITLE

    Title 48--Federal Acquisition Regulations System is composed of 
seven volumes. The chapters in these volumes are arranged as follows: 
Chapter 1 (parts 1 to 51), chapter 1 (parts 52 to 99), chapter 2 (parts 
201 to 299), chapters 3 to 6, chapters 7 to 14, chapters 15 to 28 and 
chapter 29 to end. The contents of these volumes represent all current 
regulations codified under this title of the CFR as of October 1, 2010.

    The Federal acquisition regulations in chapter 1 are those 
government-wide acquisition regulations jointly issued by the General 
Services Administration, the Department of Defense, and the National 
Aeronautics and Space Administration. Chapters 2 through 99 are 
acquisition regulations issued by individual government agencies. Parts 
1 to 69 in each of chapters 2 through 99 are reserved for agency 
regulations implementing the Federal acquisition regulations in chapter 
1 and are numerically keyed to them. Parts 70 to 99 in chapters 2 
through 99 contain agency regulations supplementing the Federal 
acquisition regulations.

    The OMB control numbers for the Federal Acquisition Regulations 
System appear in section 1.106 of chapter 1. For the convenience of the 
user section 1.106 is reprinted in the Finding Aids section of the 
second volume containing chapter 1 (parts 52 to 99).

    The first volume, containing chapter 1 (parts 1 to 51), includes an 
index to the Federal acquisition regulations.

    For this volume, Jonn V. Lilyea was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Michael L. White, assisted by Ann Worley.

[[Page 1]]



            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM




            (This book contains chapter 2, parts 201 to 299)

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

chapter 2--Defense Acquisition Regulations System, 
  Department of Defense.....................................         201

[[Page 3]]



CHAPTER 2--DEFENSE ACQUISITION REGULATIONS SYSTEM, DEPARTMENT OF DEFENSE




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

                          SUBCHAPTER A--GENERAL
Part                                                                Page
201             Federal Acquisition Regulations System......           7
202             Definitions of words and terms..............          13
203             Improper business practices and personal 
                    conflicts of interest...................          15
204             Administrative matters......................          19
                   SUBCHAPTER B--ACQUISITION PLANNING
205             Publicizing contract actions................          36
206             Competition requirements....................          38
207             Acquisition planning........................          40
208             Required sources of supplies and services...          46
209             Contractor qualifications...................          52
210             Market research.............................          60
211             Describing agency needs.....................          61
212             Acquisition of commercial items.............          66
          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES
213             Simplified acquisition procedures...........          72
214             Sealed bidding..............................          75
215             Contracting by negotiation..................          76
216             Types of contracts..........................          93
217             Special contracting methods.................          98
218             Emergency acquisitions......................         115
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
219             Small business programs.....................         119
222             Application of labor laws to Government 
                    acquisitions............................         128
223             Environment, energy and water efficiency, 
                    renewable energy technologies, 
                    occupational safety, and drug-free 
                    workplace...............................         138

[[Page 4]]

224             Protection of privacy and freedom of 
                    information.............................         142
225             Foreign acquisition.........................         142
226             Other socioeconomic programs................         183
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
227             Patents, data, and copyrights...............         186
228             Bonds and insurance.........................         227
229             Taxes.......................................         230
230             Cost accounting standards administration....         231
231             Contract cost principles and procedures.....         232
232             Contract financing..........................         236
233             Protests, disputes, and appeals.............         249
             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
234             Major system acquisition....................         251
235             Research and development contracting........         253
236             Construction and architect-engineer 
                    contracts...............................         257
237             Service contracting.........................         262
239             Acquisition of information technology.......         276
241             Acquisition of utility services.............         281
                    SUBCHAPTER G--CONTRACT MANAGEMENT
242             Contract administration and audit services..         284
243             Contract modifications......................         294
244             Subcontracting policies and procedures......         297
245             Government property.........................         298
246             Quality assurance...........................         318
247             Transportation..............................         324
249             Termination of contracts....................         332
250             Extraordinary contractual actions and the 
                    Safety Act..............................         334
251             Use of Government sources by contractors....         336
                     SUBCHAPTER H--CLAUSES AND FORMS
252             Solicitation provisions and contract clauses         338
253             Forms.......................................         512
             SUBCHAPTER I--AGENCY SUPPLEMENTARY REGULATIONS
                Appendix A--Armed Services Board of Contract 
                    Appeals.................................         515


Appendixes B-E [Reserved]

                Appendix F--Material Inspection and 
                    Receiving Report........................         524


Appendix G [Reserved]

                Appendix H--Debarment and Suspension 
                    Procedures..............................         536

[[Page 5]]

                Appendix I--Policy and Procedures for the 
                    DOD Pilot Mentor-Protege Program........         538

[[Page 7]]

                          SUBCHAPTER A_GENERAL

             PART 201_FEDERAL ACQUISITION REGULATIONS SYSTEM

               Subpart 201.1_Purpose, Authority, Issuance

Sec.

Sec. 201.104 Applicability.

Sec. 201.105 Issuance.

Sec. 201.105-3 Copies.

Sec. 201.107 Certifications.

Sec. 201.109 Statutory acquisition-related dollar thresholds-adjustment 
          for inflation.

Sec. 201.170 Peer Reviews.

                      Subpart 201.2_Administration


Sec. 201.201 Maintenance of the FAR.

Sec. 201.201-1 The two councils.

Sec. 201.201-70 Maintenance of Procedures, Guidance, and Information.

              Subpart 201.3_Agency Acquisition Regulations


Sec. 201.301 Policy.

Sec. 201.303 Publication and codification.

Sec. 201.304 Agency control and compliance procedures.

                  Subpart 201.4_Deviations From the FAR


Sec. 201.402 Policy.

Sec. 201.403 Individual deviations.

Sec. 201.404 Class deviations.

      Subpart 201.6_Career Development, Contracting Authority, and 
                            Responsibilities


Sec. 201.602 Contracting officers.

Sec. 201.602-2 Responsibilities.

Sec. 201.602-70 Contract clause.

Sec. 201.603 Selection, appointment, and termination of appointment.

Sec. 201.603-2 Selection.

Sec. 201.603-3 Appointment.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36284, July 31, 1991, unless otherwise noted.

               Subpart 201.1_Purpose, Authority, Issuance



Sec. 201.104  Applicability.

    The FAR and the Defense Federal Acquisition Regulation Supplement 
(DFARS) also apply to purchases and contracts by DoD contracting 
activities made in support of foreign military sales or North Atlantic 
Treaty Organization cooperative projects without regard to the nature or 
sources of funds obligated, unless otherwise specified in this 
regulation.

[56 FR 36284, July 31, 1991. Redesignated at 64 FR 39430, July 22, 1999]



Sec. 201.105  Issuance.



Sec. 201.105-3  Copies.

    The DFARS and the DFARS Procedures, Guidance, and Information (PGI) 
are available electronically via the World Wide Web at http://
www.acq.osd.mil/dpap/dars/index.htm.

[69 FR 63326, Nov. 1, 2004]



Sec. 201.107  Certifications.

    In accordance with Section 29 of the Office of Federal Procurement 
Policy Act (41 U.S.C. 425), a new requirement for a certification by a 
contractor or offeror may not be included in the DFARS unless--
    (1) The certification requirement is specifically imposed by 
statute; or
    (2) Written justification for such certification is provided to the 
Secretary of Defense by the Under Secretary of Defense (Acquisition, 
Technology, and Logistics), and the Secretary of Defense approves in 
writing the inclusion of such certification requirement.

[63 FR 11528, Mar. 9, 1998, as amended at 65 FR 39704, June 27, 2000]



Sec. 201.109  Statutory acquisition-related dollar thresholds-adjustment 
          for inflation.

    (d) A matrix showing the most recent escalation adjustments of 
statutory acquisition-related dollar thresholds is available at PGI 
201.109.

[71 FR 75892, Dec. 19, 2006]



Sec. 201.170  Peer Reviews.

    (a) Acquisitions valued at $1 billion or more. (1) The Office of the 
Director, Defense Procurement and Acquisition Policy, will organize 
teams of reviewers and facilitate Peer Reviews for solicitations and 
contracts valued at $1 billion or more, as follows:

[[Page 8]]

    (i) Pre-award Peer Reviews will be conducted for all solicitations 
valued at $1 billion or more (including options).
    (ii) Post-award Peer Reviews will be conducted for all contracts for 
services valued at $1 billion or more (including options).
    (iii) Reviews will be conducted using the procedures at PGI 201.170.
    (2) To facilitate planning for Peer Reviews, the military 
departments, defense agencies, and DoD field activities shall provide a 
rolling annual forecast of acquisitions with an anticipated value of $1 
billion or more (including options) at the end of each quarter (i.e., 
March 31; June 30; September 30; December 31), to the Deputy Director, 
Defense Procurement and Acquisition Policy (Contract Policy and 
International Contracting), 3060 Defense Pentagon, Washington, DC 20301-
3060.
    (b) Acquisitions valued at less than $1 billion. The military 
departments, defense agencies, and DoD field activities shall establish 
procedures for--
    (1) Pre-award Peer Reviews of solicitations valued at less than $1 
billion; and
    (2) Post-award Peer Reviews of contracts for services valued at less 
than $1 billion.

[74 FR 37626, July 29, 2009]

                      Subpart 201.2_Administration



Sec. 201.201  Maintenance of the FAR.



Sec. 201.201-1  The two councils.

    (c) The composition and operation of the DAR Council is prescribed 
in DoD Instruction 5000.35, Defense Acquisition Regulations (DAR) 
System.
    (d)(i) Departments and agencies process proposed revisions of FAR or 
DFARS through channels to the Director of the DAR Council. Process the 
proposed revision as a memorandum in the following format, addressed to 
the Director, DAR Council, OUSD(AT&L), 3062 Defense Pentagon, 
Washington, DC 20301-3062; datafax (703) 602-0350:

    I. PROBLEM: Succinctly state the problem created by current FAR and/
or DFARS coverage and describe the factual and/or legal reasons 
necessitating the change to the regulation.
    II. Recommendation: Identify the FAR and/or DFARS citations to be 
revised. Attach as TAB A a copy of the text of the existing coverage, 
conformed to include the proposed additions and deletions. Indicate 
deleted coverage with dashed lines through the current words being 
deleted and insert proposed language in brackets at the appropriate 
locations within the existing coverage. If the proposed deleted portion 
is extensive, it may be outlined by lines forming a box with diagonal 
lines drawn connecting the corners.
    III. Discussion: Include a complete, convincing explanation of why 
the change is necessary and how the recommended revision will solve the 
problem. Address advantages and disadvantages of the proposed revision, 
as well as any cost or administrative impact on Government activities 
and contractors. Identify any potential impact of the change on 
automated systems, e.g., automated financial and procurement systems. 
Provide any other background information that would be helpful in 
explaining the issue.
    IV. Collaterals: Address the need for public comment (FAR 1.301(b) 
and subpart 1.5), the Paperwork Reduction Act, and the Regulatory 
Flexibility Act (FAR 1.301(c)).
    V. Deviations: If a recommended revision of DFARS is a FAR 
deviation, identify the deviation and include under separate TAB a 
justification for the deviation that addresses the requirements of 
201.402(2). The justification should be in the form of a memorandum for 
the Director of Defense Procurement and Acquisition Policy, Office of 
the Under Secretary of Defense (Acquisition, Technology, and Logistics).

    (ii) The public may offer proposed revisions of FAR or DFARS by 
submission of a memorandum, in the format (including all of the 
information) prescribed in paragraph (d)(i) of this subsection, to the 
Director of the DAR Council.

[56 FR 36284, July 31, 1991, as amended at 60 FR 61591, Nov. 30, 1995; 
61 FR 50451, Sept. 26, 1996; 63 FR 11528, Mar. 9, 1998; 65 FR 6552, Feb. 
10, 2000; 68 FR 7439, Feb. 14, 2003; 73 FR 70906, Nov. 24, 2008]



Sec. 201.201-70  Maintenance of Procedures, Guidance, and Information.

    The DAR Council is also responsible for maintenance of the DFARS 
Procedures, Guidance, and Information (PGI).

[69 FR 63326, Nov. 1, 2004]

[[Page 9]]

              Subpart 201.3_Agency Acquisition Regulations



Sec. 201.301  Policy.

    (a)(1) DoD implementation and supplementation of the FAR is issued 
in the Defense Federal Acquisition Regulation Supplement (DFARS) under 
authorization and subject to the authority, direction, and control of 
the Secretary of Defense. The DFARS contains--
    (i) Requirements of law;
    (ii) DoD-wide policies;
    (iii) Delegations of FAR authorities;
    (iv) Deviations from FAR requirements; and
    (v) Policies/procedures that have a significant effect beyond the 
internal operating procedures of DoD or a significant cost or 
administrative impact on contractors or offerors.
    (2) Relevant procedures, guidance, and information that do not meet 
the criteria in paragraph (a)(1) of this section are issued in the DFARS 
Procedures, Guidance, and Information (PGI).
    (b) When Federal Register publication is required for any policy, 
procedure, clause, or form, the department or agency requesting Under 
Secretary of Defense (Acquisition, Technology, and Logistics) (USD 
(AT&L)) approval for use of the policy, procedure, clause, or form (see 
201.304(1)) must include an analysis of the public comments in the 
request for approval.

[56 FR 36284, July 31, 1991, as amended at 60 FR 61591, Nov. 30, 1995; 
65 FR 6552, Feb. 10, 2000; 69 FR 63326, Nov. 1, 2004]



Sec. 201.303  Publication and codification.

    (a)(i) The DFARS is codified under chapter 2 in title 48, Code of 
Federal Regulations.
    (ii) To the extent possible, all DFARS text (whether implemental or 
supplemental) is numbered as if it were implemental. Supplemental 
numbering is used only when the text cannot be integrated intelligibly 
with its FAR counterpart.
    (A) Implemental numbering is the same as its FAR counterpart, except 
when the text exceeds one paragraph, the subdivisions are numbered by 
skipping a unit in the FAR 1.105-2(b)(2) prescribed numbering sequence. 
For example, three paragraphs implementing FAR 19.501 would be numbered 
219.501 (1), (2), and (3) rather than (a), (b), and (c). Three 
paragraphs implementing FAR 19.501(a) would be numbered 219.501(a) (i), 
(ii), and (iii) rather than (a) (1), (2), and (3). Further subdivision 
of the paragraphs follows the prescribed numbering sequence, e.g., 
219.501(1)(i)(A)(1)(i).
    (B) Supplemental numbering is the same as its FAR counterpart, with 
the addition of a number of 70 and up or (S-70) and up. Parts, subparts, 
sections, or subsections are supplemented by the addition of a number of 
70 and up. Lower divisions are supplemented by the addition of a number 
of (S-70) and up. When text exceeds one paragraph, the subdivisions are 
numbered using the FAR 1.105-2(b)(2) prescribed sequence, without 
skipping a unit. For example, DFARS text supplementing FAR 19.501 would 
be numbered 219.501-70. Its subdivisions would be numbered 219.501-70 
(a), (b), and (c).
    (C) Subdivision numbering below the 4th level does not repeat the 
numbering sequence. It uses italicized Arabic numbers and then 
italicized lower case Roman numerals.
    (D) An example of DFARS numbering is in Table 1-1, DFARS Numbering.
    (iii) Department/agency and component supplements must parallel the 
FAR and DFARS numbering, except department/agency supplemental numbering 
uses subsection numbering of 90 and up, instead of 70 and up.

                       Table 1-1--DFARS Numbering
------------------------------------------------------------------------
       FAR             Is implemented as          Is supplemented as
------------------------------------------------------------------------
19                 219                        219.70
19.5               219.5                      219.570
19.501             219.501                    219.501-70
19.501-1           219.501-1                  219.501-1-70
19.501-1(a)        219.501-1(a)               219.501-1(a)(S-70)
19.501-1(a)(1)     219.501-1(a)(1)            219.501-1(a)(1)(S-70)
------------------------------------------------------------------------


[56 FR 36284, July 31, 1991, as amended at 64 FR 51074, Sept. 21, 1999]



Sec. 201.304  Agency control and compliance procedures.

    Departments and agencies and their component organizations may issue 
acquisition regulations as necessary to

[[Page 10]]

implement or supplement the FAR or DFARS.
    (1)(i) Approval of the USD (AT&L) is required before including in a 
department/agency or component supplement, or any other contracting 
regulation document such as a policy letter or clause book, any policy, 
procedure, clause, or form that--
    (A) Has a significant effect beyond the internal operating 
procedures of the agency; or
    (B) Has a significant cost or administrative impact on contractors 
or offerors.
    (ii) Except as provided in paragraph (2) of this section, the 
USD(AT&L) has delegated authority to the Director of Defense Procurement 
and Acquisition Policy (OUSD(AT&L)DPAP) to approve or disapprove the 
policies, procedures, clauses, and forms subject to paragraph (1)(i) of 
this section.
    (2) In accordance with Section 29 of the Office of Federal 
Procurement Policy Act (41 U.S.C. 425), a new requirement for a 
certification by a contractor or offeror may not be included in a 
department/agency or component procurement regulation unless--
    (i) The certification requirement is specifically imposed by 
statute; or
    (ii) Written justification for such certification is provided to the 
Secretary of Defense by USD(AT&L), and the Secretary of Defense approves 
in writing the inclusion of such certification requirement.
    (3) Contracting activities must obtain the appropriate approval (see 
201.404) for any class deviation (as defined in FAR subpart 1.4) from 
the FAR or DFARS, before its inclusion in a department/agency or 
component supplement or any other contracting regulation document such 
as a policy letter or clause book.
    (4) Each department and agency must develop and, upon approval by 
OUSD(AT&L)DPAP, implement, maintain, and comply with a plan for 
controlling the use of clauses other than those prescribed by FAR or 
DFARS.
    (5) Departments and agencies must submit requests for the Secretary 
of Defense, USD(AT&L), and OUSD(AT&L)DPAP approvals required by this 
section through the Director of the DAR Council.
    (6) The Director of Defense Procurement publishes changes to the 
DFARS in the Federal Register and electronically via the World Wide Web. 
Each change includes an effective date. Unless guidance accompanying a 
change states otherwise, contracting officers must include any new or 
revised clauses, provisions, or forms in solicitations issued on or 
after the effective date of the change.

[56 FR 36284, July 31, 1991, as amended at 60 FR 61591, Nov. 30, 1995; 
63 FR 11528, Mar. 9, 1998; 64 FR 39430, July 22, 1999; 65 FR 6552, Feb. 
10, 2000; 68 FR 7439, Feb. 14, 2003]

                  Subpart 201.4_Deviations From the FAR



Sec. 201.402  Policy.

    (1) The Director of Defense Procurement and Acquisition Policy, 
Office of the Under Secretary of Defense (Acquisition, Technology, and 
Logistics) (OUSD(AT&L)DPAP), is the approval authority within DoD for 
any individual or class deviation from--
    (i) FAR 3.104, Procurement Integrity, or DFARS 203.104, Procurement 
Integrity;
    (ii) FAR Subpart 27.4, Rights in Data and Copyrights, or DFARS 
Subpart 227.4, Rights in Data and Copyrights;
    (iii) FAR part 30, Cost Accounting Standards Administration, or 
DFARS part 230, Cost Accounting Standards Administration;
    (iv) FAR subpart 31.1, Applicability, or DFARS subpart 231.1, 
Applicability (contract cost principles);
    (v) FAR subpart 31.2, Contracts with Commercial Organizations, or 
DFARS subpart 231.2, Contracts with Commercial Organizations; or
    (vi) FAR part 32, Contract Financing (except subparts 32.7 and 32.8 
and the payment clauses prescribed by subpart 32.1), or DFARS part 232, 
Contract Financing (except subparts 232.7 and 232.8).
    (2) Submit requests for deviation approval through department/agency 
channels to the approval authority in paragraph (1) of this section, 
201.403, or 201.404, as appropriate. Submit deviations that require 
OUSD(AT&L)DPAP approval through the Director of the DAR Council. At a 
minimum, each request must--

[[Page 11]]

    (i) Identify the department/agency, and component if applicable, 
requesting the deviation;
    (ii) Identify the FAR or DFARS citation from which a deviation is 
needed, state what is required by that citation, and indicate whether an 
individual or class deviation is requested;
    (iii) Describe the deviation and indicate which of paragraphs (a) 
through (f) of FAR 1.401 best categorizes the deviation;
    (iv) State whether the deviation will have a significant effect 
beyond the internal operating procedures of the agency and/or a 
significant cost or administrative impact on contractors or offerors, 
and give reasons to support the statement;
    (v) State the period of time for which the deviation is required;
    (vi) State whether approval for the same deviation has been received 
previously, and if so, when;
    (vii) State whether the proposed deviation was published (see FAR 
subpart 1.5 for publication requirements) in the Federal Register and 
provide analysis of comments;
    (viii) State whether the request for deviation has been reviewed by 
legal counsel, and if so, state results; and
    (ix) Give detailed rationale for the request. State what problem or 
situation will be avoided, corrected, or improved if request is 
approved.

[56 FR 36284, July 31, 1991, as amended at 60 FR 61591, Nov. 30, 1995; 
61 FR 50451, Sept. 26, 1996; 64 FR 8727, Feb. 23, 1999; 65 FR 6552, Feb. 
10, 2000; 68 FR 7439, Feb. 14, 2003]



Sec. 201.403  Individual deviations.

    (1) Individual deviations, except those described in 201.402(1) and 
paragraph (2) of this section, must be approved in accordance with the 
department/agency plan prescribed by 201.304(4).
    (2) Contracting officers outside the United States may deviate from 
prescribed nonstatutory FAR and DFARS clauses when--
    (i) Contracting for support services, supplies, or construction, 
with the governments of North Atlantic Treaty Organization (NATO) 
countries or other allies (as described in 10 U.S.C. 2341(2)), or with 
United Nations or NATO organizations; and
    (ii) Such governments or organizations will not agree to the 
standard clauses.

[65 FR 6552, Feb. 10, 2000]



Sec. 201.404  Class deviations.

    (b)(i) Except as provided in paragraph (b)(ii) of this section, 
OUSD(AT&L)DPAP is the approval authority within DoD for any class 
deviation.
    (ii) The senior procurement executives for the Army, Navy, and Air 
Force, and the Directors of the Defense Commissary Agency, the Defense 
Contract Management Agency, and the Defense Logistics Agency, may 
approve any class deviation, other than those described in 201.402(1), 
that does not--
    (A) Have a significant effect beyond the internal operating 
procedures of the department or agency;
    (B) Have a significant cost or administrative impact on contractors 
or offerors;
    (C) Diminish any preference given small business concerns by the FAR 
or DFARS; or
    (D) Extend to requirements imposed by statute or by regulations of 
other agencies such as the Small Business Administration and the 
Department of Labor.

[65 FR 6552, Feb. 10, 2000, as amended at 65 FR 52951, Aug. 31, 2000; 68 
FR 7439, Feb. 14, 2003]

      Subpart 201.6_Career Development, Contracting Authority, and 
                            Responsibilities



Sec. 201.602  Contracting officers.



Sec. 201.602-2  Responsibilities.

    (1) Follow the procedures at PGI 201.602-2 regarding designation, 
assignment, and responsibilities of a contracting officer's 
representative (COR).
    (2) A COR--
    (i) Must be a Government employee, unless otherwise authorized in 
agency regulations;
    (ii) Must be qualified by training and experience commensurate with 
the responsibilities to be delegated in accordance with department/
agency guidelines;

[[Page 12]]

    (iii) May not be delegated responsibility to perform functions at a 
contractor's location that have been delegated under FAR 42.202(a) to a 
contract administration office;
    (iv) Has no authority to make any commitments or changes that affect 
price, quality, quantity, delivery, or other terms and conditions of the 
contract; and
    (v) Must be designated in writing, and a copy furnished the 
contractor and the contract administration office--
    (A) Specifying the extent of the COR's authority to act on behalf of 
the contracting officer;
    (B) Identifying the limitations on the COR's authority;
    (C) Specifying the period covered by the designation;
    (D) Stating the authority is not redelegable; and
    (E) Stating that the COR may be personally liable for unauthorized 
acts.

[71 FR 69489, Dec. 1, 2006, as amended at 75 FR 22706, Apr. 30, 2010]



Sec. 201.602-70  Contract clause.

    Use the clause at 252.201-7000, Contracting Officer's 
Representative, in solicitations and contracts when appointment of a 
contracting officer's representative is anticipated.



Sec. 201.603  Selection, appointment, and termination of appointment.



Sec. 201.603-2  Selection.

    (1) In accordance with 10 U.S.C. 1724, in order to qualify to serve 
as a contracting officer with authority to award or administer contracts 
for amounts above the simplified acquisition threshold, a person must--
    (i) Have completed all contracting courses required for a 
contracting officer to serve in the grade in which the employee or 
member of the armed forces will serve;
    (ii) Have at least 2 years experience in a contracting position;
    (iii) Have--
    (A) Received a baccalaureate degree from an accredited educational 
institution; and
    (B) Completed at least 24 semester credit hours, or equivalent, of 
study from an accredited institution of higher education in any of the 
following disciplines: accounting, business finance, law, contracts, 
purchasing, economics, industrial management, marketing, quantitative 
methods, and organization and management; and
    (iv) Meet such additional requirements, based on the dollar value 
and complexity of the contracts awarded or administered in the position, 
as may be established by the Secretary of Defense.
    (2) The qualification requirements in paragraph (1)(iii) of this 
subsection do not apply to a DoD employee or member of the armed forces 
who--
    (i) On or before September 30, 2000, occupied--
    (A) A contracting officer position with authority to award or 
administer contracts above the simplified acquisition threshold; or
    (B) A position either as an employee in the GS-1102 occupational 
series or a member of the armed forces in an occupational specialty 
similar to the GS-1102 series;
    (ii) Is in a contingency contracting force; or
    (iii) Is an individual appointed to a 3-year developmental position. 
Information on developmental opportunities is contained in DoD 
Instruction 5000.66, Operation of the Defense Acquisition, Technology, 
and Logistics Workforce Education, Training, and Career Development 
Program.
    (3) Waivers to the requirements in paragraph (1) of this subsection 
may be authorized. Information on waivers is contained in DoD 
Instruction 5000.66.

[67 FR 65509, Oct. 25, 2002, as amended at 73 FR 21844, Apr. 23, 2008]



Sec. 201.603-3  Appointment.

    (a) Certificates of Appointment executed under the Armed Services 
Procurement Regulation or the Defense Acquisition Regulation have the 
same effect as if they had been issued under FAR.
    (b) Agency heads may delegate the purchase authority in 213.301 to 
DoD civilian employees and members of the U.S. Armed Forces.

[56 FR 36284, July 31, 1991, as amended at 64 FR 56705, Oct. 21, 1999]

[[Page 13]]

                 PART 202_DEFINITIONS OF WORDS AND TERMS

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

                        Subpart 202.1_Definitions



Sec. 202.101  Definitions.

    Congressional defense committees means--
    (1) The Committee on Armed Services of the Senate;
    (2) The Subcommittee on Defense of the Committee on Appropriations 
of the Senate;
    (3) The Committee on Armed Services of the House of Representatives; 
and
    (4) The Subcommittee on Defense of the Committee on Appropriations 
of the House of Representatives.
    Contract administration office also means a contract management 
office of the Defense Contract Management Agency.
    Contracting activity for DoD also means elements designated by the 
director of a defense agency which has been delegated contracting 
authority through its agency charter. DoD contracting activities are--

                          Department of Defense

Counterintelligence Field Activity
Department of Defense Education Activity
TRICARE Management Activity
Washington Headquarters Services, Acquisition and Procurement Office

                                  Army

Headquarters, U.S. Army Contracting Command
Joint Contracting Command--Iraq/Afghanistan
National Guard Bureau
Program Executive Office for Simulation, Training, and Instrumentation
U.S. Army Aviation and Missile Life Cycle Management Command
U.S. Army Communications-Electronics Life Cycle Management Command
U.S. Army Corps of Engineers
U.S. Army Expeditionary Contracting Command
U.S. Army Intelligence and Security Command
U.S. Army Joint Munitions and Lethality Life Cycle Management Command
U.S. Army Medical Command
U.S. Army Medical Research and Materiel Command
U.S. Army Mission and Installation Contracting Command
U.S. Army Research, Development, and Engineering Command
U.S. Army Space and Missile Defense Command
U.S. Army Sustainment Command
U.S. Army Tank-Automotive and Armaments Life Cycle Management Command

                                  Navy

Office of the Deputy Assistant Secretary of the Navy (Acquisition & 
Logistics Management)
Naval Air Systems Command
Space and Naval Warfare Systems Command
Naval Facilities Engineering Command
Naval Inventory Control Point
Naval Sea Systems Command
Naval Supply Systems Command
Office of Naval Research
Military Sealift Command
Strategic Systems Programs
Marine Corps Systems Command
Installations and Logistics, Headquarters, U.S. Marine Corps

                                Air Force

Office of the Assistant Secretary of the Air Force (Acquisition)
Office of the Deputy Assistant Secretary (Contracting)
Air Force Materiel Command
Air Force Reserve Command
Air Combat Command
Air Mobility Command
Air Education and Training Command
Pacific Air Forces
United States Air Forces in Europe
Air Force Space Command
Air Force District of Washington
Air Force Operational Test & Evaluation Center
Air Force Special Operations Command
United States Air Force Academy
Aeronautical Systems Center
Air Armament Center
Electronic Systems Center
Space and Missile Systems Center

                Defense Advanced Research Projects Agency

Office of the Deputy Director, Management

                 Defense Business Transformation Agency

Contracting Office

                        Defense Commissary Agency

Directorate of Contracting

                   Defense Contract Management Agency

Office of the Director, Defense Contract Management Agency

[[Page 14]]

                 Defense Finance And Accounting Service

External Services, Defense Finance and Accounting Service

                   Defense Information Systems Agency

Defense Information Technology Contracting Organization

                       Defense Intelligence Agency

Office of Procurement

                        Defense Logistics Agency

Acquisition Management Directorate
Defense Supply Centers
Defense Energy Support Center

                   Defense Security Cooperation Agency

Contracting Division

                        Defense Security Service

Acquisition and Contracting Branch

                     Defense Threat Reduction Agency

Acquisition Management Office

                         Missile Defense Agency

Headquarters, Missile Defense Agency

                 National Geospatial-Intelligence Agency

Procurement and Contracting Office

                        National Security Agency

Headquarters, National Security Agency

                United States Special Operations Command

Headquarters, United States Special Operations Command

                  United States Transportation Command

Directorate of Acquisition

    Contracting officer's representative means an individual designated 
and authorized in writing by the contracting officer to perform specific 
technical or administrative functions.
    Departments and agencies, as used in DFARS, means the military 
departments and the defense agencies. The military departments are the 
Departments of the Army, Navy, and Air Force (the Marine Corps is a part 
of the Department of the Navy). The defense agencies are the Defense 
Advanced Research Projects Agency, the Defense Business Transformation 
Agency, the Defense Commissary Agency, the Defense Contract Management 
Agency, the Defense Finance and Accounting Service, the Defense 
Information Systems Agency, the Defense Intelligence Agency, the Defense 
Logistics Agency, the Defense Security Cooperation Agency, the Defense 
Security Service, the Defense Threat Reduction Agency, the Missile 
Defense Agency, the National Geospatial-Intelligence Agency, and the 
National Security Agency.
    Department of Defense (DoD), as used in DFARS, means the Department 
of Defense, the military departments, and the defense agencies.
    Executive agency means for DoD, the Department of Defense, the 
Department of the Army, the Department of the Navy, and the Department 
of the Air Force.
    General public and non-governmental entities, as used in the 
definition of commercial item at FAR 2.101, do not include the Federal 
Government or a State, local, or foreign government (Pub. L. 110-181, 
Section 815(b)).
    Head of the agency means, for DoD, the Secretary of Defense, the 
Secretary of the Army, the Secretary of the Navy, and the Secretary of 
the Air Force. Subject to the direction of the Secretary of Defense, the 
Under Secretary of Defense (Acquisition, Technology, and Logistics), and 
the Director of Defense Procurement and Acquisition Policy, the 
directors of the defense agencies have been delegated authority to act 
as head of the agency for their respective agencies (i.e., to perform 
functions under the FAR or DFARS reserved to a head of agency or agency 
head), except for such actions that by terms of statute, or any 
delegation, must be exercised within the Office of the Secretary of 
Defense. (For emergency acquisition flexibilities, see 218.270.)
    Procedures, Guidance, and Information (PGI) means a companion 
resource to the DFARS that--
    (1) Contains mandatory internal DoD procedures. The DFARS will 
direct compliance with mandatory procedures using imperative language 
such as ``Follow the procedures at * * *'' or similar directive 
language;
    (2) Contains non-mandatory internal DoD procedures and guidance and 
supplemental information to be used at the discretion of the contracting 
officer. The DFARS will point to non-mandatory procedures, guidance, and 
information using permissive language such

[[Page 15]]

as ``The contracting officer may use * * *'' or ``Additional information 
is available at * * *'' or other similar language;
    (3) Is numbered similarly to the DFARS, except that each PGI 
numerical designation is preceded by the letters ``PGI''; and
    (4) Is available electronically at http://www.acq.osd.mil/dpap/dars/
index.htm.
    Senior procurement executive means, for DoD--
    Department of Defense (including the defense agencies)--Under 
Secretary of Defense (Acquisition, Technology, and Logistics);
    Department of the Army--Assistant Secretary of the Army 
(Acquisition, Logistics and Technology);
    Department of the Navy--Assistant Secretary of the Navy (Research, 
Development and Acquisition);
    Department of the Air Force--Assistant Secretary of the Air Force 
(Acquisition).
    The directors of the defense agencies have been delegated authority 
to act as senior procurement executive for their respective agencies, 
except for such actions that by terms of statute, or any delegation, 
must be exercised by the Under Secretary of Defense (Acquisition, 
Technology, and Logistics).
    Tiered evaluation of offers, also known as cascading evaluation of 
offers, means a procedure used in negotiated acquisitions, when market 
research is inconclusive for justifying limiting competition to small 
business concerns, whereby the contracting officer--
    (1) Solicits and receives offers from both small and other than 
small business concerns;
    (2) Establishes a tiered or cascading order of precedence for 
evaluating offers that is specified in the solicitation; and
    (3) If no award can be made at the first tier, evaluates offers at 
the next lower tier, until award can be made.

[56 FR 36287, July 31, 1991]

    Editorial Note: For Federal Register citations affecting section 
202.101, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.

 PART 203_IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF INTEREST

Sec.

Sec. 203.070 Reporting of violations and suspected violations.

                        Subpart 203.1_Safeguards


Sec. 203.104 Procurement integrity.

Sec. 203.104-4 Disclosure, protection, and marking of contractor bid or 
          proposal information and source selection information.

Sec. 203.170 Business practices.

Sec. 203.171 Senior DoD officials seeking employment with defense 
          contractors.

Sec. 203.171-1 Scope.

Sec. 203.171-2 Definition.

Sec. 203.171-3 Policy.

Sec. 203.171-4 Contract clause.

             Subpart 203.5_Other Improper Business Practices


Sec. 203.502-2 Subcontractor kickbacks.

Sec. 203.570 Prohibition on persons convicted of frauds or other 
          defense-contract-related felonies.

Sec. 203.570-1 Scope.

Sec. 203.570-2 Prohibition period.

Sec. 203.570-3 Contract clause.

             Subpart 203.7_Voiding and Rescinding Contracts


Sec. 203.703 Authority.

    Subpart 203.9_Whistleblower Protections for Contractor Employees


Sec. 203.900 Scope of subpart.

Sec. 203.903 Policy.

Sec. 203.904 Procedures for filing complaints.

Sec. 203.905 Procedures for investigating complaints.

Sec. 203.906 Remedies.

Sec. 203.970 Contract clause.

      Subpart 203.10_Contractor Code of Business Ethics and Conduct


Sec. 203.1003 Requirements.

Sec. 203.1004 Contract clauses.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36288, July 31, 1991, unless otherwise noted.



Sec. Sec. 203.070  Reporting of violations and suspected violations.

    Report violations and suspected violations of the following 
requirements in accordance with 209.406-3 or 209.407-3 and DoDD 7050.5, 
Coordination of

[[Page 16]]

Remedies for Fraud and Corruption Related to Procurement Activities:
    (a) Certificate of Independent Price Determination (FAR 3.103).
    (b) Procurement integrity (FAR 3.104).
    (c) Gratuities clause (FAR 3.203).
    (d) Antitrust laws (FAR 3.303).
    (e) Covenant Against Contingent Fees (FAR 3.405).
    (f) Anti-kickback Act (FAR 3.502).
    (g) Prohibitions on persons convicted of defense-related contract 
felonies (203.570).

[69 FR 74990, Dec. 15, 2004]

                        Subpart 203.1_Safeguards



Sec. 203.104  Procurement integrity.



Sec. 203.104-4  Disclosure, protection, and marking of contractor bid or 
          proposal information and source selection information.

    (d)(3) For purposes of FAR 3.104-4(d)(3) only, DoD follows the 
notification procedures in FAR 27.404-5(a). However, FAR 27.404-5(a)(1) 
does not apply to DoD.

[74 FR 2409, Jan. 15, 2009]



Sec. 203.170  Business practices.

    To ensure the separation of functions for oversight, source 
selection, contract negotiation, and contract award, departments and 
agencies shall adhere to the following best practice policies:
    (a) Senior leaders shall not perform multiple roles in source 
selection for a major weapon system or major service acquisition. 
Departments and agencies shall certify every 2 years that no senior 
leader has performed multiple roles in the acquisition of a major weapon 
system or major service. Completed certifications shall be forwarded to 
the Director, Defense Procurement, in accordance with the procedures at 
PGI 203.170.
    (b) Vacant acquisition positions shall be filled on an ``acting'' 
basis from below until a permanent appointment is made. To provide 
promising professionals an opportunity to gain experience by temporarily 
filling higher positions, these oversight duties shall not be accrued at 
the top.
    (c) Acquisition process reviews of the military departments shall be 
conducted to assess and improve acquisition and management processes, 
roles, and structures. The scope of the reviews should include--
    (1) Distribution of acquisition roles and responsibilities among 
personnel;
    (2) Processes for reporting concerns about unusual or inappropriate 
actions; and
    (3) Application of DoD Instruction 5000.2, Operation of the Defense 
Acquisition System, and the disciplines in the Defense Acquisition 
Guidebook.
    (d) Source selection processes shall be--
    (1) Reviewed and approved by cognizant organizations responsible for 
oversight;
    (2) Documented by the head of the contracting activity or at the 
agency level; and
    (3) Periodically reviewed by outside officials independent of that 
office or agency.
    (e) Legal review of documentation of major acquisition system source 
selection shall be conducted prior to contract award, including the 
supporting documentation of the source selection evaluation board, 
source selection advisory council, and source selection authority.
    (f) Procurement management reviews shall determine whether clearance 
threshold authorities are clear and that independent review is provided 
for acquisitions exceeding the simplified acquisition threshold.

[72 FR 20757, Apr. 26, 2007, as amended at 74 FR 2408, Jan. 15, 2009]



Sec. 203.171  Senior DoD officials seeking employment with defense 
          contractors.



Sec. 203.171-1  Scope.

    This section implements Section 847 of the National Defense 
Authorization Act for Fiscal Year 2008 (Public Law 110-181).

[74 FR 2409, Jan. 15, 2009]



Sec. 203.171-2  Definition.

    Covered DoD official as used in this section, is defined in the 
clause at 252.203-7000, Requirements Relating to Compensation of Former 
DoD Officials.

[74 FR 2409, Jan. 15, 2009]

[[Page 17]]



Sec. 203.171-3  Policy.

    (a) A DoD official covered by the requirements of Section 847 of 
Public Law 110-181 (a ``covered DoD official'') who, within 2 years 
after leaving DoD service, expects to receive compensation from a DoD 
contractor, shall, prior to accepting such compensation, request a 
written opinion from the appropriate DoD ethics counselor regarding the 
applicability of post-employment restrictions to activities that the 
official may undertake on behalf of a contractor.
    (b) A DoD contractor may not knowingly provide compensation to a 
covered DoD official within 2 years after the official leaves DoD 
service unless the contractor first determines that the official has 
received, or has requested at least 30 days prior to receiving 
compensation from the contractor, the post-employment ethics opinion 
described in paragraph (a) of this section.
    (c) If a DoD contractor knowingly fails to comply with the 
requirements of the clause at 252.203-7000, administrative and 
contractual actions may be taken, including cancellation of a 
procurement, rescission of a contract, or initiation of suspension or 
debarment proceedings.

[74 FR 2409, Jan. 15, 2009]



Sec. 203.171-4  Contract clause.

    Use the clause at 252.203-7000, Requirements Relating to 
Compensation of Former DoD Officials, in all solicitations and 
contracts.

[74 FR 2409, Jan. 15, 2009]

             Subpart 203.5_Other Improper Business Practices



Sec. 203.502-2  Subcontractor kickbacks.

    (h) The DoD Inspector General has designated Special Agents of the 
following investigative organizations as representatives for conducting 
inspections and audits under the Anti-Kickback Act of 1986:
    (i) U.S. Army Criminal Investigation Command.
    (ii) Naval Criminal Investigative Service.
    (iii) Air Force Office of Special Investigations.
    (iv) Defense Criminal Investigative Service.

[56 FR 36288, July 31, 1991, as amended at 60 FR 29497, June 5, 1995]



Sec. 203.570  Prohibition on persons convicted of frauds or other 
          defense-contract-related felonies.



Sec. 203.570-1  Scope.

    This subpart implements 10 U.S.C. 2408. For information on 10 U.S.C. 
2408, see PGI 203.570-1.

[71 FR 14100, Mar. 21, 2006]



Sec. 203.570-2  Prohibition period.

    DoD has sole responsibility for determining the period of the 
prohibition described in paragraph (b) of the clause at 252.203-7001, 
Prohibition on Persons Convicted of Fraud or Other Defense-Contract-
Related Felonies. The prohibition period--
    (a) Shall not be less than 5 years from the date of conviction 
unless the agency head or a designee grants a waiver in the interest of 
national security. Follow the waiver procedures at PGI 203.570-2(a); and
    (b) May be more than 5 years from the date of conviction if the 
agency head or a designee makes a written determination of the need for 
the longer period. The agency shall provide a copy of the determination 
to the address at PGI 203.570-2(b).

[69 FR 74990, Dec. 15, 2004]



Sec. 203.570-3  Contract clause.

    Use the clause at 252.203-7001, Prohibition on Persons Convicted of 
Fraud or Other Defense-Contract-Related Felonies, in all solicitations 
and contracts exceeding the simplified acquisition threshold, except 
solicitations and contracts for commercial items.

[64 FR 14398, Mar. 25, 1999. Redesignated at 69 FR 74990, Dec. 15, 2004]

             Subpart 203.7_Voiding and Rescinding Contracts



Sec. 203.703  Authority.

    The authority to act for the agency head under this subpart is 
limited to a

[[Page 18]]

level no lower than an official who is appointed by and with the advice 
of the Senate, without power of redelegation. For the defense agencies, 
for purposes of this subpart, the agency head designee is the Under 
Secretary of Defense (Acquisition, Technology, and Logistics).

[56 FR 36288, July 31, 1991, as amended at 60 FR 61592, Nov. 30, 1995; 
65 FR 39704, June 27, 2000]

    Subpart 203.9_Whistleblower Protections for Contractor Employees



Sec. 203.900  Scope of subpart.

    This subpart implements 10 U.S.C. 2409 as amended by Section 846 of 
the National Defense Authorization Act for Fiscal Year 2008 (Pub. L. 
110-181) and Section 842 of the National Defense Authorization Act for 
Fiscal Year 2009 (Pub. L. 110-417).

[74 FR 2410, Jan. 15, 2009]



Sec. 203.903  Policy.

    The following policy applies to DoD instead of the policy at FAR 
3.903:
    (1) 10 U.S.C. 2409 prohibits contractors from discharging, demoting, 
or otherwise discriminating against an employee as a reprisal for 
disclosing, to any of the following entities, information that the 
employee reasonably believes is evidence of gross mismanagement of a DoD 
contract, a gross waste of DoD funds, a substantial and specific danger 
to public health or safety, or a violation of law related to a DoD 
contract (including the competition for or negotiation of a contract):
    (i) A Member of Congress.
    (ii) A representative of a committee of Congress.
    (iii) An Inspector General that receives funding from or has 
oversight over contracts awarded for or on behalf of DoD.
    (iv) The Government Accountability Office.
    (v) A DoD employee responsible for contract oversight or management.
    (vi) An authorized official of an agency or the Department of 
Justice.
    (2) A contracting officer who receives a complaint of reprisal of 
the type described in paragraph (1) of this section shall forward it to 
legal counsel or to the appropriate party in accordance with agency 
procedures.

[74 FR 2410, Jan. 15, 2009]



Sec. 203.904  Procedures for filing complaints.

    In addition to the procedures at FAR 3.904, any contractor employee 
who believes that he or she has been discharged, demoted, or otherwise 
discriminated against contrary to the policy in 203.903 may file a 
complaint with the DoD Inspector General.

[74 FR 2410, Jan. 15, 2009]



Sec. 203.905  Procedures for investigating complaints.

    The following procedures apply to DoD instead of the procedures at 
FAR 3.905:
    (1) The DoD Inspector General will make a determination as to 
whether a complaint is frivolous or merits further investigation.
    (2) If the DoD Inspector General determines that a complaint merits 
further investigation, the DoD Inspector General will--
    (i) Notify the complainant, the contractor alleged to have committed 
the violation, and the head of the agency;
    (ii) Conduct an investigation; and
    (iii) Provide a written report of findings to the complainant, the 
contractor alleged to have committed the violation, and the head of the 
agency.
    (3) The DoD Inspector General--
    (i) Will determine that the complaint is frivolous or will submit 
the report addressed in paragraph (2) of this section within 180 days 
after receiving the complaint; and
    (ii) If unable to submit a report within 180 days, will submit the 
report within the additional time period to which the person submitting 
the complaint agrees.

[74 FR 2410, Jan. 15, 2009]



Sec. 203.906  Remedies.

    (1) Not later than 30 days after receiving a DoD Inspector General 
report in accordance with 203.905, the head of the agency--
    (i) Shall determine whether sufficient basis exists to conclude that 
the

[[Page 19]]

contractor has subjected one of its employees to a reprisal as 
prohibited by 203.903; and
    (ii) Shall issue an order denying relief or shall take one or more 
of the actions specified in FAR 3.906(a).
    (2) If the head of the agency issues an order denying relief or has 
not issued an order within 210 days after the submission of the 
complaint or within 30 days after the expiration of an extension of time 
granted in accordance with 203.905(3)(ii), and there is no showing that 
such delay is due to the bad faith of the complainant--
    (i) The complainant shall be deemed to have exhausted all 
administrative remedies with respect to the complaint; and
    (ii) The complainant may bring a de novo action at law or equity 
against the contractor to seek compensatory damages and other relief 
available under 10 U.S.C. 2409 in the appropriate district court of the 
United States, which shall have jurisdiction over such an action without 
regard to the amount in controversy. Such an action shall, at the 
request of either party to the action, be tried by the court with a 
jury.
    (3) An Inspector General determination and an agency head order 
denying relief under paragraph (2) of this section shall be admissible 
in evidence in any de novo action at law or equity brought pursuant to 
10 U.S.C. 2409(c).

[74 FR 2410, Jan. 15, 2009]



Sec. 203.970  Contract clause.

    Use the clause at 252.203-7002, Requirement to Inform Employees of 
Whistleblower Rights, in all solicitations and contracts.

[74 FR 2410, Jan. 15, 2009]

      Subpart 203.10_Contractor Code of Business Ethics and Conduct



Sec. 203.1003  Requirements.

    (b) Notification of possible contractor violation. Upon notification 
of a possible contractor violation of the type described in FAR 
3.1003(b), coordinate the matter with the following office: DoD 
Inspector General, Investigative Policy and Oversight, Contractor 
Disclosure Program, 400 Army Navy Drive, Suite 1037, Arlington, VA 
22202-4704; Toll-Free Telephone: 866-429-8011.

[74 FR 53412, October 19, 2009]



Sec. 203.1004  Contract clauses.

    (a) Use the clause at 252.203-7003 in solicitations and contracts 
that include the FAR clause 52.203-13, Contractor Code of Business 
Ethics and Conduct.
    (b)(2)(ii) Insert the following address in paragraph (b)(3) of the 
clause at FAR 52.203-14, Display of Hotline Poster(s): DoD Inspector 
General, ATTN: Defense Hotline, 400 Army Navy Drive, Arlington, VA 
22202-4704.

[73 FR 46815, Aug. 12, 2008, as amended at 74 FR 53413, October 19, 
2009; 75 FR 59101, Sept. 27, 2010]

                     PART 204_ADMINISTRATIVE MATTERS

                    Subpart 204.1_Contract Execution

Sec.

Sec. 204.101 Contracting officer's signature.

                   Subpart 204.2_Contract Distribution


Sec. 204.201 Procedures.

Sec. 204.203 Taxpayer identification information.

Sec. 204.270 Electronic Document Access.

    Subpart 204.4_Safeguarding Classified Information Within Industry


Sec. 204.402 General.

Sec. 204.404 Contract clause.

Sec. 204.404-70 Additional contract clauses.

Sec. 204.470 U.S.-International Atomic Energy Agency Additional 
          Protocol.

Sec. 204.470-1 General.

Sec. 204.470-2 National security exclusion.

Sec. 204.470-3 Contract clause.

                    Subpart 204.6_Contract Reporting


Sec. 204.602 General.

Sec. 204.604 Responsibilities.

Sec. 204.606 Reporting data.

                      Subpart 204.8_Contract Files


Sec. 204.802 Contract files.

Sec. 204.804 Closeout of contract files.

Sec. 204.805 Disposal of contract files.

        Subpart 204.9_Taxpayer Identification Number Information


Sec. 204.902 General.

[[Page 20]]

             Subpart 204.11_Central Contractor Registration


Sec. 204.1103 Procedures.

Sec. 204.1104 Solicitation provision and contract clauses.

        Subpart 204.12_Annual Representations and Certifications


Sec. 204.1202 Solicitation provision and contract clause.

  Subpart 204.70_Uniform Procurement Instrument Identification Numbers


Sec. 204.7000 Scope.

Sec. 204.7001 Policy.

Sec. 204.7002 Procedures.

Sec. 204.7003 Basic PII number.

Sec. 204.7004 Supplementary PII numbers.

Sec. 204.7005 Assignment of order codes.

Sec. 204.7006 Cross reference to Federal Procurement Data System.

       Subpart 204.71_Uniform Contract Line Item Numbering System


Sec. 204.7100 Scope.

Sec. 204.7101 Definitions.

Sec. 204.7102 Policy.

Sec. 204.7103 Contract line items.

Sec. 204.7103-1 Criteria for establishing.

Sec. 204.7103-2 Numbering procedures.

Sec. 204.7104 Contract subline items.

Sec. 204.7104-1 Criteria for establishing.

Sec. 204.7104-2 Numbering procedures.

Sec. 204.7105 Contract exhibits and attachments.

Sec. 204.7106 Contract modifications.

Sec. 204.7107 Contract accounting classification reference number (ACRN) 
          and agency accounting identifier (AAI).

Sec. 204.7108 Payment instructions.

Sec. 204.7109 Contract clause.

                Subpart 204.72_Contractor Identification


Sec. 204.7200 Scope of subpart.

Sec. 204.7201 Definitions.

Sec. 204.7202 General.

Sec. 204.7202-1 CAGE codes.

Sec. 204.7202-2 DUNS numbers.

Sec. 204.7202-3 TINs.

Sec. 204.7203 Responsibilities of contracting officers.

Sec. 204.7204 Maintenance of the CAGE file.

Sec. 204.7205 Novation agreements, mergers and sales of assets.

Sec. 204.7206 Using CAGE codes to identify agents and brokers.

Sec. 204.7207 Solicitation provision.

                 Subpart 204.73_Export-Controlled Items


Sec. 204.7300 Scope of subpart.

Sec. 204.7301 Definitions.

Sec. 204.7302 General.

Sec. 204.7303 Policy.

Sec. 204.7304 Contract clauses.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36289, July 31, 1991, unless otherwise noted.

                    Subpart 204.1_Contract Execution



Sec. 204.101  Contracting officer's signature.

    Follow the procedures at PGI 204.101 for signature of contract 
documents.

[71 FR 9268, Feb. 23, 2006]

                   Subpart 204.2_Contract Distribution



Sec. 204.201  Procedures.

    Follow the procedures at PGI 204.201 for the distribution of 
contracts and modifications.

[70 FR 58982, Oct. 11, 2005]



Sec. 204.203  Taxpayer identification information.

    (b) The procedure at FAR 4.203(b) does not apply to contracts that 
include the clause at FAR 52.204-7, Central Contractor Registration. The 
payment office obtains the taxpayer identification number and the type 
of organization from the Central Contractor Registration database.

[68 FR 64558, Nov. 14, 2003]



Sec. 204.270  Electronic Document Access.

    Follow the procedures at PGI 204.270 relating to obtaining an 
account in the Electronic Document Access system.

[75 FR 59102, Sept. 27, 2010]

    Subpart 204.4_Safeguarding Classified Information Within Industry



Sec. 204.402  General.

    DoD employees or members of the Armed Forces who are assigned to or 
visiting a contractor facility and are engaged in oversight of an 
acquisition program will retain control of their work products, both 
classified and unclassified.

[71 FR 9268, Feb. 23, 2006]

[[Page 21]]



Sec. 204.404  Contract clause.



Sec. 204.404-70  Additional contract clauses.

    (a) Use the clause at 252.204-7000, Disclosure of Information, in 
solicitations and contracts when the contractor will have access to or 
generate unclassified information that may be sensitive and 
inappropriate for release to the public.
    (b) Use the clause at 252.204-7003, Control of Government Personnel 
Work Product, in all solicitations and contracts.
    (c) Use the clause at 252.204-7005, Oral Attestation of Security 
Responsibilities, in solicitations and contracts that include the clause 
at FAR 52.204-2, Security Requirements.

[57 FR 14992, Apr. 23, 1992, as amended at 64 FR 45197, Aug. 19, 1999]



Sec. 204.470  U.S.-International Atomic Energy Agency Additional 
          Protocol.



Sec. 204.470-1  General.

    Under the U.S.-International Atomic Energy Agency Additional 
Protocol (U.S.-IAEA AP), the United States is required to declare a wide 
range of public and private nuclear-related activities to the IAEA and 
potentially provide access to IAEA inspectors for verification purposes.

[74 FR 2412, Jan. 15, 2009]



Sec. 204.470-2  National security exclusion.

    (a) The U.S.-IAEA AP permits the United States unilaterally to 
declare exclusions from inspection requirements for activities, or 
locations or information associated with such activities, with direct 
national security significance.
    (b) In order to ensure that all relevant activities are reviewed for 
direct national security significance, both current and former 
activities, and associated locations or information, are to be 
considered for applicability for a national security exclusion.
    (c) If a DoD program manager receives notification from a contractor 
that the contractor is required to report any of its activities in 
accordance with the U.S.-IAEA AP, the program manager will--
    (1) Conduct a security assessment to determine if, and by what 
means, access may be granted to the IAEA; or
    (2) Provide written justification to the component or agency treaty 
office for application of the national security exclusion at that 
location to exclude access by the IAEA, in accordance with DoD 
Instruction 2060.03, Application of the National Security Exclusion to 
the Agreements Between the United States of America and the 
International Atomic Energy Agency for the Application of Safeguards in 
the United States of America.

[74 FR 2412, Jan. 15, 2009]



Sec. 204.470-3  Contract clause.

    Use the clause at 252.204-7010, Requirement for Contractor to Notify 
DoD if the Contractor's Activities are Subject to Reporting Under the 
U.S.-International Atomic Energy Agency Additional Protocol, in 
solicitations and contracts for research and development or major 
defense acquisition programs involving--
    (a) Any fissionable materials (e.g., uranium, plutonium, neptunium, 
thorium, americium);
    (b) Other radiological source materials; or
    (c) Technologies directly related to nuclear power production, 
including nuclear or radiological waste materials.

[74 FR 2412, Jan. 15, 2009]

                    Subpart 204.6_Contract Reporting



Sec. 204.602  General.

    See PGI 204.602 for additional information on the Federal 
Procurement Data System (FPDS) and procedures for resolving technical or 
policy issues relating to FPDS.

[74 FR 37644, July 29, 2009]



Sec. 204.604  Responsibilities.

    (1) The process for reporting contract actions to FPDS should, where 
possible, be automated by incorporating it into contract writing 
systems.
    (2) Data in FPDS is stored indefinitely and is electronically 
retrievable. Therefore, the contracting officer may reference the 
contract action report

[[Page 22]]

(CAR) approval date in the associated Government contract file instead 
of including a paper copy of the electronically submitted CAR in the 
file. Such reference satisfies contract file documentation requirements 
of FAR 4.803(a).
    (3) By December 15th of each year, the chief acquisition officer of 
each DoD component required to report its contract actions shall submit 
to the Director, Defense Procurement and Acquisition Policy, its annual 
certification and data validation results for the preceding fiscal year 
in accordance with the DoD Data Improvement Plan requirements at http://
www.acq.osd.mil/dpap/pdi/eb. The Director, Defense Procurement and 
Acquisition Policy, will submit a consolidated DoD annual certification 
to the Office of Management and Budget by January 5th of each year.

[74 FR 37644, July 29, 2009]



Sec. 204.606  Reporting data.

    In addition to FAR 4.606, follow the procedures at PGI 204.606 for 
reporting data to FPDS.

[74 FR 37644, July 29, 2009]

                      Subpart 204.8_Contract Files



Sec. 204.802  Contract files.

    Official contract files shall consist of--
    (1) Only original, authenticated or conformed copies of contractual 
instruments--
    (i) Authenticated copies means copies that are shown to be genuine 
in one of two ways--
    (A) Certification as true copy by signature of an authorized person; 
or
    (B) Official seal.
    (ii) Conformed copies means copies that are complete and accurate, 
including the date signed and the names and titles of the parties who 
signed them.
    (2) Signed or official record copies of correspondence, memoranda, 
and other documents.



Sec. 204.804  Closeout of contract files.

    Contracting officers shall close out contracts in accordance with 
the procedures at PGI 204.804. The closeout date for file purposes shall 
be determined and documented by the procuring contracting officer.

[73 FR 4114, Jan. 24, 2008]



Sec. 204.805  Disposal of contract files.

    (1) The sources of the period for which official contract files must 
be retained are General Records Schedule 3 (Procurement, Supply, and 
Grant Records) and General Records Schedule 6 (Accountable Officers' 
Accounts Records). Copies of the General Records Schedule may be 
obtained from the National Archives and Records Administration, 
Washington, DC 20408.
    (2) Deviations from the periods cannot be granted by the Defense 
Acquisition Regulatory Council. Forward requests for deviations to both 
the Government Accountability Office and the National Archives and 
Records Administration.
    (3) Hold completed contract files in the office responsible for 
maintaining them for a period of 12 months after completion. After the 
initial 12 month period, send the records to the local records holding 
or staging area until they are eligible for destruction. If no space is 
available locally, transfer the files to the General Services 
Administration Federal Records Center that services the area.
    (4) Duplicate or working contract files should contain no originals 
of materials that properly belong in the official files. Destroy working 
files as soon as practicable once they are no longer needed.
    (5) Retain pricing review files, containing documents related to 
reviews of the contractor's price proposals, subject to cost or pricing 
data (see FAR 15.403-4), for six years. If it is impossible to determine 
the final payment date in order to measure the six year period, retain 
the files for nine years.

[56 FR 36289, July 31, 1991, as amended at 62 FR 40472, July 29, 1997; 
63 FR 11528, Mar. 9, 1998; 71 FR 53044, Sept. 8, 2006]

        Subpart 204.9_Taxpayer Identification Number Information

    Source: 64 FR 43099, Aug. 9, 1999, unless otherwise noted.

[[Page 23]]



Sec. 204.902  General.

    (b) DoD uses the Federal Procurement Data System (FPDS) to meet 
these reporting requirements.

[74 FR 37645, July 29, 2009]

             Subpart 204.11_Central Contractor Registration

    Source: 68 FR 64558, Nov. 14, 2003, unless otherwise noted.



Sec. 204.1103  Procedures.

    (1) On contract award documents, use the contractor's legal or 
``doing business as'' name and physical address information as recorded 
in the Central Contractor Registration (CCR) database at the time of 
award.
    (2) When making a determination to exercise an option, or at any 
other time before issuing a modification other than a unilateral 
modification making an administrative change, ensure that--
    (i) The contractor's record is active in the CCR database; and
    (ii) The contractor's Data Universal Numbering System (DUNS) number, 
Commercial and Government Entity (CAGE) code, name, and physical address 
are accurately reflected in the contract document.
    (3) At any time, if the DUNS number, CAGE code, contractor name, or 
physical address on a contract no longer matches the information on the 
contractor's record in the CCR database, the contracting officer shall 
process a novation or change-of-name agreement, or an address change, as 
appropriate.
    (4) See PGI 204.1103 for additional requirements relating to use of 
information in the CCR database.
    (5) On contractual documents transmitted to the payment office, 
provide the CAGE code, instead of the DUNS number or DUNS+4 number, in 
accordance with agency procedures.

[74 FR 37643, July 29, 2009]



Sec. 204.1104  Solicitation provision and contract clauses.

    When using the clause at FAR 52.204-7, Central Contractor 
Registration, use the clause with 252.204-7004, Alternate A.

        Subpart 204.12_Annual Representations and Certifications

    Source: 73 FR 1823, Jan. 10, 2008, unless otherwise noted.



Sec. 204.1202  Solicitation provision and contract clause.

    When using the provision at FAR 52.204-8, Annual Representations and 
Certifications--
    (1) Use the provision with 252.204-7007, Alternate A, Annual 
Representations and Certifications; and
    (2) Do not include the following representations and certifications:
    (i) 252.209-7005, Reserve Officer Training Corps and Military 
Recruiting on Campus.
    (ii) 252.212-7000, Offeror Representations and Certifications--
Commercial Items.
    (iii) 252.216-7003, Economic Price Adjustment--Wage Rates or 
Material Prices Controlled by a Foreign Government.
    (iv) 252.225-7000, Buy American Act--Balance of Payments Program 
Certificate.
    (v) 252.225-7020, Trade Agreements Certificate.
    (vi) 252.225-7031, Secondary Arab Boycott of Israel.
    (vii) 252.225-7035, Buy American Act--Free Trade Agreements--Balance 
of Payments Program Certificate.
    (viii) 252.225-7042, Authorization to Perform.
    (ix) 252.229-7003, Tax Exemptions (Italy).
    (x) 252.229-7005, Tax Exemptions (Spain).
    (xi) 252.239-7011, Special Construction and Equipment Charges.
    (xii) 252.247-7022, Representation of Extent of Transportation by 
Sea.

  Subpart 204.70_Uniform Procurement Instrument Identification Numbers



Sec. 204.7000  Scope.

    This subpart--

[[Page 24]]

    (a) Prescribes policies and procedures for assigning numbers to all 
solicitations, contracts, and related instruments; and
    (b) Does not apply to solicitations or orders for communication 
service authorizations issued by the Defense Information Technology 
Contracting Organization of the Defense Information Systems Agency in 
accordance with 239.7407-2.

[68 FR 64556, Nov. 14, 2003]



Sec. 204.7001  Policy.

    (a) Use the uniform procurement instrument identification (PII) 
numbering system prescribed by this subpart for the solicitation/
contract instruments described in 204.7003 and 204.7004.
    (b) Retain the basic PII number unchanged for the life of the 
instrument unless the conditions in paragraph (c) of this section exist.
    (c)(1) If continued performance under a contract number is not 
possible or is not in the Government's best interest solely for 
administrative reasons (e.g., when the supplementary PII serial 
numbering system is exhausted or for lengthy major systems contracts 
with multiple options), the contracting officer may assign an additional 
PII number by issuing a separate continued contract to permit continued 
contract performance.
    (2) A continued contract--
    (i) Does not constitute a new procurement;
    (ii) Incorporates all prices, terms, and conditions of the 
predecessor contract effective at the time of issuance of the continued 
contract;
    (iii) Operates as a separate contract independent of the predecessor 
contract once issued; and
    (iv) Shall not evade competition, expand the scope of work, or 
extend the period of performance beyond that of the predecessor 
contract.
    (3) When issuing a continued contract, the contracting officer 
shall--
    (i) Issue an administrative modification to the predecessor contract 
to clearly state that--
    (A) Any future awards provided for under the terms of the 
predecessor contract (e.g., issuance of orders or exercise of options) 
will be accomplished under the continued contract; and
    (B) Supplies and services already acquired under the predecessor 
contract shall remain solely under that contract for purposes of 
Government inspection, acceptance, payment, and closeout; and
    (ii) Follow the procedures at PGI 204.7001(c).

[71 FR 27640, May 12, 2006]



Sec. 204.7002  Procedures.

    (a) In assigning PII numbers--
    (1) Use only the alpha-numeric characters, as prescribed in this 
subpart; and
    (2) Do not use the letter ``I'' or ``O''.
    (b) If department/agency procedures require other identification on 
the solicitation, contract, or other related instrument forms, enter it 
in such a location so as to separate it clearly from the PII number.
    (c) Enter the basic PII number, including Federal supply contract 
numbers and any supplementary numbers, in the spaces provided on the 
solicitation, contract, or related instrument forms. Separate the major 
elements by dashes, e.g., N00023-90-D-0009 (not necessary in electronic 
transmission). If there is no space provided on the form, enter the 
number in the upper right corner of the form and identify what it is 
(e.g., Supplementary Number N00023-90-F-0120).

[56 FR 36289, July 31, 1991, as amended at 65 FR 14398, Mar. 16, 2000; 
68 FR 64556, Nov. 14, 2003]



Sec. 204.7003  Basic PII number.

    (a) Elements of a number. The number consists of 13 alpha-numeric 
characters grouped to convey certain information.
    (1) Positions 1 through 6. The first six positions identify the 
department/agency and office issuing the instrument. Use the DoD 
Activity Address Code (DoDAAC) assigned to the issuing office. DoDAACs 
can be found at https://day2k1.daas.dla.mil/daasinq/.
    (2) Positions 7 through 8. The seventh and eighth positions are the 
last two digits of the fiscal year in which the procurement instrument 
is issued or awarded.

[[Page 25]]

    (3) Position 9. Indicate the type of instrument by entering one of 
the following upper case letters in position nine--
    (i) Blanket purchase agreements--A
    (ii) Invitations for bids--B
    (iii) Contracts of all types except indefinite delivery contracts, 
sales contracts, and contracts placed with or through other Government 
departments or agencies or against contracts placed by such departments 
or agencies outside the DoD. Do not use this code for contracts or 
agreements with provisions for orders or calls--C
    (iv) Indefinite delivery contracts--D
    (v) Reserved--E
    (vi) Contracting actions placed with or through other Government 
departments or agencies or against contracts placed by such departments 
or agencies outside the DoD (including actions with the National 
Industries for the Blind (NIB), the National Industries for the Severely 
Handicapped (NISH), and the Federal Prison Industries (UNICOR))--F
    (vii) Basic ordering agreements--G
    (viii) Agreements, including basic agreements and loan agreements, 
but excluding blanket purchase agreements, basic ordering agreements, 
and leases. Do not use this code for contracts or agreements with 
provisions for orders or calls--H
    (ix) Do not use--I
    (x) Reserved--J
    (xi) Short form research contract--K
    (xii) Lease agreement--L
    (xiii) Purchase orders--manual (assign W when numbering capacity of 
M is exhausted during the fiscal year)--M
    (xiv) Notice of intent to purchase--N
    (xv) Do not use--O
    (xvi) Purchase order--automated (assign V when numbering capacity of 
P is exhausted during a fiscal year)--P
    (xvii) Request for quotation--manual--Q
    (xviii) Request for proposal--R
    (xix) Sales contract--S
    (xx) Request for quotation--automated (assign U when numbering 
capacity of T is exhausted during a fiscal year)--T
    (xxi) See T--U
    (xxii) See P--V
    (xxiii) See M--W
    (xxiv) Reserved for departmental use--X
    (xxv) Imprest fund--Y
    (xxvi) Reserved for departmental use--Z
    (4) Position 10 through 13. Enter the serial number of the 
instrument in these positions. A separate series of serial numbers may 
be used for any type of instrument listed in paragraph (a)(3) of this 
section. Activities shall assign such series of PII numbers 
sequentially. An activity may reserve blocks of numbers or alpha-numeric 
numbers for use by its various components.
    (b) Illustration of PII number. The following illustrates a properly 
configured PII number:

[[Page 26]]

[GRAPHIC] [TIFF OMITTED] TR29JY09.000


[56 FR 36289, July 31, 1991, as amended at 56 FR 67212, Dec. 30, 1991; 
59 FR 27668, May 27, 1994; 60 FR 61592, Nov. 30, 1995; 61 FR 50451, 
Sept. 26, 1996; 62 FR 34121, June 24, 1997; 64 FR 51075, Sept. 21, 1999; 
65 FR 14398, Mar. 16, 2000; 65 FR 39704, June 27, 2000; 68 FR 7439, Feb. 
14, 2003; 68 FR 64557, Nov. 14, 2003; 69 FR 63327, Nov. 1, 2004; 74 FR 
37643, 37646, July 29, 2009]



Sec. 204.7004  Supplementary PII numbers.

    (a) Uses of the supplementary number. Use supplementary numbers with 
the basic PII number, to identify--
    (1) Amendments to solicitations;
    (2) Modifications to contracts and agreements, including provisioned 
item orders; and
    (3) Calls or orders under contracts, basic ordering agreements, or 
blanket purchase agreements, issued by the contracting office or by a 
DoD activity other than the contracting office, including DoD orders 
against Federal supply schedules.
    (b) Amendments to solicitations. Number amendments to solicitations 
sequentially using a four position numeric serial number added to the 
basic PII number and beginning with 0001, e.g., N00062-91-R-1234-0001.
    (c) Modifications to contracts and agreements. (1) Number 
modifications to contracts and agreements using a six position alpha-
numeric added to the basic PII number.
    (2) Position 1. Identify the office issuing the modification--
    (i) Contract administration office--A
    (ii) Contracting office--P
    (3) Positions 2 through 3. These are the first two digits in a 
serial number. They may be either alpha or numeric. Use the letters K, 
L, M, N, P, Q, S, T, U, V, W, X, Y, or Z only in the second position and 
only in the following circumstances--
    (i) Use K, L, M, N, P, and Q in the second position only if the 
modification is issued by the Air Force and is a provisioned item order.
    (ii) Use S, and only S, in the second position to identify 
modifications issued to provide initial or amended shipping instructions 
when--
    (A) The contract has either FOB origin or destination delivery 
terms; and
    (B) The price changes.
    (iii) Use T, U, V, W, X, or Y, and only those characters, in the 
second position to identify modifications issued to provide initial or 
amended shipping instructions when--
    (A) The contract has FOB origin delivery terms; and
    (B) The price does not change.
    (iv) Only use Z in the second position to identify a modification 
which definitizes a letter contract.

[[Page 27]]

    (4) Positions 4 through 6. These positions are always numeric. Use a 
separate series of serial numbers for each type of modification listed 
in paragraph (c)(3) of this section. Examples of proper numbering for 
positions 2-6 (the first position will be either ``A'' or ``P'') are as 
follows:

------------------------------------------------------------------------
                                  Provisioned items
                                 order (reserved for       Shipping
      Normal modification          exclusive use by      instructions
                                 the Air Force only)
------------------------------------------------------------------------
00001-99999....................  K0001-K9999          S0001-S9999
  then.........................  KA001-KZ999          SA001-SZ999
A0001-A9999....................  L0001-L9999          T0001-T9999
B0001-B9999....................  LA001-LZ999          TA001-TZ999
  and so on to.................  M0001-M9999          U0001-U9999
H0001-H9999....................  MA001-MZ999          UA001-UZ999
  then.........................  N0001-N9999          V0001-V9999
J0001-J9999....................  NA001-NZ999          VA001-VZ999
  then.........................  P0001-P9999          W0001-W9999
R0001-R9999....................  PA001-PZ999          WA001-WZ999
  then.........................  Q0001-Q9999          X0001-X9999
AA001-HZ999....................  QA001-QZ999          XA001-XZ999
  then.........................  ...................  Y0001-Y9999
JA001-JZ999....................  ...................  YA001-YZ999
RA001-RZ999....................
------------------------------------------------------------------------

    (5) If the contract administration office is changing the contract 
administration or disbursement office for the first time and is using 
computer generated modifications to notify many offices, it uses the six 
position supplementary number ARZ999. If either office has to be changed 
again during the life of the contract, the supplementary number will be 
ARZ998, and on down as needed.
    (6) Each office authorized to issue modifications shall assign the 
supplementary identification numbers in sequence. Do not assign the 
numbers until it has been determined that a modification is to be 
issued.
    (d) Delivery orders under indefinite delivery contracts, orders 
under basic ordering agreements, and calls under blanket purchase 
agreements. (1) Calls or orders issued by the office issuing the 
contract or agreement. Use a four position alpha-numeric call or order 
serial number added to the basic PII number. These shall be identified 
by using serial numbers beginning 0001 through 9999. When the numeric 
identifiers run out, use alpha characters in the third and fourth 
positions. Never use alpha characters in the first and second positions.
    (2) Orders placed against another activity's contract or agreement.
    (i) If the office placing the order or call is different from the 
office identified in the basic PII number, assign a serial number to the 
order or call. The first and second positions contain the call/order 
code assigned to the ordering office in accordance with 204.7005. Do not 
use the letters A or P in the first position. The third and fourth 
positions are a two position serial number assigned by the ordering 
office. The series will begin with 01. When the numbers exceed 99, the 
office will assign a uniform series of identifiers containing alpha and/
or numeric characters, e.g., Basic : N00383-91-D-0001 serial 
: TU01.
    (ii) If an office is placing calls or orders with NIB, NISH, or 
UNICOR, the office shall identify the instrument with a 13 position 
supplementary PII number using an F in the 9th position. Modifications 
to these calls or orders shall be numbered in accordance with paragraph 
(c) of this section, e.g., Order : DLA100-91-F-0001 
modification : A00001.
    (e) Modifications to calls or orders. Use a two position alpha-
numeric suffix, known as a call or order modification indicator, to 
identify a modification to a call or order.
    (1) Modifications to a call or order issued by a purchasing office 
begin with 01, 02, and so on through 99, then B1 through B9, BA through 
BZ, C1 through C9, and so on through ZZ.
    (2) Modifications to a call or order issued by a contract 
administration office begin with 1A, 1B, and so on through 9Z, followed 
by A1, A2, and so on to A9, then AA, AB, and so on through AZ.

[64 FR 43099, Aug. 9, 1999, as amended at 68 FR 64557, Nov. 14, 2003]



Sec. 204.7005  Assignment of order codes.

    (a) The Defense Logistics Agency, Acquisition Policy Branch (J71), 
Fort Belvoir, VA 22060-6221, is the executive agent for maintenance of 
code assignments for use in the first two positions of an order number 
when an activity places an order against another activity's contract or 
agreement (see 204.7004(d)(2)). The executive agent distributes blocks 
of two-character order codes to department/agency monitors for further 
assignment.

[[Page 28]]

    (b) Contracting activities submit requests for assignment of or 
changes in two-character order codes to their respective monitors in 
accordance with department/agency procedures. Order code monitors--
    (1) Approve requests for additions, deletions, or changes; and
    (2) Provide notification of additions, deletions, or changes to--
    (i) The executive agent; and
    (ii) The executive editor, Defense Acquisition Regulations, 
OUSD(AT&L)DPAP(DAR), 3062 Defense Pentagon, Washington, DC 20301-3062.
    (c) Order code monitors are--

Army: Army Contracting Agency, Attn: SFCA-IT, 5109 Leesburg Pike, Suite 
302, Falls Church, VA 22041-3201
Navy and Marine Corps: Office of the Assistant Secretary of the Navy 
(RD&A), 1000 Navy Pentagon, Room BF992, Washington, DC 20350-1000
Air Force: SAF/AQCI, 1060 Air Force Pentagon, Washington, DC 20330-1060
Defense Logistics Agency: Defense Logistics Agency, Acquisition Policy 
Branch (J-3311), John J. Kingman Road, Fort Belvoir, VA 22060-6221
Other Defense Agencies: Army Contracting Agency, Attn: SFCA-IT 5109 
Leesburg Pike, Suite 302, Falls Church, VA 22041-3201

    (d) Order code assignments can be found at http://www.acq.osd.mil/
dpap/dars/order--code--assignments.html

[68 FR 64557, Nov. 14, 2003, as amended at 69 FR 63327, Nov. 1, 2004; 72 
FR 42313, Aug. 2, 2007; 73 FR 4113, Jan. 24, 2008; 73 FR 27464, May 13, 
2008]



Sec. 204.7006  Cross reference to Federal Procurement Data System.

    Detailed guidance on mapping PII and supplementary PII numbers 
stored in the Electronic Document Access system to data elements 
reported in the Federal Procurement Data System can be found in PGI 
204.7006.

[75 FR 59102, Sept. 27, 2010]

       Subpart 204.71_Uniform Contract Line Item Numbering System



Sec. 204.7100  Scope.

    This subpart prescribes policies and procedures for assigning 
contract line item numbers.



Sec. 204.7101  Definitions.

    Accounting classification reference number (ACRN) means any 
combination of a two position alpha/numeric code used as a method of 
relating the accounting classification citation to detailed line item 
information contained in the schedule.
    Attachment means any documentation, appended to a contract or 
incorporated by reference, which does not establish a requirement for 
deliverables.
    Definitized item, as used in this subpart, means an item for which a 
firm price has been established in the basic contract or by 
modification.
    Exhibit means a document, referred to in a contract, which is 
attached and establishes requirements for deliverables. The term shall 
not be used to refer to any other kind of attachment to a contract. The 
DD Form 1423, Contract Data Requirements List, is always an exhibit, 
rather than an attachment.
    Nonseverable deliverable, as used in this subpart, means a 
deliverable item that is a single end product or undertaking, entire in 
nature, that cannot be feasibly subdivided into discrete elements or 
phases without losing its identity.
    Undefinitized item, as used in this subpart, means an item for which 
a price has not been established in the basic contract or by 
modification.

[56 FR 36289, July 31, 1991, as amended at 60 FR 34468, July 3, 1995; 70 
FR 58982, Oct. 11, 2005]



Sec. 204.7102  Policy.

    (a) The numbering procedures of this subpart shall apply to all--
    (1) Solicitations;
    (2) Solicitation line and subline item numbers;
    (3) Contracts as defined in FAR Subpart 2.1;
    (4) Contract line and subline item numbers;
    (5) Exhibits;
    (6) Exhibit line and subline items; and
    (7) Any other document expected to become part of the contract.

[[Page 29]]

    (b) The numbering procedures are mandatory for all contracts where 
separate contract line item numbers are assigned, unless--
    (1) The contract is an indefinite-delivery type for petroleum 
products against which posts, camps, and stations issue delivery orders 
for products to be consumed by them; or
    (2) The contract is a communications service authorization issued by 
the Defense Information Systems Agency's Defense Information Technology 
Contracting Organization.

[71 FR 9269, Feb. 23, 2006]



Sec. 204.7103  Contract line items.



Sec. 204.7103-1  Criteria for establishing.

    Contracts shall identify the items or services to be acquired as 
separate contract line items unless it is not feasible to do so.
    (a) Contract line items shall have all four of the following 
characteristics; however, there are exceptions within the 
characteristics, which may make establishing a separate contract line 
item appropriate even though one of the characteristics appears to be 
missing--
    (1) Single unit price. The item shall have a single unit price or a 
single total price, except--
    (i) If the item is not separately priced (NSP) but the price is 
included in the unit price of another contract line item, enter NSP 
instead of the unit price;
    (ii) When there are associated subline items, established for other 
than informational reasons, and those subline items are priced in 
accordance with 204.7104;
    (iii) When the items or services are being acquired on a cost-
reimbursement contract;
    (iv) When the contract is for maintenance and repair services (e.g., 
a labor hour contract) and firm prices have been established for 
elements of the total price of an item but the actual number and 
quantity of the elements are not known until performance. The 
contracting officer may structure these contracts to reflect a firm or 
estimated total amount for each line item;
    (v) When the contract line item is established to refer to an 
exhibit or an attachment (if management needs dictate that a unit price 
be entered, the price shall be set forth in the item description block 
and enclosed in parentheses); or
    (vi) When the contract is an indefinite delivery type contract and 
provides that the price of an item shall be determined at the time a 
delivery order is placed and the price is influenced by such factors as 
the quantity ordered (e.g., 10-99 @ $1.00, 100-249 @ $.98, 250+ @ $.95), 
the destination, the FOB point, or the type of packaging required.
    (2) Separately identifiable. A contract line item must be identified 
separately from any other items or services on the contract.
    (i) Supplies are separately identifiable if they have no more than 
one--
    (A) National stock number (NSN);
    (B) Item description; or
    (C) Manufacturer's part number.
    (ii) Services are separately identifiable if they have no more than 
one--
    (A) Scope of work; or
    (B) Description of services.
    (iii) This requirement does not apply if there are associated 
subline items, established for other than informational reasons, and 
those subline items include the actual detailed identification in 
accordance with 204.7104. Where this exception applies, use a general 
narrative description instead of the contract item description.
    (3) Separate delivery schedule. Each contract line item or service 
shall have its own delivery schedule, period of performance, or 
completion date expressly stated (``as required'' constitutes an 
expressly stated delivery term).
    (i) The fact that there is more than one delivery date, destination, 
performance date, or performance point may be a determining factor in 
the decision as to whether to establish more than one contract line 
item.
    (ii) If a contract line item has more than one destination or 
delivery date, the contracting officer may create individual contract 
line items for the different destinations or delivery dates, or may 
specify the different delivery dates for the units by destination in the 
delivery schedule.

[[Page 30]]

    (4) Single accounting classification citation. (i) Each contract 
line item shall reference a single accounting classification citation 
except as provided in paragraph (a)(4)(ii) of this subsection.
    (ii) The use of multiple accounting classification citations for a 
contract line item is authorized in the following situations:
    (A) A single, nonseverable deliverable to be paid for with R&D or 
other funds properly incrementally obligated over several fiscal years 
in accordance with DoD policy;
    (B) A single, nonseverable deliverable to be paid for with different 
authorizations or appropriations, such as in the acquisition of a 
satellite or the modification of production tooling used to produce 
items being acquired by several activities; or
    (C) A modification to an existing contract line item for a 
nonseverable deliverable that results in the delivery of a modified 
item(s) where the item(s) and modification are to be paid for with 
different accounting classification citations.
    (iii) When the use of multiple accounting classification citations 
is authorized for a single contract line item, establish informational 
subline items for each accounting classification citation in accordance 
with 204.7104-1(a).
    (b) All subline items and exhibit line items under one contract line 
item shall be the same contract type as the contract line item.
    (c) For a contract that contains a combination of fixed-price line 
items, time-and-materials/labor-hour line items, and/or cost-
reimbursement line items, identify the contract type for each contract 
line item in Section B, Supplies or Services and Prices/Costs, to 
facilitate appropriate payment.
    (d) Exhibits may be used as an alternative to putting a long list of 
contract line items in the schedule. If exhibits are used, create a 
contract line item citing the exhibit's identifier. See 204.7105(a).
    (e) If the contract involves a test model or a first article which 
must be approved, establish a separate contract line item or subline 
item for each item of supply or service which must be approved. If the 
test model or first article consists of a lot composed of a mixture of 
items, a single line item or subline item may be used for the lot.
    (f) If a supply or service involves ancillary functions, like 
packaging and handling, transportation, payment of state or local taxes, 
or use of reusable containers, and these functions are normally 
performed by the contractor and the contractor is normally entitled to 
reimbursement for performing these functions, do not establish a 
separate contract line item solely to account for these functions. 
However, do identify the functions in the contract schedule. If the 
offeror separately prices these functions, contracting officers may 
establish separate contract line items for the functions; however, the 
separate line items must conform to the requirements of paragraph (a) of 
this subsection.

[56 FR 36289, July 31, 1991, as amended at 60 FR 34468, July 3, 1995; 60 
FR 43191, Aug. 18, 1995; 70 FR 58982, Oct. 11, 2005]



Sec. 204.7103-2  Numbering procedures.

    Follow the procedures at PGI 204.7103-2 for numbering contract line 
items.

[70 FR 58983, Oct. 11, 2005]



Sec. 204.7104  Contract subline items.



Sec. 204.7104-1  Criteria for establishing.

    Contract subline items provide flexibility to further identify 
elements within a contract line item for tracking performance or 
simplifying administration. There are only two kinds of subline items: 
those which are informational in nature and those which consist of more 
than one item that requires separate identification.
    (a) Informational subline items. (1) This type of subline item 
identifies information that relates directly to the contract line item 
and is an integral part of it (e.g., parts of an assembly or parts of a 
kit). These subline items shall not be scheduled separately for 
delivery, identified separately for shipment or performance, or priced 
separately for payment purposes.
    (2) The informational subline item may include quantities, prices, 
or amounts, if necessary to satisfy management requirements. However, 
these elements shall be included within the

[[Page 31]]

item description in the supplies/services column and enclosed in 
parentheses to prevent confusing them with quantities, prices, or 
amounts that have contractual significance. Do not enter these elements 
in the quantity and price columns.
    (3) Informational subline items shall be used to identify each 
accounting classification citation assigned to a single contract line 
item number when use of multiple citations is authorized (see 204.7103-
1(a)(4)(ii)).
    (b) Separately identified subline items. (1) Subline items will be 
used instead of contract line items to facilitate payment, delivery 
tracking, contract funds accounting, or other management purposes. Such 
subline items shall be used when items bought under one contract line 
item number--
    (i) Are to be paid for from more than one accounting classification. 
A subline item shall be established for the quantity associated with the 
single accounting classification citation. Establish a line item rather 
than a subline item if it is likely that a subline item may be assigned 
additional accounting classification citations at a later date. Identify 
the funding as described in 204.7104-1(a)(3);
    (ii) Are to be packaged in different sizes, each represented by its 
own NSN;
    (iii) Have collateral costs, such as packaging costs, but those 
costs are not a part of the unit price of the contract line item;
    (iv) Have different delivery dates or destinations or requisitions, 
or a combination of the three; or
    (v) Identify parts of an assembly or kit which--
    (A) Have to be separately identified at the time of shipment or 
performance; and
    (B) Are separately priced.
    (2) Each separately identified contract subline item shall have its 
own--
    (i) Delivery schedule, period of performance, or completion date;
    (ii) Unit price or single total price or amount (not separately 
priced (NSP) is acceptable as an entry for price or amount if the price 
is included in another subline item or a different contract line item). 
This requirement does not apply--
    (A) If the subline item was created to refer to an exhibit or an 
attachment. If management needs dictate that a unit price be entered, 
the price shall be set forth in the item description block of the 
schedule and enclosed in parentheses; or
    (B) In the case of indefinite delivery contracts described at 
204.7103-1(a)(1)(vi).
    (iii) Identification (e.g., NSN, item description, manufacturer's 
part number, scope of work, description of services).
    (3) Unit prices and extended amounts.
    (i) The unit price and total amount for all subline items may be 
entered at the contract line item number level if the unit price for the 
subline items is identical. If there is any variation, the subline item 
unit prices shall be entered at the subline item level only.
    (ii) The unit price and extended amounts may be entered at the 
subline items level.
    (iii) The two methods in paragraphs (b)(3) (i) and (ii) of this 
subsection shall not be combined in a contract line item.
    (iv) When the price for items not separately priced is included in 
the price of another subline item or contract line item, it may be 
necessary to withhold payment on the priced subline item until all the 
related subline items that are not separately priced have been 
delivered. In those cases, use the clause at 252.204-7002, Payment for 
Subline Items Not Separately Priced.

[56 FR 36289, July 31, 1991, as amended at 60 FR 34468, July 3, 1995; 68 
FR 75200, Dec. 30, 2003]



Sec. 204.7104-2  Numbering procedures.

    Follow the procedures at PGI 204.7104-2 for numbering contract 
subline items.

[70 FR 58983, Oct. 11, 2005]



Sec. 204.7105  Contract exhibits and attachments.

    Follow the procedures at PGI 204.7105 for use and numbering of 
contract exhibits and attachments.

[71 FR 9269, Feb. 23, 2006]

[[Page 32]]



Sec. 204.7106  Contract modifications.

    (a) If new items are added, assign new contract line or subline item 
numbers or exhibit line item numbers, in accordance with the procedures 
established at 204.7103, 204.7104, and 204.7105.
    (b) Modifications to existing contract line items or exhibit line 
items. (1) If the modification relates to existing contract line items 
or exhibit line items, the modification shall refer to those item 
numbers.
    (2) If the contracting officer decides to assign new identifications 
to existing contract or exhibit line items, the following rules apply--
    (i) Definitized and undefinitized items. (A) The original line item 
or subline item number may be used if the modification applies to the 
total quantity of the original line item or subline.
    (B) The original line item or subline item number may be used if the 
modification makes only minor changes in the specifications of some of 
the items ordered on the original line item or subline item and the 
resulting changes in unit price can be averaged to provide a new single 
unit price for the total quantity. If the changes in the specifications 
make the item significantly distinguishable from the original item or 
the resulting changes in unit price cannot be averaged, create a new 
line item.
    (C) If the modification affects only a partial quantity of an 
existing contract or exhibit line item or subline item and the change 
does not involve either the delivery date or the ship-to/mark-for data, 
the original contract or exhibit line item or subline item number shall 
remain with the unchanged quantity. Assign the changed quantity the next 
available number.
    (ii) Undefinitized items. In addition to the rules in paragraph 
(b)(2)(i), the following additional rules apply to undefinitized items--
    (A) If the modification is undefinitized and increases the quantity 
of an existing definitized item, assign the undefinitized quantity the 
next available number.
    (B) If the modification increases the quantity of an existing 
undefinitized item, the original contract or exhibit line item or 
subline item may be used if the unit price for the new quantity is 
expected to be the same as the price for the original quantity. If the 
unit prices of the two quantities will be different, assign the new 
quantity the next available number.
    (C) If the modification both affects only a partial quantity of the 
existing contract or exhibit line or subline item and definitizes the 
price for the affected portion, the definitized portion shall retain the 
original item number. If there is any undefinitized portion of the item, 
assign it the next available number. However, if the modification 
definitizes the price for the whole quantity of the line item, and price 
impact of the changed work can be apportioned equally over the whole to 
arrive at a new unit price, the quantity with the changes can be added 
into the quantity of the existing item.
    (D) If the modification affects only a partial quantity of an 
existing contract or exhibit line or subline item but does not change 
the delivery schedule or definitize price, the unchanged portion shall 
retain the original contract or exhibit line or subline item number. 
Assign the changed portion the next available number.
    (3) If the modification will decrease the amount obligated--
    (i) There shall be coordination between the administrative and 
procuring contracting offices before issuance of the modification; and
    (ii) The contracting officer shall not issue the modification unless 
sufficient unliquidated obligation exists or the purpose is to recover 
monies owed to the Government.

[56 FR 36289, July 31, 1991, as amended at 70 FR 58983, Oct. 11, 2005]



Sec. 204.7107  Contract accounting classification reference number 
          (ACRN) and agency accounting identifier (AAI).

    Traceability of funds from accounting systems to contract actions is 
accomplished using ACRNs and AAIs. Follow the procedures at PGI 204.7107 
for use of ACRNs and AAIs.

[74 FR 52895, Oct. 15, 2009]

[[Page 33]]



Sec. 204.7108  Payment instructions.

    Follow the procedures at PGI 204.7108 for inclusion of payment 
instructions in contracts.

[70 FR 58983, Oct. 11, 2005]



Sec. 204.7109  Contract clause.

    Use the clause at 252.204-7006, Billing Instructions, in 
solicitations and contracts if Section G includes--
    (a) Any of the standard payment instructions at PGI 204.7108(d)(1) 
through (6); or
    (b) Other payment instructions, in accordance with PGI 
204.7108(d)(12), that require contractor identification of the contract 
line item(s) on the payment request.

[70 FR 58983, Oct. 11, 2005]

                Subpart 204.72_Contractor Identification



Sec. 204.7200  Scope of subpart.

    This subpart prescribes uniform policies and procedures for 
identification of commercial and Government entities when it is 
necessary to--
    (a) Exchange data with another contracting activity, including 
contract administration activities and contract payment activities, or 
comply with the reporting requirements of subpart 204.6; or
    (b) Identify contractors for the purpose of developing computerized 
acquisition systems or solicitation mailing lists.

[64 FR 43099, Aug. 9, 1999]



Sec. 204.7201  Definitions.

    (a) Commercial and Government Entity (CAGE) code means--
    (1) A code assigned by the Defense Logistics Information Service 
(DLIS) to identify a commercial or Government entity; or
    (2) A code assigned by a member of the North Atlantic Treaty 
Organization (NATO) that DLIS records and maintains in the CAGE master 
file. This type of code is known as an ``NCAGE code.''
    (b) Contractor identification code means a code that the contracting 
office uses to identify an offeror. The three types of contractor 
identification codes are CAGE codes, Data Universal Numbering System 
(DUNS) numbers, and Taxpayer Identification Numbers (TINs).

[64 FR 43099, Aug. 9, 1999]



Sec. 204.7202  General.



Sec. 204.7202-1  CAGE codes.

    (a) DLIS assigns or records and maintains CAGE codes to identify 
commercial and Government entities. DoD 4000.25-5-M, Military Standard 
Contract Administration Procedures (MILSCAP), and Volume 7 of DoD 
4100.39-M, Federal Logistics Information System (FLIS) Procedures 
Manual, prescribe use of CAGE codes.
    (b)(1) If a prospective contractor located in the United States must 
register in the Central Contractor Registration (CCR) database (see FAR 
Subpart 4.11) and does not have a CAGE code, DLIS will assign a CAGE 
code when the prospective contractor submits its request for 
registration in the CCR database. Foreign registrants must obtain a 
North Atlantic Treaty Organization CAGE (NCAGE) code in order to 
register in the CCR database. NCAGE codes may be obtained from the 
Codification Bureau in the foreign registrant's country. Additional 
information on obtaining NCAGE codes is available at http://
www.dlis.dla.mil/Forms/Form--AC135.asp.
    (2) If registration in the CCR database is not required, the 
prospective contractor's CAGE code is not already available in the 
contracting office, and the prospective contractor does not respond to 
the provision at 252.204-7001, Commercial and Government Entity (CAGE) 
Code Reporting, use the following procedures:
    (i) To identify the prospective contractor's CAGE code, use--
    (A) The monthly H-series CD ROM that contains the H-4/H-8 CAGE 
master file issued by DLIS (Their address is: Customer Service, Federal 
Center, 74 Washington Avenue, North, Battle Creek, MI 49017-3084. Their 
telephone number is: toll-free 1-888-352-9333);
    (B) The on-line access to the CAGE file through the Defense 
Logistics Information System;
    (C) The on-line access to the Defense Logistics Agency (DLA) CAGE 
file

[[Page 34]]

through the DLA Network or dial-up capability; or
    (D) The Internet to access the CAGE Lookup Server at http://
www.dlis.dla.mil/cage--welcome.asp.
    (ii) If no CAGE code is identified through use of the procedures in 
paragraph (b)(2)(i) of this subsection, ask DLIS to assign a CAGE code. 
Submit a DD Form 2051, Request for Assignment of a Commercial and 
Government Entity (CAGE) Code, (or electronic equivalent) to the address 
in paragraph (b)(2)(i)(A) of this subsection, ATTN: DLIS-SBB. The 
contracting office completes Section A of the DD Form 2051, and the 
contractor completes Section B. The contracting office must verify 
Section B before submitting the form.
    (c) Direct questions on obtaining computer tapes, electronic 
updates, or code assignments to DLIS Customer Service: toll-free (888) 
227-2423 or (888) 352-9333; DSN 932-4725; or commercial (616) 961-4725.

[64 FR 43100, Aug. 9, 1999, as amended at 65 FR 63804, Oct. 25, 2000; 67 
FR 49252, July 30, 2002; 68 FR 15380, Mar. 31, 2003; 68 FR 64558, Nov. 
14, 2003]



Sec. 204.7202-2  DUNS numbers.

    Requirements for use of DUNS numbers are in FAR 4.605(b) and 
4.607(a).

[74 FR 34265, July 15, 2009]



Sec. 204.7202-3  TINs.

    Requirements for use of TINs are in FAR subpart 4.9.

[64 FR 43100, Aug. 9, 1999]



Sec. 204.7203  Responsibilities of contracting officers.

    (a) Assist offerors in obtaining the required CAGE codes.
    (b) Do not deny a potential offeror a solicitation package because 
the offeror does not have a contractor identification code.

[64 FR 43100, Aug. 9, 1999, as amended at 74 FR 37645, July 29, 2009]



Sec. 204.7204  Maintenance of the CAGE file.

    (a) DLIS will accept written requests for changes to CAGE files, 
other than name changes, from the following entities:
    (1) The entity identified by the code. The entity must use company 
letterhead to forward the request.
    (2) The contracting office.
    (3) The contract administration office.
    (b) Submit requests for changes to CAGE files on DD Form 2051, or 
electronic equivalent, to--Defense Logistics Information Service, DLIS-
SBB, Federal Center, 74 Washington Avenue, North, Battle Creek, MI 
49017-3084. Telephone Numbers: toll-free (888) 352-9333, DSN 932-4725, 
commercial (616) 961-4725. Facsimile: (616) 961-4388, 4485.
    (c) The contracting officer responsible for execution of a change-
of-name agreement (see FAR subpart 42.12) must submit the agreement to 
DLIS-SBB. If there are no current contracts, each contracting and 
contract administration office receiving notification of changes from 
the commercial entity must forward a copy of the change notice annotated 
with the CAGE code to DLIS-SBB unless the change notice indicates that 
DLIS-SBB already has been notified.
    (d) Additional guidance for maintaining CAGE codes is in Volume 7 of 
DoD 4100.39-M, Federal Logistics Information System (FLIS) Procedures 
Manual.

[64 FR 43100, Aug. 9, 1999; 64 FR 46474, Aug. 25, 1999, as amended at 65 
FR 63804, Oct. 25, 2000]



Sec. 204.7205  Novation agreements, mergers and sales of assets.

    Contracting officers shall process and execute novation agreements 
in accordance with FAR Subpart 42.12, Novation and Change-of-Name 
Agreements. These actions are independent of code and name assignments 
made as a result of the occasion which created the need for the novation 
agreement. The maintenance activity will determine which entity(s) will 
retain the existing code(s) and which entities will be assigned new 
codes. The contracting officer responsible for processing the novation 
agreement shall provide the maintenance activity with the following 
information:
    (a) Name(s), address(es), and code(s) of the contractor(s) 
transferring the original contractual rights and obligations 
(transferor).

[[Page 35]]

    (b) Name(s), address(es), and code(s) (if any) of the entity who is 
the successor in interest (transferee).
    (c) Name(s), address(es), and code(s) (if any) of the entity who is 
retaining or receiving the rights to the technical data.
    (d) Description of the circumstances surrounding the novation 
agreement and especially the relationship of each entity to the other.

[56 FR 36289, July 31, 1991, as amended at 66 FR 49861, Oct. 1, 2001]



Sec. 204.7206  Using CAGE codes to identify agents and brokers.

    Authorized agents and brokers are entities and, as such, may be 
assigned CAGE codes for identification and processing purposes.
    (a) A single CAGE code will be assigned to the agent/broker 
establishment in addition to any codes assigned to the entities 
represented by the agent/broker, i.e., only one code will be assigned to 
a specific agent/broker entity regardless of the number of firms 
represented by that agent/broker.
    (b) Additional codes may be assigned to an agent/broker if they meet 
the criteria for assigning additional codes for entities, e.g., 
different location.
    (c) Codes will not be assigned to an agent/broker in care of the 
entity being represented or in any way infer that the agent/broker is a 
separate establishment bearing the name of the entity represented by the 
agent/broker.

[56 FR 36289, July 31, 1991, as amended at 61 FR 51032, Sept. 30, 1996; 
62 FR 48182, Sept. 15, 1997]



Sec. 204.7207  Solicitation provision.

    Use the provision at 252.204-7001, Commercial and Government Entity 
(CAGE) Code Reporting, in solicitations when--
    (a) The solicitation does not include the clause at FAR 52.204-7, 
Central Contractor Registration; and
    (b) The CAGE codes for the potential offerors are not available to 
the contracting office.

[66 FR 47097, Sept. 11, 2001, as amended at 68 FR 64558, Nov. 14, 2003]

                 Subpart 204.73_Export-Controlled Items

    Source: 75 FR 18034, Apr. 8, 2010, unless otherwise noted.



Sec. 204.7300  Scope of subpart.

    This subpart implements section 890(a) of the National Defense 
Authorization Act for Fiscal Year 2008 (Pub. L. 110-181).



Sec. 204.7301  Definitions.

    Export-controlled items, as used in this subpart, is defined in the 
clause at 252.204-7008.



Sec. 204.7302  General.

    Certain types of items are subject to export controls in accordance 
with the Arms Export Control Act (22 U.S.C. 2751, et seq.), the 
International Traffic in Arms Regulations (22 CFR parts 120-130), the 
Export Administration Act of 1979, as amended (50 U.S.C. App. 2401, et 
seq.), and the Export Administration Regulations (15 CFR parts 730-774). 
See PGI 204.7302 for additional information.



Sec. 204.7303  Policy.

    (a) It is in the interest of both the Government and the contractor 
to be aware of export controls as they apply to the performance of DoD 
contracts.
    (b) It is the contractor's responsibility to comply with all 
applicable laws and regulations regarding export-controlled items. This 
responsibility exists independent of, and is not established or limited 
by, this subpart.



Sec. 204.7304  Contract clauses.

    Use the clause at 252.204-7008, Export-Controlled Items, in all 
solicitations and contracts.

[[Page 36]]

                    SUBCHAPTER B_ACQUISITION PLANNING

                  PART 205_PUBLICIZING CONTRACT ACTIONS

           Subpart 205.2_Synopses of Proposed Contract Actions

Sec.

Sec. 205.203 Publicizing and response time.

Sec. 205.205 Special situations.

Sec. 205.207 Preparation and transmittal of synopses.

                Subpart 205.3_Synopses of Contract Awards


Sec. 205.301 General.

Sec. 205.303 Announcement of contract awards.

                  Subpart 205.4_Release of Information


Sec. 205.470 Contract clause.

                    Subpart 205.5_Paid Advertisements


Sec. 205.502 Authority.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36302, July 31, 1991, unless otherwise noted.

           Subpart 205.2_Synopses of Proposed Contract Actions



Sec. 205.203  Publicizing and response time.

    (b) Allow at least 45 days response time when requested by a 
qualifying or designated country source (as these terms are used in part 
225) and the request is consistent with the Government's requirement.



Sec. 205.205-70  Notification of bundling of DoD contracts.

    (a) When a proposed acquisition is funded entirely using DoD funds 
and potentially involves bundling, the contracting officer shall, at 
least 30 days prior to the release of a solicitation or 30 days prior to 
placing an order without a solicitation, publish in FedBizOpps.gov (or 
any successor site) a notification of the intent to bundle the 
requirement. In addition, if the agency has determined that measurably 
substantial benefits are expected to be derived as a result of bundling, 
the notification shall include a brief description of those benefits 
(see FAR 7.107).
    (b) This requirement is in addition to the notification requirements 
at FAR 10.001(c)(2)(i) and (ii).

[75 FR 40716, July 13, 2010]



Sec. 205.207  Preparation and transmittal of synopses.

    (d)(i) For acquisitions being considered for historically black 
college and university and minority institution set-asides under 
226.370--
    (A) Cite the appropriate Numbered Note; and
    (B) Include the notice at PGI 205.207(d)(i).
    (ii) For broad agency announcement notices, see 235.016.

[69 FR 63328, Nov. 1, 2004, as amended at 70 FR 73149, Dec. 9, 2005]

                Subpart 205.3_Synopses of Contract Awards



Sec. 205.301  General.

    (a)(S-70) Synopsis of exceptions to domestic source requirements.
    (i) In accordance with 10 U.S.C. 2533a(k), contracting officers also 
must synopsize through the GPE, awards exceeding the simplified 
acquisition threshold that are for the acquisition of any clothing, 
fiber, yarn, or fabric items described in 225.7002-1(a)(2) through (10), 
if--
    (A) The Secretary concerned has determined that domestic items are 
not available, in accordance with 225.7002-2(b); or
    (B) The acquisition is for chemical warfare protective clothing, and 
the contracting officer has determined that an exception to domestic 
source requirements applies because the acquisition furthers an 
agreement with a qualifying country, in accordance with 225.7002-2(n).
    (ii) The synopsis must be submitted in sufficient time to permit its 
publication not later than 7 days after contract award.
    (iii) In addition to the information otherwise required in a 
synopsis of contract award, the synopsis must include

[[Page 37]]

one of the following statements as applicable:
    (A) ``The exception at DFARS 225.7002-2(b) applies to this 
acquisition, because the Secretary concerned has determined that items 
grown, reprocessed, reused, or produced in the United States cannot be 
acquired as and when needed in satisfactory quality and sufficient 
quantity at U.S. market prices.''
    (B) ``The exception at DFARS 225.7002-2(n) applies to this 
acquisition, because the contracting officer has determined that this 
acquisition of chemical warfare protective clothing furthers an 
agreement with a qualifying country identified in DFARS 225.003(10).''

[71 FR 58536, Oct. 4, 2006, as amended at 74 FR 52895, Oct. 15, 2009; 74 
FR 59914, Nov. 19, 2009]



Sec. 205.303  Announcement of contract awards.

    (a) Public announcement. (i) The threshold for DoD awards is $6.5 
million. Report all contractual actions, including modifications, that 
have a face value, excluding unexercised options, of more than $6.5 
million.
    (A) For undefinitized contractual actions, report the not-to-exceed 
(NTE) amount. Later, if the definitized amount exceeds the NTE amount by 
more than $6.5 million, report only the amount exceeding the NTE.
    (B) For indefinite delivery, time and material, labor hour, and 
similar contracts, report the initial award if the estimated face value, 
excluding unexercised options, is more than $6.5 million. Do not report 
orders up to the estimated value, but after the estimated value is 
reached, report subsequent modifications and orders that have a face 
value of more than $6.5 million.
    (C) Do not report the same work twice.
    (ii) Departments and agencies submit the information--
    (A) To the Office of the Assistant Secretary of Defense (Public 
Affairs);
    (B) By the close of business the day before the date of the proposed 
award;
    (C) Using report control symbol DD-LA- (AR) 1279;
    (D) Including, as a minimum, the following--
    (1) Contract data. Contract number, modification number, or delivery 
order number, face value of this action, total cumulative face value of 
the contract, description of what is being bought, contract type, 
whether any of the buy was for foreign military sales (FMS) and 
identification of the FMS customer;
    (2) Competition information. Number of solicitations mailed and 
number of offers received;
    (3) Contractor data. Name, address, and place of performance (if 
significant work is performed at a different location);
    (4) Funding data. Type of appropriation and fiscal year of the 
funds, and whether the contract is multiyear (see FAR Subpart 17.1); and
    (5) Miscellaneous data. Identification of the contracting office, 
the contracting office point of contact, known congressional interest, 
and the information release date.
    (iii) Departments and agencies, in accordance with department/agency 
procedures and concurrent with the public announcement, shall provide 
information similar to that required by paragraph (a)(ii) of this 
section to members of Congress in whose state or district the contractor 
is located and the work is to be performed.

[56 FR 36302, July 31, 1991, as amended at 56 FR 67212, Dec. 30, 1991; 
71 FR 75892, Dec. 19, 2006; 75 FR 45073, Aug. 2, 2010]

                  Subpart 205.4_Release of Information



Sec. 205.470  Contract clause.

    Use the clause at 252.205-7000, Provision of Information to 
Cooperative Agreement Holders, in solicitations and contracts expected 
to exceed $1,000,000,000. This clause implements 10 U.S.C. 2416.

[69 FR 63328, Nov. 1, 2004, as amended at 70 FR 8537, Feb. 22, 2005]

                    Subpart 205.5_Paid Advertisements



Sec. 205.502  Authority.

    (a) Newspapers. Heads of contracting activities are delegated 
authority to

[[Page 38]]

approve the publication of paid advertisements in newspapers.

[69 FR 63328, Nov. 1, 2004]

                    PART 206_COMPETITION REQUIREMENTS

Sec.

Sec. 206.001 Applicability.

   Subpart 206.2_Full and Open Competition After Exclusion of Sources


Sec. 206.202 Establishing or maintaining alternative sources.

Sec. 206.203 Set-asides for small business concerns.

           Subpart 206.3_Other Than Full and Open Competition


Sec. 206.302 Circumstances permitting other than full and open 
          competition.

Sec. 206.302-1 Only one responsible source and no other supplies or 
          services will satisfy agency requirements.

Sec. 206.302-2 Unusual and compelling urgency.

Sec. 206.302-3 Industrial mobilization; or engineering, development, or 
          research capability.

Sec. 206.302-3-70 Solicitation provision.

Sec. 206.302-4 International agreement.

Sec. 206.302-5 Authorized or required by statute.

Sec. 206.302-7 Public interest.

Sec. 206.303 Justifications.

Sec. 206.303-70 Acquisitions in support of operations in Iraq or 
          Afghanistan.

Sec. 206.304 Approval of the justification.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36303, July 31, 1991, unless otherwise noted.



Sec. 206.001  Applicability.

    (b) As authorized by 10 U.S.C. 1091, contracts awarded to 
individuals using the procedures at 237.104(b)(ii) are exempt from the 
competitive requirements of FAR part 6.
    (S-70) Also excepted from this part are follow-on production 
contracts for products developed pursuant to the ``other transactions'' 
authority of 10 U.S.C. 2371 for prototype projects when--
    (1) The other transaction agreement includes provisions for a 
follow-on production contract;
    (2) The contracting officer receives sufficient information from the 
agreements officer and the project manager for the prototype other 
transaction agreement, which documents that the conditions set forth in 
10 U.S.C. 2371 note, subsections (f)(2) (A) and (B) (see 32 CFR 3.9(d)), 
have been met; and
    (3) The contracting officer establishes quantities and prices for 
the follow-on production contract that do not exceed the quantities and 
target prices established in the other transaction agreement.

[70 FR 2361, Jan. 13, 2005]

   Subpart 206.2_Full and Open Competition After Exclusion of Sources



Sec. 206.202  Establishing or maintaining alternative sources.

    (a) Agencies may use this authority to totally or partially exclude 
a particular source from a contract action.
    (b) The determination and findings (D&F) and the documentation 
supporting the D&F shall identify the source to be excluded from the 
contract action. Include the information at PGI 206.202(b), as 
applicable, and any other information that may be pertinent, in the 
supporting documentation.

[69 FR 74991, Dec. 15, 2004]



Sec. 206.203  Set-asides for small business concerns.

    (b) Also no separate justification or determination and findings is 
required for contract actions processed as historically black college 
and university and minority institution set-asides (see 226.7003).

[63 FR 41973, Aug. 6, 1998]

           Subpart 206.3_Other Than Full and Open Competition



Sec. 206.302  Circumstances permitting other than full and open 
          competition.



Sec. 206.302-1  Only one responsible source and no other supplies or 
          services will satisfy agency requirements.

    (a) Authority. (2)(i) Section 8059 of Pub. L. 101-511 and similar 
sections in subsequent defense appropriations acts prohibit departments 
and agencies from entering into contracts for studies, analyses, or 
consulting services (see FAR subpart 37.2) on the basis of

[[Page 39]]

an unsolicited proposal without providing for full and open competition, 
unless--
    (1) The head of the contracting activity, or a designee no lower 
than chief of the contracting office, determines that--
    (i) Following thorough technical evaluation, only one source is 
fully qualified to perform the proposed work;
    (ii) The unsolicited proposal offers significant scientific or 
technological promise, represents the product of original thinking, and 
was submitted in confidence; or
    (iii) The contract benefits the national defense by taking advantage 
of a unique and significant industrial accomplishment or by ensuring 
financial support to a new product or idea;
    (2) A civilian official of the DoD, whose appointment has been 
confirmed by the Senate, determines the award to be in the interest of 
national defense; or
    (3) The contract is related to improvement of equipment that is in 
development or production.
    (b) Application. This authority may be used for acquisitions of test 
articles and associated support services from a designated foreign 
source under the DoD Foreign Comparative Testing Program.

[56 FR 36303, July 31, 1991, as amended at 57 FR 14992, Apr. 23, 1992; 
58 FR 28463, May 13, 1993; 69 FR 74991, Dec. 15, 2004]



Sec. 206.302-2  Unusual and compelling urgency.

    (b) Application. For guidance on circumstances under which use of 
this authority may be appropriate, see PGI 206.302-2(b).

[69 FR 74991, Dec. 15, 2004]



Sec. 206.302-3  Industrial mobilization; or engineering, development, or 
          research capability.



Sec. 206.302-3-70  Solicitation provision.

    Use the provision at 252.206-7000, Domestic Source Restriction, in 
all solicitations that are restricted to domestic sources under the 
authority of FAR 6.302-3.



Sec. 206.302-4  International agreement.

    (c) Limitations. Pursuant to 10 U.S.C. 2304(f)(2)(E), the 
justifications and approvals described in FAR 6.303 and 6.304 are not 
required if the head of the contracting activity prepares a document 
that describes the terms of an agreement or treaty or the written 
directions, such as a Letter of Offer and Acceptance, that have the 
effect of requiring the use of other than competitive procedures for the 
acquisition.

[63 FR 67803, Dec. 9, 1998]



Sec. 206.302-5  Authorized or required by statute.

    (b) Application. Agencies may use this authority to--
    (i) Acquire supplies and services from military exchange stores 
outside the United States for use by the armed forces outside the United 
States in accordance with 10 U.S.C. 2424(a) and subject to the 
limitations of 10 U.S.C. 2424(b). The limitations of 10 U.S.C. 2424(b) 
(1) and (2) do not apply to the purchase of soft drinks that are 
manufactured in the United States. For the purposes of 10 U.S.C. 2424, 
soft drinks manufactured in the United States are brand name carbonated 
sodas, manufactured in the United States, as evidenced by product 
markings.
    (ii) Acquire police, fire protection, airfield operation, or other 
community services from local governments at military installations to 
be closed under the circumstances in 237.7401 (Section 2907 of Fiscal 
Year 1994 Defense Authorization Act (Pub. L. 103-160)).
    (c) Limitations. (i) 10 U.S.C. 2361 precludes use of this exception 
for awards to colleges or universities for the performance of research 
and development, or for the construction of any research or other 
facility, unless--
    (A) The statute authorizing or requiring award specifically--
    (1) States that the statute modifies or supersedes the provisions of 
10 U.S.C. 2361,
    (2) Identifies the particular college or university involved, and
    (3) States that award is being made in contravention of 10 U.S.C. 
2361(a); and

[[Page 40]]

    (B) The Secretary of Defense provides Congress written notice of 
intent to award. The contract cannot be awarded until 180 days have 
elapsed since the date Congress received the notice of intent to award. 
Contracting activities must submit a draft notice of intent with 
supporting documentation through channels to the Director of Defense 
Procurement and Acquisition Policy, Office of the Under Secretary of 
Defense (Acquisition, Technology, and Logistics).
    (ii) The limitation in paragraph (c)(i) of this subsection applies 
only if the statute authorizing or requiring award was enacted after 
September 30, 1989.
    (iii) Subsequent statutes may provide different or additional 
constraints on the award of contracts to specified colleges and 
universities. Contracting officers should consult legal counsel on a 
case-by-case basis.

[56 FR 36303, July 31, 1991, as amended at 57 FR 14992, Apr. 23, 1992; 
58 FR 28463, May 13, 1993; 59 FR 36089, July 15, 1994; 60 FR 29497, June 
5, 1995; 60 FR 40107, Aug. 7, 1995; 65 FR 39704, June 27, 2000; 68 FR 
7439, Feb. 14, 2003]



Sec. 206.302-7  Public interest.

    (c) Limitations. For the defense agencies, the written determination 
to use this authority must be made by the Secretary of Defense.



Sec. 206.303  Justifications.



Sec. 206.303-70  Acquisitions in support of operations in Iraq or 
          Afghanistan.

    The justification and approval addressed in FAR 6.303 is not 
required for acquisitions conducted using a procedure specified in 
225.7703-1(a).

[73 FR 53152, Sept. 15, 2008]



Sec. 206.304  Approval of the justification.

    (a)(4) The Under Secretary of Defense (Acquisition, Technology, and 
Logistics) may delegate this authority to--
    (A) An Assistant Secretary of Defense; or
    (B) For a defense agency, an officer or employee serving in, 
assigned, or detailed to that agency who--
    (1) If a member of the armed forces, is serving in a rank above 
brigadier general or rear admiral (lower half); or
    (2) If a civilian, is serving in a position with a grade under the 
General Schedule (or any other schedule for civilian officers or 
employees) that is comparable to or higher than the grade of major 
general or rear admiral.

[61 FR 10285, Mar. 13, 1995, as amended at 61 FR 50451, Sept. 26, 1996; 
65 FR 39704, June 27, 2000]

                      PART 207_ACQUISITION PLANNING

                     Subpart 207.1_Acquisition Plans

Sec.

Sec. 207.102 Policy.

Sec. 207.103 Agency-head responsibilities.

Sec. 207.104 General procedures.

Sec. 207.105 Contents of written acquisition plans.

Sec. 207.106 Additional requirements for major systems.

Sec. 207.170 Consolidation of contract requirements.

Sec. 207.170-1 Scope.

Sec. 207.170-2 Definitions.

Sec. 207.170-3 Policy and procedures.

Sec. 207.171 Component breakout.

Sec. 207.171-1 Scope.

Sec. 207.171-2 Definition.

Sec. 207.171-3 Policy.

Sec. 207.171-4 Procedures.

Sec. 207.172 Human research.

                Subpart 207.4_Equipment Lease or Purchase


Sec. 207.401 Acquisition considerations.

Sec. 207.470 Statutory requirements.

Sec. 207.471 Funding requirements.

             Subpart 207.5_Inherently Governmental Functions


Sec. 207.500 Scope of subpart.

Sec. 207.503 Policy.

     Subpart 207.70_Buy-to-Budget_Additional Quantities of End Items


Sec. 207.7001 Definition.

Sec. 207.7002 Authority to acquire additional quantities of end items.

Sec. 207.7003 Limitation.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36305, July 31, 1991, unless otherwise noted.

                     Subpart 207.1_Acquisition Plans



Sec. 207.102  Policy.

    (a)(1) See 212.102 regarding requirements for a written 
determination that

[[Page 41]]

the commercial item definition has been met when using FAR Part 12 
procedures.

[73 FR 4114, Jan. 24, 2008]



Sec. 207.103  Agency-head responsibilities.

    (d)(i) Prepare written acquisition plans for--
    (A) Acquisitions for development, as defined in FAR 35.001, when the 
total cost of all contracts for the acquisition program is estimated at 
$10 million or more;
    (B) Acquisitions for production or services when the total cost of 
all contracts for the acquisition program is estimated at $50 million or 
more for all years or $25 million or more for any fiscal year; and
    (C) Any other acquisition considered appropriate by the department 
or agency.
    (ii) Written plans are not required in acquisitions for a final buy 
out or one-time buy. The terms ``final buy out'' and ``one-time buy'' 
refer to a single contract that covers all known present and future 
requirements. This exception does not apply to a multiyear contract or a 
contract with options or phases.
    (e) Prepare written acquisition plans for acquisition programs 
meeting the thresholds of paragraphs (d)(i)(A) and (B) of this section 
on a program basis. Other acquisition plans may be written on either a 
program or an individual contract basis.
    (g) The program manager, or other official responsible for the 
program, has overall responsibility for acquisition planning.
    (h) For procurement of conventional ammunition, as defined in DoDD 
5160.65, Single Manager for Conventional Ammunition (SMCA), the SMCA 
will review the acquisition plan to determine if it is consistent with 
retaining national technology and industrial base capabilities in 
accordance with 10 U.S.C. 2304(c)(3) and Section 806 of Public Law 105-
261. The department or agency--
    (i) Shall submit the acquisition plan to the address in PGI 
207.103(h); and
    (ii) Shall not proceed with the procurement until the SMCA provides 
written concurrence with the acquisition plan. In the case of a non-
concurrence, the SMCA will resolve issues with the Army Office of the 
Executive Director for Conventional Ammunition.

[71 FR 53045, Sept. 8, 2006, as amended at 71 FR 58537, Oct. 4, 2006]



Sec. 207.104  General procedures.

    In developing an acquisition plan, agency officials shall take into 
account the requirement for scheduling and conducting a Peer Review in 
accordance with 201.170.

[74 FR 37626, July 29, 2009]



Sec. 207.105  Contents of written acquisition plans.

    In addition to the requirements of FAR 7.105, planners shall follow 
the procedures at PGI 207.105.

[71 FR 53045, Sept. 8, 2006]



Sec. 207.106  Additional requirements for major systems.

    (b)(1)(A) The contracting officer is prohibited by 10 U.S.C. 
2305(d)(4)(A) from requiring offers for development or production of 
major systems that would enable the Government to use technical data to 
competitively reprocure identical items or components of the system if 
the item or component were developed exclusively at private expense, 
unless the contracting officer determines that--
    (1) The original supplier of the item or component will be unable to 
satisfy program schedule or delivery requirements;
    (2) Proposals by the original supplier of the item or component to 
meet mobilization requirements are insufficient to meet the agency's 
mobilization needs; or
    (3) The Government is otherwise entitled to unlimited rights in 
technical data.
    (B) If the contracting officer makes a determination, under 
paragraphs (b)(1)(A) (1) and (2) of this section, for a competitive 
solicitation, 10 U.S.C. 2305(d)(4)(B) requires that the evaluation of 
items developed at private expense be based on an analysis of the total 
value, in terms of innovative design, life-cycle costs, and other 
pertinent factors, of incorporating such items in the system.

[[Page 42]]

    (S-70)(1) In accordance with Section 802(a) of the National Defense 
Authorization Act for Fiscal Year 2007 (Pub. L. 109-364) and DoD policy 
requirements, acquisition plans for major weapon systems and subsystems 
of major weapon systems shall--
    (i) Assess the long-term technical data and computer software needs 
of those systems and subsystems; and
    (ii) Establish acquisition strategies that provide for the technical 
data and computer software deliverables and associated license rights 
needed to sustain those systems and subsystems over their life cycle. 
The strategy may include--
    (A) The development of maintenance capabilities within DoD; or
    (B) Competition for contracts for sustainment of the systems or 
subsystems.
    (2) Assessments and corresponding acquisition strategies developed 
under this section shall--
    (i) Be developed before issuance of a solicitation for the weapon 
system or subsystem;
    (ii) Address the merits of including a priced contract option for 
the future delivery of technical data and computer software, and 
associated license rights, that were not acquired upon initial contract 
award;
    (iii) Address the potential for changes in the sustainment plan over 
the life cycle of the weapon system or subsystem; and
    (iv) Apply to weapon systems and subsystems that are to be supported 
by performance-based logistics arrangements as well as to weapon systems 
and subsystems that are to be supported by other sustainment approaches.
    (S-71) See 209.570 for policy applicable to acquisition strategies 
that consider the use of lead system integrators.
    (S-72)(1) In accordance with section 202 of the Weapon Systems 
Acquisition Reform Act of 2009 (Pub. L. 111-23), acquisition plans for 
major defense acquisition programs as defined in 10 U.S.C. 2430, shall 
include measures that--
    (i) Ensure competition, or the option of competition, at both the 
prime contract level and subcontract level (at such tier or tiers as are 
appropriate) throughout the program life cycle as a means to improve 
contractor performance; and
    (ii) Document the rationale for the selection of the appropriate 
subcontract tier or tiers under paragraph (S-72)(1)(i) of this section, 
and the measures which will be employed to ensure competition, or the 
option of competition.
    (2) Measures to ensure competition, or the option of competition, 
may include, but are not limited to, cost-effective measures intended to 
achieve the following:
    (i) Competitive prototyping.
    (ii) Dual-sourcing.
    (iii) Unbundling of contracts.
    (iv) Funding of next-generation prototype systems or subsystems.
    (v) Use of modular, open architectures to enable competition for 
upgrades.
    (vi) Use of build-to-print approaches to enable production through 
multiple sources.
    (vii) Acquisition of complete technical data packages.
    (viii) Periodic competitions for subsystem upgrades.
    (ix) Licensing of additional suppliers.
    (x) Periodic system or program reviews to address long-term 
competitive effects of program decisions.
    (3) In order to ensure fair and objective ``make-or-buy'' decisions 
by prime contractors, acquisition strategies and resultant solicitations 
and contracts shall--
    (i) Require prime contractors to give full and fair consideration to 
qualified sources other than the prime contractor for the development or 
construction of major subsystems and components of major weapon systems;
    (ii) Provide for Government surveillance of the process by which 
prime contractors consider such sources and determine whether to conduct 
such development or construction in-house or through a subcontract; and
    (iii) Provide for the assessment of the extent to which the prime 
contractor has given full and fair consideration to qualified sources in 
sourcing decisions as a part of past performance evaluations.

[[Page 43]]

    (4) Whenever a source-of-repair decision results in a plan to award 
a contract for the performance of maintenance and sustainment services 
on a major weapon system, to the maximum extent practicable and 
consistent with statutory requirements, the acquisition plan shall 
prescribe that award will be made on a competitive basis after giving 
full consideration to all sources (including sources that partner or 
subcontract with public or private sector repair activities).

[56 FR 36305, July 31, 1991, as amended at 72 FR 51188, Sept. 6, 2007; 
73 FR 1824, Jan. 10, 2008; 74 FR 68701, Dec. 29, 2009; 75 FR 8273, Feb. 
24, 2010]



Sec. 207.170  Consolidation of contract requirements.



Sec. 207.170-1  Scope.

    This section implements 10 U.S.C. 2382.

[69 FR 55987, Sept. 17, 2004]



Sec. 207.170-2  Definitions.

    As used in this section--
    Consolidation of contract requirements means the use of a 
solicitation to obtain offers for a single contract or a multiple award 
contract to satisfy two or more requirements of a department, agency, or 
activity for supplies or services that previously have been provided to, 
or performed for, that department, agency, or activity under two or more 
separate contracts.
    Multiple award contract means--
    (1) Orders placed using a multiple award schedule issued by the 
General Services Administration as described in FAR Subpart 8.4;
    (2) A multiple award task order or delivery order contract issued in 
accordance with FAR Subpart 16.5; or
    (3) Any other indefinite-delivery, indefinite-quantity contract that 
an agency enters into with two or more sources for the same line item 
under the same solicitation.

[71 FR 14106, Mar. 21, 2006]



Sec. 207.170-3  Policy and procedures.

    (a) Agencies shall not consolidate contract requirements with an 
estimated total value exceeding $6 million unless the acquisition 
strategy includes--
    (1) The results of market research;
    (2) Identification of any alternative contracting approaches that 
would involve a lesser degree of consolidation; and
    (3) A determination by the senior procurement executive that the 
consolidation is necessary and justified.
    (i) Market research may indicate that consolidation of contract 
requirements is necessary and justified if the benefits of the 
acquisition strategy substantially exceed the benefits of each of the 
possible alternative contracting approaches. Benefits may include costs 
and, regardless of whether quantifiable in dollar amounts--
    (A) Quality;
    (B) Acquisition cycle;
    (C) Terms and conditions; and
    (D) Any other benefit.
    (ii) Savings in administrative or personnel costs alone do not 
constitute a sufficient justification for a consolidation of contract 
requirements unless the total amount of the cost savings is expected to 
be substantial in relation to the total cost of the procurement.
    (b) Include the determination made in accordance with paragraph 
(a)(3) of this section in the contract file.

[69 FR 55987, Sept. 17, 2004, as amended at 71 FR 14106, Mar. 21, 2006; 
71 FR 75892, Dec. 19, 2006; 75 FR 45073, Aug. 2, 2010]



Sec. 207.171  Component breakout.



Sec. 207.171-1  Scope.

    (a) This section provides policy for breaking out components of end 
items for future acquisitions so that the Government can purchase the 
components directly from the manufacturer or supplier and furnish them 
to the end item manufacturer as Government-furnished material.
    (b) This section does not apply to--
    (1) The initial decisions on Government-furnished equipment or 
contractor-furnished equipment that are made at the inception of an 
acquisition program; or
    (2) Breakout of parts for replenishment (see appendix E).

[71 FR 14102, Mar. 21, 2006]

[[Page 44]]



Sec. 207.171-2  Definition.

    Component, as used in this section, includes subsystems, assemblies, 
subassemblies, and other major elements of an end item; it does not 
include elements of relatively small annual acquisition value.

[71 FR 14102, Mar. 21, 2006]



Sec. 207.171-3  Policy.

    DoD policy is to break out components of weapons systems or other 
major end items under certain circumstances.
    (a) When it is anticipated that a prime contract will be awarded 
without adequate price competition, and the prime contractor is expected 
to acquire any component without adequate price competition, the agency 
shall break out that component if--
    (1) Substantial net cost savings probably will be achieved; and
    (2) Breakout action will not jeopardize the quality, reliability, 
performance, or timely delivery of the end item.
    (b) Even when either or both the prime contract and the component 
will be acquired with adequate price competition, the agency shall 
consider breakout of the component if substantial net cost savings will 
result from--
    (1) Greater quantity acquisitions; or
    (2) Such factors as improved logistics support (through reduction in 
varieties of spare parts) and economies in operations and training 
(through standardization of design).
    (c) Breakout normally is not justified for a component that is not 
expected to exceed $1 million for the current year's requirement.

[71 FR 14102, Mar. 21, 2006]



Sec. 207.171-4  Procedures.

    Agencies shall follow the procedures at PGI 207.171-4 for component 
breakout.

[71 FR 14102, Mar. 21, 2006]



Sec. 207.172  Human research.

    Any DoD component sponsoring research involving human subjects--
    (a) Is responsible for oversight of compliance with 32 CFR Part 219, 
Protection of Human Subjects; and
    (b) Must have a Human Research Protection Official, as defined in 
the clause at 252.235-7004, Protection of Human Subjects, and identified 
in the DoD component's Human Research Protection Management Plan. This 
official is responsible for the oversight and execution of the 
requirements of the clause at 252.235-7004 and shall be identified in 
acquisition planning.

[74 FR 37648, July 29, 2009]

                Subpart 207.4_Equipment Lease or Purchase



Sec. 207.401  Acquisition considerations.

    If the equipment will be leased for more than 60 days, the requiring 
activity must prepare and provide the contracting officer with the 
justification supporting the decision to lease or purchase.



Sec. 207.470  Statutory requirements.

    (a) Requirement for authorization of certain contracts relating to 
vessels, aircraft, and combat vehicles. The contracting officer shall 
not enter into any contract for the lease or charter of any vessel, 
aircraft, or combat vehicle, or any contract for services that would 
require the use of the contractor's vessel, aircraft, or combat vehicle, 
unless the Secretary of the military department concerned has satisfied 
the requirements of 10 U.S.C. 2401, when--
    (1) The contract will be a long-term lease or charter as defined in 
10 U.S.C. 2401(d)(1); or
    (2) The terms of the contract provide for a substantial termination 
liability as defined in 10 U.S.C. 2401(d)(2). Also see PGI 207.470.
    (b) Limitation on contracts with terms of 18 months or more. As 
required by 10 U.S.C. 2401a, the contracting officer shall not enter 
into any contract for any vessel, aircraft, or vehicle, through a lease, 
charter, or similar agreement with a term of 18 months or more, or 
extend or renew any such contract for a term of 18 months or more, 
unless the head of the contracting activity has--
    (1) Considered all costs of such a contract (including estimated 
termination liability); and

[[Page 45]]

    (2) Determined in writing that the contract is in the best interest 
of the Government.
    (c) Leasing of commercial vehicles and associated equipment. Except 
as provided in paragraphs (a) and (b) of this section, the contracting 
officer may use leasing in the acquisition of commercial vehicles and 
associated equipment whenever the contracting officer determines that 
leasing of such vehicles is practicable and efficient (10 US.C. 2401a).

[61 FR 16879, Apr. 18, 1996, as amended at 61 FR 50451, Sept. 26, 1996; 
74 FR 34266, July 15, 2009]



Sec. 207.471  Funding requirements.

    (a) Fund leases in accordance with DoD Financial Management 
Regulation (FMR) 7000.14-R, Volume 2A, Chapter 1.
    (b) DoD leases are either capital leases or operating leases. See 
FMR 7000.14-R, Volume 4, Chapter 7, Section 070207.
    (c) Use procurement funds for capital leases, as these are 
essentially installment purchases of property.

[64 FR 31732, June 14, 1999, as amended at 66 FR 55121, Nov. 1, 2001; 71 
FR 53045, Sept. 8, 2006]

             Subpart 207.5_Inherently Governmental Functions

    Source: 70 FR 14573, Mar. 23, 2005, unless otherwise noted.



Sec. 207.500  Scope of subpart.

    This subpart also implements 10 U.S.C. 2383.



Sec. 207.503  Policy.

    (e) The written determination required by FAR 7.503(e), that none of 
the functions to be performed by contract are inherently governmental--
    (i) Shall be prepared using DoD Instruction 1100.22, Guidance for 
Determining Workforce Mix; and
    (ii) Shall include a determination that none of the functions to be 
performed are exempt from private sector performance, as addressed in 
DoD Instruction 1100.22.
    (S-70) Contracts for acquisition functions.
    (1) In accordance with 10 U.S.C. 2383, the head of an agency may 
enter into a contract for performance of the acquisition functions 
closely associated with inherently governmental functions that are 
listed at FAR 7.503(d) only if--
    (i) The contracting officer determines that appropriate military or 
civilian DoD personnel--
    (A) Cannot reasonably be made available to perform the functions;
    (B) Will oversee contractor performance of the contract; and
    (C) Will perform all inherently governmental functions associated 
with the functions to be performed under the contract; and
    (ii) The contracting officer ensures that the agency addresses any 
potential organizational conflict of interest of the contractor in the 
performance of the functions under the contract (see FAR Subpart 9.5).
    (2) See related information at PGI 207.503(S-70).

[70 FR 14573, Mar. 23, 2005, as amended at 71 FR 14101, Mar. 21, 2006; 
73 FR 1826, Jan. 10, 2008]

     Subpart 207.70_Buy-to-Budget_Additional Quantities of End Items

    Source: 68 FR 43331, July 22, 2003, unless otherwise noted.



Sec. 207.7001  Definition.

    End item, as used in this subpart, means a production product 
assembled, completed, and ready for issue or deployment.



Sec. 207.7002  Authority to acquire additional quantities of end items.

    10 U.S.C. 2308 authorizes DoD to use funds available for the 
acquisition of an end item to acquire a higher quantity of the end item 
than the quantity specified in a law providing for the funding of that 
acquisition, if the head of an agency determines that--
    (a) The agency has an established requirement for the end item that 
is expected to remain substantially unchanged throughout the period of 
the acquisition;

[[Page 46]]

    (b) It is possible to acquire the higher quantity of the end item 
without additional funding because of production efficiencies or other 
cost reductions;
    (c) The amount of funds used for the acquisition of the higher 
quantity of the end item will not exceed the amount provided under that 
law for the acquisition of the end item; and
    (d) The amount provided under that law for the acquisition of the 
end item is sufficient to ensure that each unit of the end item acquired 
within the higher quantity is fully funded as a complete end item.



Sec. 207.7003  Limitation.

    For noncompetitive acquisitions, the acquisition of additional 
quantities is limited to not more than 10 percent of the quantity 
approved in the justification and approval prepared in accordance with 
FAR part 6 for the acquisition of the end item.

           PART 208_REQUIRED SOURCES OF SUPPLIES AND SERVICES

Sec.

Sec. 208.002 Priorities for use of Government supply sources.

                 Subpart 208.4_Federal Supply Schedules


Sec. 208.404 Use of Federal Supply Schedules.

Sec. 208.405-70 Additional ordering procedures.

Sec. 208.406 Ordering activity responsibilities.

Sec. 208.406-1 Order placement.

     Subpart 208.6_Acquisition From Federal Prison Industries, Inc.


Sec. 208.602-70 Acquisition of items for which FPI has a significant 
          market share.

 Subpart 208.7_Acquisition From Nonprofit Agencies Employing People Who 
                     Are Blind or Severely Disabled


Sec. 208.705 Procedures.

                 Subpart 208.70_Coordinated Acquisition


Sec. 208.7000 Scope of subpart.

Sec. 208.7001 Definitions.

Sec. 208.7002 Assignment authority.

Sec. 208.7002-1 Acquiring department responsibilities.

Sec. 208.7002-2 Requiring department responsibilities.

Sec. 208.7003 Applicability.

Sec. 208.7003-1 Assignments under integrated materiel management (IMM).

Sec. 208.7003-2 Assignments under coordinated acquisition.

Sec. 208.7004 Procedures.

Sec. 208.7005 Military interdepartmental purchase requests.

Sec. 208.7006 Coordinated acquisition assignments.

     Subpart 208.71_Acquisition for National Aeronautics and Space 
                          Administration (NASA)


Sec. 208.7100 Authorization.

Sec. 208.7101 Policy.

Sec. 208.7102 Procedures.

Subpart 208.72 [Reserved]


Sec. 208.7201 Definitions.

Sec. 208.7202 General.

Sec. 208.7203 Authority.

Sec. 208.7204 Procedures.

         Subpart 208.73_Use of Government-Owned Precious Metals


Sec. 208.7301 Definitions.

Sec. 208.7302 Policy.

Sec. 208.7303 Procedures.

Sec. 208.7304 Refined precious metals.

Sec. 208.7305 Contract clause.

              Subpart 208.74_Enterprise Software Agreements


Sec. 208.7400 Scope of subpart.

Sec. 208.7401 Definitions.

Sec. 208.7402 General.

Sec. 208.7403 Acquisition procedures.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36306, July 31, 1991, unless otherwise noted.



Sec. 208.002  Priorities for use of Government supply sources.

    (a)(1)(v) See Subpart 208.70, Coordinated Acquisition, and Subpart 
208.74, Enterprise Software Agreements.

[71 FR 39004, July 11, 2006]

                 Subpart 208.4_Federal Supply Schedules



Sec. 208.404  Use of Federal Supply Schedules.

    (a)(i) Departments and agencies shall comply with the review, 
approval, and reporting requirements established in accordance with 
subpart 217.78 when placing orders for supplies or services in amounts 
exceeding the simplified acquisition threshold.

[[Page 47]]

    (ii) When a schedule lists both foreign and domestic items that will 
meet the needs of the requiring activity, the ordering office must apply 
the procedures of part 225 and FAR part 25, Foreign Acquisition. When 
purchase of an item of foreign origin is specifically required, the 
requiring activity must furnish the ordering office sufficient 
information to permit the determinations required by part 225 and FAR 
part 25 to be made.

[56 FR 36306, July 31, 1991, as amended at 67 FR 65508, Oct. 25, 2002; 
69 FR 63327, Nov. 1, 2004; 70 FR 29642, May 24, 2005; 71 FR 14103, 
14107, Mar. 21, 2006]



Sec. 208.405-70  Additional ordering procedures.

    (a) This subsection--
    (1) Implements Section 803 of the National Defense Authorization Act 
for Fiscal Year 2002 (Pub. L. 107-107) for the acquisition of services, 
and establishes similar policy for the acquisition of supplies;
    (2) Applies to orders for supplies or services under Federal Supply 
Schedules, including orders under blanket purchase agreements 
established under Federal Supply Schedules; and
    (3) Also applies to orders placed by non-DoD agencies on behalf of 
DoD.
    (b) Each order exceeding $150,000 shall be placed on a competitive 
basis in accordance with paragraph (c) of this subsection, unless this 
requirement is waived on the basis of a justification that is prepared 
and approved in accordance with FAR 8.405-6 and includes a written 
determination that--
    (1) A statute expressly authorizes or requires that the purchase be 
made from a specified source; or
    (2) One of the circumstances described at FAR 16.505(b)(2)(i) 
through (iii) applies to the order. Follow the procedures at PGI 
216.505-70 if FAR 16.505(b)(2)(ii) or (iii) is deemed to apply.
    (c) An order exceeding $150,000 is placed on a competitive basis 
only if the contracting officer provides a fair notice of the intent to 
make the purchase, including a description of the supplies to be 
delivered or the services to be performed and the basis upon which the 
contracting officer will make the selection, to--
    (1) As many schedule contractors as practicable, consistent with 
market research appropriate to the circumstances, to reasonably ensure 
that offers will be received from at least three contractors that can 
fulfill the requirements, and the contracting officer--
    (i)(A) Receives offers from at least three contractors that can 
fulfill the requirements; or
    (B) Determines in writing that no additional contractors that can 
fulfill the requirements could be identified despite reasonable efforts 
to do so (documentation should clearly explain efforts made to obtain 
offers from at least three contractors); and
    (ii) Ensures all offers received are fairly considered; or
    (2) All contractors offering the required supplies or services under 
the applicable multiple award schedule, and affords all contractors 
responding to the notice a fair opportunity to submit an offer and have 
that offer fairly considered.
    (d) See PGI 208.405-70 for additional information regarding fair 
notice to contractors and requirements relating to the establishment of 
blanket purchase agreements under Federal Supply Schedules.

[71 FR 14107, Mar. 21, 2006, as amended at 75 FR 45073, Aug. 2, 2010]



Sec. Sec. 208.406  Ordering activity responsibilities.



Sec. Sec. 208.406-1  Order placement.

    Follow the procedures at PGI 208.406-1 when ordering from schedules.

[71 FR 14107, Mar. 21, 2006]

     Subpart 208.6_Acquisition From Federal Prison Industries, Inc.



Sec. 208.602-70  Acquisition of items for which FPI has a significant 
          market share.

    (a) Scope. This subsection implements Section 827 of the National 
Defense Authorization Act for Fiscal Year 2008 (Pub. L. 110-181).
    (b) Definition. Item for which FPI has a significant market share, 
as used in this

[[Page 48]]

subsection, means an item for which FPI's share of the DoD market for 
the federal supply class including that item is greater than 5 percent, 
as determined by DoD in consultation with the Office of Federal 
Procurement Policy. A list of the federal supply classes of items for 
which FPI has a significant market share is maintained at

http://www.acq.osd.mil/dpap/cpic/cp/
specific--policy--areas.html#federal--

prison.
    (c) Policy. (1) When acquiring an item for which FPI has a 
significant market share--
    (i) Acquire the item using--
    (A) Competitive procedures (e.g., the procedures in FAR 6.102, the 
set-aside procedures in FAR Subpart 19.5, or competition conducted in 
accordance with FAR Part 13); or
    (B) The fair opportunity procedures in FAR 16.505, if placing an 
order under a multiple award delivery-order contract; and
    (ii) Include FPI in the solicitation process, consider a timely 
offer from FPI, and make an award in accordance with the policy at FAR 
8.602(a)(4)(ii) through (v).
    (2) When acquiring an item for which FPI does not have a significant 
market share, acquire the item in accordance with the policy at FAR 
8.602.

[73 FR 46817, Aug. 12, 2008]

 Subpart 208.7_Acquisition From Nonprofit Agencies Employing People Who 
                     Are Blind or Severely Disabled



Sec. 208.705  Procedures.

    Follow the procedures at PGI 208.705 when placing orders with 
central nonprofit agencies.

[71 FR 39004, July 11, 2006]

                 Subpart 208.70_Coordinated Acquisition



Sec. 208.7000  Scope of subpart.

    This subpart prescribes policy and procedures for acquisition of 
items for which contracting responsibility is assigned to one or more of 
the departments/agencies or the General Services Administration. 
Contracting responsibility is assigned through--
    (a) The Coordinated Acquisition Program (commodity assignments are 
listed in PGI 208.7006); or
    (b) The Integrated Materiel Management Program (assignments are in 
DoD 4140.26-M, Defense Integrated Materiel Management Manual for 
Consumable Items).

[56 FR 36306, July 31, 1991, as amended at 67 FR 77936, Dec. 20, 2002; 
71 FR 39004, July 11, 2006]



Sec. 208.7001  Definitions.

    For purposes of this subpart--
    Acquiring department means the department, agency, or General 
Services Administration which has contracting responsibility under the 
Coordinated Acquisition Program.
    Integrated materiel management means assignment of acquisition 
management responsibility to one department, agency, or the General 
Services Administration for all of DoD's requirements for the assigned 
item. Acquisition management normally includes computing requirements, 
funding, budgeting, storing, issuing, cataloging, standardizing, and 
contracting functions.
    Requiring department means the department or agency which has the 
requirement for an item.



Sec. 208.7002  Assignment authority.

    (a) Under the DoD Coordinated Acquisition Program, contracting 
responsibility for certain commodities is assigned to a single 
department, agency, or the General Services Administration (GSA). 
Commodity assignments are made--
    (1) To the departments and agencies, by the Deputy Under Secretary 
of Defense (Logistics);
    (2) To GSA, through agreement with GSA, by the Deputy Under 
Secretary of Defense (Logistics);
    (3) Outside the contiguous United States, by the Unified Commanders; 
and
    (4) For acquisitions to be made in the contiguous United States for 
commodities not assigned under paragraphs (a)(1), (2), or (3) of this 
section, by agreement of agency heads (10 U.S.C. 2311).

[[Page 49]]

    (i) Agreement may be on either a one-time or a continuing basis. The 
submission of a military interdepartmental purchase request (MIPR) by a 
requiring activity and its acceptance by the contracting activity of 
another department, even though based on an oral communication, 
constitutes a one-time agreement.
    (ii) Consider repetitive delegated acquisition responsibilities for 
coordinated acquisition assignment. If not considered suitable for 
coordinated acquisition assignment, formalize continuing agreements and 
distribute them to all activities concerned.
    (b) Under the Integrated Materiel Management Program, assignments 
are made by the Deputy Under Secretary of Defense (Logistics)--
    (1) To the departments and agencies; and
    (2) To GSA, through agreement with GSA.

[56 FR 36306, July 31, 1991, as amended at 64 FR 51075, Sept. 21, 1999; 
70 FR 35544, June 21, 2005]



Sec. 208.7002-1   Acquiring department responsibilities.

    See PGI 208.7002-1 for the acquiring department's responsibilities.

[71 FR 39004, July 11, 2006]



Sec. 208.7002-2   Requiring department responsibilities.

    See PGI 208.7002-2 for the requiring department's responsibilities.

[71 FR 39004, July 11, 2006]



Sec. 208.7003  Applicability.



Sec. 208.7003-1  Assignments under integrated materiel management (IMM).

    (a) Acquire all items assigned for IMM from the IMM manager except--
    (1) Items purchased under circumstances of unusual and compelling 
urgency as defined in FAR 6.302-2. After such a purchase is made, the 
requiring activity must send one copy of the contract and a statement of 
the emergency to the IMM manager;
    (2) Items for which the IMM manager assigns a supply system code for 
local purchase or otherwise grants authority to purchase locally; or
    (3) When purchase by the requiring activity is in the best interest 
of the Government in terms of the combination of quality, timeliness, 
and cost that best meets the requirement. This exception does not apply 
to items--
    (i) Critical to the safe operation of a weapon system;
    (ii) With special security characteristics; or
    (iii) Which are dangerous (e.g., explosives, munitions).
    (b) Follow the procedures at PGI 208.7003-1(b) when an item assigned 
for IMM is to be acquired by the requiring department in accordance with 
paragraph (a)(3) of this subsection.

[60 FR 61593, Nov. 30, 1995, as amended at 64 FR 51075, Sept. 21, 1999; 
64 FR 61031, Nov. 9, 1999; 71 FR 39004, July 11, 2006]



Sec. 208.7003-2  Assignments under coordinated acquisition.

    Requiring departments must submit to the acquiring department all 
contracting requirements for items assigned for coordinated acquisition, 
except--
    (a) Items obtained through the sources in FAR 8.002(a)(1) (i) 
through (vii);
    (b) Items obtained under 208.7003-1(a);
    (c) Requirements not in excess of the simplified acquisition 
threshold in FAR part 2, when contracting by the requiring department is 
in the best interest of the Government;
    (d) In an emergency. When an emergency purchase is made, the 
requiring department must send one copy of the contract and a statement 
of the emergency to the contracting activity of the acquiring 
department;
    (e) Requirements for which the acquiring department's contracting 
activity delegates contracting authority to the requiring department;
    (f) Items in a research and development stage (as described in FAR 
part 35). Under this exception, the military departments may contract 
for research and development requirements, including quantities for 
testing purposes and items undergoing in-service evaluation (not yet in 
actual production, but beyond prototype). Generally, this exception 
applies only when research and development funds are used.

[[Page 50]]

    (g) Items peculiar to nuclear ordnance material where design 
characteristics or test-inspection requirements are controlled by the 
Department of Energy (DoE) or by DoD to ensure reliability of nuclear 
weapons.
    (1) This exception applies to all items designed for and peculiar to 
nuclear ordnance regardless of agency control, or to any item which 
requires test or inspection conducted or controlled by DoE or DoD.
    (2) This exception does not cover items used for both nuclear 
ordnance and other purposes if the items are not subject to the special 
testing procedures.
    (h) Items to be acquired under FAR 6.302-6 (national security 
requires limitation of sources);
    (i) Items to be acquired under FAR 6.302-1 (supplies available only 
from the original source for follow-on contract);
    (j) Items directly related to a major system and which are design 
controlled by and acquired from either the system manufacturer or a 
manufacturer of a major subsystem;
    (k) Items subject to rapid design changes, or to continuous redesign 
or modification during the production and/or operational use phases, 
which require continual contact between industry and the requiring 
department to ensure that the item meets the requirements:
    (1) This exception permits the requiring department to contract for 
items of highly unstable design. For use of this exception, it must be 
clearly impractical, both technically and contractually, to refer the 
acquisition to the acquiring department. Anticipation that contracting 
by negotiation will be appropriate, or that a number of design changes 
may occur during contract performance is not in itself sufficient reason 
for using this exception.
    (2) This exception also applies to items requiring compatibility 
testing, provided such testing requires continual contact between 
industry and the requiring department;
    (l) Containers acquired only with items for which they are designed;
    (m) One-time buy of a noncataloged item.
    (1) This exception permits the requiring departments to contract for 
a nonrecurring requirement for a noncataloged item. This exception could 
cover a part or component for a prototype which may be stock numbered at 
a later date.
    (2) This exception does not permit acquisitions of recurring 
requirements for an item, based solely on the fact that the item is not 
stock numbered, nor may it be used to acquire items which have only 
slightly different characteristics than previously cataloged items.

[56 FR 36306, July 31, 1991, as amended at 60 FR 61593, Nov. 30, 1995; 
64 FR 51075, Sept. 21, 1999; 71 FR 69489, Dec. 1, 2006]



Sec. 208.7004  Procedures.

    Follow the procedures at PGI 208.7004 for processing coordinated 
acquisition requirements.

[71 FR 39005, July 11, 2006]



Sec. 208.7005  Military interdepartmental purchase requests.

    Follow the procedures at--
    (a) PGI 253.208-1 when using DD Form 448, Military Interdepartmental 
Purchase Request; and
    (b) PGI 253.208-2 when using DD Form 448-2, Acceptance of MIPR.

[71 FR 39005, July 11, 2006]



Sec. 208.7006  Coordinated acquisition assignments.

    See PGI 208.7006 for coordinated acquisition assignments.

[71 FR 39005, July 11, 2006]

     Subpart 208.71_Acquisition for National Aeronautics and Space 
                          Administration (NASA)



Sec. 208.7100  Authorization.

    NASA is authorized by Public Law 85-568 to use the acquisition 
services, personnel, equipment, and facilities of DoD departments and 
agencies with their consent, with or without reimbursement, and on a 
similar basis to cooperate with the departments/agencies in the use of 
acquisition services, equipment, and facilities.

[[Page 51]]



Sec. 208.7101  Policy.

    Departments and agencies shall cooperate fully with NASA in making 
acquisition services, equipment, personnel, and facilities available on 
the basis of mutual agreement.

[71 FR 39005, July 11, 2006]



Sec. 208.7102  Procedures.

    Follow the procedures at PGI 208.7102 when contracting or performing 
services for NASA.

[71 FR 39005, July 11, 2006]

Subpart 208.72 [Reserved]

         Subpart 208.73_Use of Government-Owned Precious Metals



Sec. 208.7301  Definitions.

    As used in this subpart--
    Defense Supply Center, Philadelphia (DSCP) means the Defense 
Logistics Agency field activity located at 700 Robbins Avenue, 
Philadelphia, PA 19111-5096, which is the assigned commodity integrated 
material manager for refined precious metals and is responsible for the 
storage and issue of such material.
    Refined precious metal means recovered silver, gold, platinum, 
palladium, iridium, rhodium, or ruthenium, in bullion, granulation or 
sponge form, which has been purified to at least .999 percentage of 
fineness.

[56 FR 36306, July 31, 1991, as amended at 65 FR 14398, Mar. 16, 2000; 
65 FR 52951, Aug. 31, 2000; 65 FR 58607 Sept. 29, 2000; 71 FR 39005, 
July 11, 2006]



Sec. 208.7302  Policy.

    DoD policy is for maximum participation in the Precious Metals 
Recovery Program. DoD components shall furnish recovered precious metals 
contained in the DSCP inventory to production contractors rather than 
use contractor-furnished precious metals whenever the contracting 
officer determines it to be in the Government's best interest.

[56 FR 36306, July 31, 1991, as amended at 65 FR 52951, Aug. 31, 2000; 
71 FR 39005, July 11, 2006]



Sec. 208.7303  Procedures.

    Follow the procedures at PGI 208.7303 for use of the Precious Metals 
Recovery Program.

[71 FR 39005, July 11, 2006]



Sec. 208.7304  Refined precious metals.

    See PGI 208.7304 for a list of refined precious metals managed by 
DSCP.

[71 FR 39005, July 11, 2006]



Sec. 208.7305  Contract clause.

    (a) Use the clause at 252.208-7000, Intent to Furnish Precious 
Metals as Government-Furnished Material, in all solicitations and 
contracts except--
    (1) When the contracting officer has determined that the required 
precious metals are not available from DSCP;
    (2) When the contracting officer knows that the items being acquired 
do not require precious metals in their manufacture; or
    (3) For acquisitions at or below the simplified acquisition 
threshold.
    (b) To make the determination in paragraph (a)(1) of this section, 
the contracting officer shall consult with the end item inventory 
manager and comply with the procedures in Chapter 11, DoD 4160.21-M, 
Defense Materiel Disposition Manual.

[56 FR 36306, July 31, 1991, as amended at 64 FR 2596, Jan. 15, 1999; 65 
FR 14398, Mar. 16, 2000; 65 FR 52952, Aug. 31, 2000]

              Subpart 208.74_Enterprise Software Agreements

    Source: 67 FR 65511, Oct. 25, 2002, unless otherwise noted.



Sec. 208.7400  Scope of subpart.

    This subpart prescribes policy and procedures for acquisition of 
commercial software and software maintenance, including software and 
software maintenance that is acquired--
    (a) As part of a system or system upgrade, where practicable;
    (b) Under a service contract;
    (c) Under a contract or agreement administered by another agency 
(e.g., under an interagency agreement);

[[Page 52]]

    (d) Under a Federal Supply Schedule contract or blanket purchase 
agreement established in accordance with FAR 8.405 and 208.405-70; or
    (e) By a contractor that is authorized to order From a Government 
supply source pursuant to FAR 51.101.

[67 FR 65511, Oct. 25, 2002, as amended at 71 FR 62559, Oct. 26, 2006]



Sec. 208.7401  Definitions.

    As used in this subpart--
    Enterprise software agreement means an agreement or a contract that 
is used to acquire designated commercial software or related services 
such as software maintenance.
    Enterprise Software Initiative means an initiative led by the DoD 
Chief Information Officer to develop processes for DoD-wide software 
asset management.
    Software maintenance means services normally provided by a software 
company as standard services at established catalog or market prices, 
e.g., the right to receive and use upgraded versions of software, 
updates, and revisions.

[67 FR 65511, Oct. 25, 2002, as amended at 71 FR 39005, July 11, 2006]



Sec. 208.7402  General.

    Departments and agencies shall fulfill requirements for commercial 
software and related services, such as software maintenance, in 
accordance with the DoD Enterprise Software Initiative (ESI) (see Web 
site at http://www.don-imit.navy.mil/esi). ESI promotes the use of 
enterprise software agreements (ESAs) with contractors that allow DoD to 
obtain favorable terms and pricing for commercial software and related 
services. ESI does not dictate the products or services to be acquired.



Sec. 208.7403  Acquisition procedures.

    Follow the procedures at PGI 208.7403 when acquiring commercial 
software and related services.

[71 FR 39005, July 11, 2006]

                   PART 209_CONTRACTOR QUALIFICATIONS

            Subpart 209.1_Responsible Prospective Contractors

Sec.

Sec. 209.101 Definitions.

Sec. 209.104 Standards.

Sec. 209.104-1 General standards.

Sec. 209.104-4 Subcontractor responsibility.

Sec. 209.104-70 Solicitation provisions.

Sec. 209.105-1 Obtaining information.

Sec. 209.105-2 Determinations and documentation.

Sec. 209.106 Preaward surveys.

                Subpart 209.2_Qualifications Requirements


Sec. 209.202 Policy.

Sec. 209.270 Aviation critical safety items.

Sec. 209.270-1 Scope.

Sec. 209.270-2 Definitions.

Sec. 209.270-3 Policy.

Sec. 209.270-4 Procedures.

Subpart 209.3 [Reserved]

         Subpart 209.4_Debarment, Suspension, and Ineligibility


Sec. 209.402 Policy.

Sec. 209.403 Definitions.

Sec. 209.405 Effect of listing.

Sec. 209.405-1 Continuation of current contracts.

Sec. 209.405-2 Restrictions on subcontracting.

Sec. 209.406 Debarment.

Sec. 209.406-1 General.

Sec. 209.406-2 Causes for debarment.

Sec. 209.406-3 Procedures.

Sec. 209.407 Suspension.

Sec. 209.407-3 Procedures.

Sec. 209.409 Solicitation provision and contract clause.

Sec. 209.470 Reserve Officer Training Corps and military recruiting on 
          campus.

Sec. 209.470-1 Definition.

Sec. 209.470-2 Policy.

Sec. 209.470-3 Procedures.

Sec. 209.470-4 Contract clause.

Sec. 209.471 Congressional Medal of Honor.

    Subpart 209.5_Organizational and Consultant Conflicts of Interest


Sec. 209.570 Limitations on contractors acting as lead system 
          integrators.

Sec. 209.570-1 Definitions.

Sec. 209.570-2 Policy.

Sec. 209.570-3 Procedures.

Sec. 209.570-4 Solicitation provision and contract clause.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

[[Page 53]]


    Source: 56 FR 36313, July 31, 1991, unless otherwise noted.

            Subpart 209.1_Responsible Prospective Contractors



Sec. 209.101  Definitions.

    ``Entity controlled by a foreign government,'' ``foreign 
government,'' and ``proscribed information,'' are defined in the 
provision at 252.209-7002, Disclosure of Ownership or Control by a 
Foreign Government.

[59 FR 51132, Oct. 7, 1994]



Sec. 209.104  Standards.



Sec. 209.104-1  General standards.

    (e) For cost-reimbursement or incentive type contracts, or contracts 
which provide for progress payments based on costs or on a percentage or 
stage of completion, the prospective contractor's accounting system and 
related internal controls must provide reasonable assurance that--
    (i) Applicable laws and regulations are complied with;
    (ii) The accounting system and cost data are reliable;
    (iii) Risk of misallocations and mischarges are minimized; and
    (iv) Contract allocations and charges are consistent with invoice 
procedures.
    (g)(i) Ownership or control by the government of a terrorist 
country. (A) Under 10 U.S.C. 2327(b), a contracting officer shall not 
award a contract of $150,000 or more to a firm or to a subsidiary of a 
firm when a foreign government--
    (1) Either directly or indirectly, has a significant interest--
    (i) In the firm; or
    (ii) In the subsidiary or the firm that owns the subsidiary; and
    (2) Has been determined by the Secretary of State under 50 U.S.C. 
App. 2405(j)(1)(A) to be a government of a country that has repeatedly 
provided support for acts of international terrorism.
    (B) The Secretary of Defense may waive the prohibition in paragraph 
(g)(i)(A) of this subsection in accordance with 10 U.S.C. 2327(c). This 
waiver authority may not be delegated.
    (C) Forward any information indicating that a firm or a subsidiary 
of a firm may be owned or controlled by the government of a terrorist 
country, through agency channels, to: Deputy Director, Defense 
Procurement (Contract Policy and International Contracting, 
OUSD(AT&L)DPAP(CPIC)), 3060 Defense Pentagon, Washington, DC 20301-3060.
    (ii) Ownership or control by a foreign government when access to 
proscribed information is required to perform the contract. (A) Under 10 
U.S.C. 2536(a), no DoD contract under a national security program may be 
awarded to an entity controlled by a foreign government if that entity 
requires access to proscribed information to perform the contract.
    (B) Whenever the contracting officer has a question about 
application of the provision at 252.209-7002, the contracting officer 
may seek advice from the Security Directorate, Office of the Deputy 
Under Secretary of Defense, Human Intelligence, Counterintelligence, and 
Security.
    (C) In accordance with 10 U.S.C. 2536(b)(1)(A), the Secretary of 
Defense may waive the prohibition in paragraph (g)(ii)(A) of this 
subsection upon determining that the waiver is essential to the national 
security interests of the United States. The Secretary has delegated 
authority to grant this waiver to the Undersecretary of Defense for 
Intelligence. Waiver requests, prepared by the requiring activity in 
coordination with the contracting officer, shall be processed through 
the Director of Defense Procurement and Acquisition Policy, Office of 
the Under Secretary of Defense (Acquisition, Technology, and Logistics), 
and shall include a proposed national interest determination. The 
proposed national interest determination, prepared by the requiring 
activity in coordination with the contracting officer, shall include:
    (1) Identification of the proposed awardee, with a synopsis of its 
foreign ownership (include solicitation and other reference numbers to 
identify the action);
    (2) General description of the acquisition and performance 
requirements;
    (3) Identification of the national security interests involved and 
the ways award of the contract helps advance those interests;

[[Page 54]]

    (4) The availability of another entity with the capacity, capability 
and technical expertise to satisfy defense acquisition, technology base, 
or industrial base requirements; and
    (5) A description of any alternate means available to satisfy the 
requirement, e.g., use of substitute products or technology or alternate 
approaches to accomplish the program objectives.
    (D) In accordance with 10 U.S.C. 2536(b)(1)(B), the Secretary of 
Defense may, in the case of a contract awarded for environmental 
restoration, remediation, or waste management at a DoD facility, waive 
the prohibition in paragraph (g)(ii)(A) of this subsection upon--
    (1) Determining that--
    (i) The waiver will advance the environmental restoration, 
remediation, or waste management objectives of DoD and will not harm the 
national security interests of the United States; and
    (ii) The entity to which the contract is awarded is controlled by a 
foreign government with which the Secretary is authorized to exchange 
Restricted Data under section 144c. of the Atomic Energy Act of 1954 (42 
U.S.C. 2164(c)); and
    (2) Notifying Congress of the decision to grant the waiver. The 
contract may be awarded only after the end of the 45-day period 
beginning on the date the notification is received by the appropriate 
Congressional committees.

[58 FR 28464, May 13, 1993, as amended at 59 FR 51131, 51132, Oct. 7, 
1994; 60 FR 29497, June 5, 1995; 62 FR 34121, June 24, 1997; 63 FR 
11851, Mar. 11, 1998; 63 FR 14837, Mar. 27, 1998; 65 FR 39704, June 27, 
2000; 67 FR 4208, Jan. 29, 2002; 68 FR 7439, Feb. 14, 2003; 74 FR 2413, 
Jan. 15, 2009; 75 FR 35685, June 23, 2010; 75 FR 45073, Aug. 2, 2010]



Sec. 209.104-4  Subcontractor responsibility.

    Generally, the Canadian Commercial Corporation's (CCC) proposal of a 
firm as its subcontractor is sufficient basis for an affirmative 
determination of responsibility. However, when the CCC determination of 
responsibility is not consistent with other information available to the 
contracting officer, the contracting officer shall request from CCC and 
any other sources whatever additional information is necessary to make 
the responsibility determination.



Sec. 209.104-70  Solicitation provisions.

    (a) Use the provision at 252.209-7001, Disclosure of Ownership or 
Control by the Government of a Terrorist Country, in all solicitations 
expected to result in contracts of $150,000 or more. Any disclosure that 
the government of a terrorist country has a significant interest in an 
offeror or a subsidiary of an offeror shall be forwarded through the 
head of the agency to the Director of Defense Procurement and 
Acquisition Policy, ATTN: OUSD(AT&L)DPAP/(CPIC), 3060 Defense Pentagon, 
Washington, DC 20101-3060.
    (b) Use the provision at 252.209-7002, Disclosure of Ownership or 
Control by a Foreign Government, in all solicitations, including those 
subject to the procedures in FAR part 13, when access to proscribed 
information is necessary to perform a DoD contract under a national 
security program.

[58 FR 28464, May 13, 1993, as amended at 59 FR 51131, Oct. 7, 1994; 62 
FR 34122, June 24, 1997; 63 FR 11851, Mar. 11, 1998; 63 FR 14837, Mar. 
27, 1998; 65 FR 39704, June 27, 2000; 67 FR 4208, Jan. 29, 2002; 68 FR 
7439, Feb. 14, 2003; 72 FR 30278, May 31, 2007; 75 FR 45073, Aug. 2, 
2010]



Sec. 209.105-1  Obtaining information.

    (1) For guidance on using the Excluded Parties List System, see PGI 
209.105-1.
    (2) A satisfactory performance record is a factor in determining 
contractor responsibility (see FAR 9.104-1(c)). One source of 
information relating to contractor performance is the Past Performance 
Information Retrieval System (PPIRS), available at http://www.ppirs.gov. 
Information relating to contract terminations for cause and for default 
is also available through PPIRS (see PGI 212.403(c) and PGI 249.470). 
This termination information is just one consideration in determining 
contractor responsibility.

[74 FR 2415, Jan. 15, 2009]

[[Page 55]]



Sec. 209.105-2  Determinations and documentation.

    (a) The contracting officer shall submit a copy of a determination 
of nonresponsibility to the appropriate debarring and suspending 
official listed in 209.403.

[71 FR 62559, Oct. 26, 2006]



Sec. 209.106  Preaward surveys.

    When requesting a preawared survey, follow the procedures at PGI 
209.106.

[69 FR 65089, Nov. 10, 2004]

                Subpart 209.2_Qualifications Requirements



Sec. 209.202  Policy.

    (a)(1) Except for aviation or ship critical safety items, obtain 
approval in accordance with PGI 209.202(a)(1) when establishing 
qualification requirements. See 209.270 for approval of qualification 
requirements for aviation or ship critical safety items.

[73 FR 1827, Jan. 10, 2008]



Sec. 209.270  Aviation and ship critical safety items.



Sec. 209.270-1  Scope.

    This section--
    (a) Implements--
    (1) Section 802 of the National Defense Authorization Act for Fiscal 
Year 2004 (Pub. L. 108-136); and
    (2) Section 130 of the National Defense Authorization Act for Fiscal 
Year 2007 (Pub. L. 109-364); and
    (b) Prescribes policy and procedures for qualification requirements 
in the procurement of aviation and ship critical safety items and the 
modification, repair, and overhaul of those items.

[73 FR 1827, Jan. 10, 2008]



Sec. 209.270-2  Definitions.

    As used in this section--
    Aviation critical safety item means a part, an assembly, 
installation equipment, launch equipment, recovery equipment, or support 
equipment for an aircraft or aviation weapon system if the part, 
assembly, or equipment contains a characteristic any failure, 
malfunction, or absence of which could cause--
    (1) A catastrophic or critical failure resulting in the loss of or 
serious damage to the aircraft or weapon system;
    (2) An unacceptable risk of personal injury or loss of life; or
    (3) An uncommanded engine shutdown that jeopardizes safety.
    Design control activity--(1) With respect to an aviation critical 
safety item, means the systems command of a military department that is 
specifically responsible for ensuring the air worthiness of an aviation 
system or equipment in which an aviation critical safety item is to be 
used; and
    (2) With respect to a ship critical safety item, means the systems 
command of a military department that is specifically responsible for 
ensuring the seaworthiness of a ship or ship equipment in which a ship 
critical safety item is to be used.
    Ship critical safety item means any ship part, assembly, or support 
equipment containing a characteristic the failure, malfunction, or 
absence of which could cause--
    (1) A catastrophic or critical failure resulting in loss of or 
serious damage to the ship; or
    (2) An unacceptable risk of personal injury or loss of life.

[69 FR 55988, Sept. 17, 2004, as amended at 73 FR 1827, Jan. 10, 2008]



Sec. 209.270-3  Policy.

    (a) The head of the contracting activity responsible for procuring 
an aviation or ship critical safety item may enter into a contract for 
the procurement, modification, repair, or overhaul of such an item only 
with a source approved by the head of the design control activity.
    (b) The approval authorities specified in this section apply instead 
of those otherwise specified in FAR 9.202(a)(1), 9.202(c), or 9.206-
1(c), for the procurement, modification, repair, and overhaul of 
aviation or ship critical safety items.

[73 FR 1827, Jan. 10, 2008]



Sec. 209.270-4  Procedures.

    (a) The head of the design control activity shall--
    (1) Identify items that meet the criteria for designation as 
aviation or

[[Page 56]]

ship critical safety items. See additional information at PGI 209.270-4;
    (2) Approve qualification requirements in accordance with procedures 
established by the design control activity; and
    (3) Qualify and identify aviation and ship critical safety item 
suppliers and products.
    (b) The contracting officer shall--
    (1) Ensure that the head of the design control activity has 
determined that a prospective contractor or its product meets or can 
meet the established qualification standards before the date specified 
for award of the contract;
    (2) Refer any offers received from an unapproved source to the head 
of the design control activity for approval. The head of the design 
control activity will determine whether the offeror or its product meets 
or can meet the established qualification standards before the date 
specified for award of the contract; and
    (3) Refer any requests for qualification to the design control 
activity.
    (c) See 246.407 (S-70) and 246.504 for quality assurance 
requirements.

[69 FR 55988, Sept. 17, 2004, as amended at 70 FR 57190, Sept. 30, 2005; 
73 FR 1827, Jan. 10, 2008]

Subpart 209.3 [Reserved]

         Subpart 209.4_Debarment, Suspension, and Ineligibility



Sec. 209.402  Policy.

    (d) The uniform suspension and debarment procedures to be followed 
by all debarring and suspending officials are set out in appendix H to 
this chapter.
    (e) The department or agency shall provide a copy of the Debarment 
and Suspension Procedures at DFARS appendix H to this chapter to 
contractors at the time of their suspension or when they are proposed 
for debarment, and upon request to other interested parties.

[59 FR 27668, May 27, 1994]



Sec. 209.403  Definitions.

    Debarring and suspending official. (1) For DoD, the designees are--

Army--Commander, U.S. Army Legal Services Agency
Navy--The General Counsel of the Department of the Navy
Air Force--Deputy General Counsel (Contractor Responsibility)
Defense Advanced Research Projects Agency--The Director
Defense Information Systems Agency--The General Counsel
Defense Intelligence Agency--The Senior Procurement Executive
Defense Logistics Agency--The Special Assistant for Contracting 
Integrity
National Geospatial--Intelligence Agency--The General Counsel
Defense Threat Reduction Agency--The Director
National Security Agency--The Senior Acquisition Executive
Missile Defense Agency--The General Counsel
Overseas installations--as designated by the agency head

    (2) Overseas debarring and suspending officials--
    (i) Are authorized to debar or suspend contractors located within 
the official's geographic area of responsibility under any delegation of 
authority they receive from their agency head.
    (ii) Debar or suspend in accordance with the procedures in FAR 
subpart 9.4 or under modified procedures approved by the agency head 
based on consideration of the laws or customs of the foreign countries 
concerned.
    (iii) In addition to the bases for debarment in FAR 9.406-2, may 
consider the following additional bases--
    (A) The foreign country concerned determines that a contractor has 
engaged in bid-rigging, price-fixing, or other anti-competitive 
behavior; or
    (B) The foreign country concerned declares the contractor to be 
formally debarred, suspended, or otherwise ineligible to contract with 
that foreign government or its instrumentalities.
    (3) The Defense Logistics Agency Special Assistant for Contracting 
Integrity is the exclusive representative of the Secretary of Defense to 
suspend and debar contractors from the purchase of Federal personal 
property under the Federal Property Management Regulations (41 CFR 101-
45.6) and

[[Page 57]]

the Defense Materiel Disposition Manual (DoD 4160.21-M).

[56 FR 36313, July 31, 1991, as amended at 56 FR 67212, Dec. 30, 1991; 
59 FR 27669, May 27, 1994; 60 FR 61593, Nov. 30, 1995; 61 FR 50452, 
Sept. 26, 1996; 63 FR 11528, Mar. 9, 1998; 64 FR 51075, Sept. 21, 1999; 
64 FR 62985, Nov. 18, 1999; 68 FR 7439, Feb. 14, 2003; 70 FR 14573, Mar. 
23, 2005; 74 FR 42780, Aug. 25, 2009; 74 FR 52895, Oct. 15, 2009]



Sec. 209.405  Effect of listing.

    (a) Under 10 U.S.C. 2393(b), when a department or agency determines 
that a compelling reason exists for it to conduct business with a 
contractor that is debarred or suspended from procurement programs, it 
must provide written notice of the determination to the General Services 
Administration, Office of Acquisition Policy. Examples of compelling 
Reasons are--
    (i) Only a debarred or suspended contractor can provide the supplies 
or services;
    (ii) Urgency requires contracting with a debarred or suspended 
contractor;
    (iii) The contractor and a department or agency have an agreement 
covering the same events that resulted in the debarment or suspension 
and the agreement includes the department or agency decision not to 
debar or suspend the contractor; or
    (iv) The national defense requires continued business dealings with 
the debarred or suspended contractor.
    (b)(i) The Procurement Cause and Treatment Code ``H'' annotation in 
the GSA List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs identifies contractor facilities where no part 
of a contract or subcontract may be performed because of a violation of 
the Clean Air Act (42 U.S.C. 7606) or the Clean Water Act (33 U.S.C. 
1368).
    (ii) Under the authority of Section 8 of Executive Order 11738, the 
agency head may grant an exemption permitting award to a contractor 
using a Code ``H'' ineligible facility if the agency head determines 
that such an exemption is in the paramount interest of the United 
States.
    (A) The agency head may delegate this exemption authority to a level 
no lower than a general or flag officer or a member of the Senior 
Executive Service.
    (B) The official granting the exemption--
    (1) Shall promptly notify the Environmental Protection Agency 
suspending and debarring official of the exemption and the corresponding 
justification; and
    (2) May grant a class exemption only after consulting with the 
Environmental Protection Agency suspending and debarring official.
    (C) Exemptions shall be for a period not to exceed one year. The 
continuing necessity for each exemption shall be reviewed annually and, 
upon the making of a new determination, may be extended for periods not 
to exceed one year.
    (D) All exemptions must be reported annually to the Environmental 
Protection Agency suspending and debarring official.
    (E) See PGI 209.405 for additional procedures and information.

[74 FR 2414, Jan. 15, 2009]



Sec. 209.405-1  Continuation of current contracts.

    (b) Unless the agency head makes a written determination that a 
compelling reason exists to do so, ordering activities shall not--
    (i) Place orders exceeding the guaranteed minimum under indefinite 
quantity contracts: or
    (ii) When the agency is an optional user, place orders against 
Federal Supply Schedule contracts.
    (c) This includes exercise of options.

[60 FR 29497, June 5, 1995, as amended at 60 FR 61593, Nov. 30, 1995]



Sec. 209.405-2  Restrictions on subcontracting.

    (a) The contracting officer shall not consent to any subcontract 
with a firm, or a subsidiary of a firm, that is identified by the 
Secretary of Defense as being owned or controlled by the government of a 
terrorist country unless the agency head states in writing the 
compelling reasons for the subcontract.

[63 FR 14837, Mar. 27, 1998]

[[Page 58]]



Sec. 209.406  Debarment.



Sec. 209.406-1  General.

    (a)(i) When the debarring official decides that debarment is not 
necessary, the official may require the contractor to enter into a 
written agreement which includes--
    (A) A requirement for the contractor to establish, if not already 
established, and to maintain the standards of conduct and internal 
control systems prescribed by subpart 203.70; and
    (B) Other requirements the debarring official considers appropriate.
    (ii) Before the debarring official decides not to suspend or debar 
in the case of an indictment or conviction for a felony, the debarring 
official must determine that the contractor has addressed adequately the 
circumstances that gave rise to the misconduct, and that appropriate 
standards of ethics and integrity are in place and are working.

[57 FR 14992, Apr. 23, 1992]



Sec. 209.406-2  Causes for debarment.

    (1) Any person shall be considered for debarment if criminally 
convicted of intentionally affixing a label bearing a ``Made in 
America'' inscription to any product sold in or shipped to the United 
States or its outlying areas that was not made in the United States or 
its outlying areas (10 U.S.C. 2410f).
    (i) The debarring official will make a determination concerning 
debarment not later than 90 days after determining that a person has 
been so convicted.
    (ii) In cases where the debarring official decides not to debar, the 
debarring official will report that decision to the Director of Defense 
Procurement and Acquisition Policy who will notify Congress within 30 
days after the decision is made.
    (2) Any contractor that knowingly provides compensation to a former 
DoD official in violation of Section 847 of the National Defense 
Authorization Act for Fiscal Year 2008 (Pub. L. 110-181) may face 
suspension and debarment proceedings in accordance with 41 U.S.C. 
423(e)(3)(A)(iii).

[58 FR 28464, May 13, 1993, as amended at 68 FR 7439, Feb. 14, 2003; 70 
FR 35544, June 21, 2005; 74 FR 2409, Jan. 15, 2009]



Sec. Sec. 209.406-3  Procedures.

    Refer all matters appropriate for consideration by an agency 
debarring and suspending official as soon as practicable to the 
appropriate debarring and suspending official identified in 209.403. Any 
person may refer a matter to the debarring and suspending official. 
Follow the procedures at PGI 209.406-3.

[69 FR 74990, Dec. 15, 2004]



Sec. 209.407  Suspension.



Sec. Sec. 209.407-3  Procedures.

    Refer all matters appropriate for consideration by an agency 
debarring and suspending official as soon as practicable to the 
appropriate debarring and suspending official identified in 209.403. Any 
person may refer a matter to the debarring and suspending official. 
Follow the procedures at PGI 209.407-3.

[69 FR 74990, Dec. 15, 2004]



Sec. 209.409  Solicitation provision and contract clause.

    Use the clause at 252.209-7004, Subcontracting with Firms That Are 
Owned or Controlled by the Government of a Terrorist Country, in 
solicitations and contracts with a value of $150,000 or more.

[63 FR 14837, Mar. 27, 1998, as amended at 75 FR 45073, Aug. 2, 2010]



Sec. 209.470  Reserve Officer Training Corps and military recruiting on 
          campus.



Sec. 209.470-1  Definition.

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

[65 FR 2056, Jan. 13, 2000]

[[Page 59]]



Sec. 209.470-2  Policy.

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

[65 FR 2056, Jan. 13, 2000]



Sec. 209.470-3  Procedures.

    If the Secretary of Defense determines that an institution of higher 
education is ineligible to receive DoD funds because of a policy or 
practice described in 209.470-2(a)--
    (a) The Secretary of Defense will list the institution on the List 
of Parties Excluded from Federal Procurement and Nonprocurement Programs 
published by General Services Administration (also see FAR 9.404 and 32 
CFR part 216); and
    (b) DoD components--
    (1) Shall not solicit offers from, award contracts to, or consent to 
subcontracts with the institution;
    (2) Shall make no further payments under existing contracts with the 
institution; and
    (3) Shall terminate existing contracts with the institution.

[65 FR 2057, Jan. 13, 2000, as amended at 67 FR 49254, July 30, 2002]



Sec. 209.470-4  Contract clause.

    Use the clause at 252.209-7005, Reserve Officer Training Corps and 
Military Recruiting on Campus, in all solicitations and contracts with 
institutions of higher education.

[65 FR 2057, Jan. 13, 2000]



Sec. 209.471  Congressional Medal of Honor.

    In accordance with Section 8118 of Pub. L. 105-262, do not award a 
contract to, extend a contract with, or approve the award of a 
subcontract to any entity that, within the preceding 15 years, has been 
convicted under 18 U.S.C. 704 of the unlawful manufacture or sale of the 
Congressional Medal of Honor. Any entity so convicted will be listed as 
ineligible on the List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs published by the General Services 
Administration.

[64 FR 31733, June 14, 1999]

    Subpart 209.5_Organizational and Consultant Conflicts of Interest

    Source: 73 FR 1824, Jan. 10, 2008, unless otherwise noted.



Sec. 209.570  Limitations on contractors acting as lead system 
          integrators.



Sec. 209.570-1  Definitions.

    Lead system integrator, as used in this section, is defined in the 
clause at 252.209-7007, Prohibited Financial Interests for Lead System 
Integrators. See PGI 209.570-1 for additional information.



Sec. 209.570-2  Policy.

    (a) Except as provided in paragraph (b) of this subsection, 10 
U.S.C. 2410p prohibits any entity performing lead system integrator 
functions in the acquisition of a major system by DoD from having any 
direct financial interest in the development or construction of any 
individual system or element of any system of systems.

[[Page 60]]

    (b) The prohibition in paragraph (a) of this subsection does not 
apply if--
    (1) The Secretary of Defense certifies to the Committees on Armed 
Services of the Senate and the House of Representatives that--
    (i) The entity was selected by DoD as a contractor to develop or 
construct the system or element concerned through the use of competitive 
procedures; and
    (ii) DoD took appropriate steps to prevent any organizational 
conflict of interest in the selection process; or
    (2) The entity was selected by a subcontractor to serve as a lower-
tier subcontractor, through a process over which the entity exercised no 
control.
    (c) In accordance with Section 802 of the National Defense 
Authorization Act for Fiscal Year 2008 (Pub. L. 110-181), DoD may award 
a new contract for lead system integrator functions in the acquisition 
of a major system only if--
    (1) The major system has not yet proceeded beyond low-rate initial 
production; or
    (2) The Secretary of Defense determines in writing that it would not 
be practicable to carry out the acquisition without continuing to use a 
contractor to perform lead system integrator functions and that doing so 
is in the best interest of DoD. The authority to make this determination 
may not be delegated below the level of the Under Secretary of Defense 
for Acquisition, Technology, and Logistics. (Also see 209.570-3(b).)
    (d) Effective October 1, 2010, DoD is prohibited from awarding a new 
contract for lead system integrator functions in the acquisition of a 
major system to any entity that was not performing lead system 
integrator functions in the acquisition of the major system prior to 
January 28, 2008.

[73 FR 1824, Jan. 10, 2008, as amended at 74 FR 34268, July 15, 2009]



Sec. 209.570-3  Procedures.

    (a) In making a responsibility determination before awarding a 
contract for the acquisition of a major system, the contracting officer 
shall--
    (1) Determine whether the prospective contractor meets the 
definition of ``lead system integrator'';
    (2) Consider all information regarding the prospective contractor's 
direct financial interests in view of the prohibition at 209.570-2(a); 
and
    (3) Follow the procedures at PGI 209.570-3.
    (b) A determination to use a contractor to perform lead system 
integrator functions in accordance with 209.570-2(c)(2)--
    (1) Shall specify the reasons why it would not be practicable to 
carry out the acquisition without continuing to use a contractor to 
perform lead system integrator functions, including a discussion of 
alternatives, such as use of the DoD workforce or a system engineering 
and technical assistance contractor;
    (2) Shall include a plan for phasing out the use of contracted lead 
system integrator functions over the shortest period of time consistent 
with the interest of the national defense; and
    (3) Shall be provided to the Committees on Armed Services of the 
Senate and the House of Representatives at least 45 days before the 
award of a contract pursuant to the determination.

[74 FR 34268, July 15, 2009]



Sec. 209.570-4  Solicitation provision and contract clause.

    (a) Use the provision at 252.209-7006, Limitations on Contractors 
Acting as Lead System Integrators, in solicitations for the acquisition 
of a major system when the acquisition strategy envisions the use of a 
lead system integrator.
    (b) Use the clause at 252.209-7007, Prohibited Financial Interests 
for Lead System Integrators--
    (1) In solicitations that include the provision at 252.209-7006; and
    (2) In contracts when the contractor will fill the role of a lead 
system integrator for the acquisition of a major system.

                        PART 210_MARKET RESEARCH

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.



Sec. 210.001  Policy.

    (a) In addition to the requirements of FAR 10.001(a), agencies 
shall--

[[Page 61]]

    (i) Conduct market research appropriate to the circumstances 
before--
    (A) Soliciting offers for acquisitions that could lead to a 
consolidation of contract requirements as defined in 207.170-2; or
    (B) Issuing a solicitation with tiered evaluation of offers (Section 
816 of Public Law 109-163); and
    (ii) Use the results of market research to determine--
    (A) Whether consolidation of contract requirements is necessary and 
justified in accordance with Sec. 207.170-3; or
    (B) Whether the criteria in FAR part 19 are met for setting aside 
the acquisition for small business or, for a task or delivery order, 
whether there are a sufficient number of qualified small business 
concerns available to justify limiting competition under the terms of 
the contract. If the contracting officer cannot determine whether the 
criteria are met, the contracting officer shall include a written 
explanation in the contract file as to why such a determination could 
not be made (Section 816 of Public Law 109-163).
    (c)(2) In addition to the notification requirements at FAR 
10.001(c)(2)(i) and (ii), see 205.205-70 for the bundling notification 
publication requirement.

[71 FR 53043, Sept. 8, 2006, as amended at 75 FR 40716, July 
13, 2010]

                    PART 211_DESCRIBING AGENCY NEEDS

Sec.

Sec. 211.002 Policy.

Sec. 211.002-70 Contract clause.

      Subpart 211.1_Selecting and Developing Requirements Documents


Sec. 211.105 Items peculiar to one manufacturer.

Sec. 211.106 Purchase descriptions for service contracts.

Sec. 211.107 Solicitation provision.

       Subpart 211.2_Using and Maintaining Requirements Documents


Sec. 211.201 Identification and availability of specifications.

Sec. 211.204 Solicitation provisions and contract clauses.

Sec. 211.270 [Reserved]

Sec. 211.271 Elimination of use of class I ozone-depleting substances.

Sec. 211.272 Alternate preservation, packaging, and packing.

Sec. 211.273 Substitutions for military or Federal specifications and 
          standards.

Sec. 211.273-1 Definition.

Sec. 211.273-2 Policy.

Sec. 211.273-3 Procedures.

Sec. 211.273-4 Contract clause.

Sec. 211.274 Item identification and valuation requirements.

Sec. 211.274-1 General.

Sec. 211.274-2 Policy for unique item identification.

Sec. 211.274-3 Policy for valuation.

Sec. 211.274-4 Policy for reporting of Government-furnished equipment in 
          the DoD Item Unique Identification (IUID) Registry.

Sec. 211.274-5 Policy for assignment of Government-assigned serial 
          numbers.

Sec. 211.274-6 Contract clauses.

Sec. 211.275 Radio frequency identification.

Sec. 211.275-1 Definitions.

Sec. 211.275-2 Policy.

Sec. 211.275-3 Contract clause.

                    Subpart 211.5_Liquidated Damages


Sec. 211.503 Contract clauses.

                Subpart 211.6_Priorities and Allocations


Sec. 211.602 General.

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

    Source: 60 FR 61594, Nov. 30, 1995, unless otherwise noted.



Sec. 211.002  Policy.

    All defense technology and acquisition programs in DoD are subject 
to the policies and procedures in DoDD 5000.1, The Defense Acquisition 
System, and DoDI 5000.2, Operation of the Defense Acquisition System.

[71 FR 27641, May 12, 2006]



Sec. 211.002-70  Contract clause.

    Use the clause at 252.211-7000, Acquisition Streamlining, in all

      Subpart 211.1_Selecting and Developing Requirements Documents



Sec. 211.105  Items peculiar to one manufacturer.

    Follow the publication requirements at PGI 211.105.

[70 FR 23804, May 5, 2005]

[[Page 62]]



Sec. 211.106  Purchase descriptions for service contracts.

    Agencies shall require that purchase descriptions for service 
contracts and resulting requirements documents, such as statements of 
work or performance work statements, include language to provide a clear 
distinction between Government employees and contractor employees. 
Service contracts shall require contractor employees to identify 
themselves as contractor personnel by introducing themselves or being 
introduced as contractor personnel and by displaying distinguishing 
badges or other visible identification for meetings with Government 
personnel. In addition, contracts shall require contractor personnel to 
appropriately identify themselves as contractor employees in telephone 
conversations and in formal and informal written correspondence.

[75 FR 54525, Sept. 8, 2010]



Sec. 211.107  Solicitation provision.

    (b) DoD uses the categorical method of reporting. Do not use the 
provision at FAR 52.211-7, Alternatives to Government-Unique Standards, 
in DoD solicitations.

[65 FR 6553, Feb. 10, 2000]

       Subpart 211.2_Using and Maintaining Requirements Documents



Sec. 211.201  Identification and availability of specifications.

    Follow the procedures at PGI 211.201 for use of specifications, 
standards, and data item descriptions.

[71 FR 27641, May 12, 2006]



Sec. 211.204  Solicitation provisions and contract clauses.

    (c) When contract performance requires use of specifications, 
standards, and data item descriptions that are not listed in the 
Acquisition Streamlining and Standardization Information System 
database, use provisions, as appropriate, substantially the same as 
those at--
    (i) 252.211-7001, Availability of Specifications, Standards, and 
Data Item Descriptions Not Listed in the Acquisition Streamlining and 
Standardization Information System (ASSIST), and Plans, Drawings, and 
Other Pertinent Documents; and
    (ii) 252.211-7002, Availability for Examination of Specifications, 
Standards, Plans, Drawings, Data Item Descriptions, and Other Pertinent 
Documents.

[71 FR 27641, May 12, 2006]



Sec. 211.270  [Reserved]



Sec. 211.271  Elimination of use of class I ozone-depleting substances.

    See subpart 223.8 for restrictions on contracting for ozone-
depleting substances.

[70 FR 73150, Dec. 9, 2005]



Sec. 211.272  Alternate preservation, packaging, and packing.

    Use the provision at 252.211-7004, Alternate Preservation, 
Packaging, and Packing, in solicitations which include military 
preservation, packaging, or packing specifications when it is feasible 
to evaluate and award using commercial or industrial preservation, 
packaging, or packing.



Sec. 211.273  Substitutions for military or Federal specifications and 
          standards.



Sec. 211.273-1  Definition.

    SPI process, as used in this section, is defined in the clause at 
252.211-7005, Substitutions for Military or Federal Specifications and 
Standards.

[62 FR 44224, Aug. 20, 1997]



Sec. 211.273-2  Policy.

    (a) Under the Single Process Initiative (SPI), DoD accepts SPI 
processes in lieu of specific military or Federal specifications or 
standards that specify a management or manufacturing process.
    (b) DoD acceptance of an SPI process follows the decision of a 
Management Council, which includes representatives of the contractor, 
the Defense Contract Management Agency, the Defense Contract Audit 
Agency, and the military departments.

[[Page 63]]

    (c) In procurements of previously developed items, SPI processes 
that previously were accepted by the Management Council shall be 
considered valid replacements for military or Federal specifications or 
standards, absent a specific determination to the contrary.

[62 FR 44224, Aug. 20, 1997, as amended at 64 FR 14399, Mar. 25, 1999; 
65 FR 52952, Aug. 31, 2000; 71 FR 27641, May 12, 2006]



Sec. 211.273-3  Procedures.

    Follow the procedures at PGI 211.273-3 for encouraging the use of 
SPI processes instead of military or Federal specifications and 
standards.

[71 FR 27641, May 12, 2006]



Sec. 211.273-4  Contract clause.

    Use the clause at 252.211-7005, Substitutions for Military or 
Federal Specifications and Standards, in solicitations and contracts 
exceeding the micro-purchase threshold, when procuring previously 
developed items.

[62 FR 44224, Aug. 20, 1997]



Sec. 211.274  Item identification and valuation requirements.



Sec. 211.274-1  General.

    Unique item identification and valuation is a system of marking and 
valuing items delivered to DoD that will enhance logistics, contracting, 
and financial business transactions supporting the United States and 
coalition troops. Through unique item identification policy, which 
capitalizes on leading practices and embraces open standards, DoD can--
    (a) Achieve lower life-cycle cost of item management and improve 
life-cycle property management;
    (b) Improve operational readiness;
    (c) Provide reliable accountability of property and asset visibility 
throughout the life cycle; and
    (d) Reduce the burden on the workforce through increased 
productivity and efficiency.

[70 FR 20836, Apr. 22, 2005]



Sec. 211.274-2  Policy for unique item identification.

    (a) It is DoD policy that DoD unique item identification, or a DoD 
recognized unique identification equivalent, is required for--
    (1) All delivered items for which the Government's unit acquisition 
cost is $5,000 or more;
    (2) Items for which the Government's unit acquisition cost is less 
than $5,000, when identified by the requiring activity as serially 
managed, mission essential, or controlled inventory;
    (3) Items for which the Government's unit acquisition cost is less 
than $5,000, when the requiring activity determines that permanent 
identification is required; and
    (4) Regardless of value--
    (i) Any DoD serially managed subassembly, component, or part 
embedded within a delivered item; and
    (ii) The parent item (as defined in 252.211-7003(a)) that contains 
the embedded subassembly, component, or part.
    (b) Exceptions. The Contractor will not be required to provide DoD 
unique item identification if--
    (1) The items, as determined by the head of the agency, are to be 
used to support a contingency operation or to facilitate defense against 
or recovery from nuclear, biological, chemical, or radiological attack; 
or
    (2) A determination and findings has been executed concluding that 
it is more cost effective for the Government requiring activity to 
assign, mark, and register the unique item identification after delivery 
of an item acquired from a small business concern or a commercial item 
acquired under FAR Part 12 or Part 8.
    (i) The determination and findings shall be executed by--
    (A) The Component Acquisition Executive for an acquisition category 
(ACAT) I program; or
    (B) The head of the contracting activity for all other programs.
    (ii) The DoD Unique Item Identification Program Office must receive 
a copy of the determination and findings required by paragraph (b)(2)(i) 
of this subsection. Send the copy to DPAP, SPEC ASST, 3060 Defense 
Pentagon, 3E1044, Washington, DC 20301-3060; or by facsimile to (703) 
695-7596.

[70 FR 20836, Apr. 22, 2005]

[[Page 64]]



Sec. 211.274-3  Policy for valuation.

    (a) It is DoD policy that contractors shall be required to identify 
the Government's unit acquisition cost (as defined in 252.211-7003(a)) 
for all items delivered, even if none of the criteria for placing a 
unique item identification mark applies.
    (b) The Government's unit acquisition cost is--
    (1) For fixed-price type line, subline, or exhibit line items, the 
unit price identified in the contract at the time of delivery;
    (2) For cost-type or undefinitized line, subline, or exhibit line 
items, the contractor's estimated fully burdened unit cost to the 
Government at the time of delivery; and
    (3) For items delivered under a time-and-materials contract, the 
contractor's estimated fully burdened unit cost to the Government at the 
time of delivery.
    (c) The Government's unit acquisition cost of subassemblies, 
components, and parts embedded in delivered items need not be separately 
identified.

[70 FR 20836, Apr. 22, 2005]



Sec. 211.274-4  Policy for reporting of Government-furnished equipment 
          in the DoD Item Unique Identification (IUID) Registry.

    It is DoD policy that Government-furnished equipment be recorded in 
the DoD IUID Registry, except for--
    (a) Items with an acquisition cost of less than $5,000 that are not 
identified as serially managed, mission essential, sensitive, or 
controlled inventory, unless the terms and conditions of the contract 
state otherwise;
    (b) Government-furnished material;
    (c) Reparables;
    (d) Contractor-acquired property as defined in FAR Part 45;
    (e) Property under any statutory leasing authority;
    (f) Property to which the Government has acquired a lien or title 
solely because of partial, advance, progress, or performance-based 
payments;
    (g) Intellectual property or software; and
    (h) Real property.

[73 FR 70908, Nov. 24, 2008]



Sec. 211.274-5  Policy for assignment of Government-assigned serial 
          numbers.

    It is DoD policy that contractors apply Government-assigned serial 
numbers, such as tail numbers/hull numbers and equipment registration 
numbers, in human-readable format on major end items when required by 
law, regulation, or military operational necessity. The latest version 
of MIL-STD-130, Marking of U.S. Military Property, shall be used for the 
marking of human-readable information.

[75 FR 59103, Sept. 27, 2010]



Sec. 211.274-6  Contract clauses.

    (a)(1) Use the clause at 252.211-7003, Item Identification and 
Valuation, in solicitations and contracts that--
    (i) Require item identification or valuation, or both, in accordance 
with 211.274-2 and 211.274-3; or
    (ii) Contain the clause at 252.211-7007.
    (2) Complete paragraph (c)(1)(ii) of the clause with the contract 
line, subline, or exhibit line item number and description of any 
item(s) below $5,000 in unit acquisition cost for which DoD unique item 
identification or a DoD recognized unique identification equivalent is 
required in accordance with 211.274-2(a)(2) or (3).
    (3) Complete paragraph (c)(1)(iii) of the clause with the applicable 
attachment number, when DoD unique item identification or a DoD 
recognized unique identification equivalent is required in accordance 
with 211.274-2(a)(4) for DoD serially managed subassemblies, components, 
or parts embedded within deliverable items.
    (4) Use the clause with its Alternate I if--
    (i) An exception in 211.274-2(b) applies; or
    (ii) Items are to be delivered to the Government and none of the 
criteria for placing a unique item identification mark applies.
    (b)(1) Use the clause at 252.211-7007, Reporting of Government-
Furnished Equipment in the DoD Item Unique Identification (IUID) 
Registry, in solicitations and contracts that contain the clause at--
    (i) FAR 52.245-1, Government Property; or

[[Page 65]]

    (ii) FAR 52.245-2, Government Property Installation Operation 
Services.
    (2) Complete paragraph (b)(2)(ii) of the clause as applicable.
    (c) Use the clause at 252.211-7008, Use of Government-Assigned 
Serial Numbers, in solicitations and contracts that--
    (1) Contain the clause at 252.211-7003, Item Identification and 
Valuation; and
    (2) Require the contractor to mark major end items under the terms 
and conditions of the contract.

[72 FR 52298, Sept. 13, 2007, as amended at 73 FR 70908, Nov. 24, 2008. 
Redesignated and amended at 75 FR 59103, Sept. 27, 2010]



Sec. 211.275  Radio frequency identification.



Sec. 211.275-1  Definitions.

    Bulk commodities, case, palletized unit load, passive RFID tag, and 
radio frequency identification are defined in the clause at 252.211-
7006, Radio Frequency Identification.

[70 FR 53968, Sept. 13, 2005]



Sec. 211.275-2  Policy.

    (a) Except as provided in paragraph (b) of this subsection, radio 
frequency identification (RFID), in the form of a passive RFID tag, is 
required for individual cases and palletized unit loads that--
    (1) Contain items in any of the following classes of supply, as 
defined in DoD 4140.1-R, DoD Supply Chain Materiel Management 
Regulation, AP1.1.11:
    (i) Subclass of Class I--Packaged operational rations.
    (ii) Class II--Clothing, individual equipment, tentage, 
organizational tool kits, hand tools, and administrative and 
housekeeping supplies and equipment.
    (iii) Class IIIP--Packaged petroleum, lubricants, oils, 
preservatives, chemicals, and additives.
    (iv) Class IV--Construction and barrier materials.
    (v) Class VI--Personal demand items (non-military sales items).
    (vi) Subclass of Class VIII--Medical materials (excluding 
pharmaceuticals, biologicals, and reagents--suppliers should limit the 
mixing of excluded and non-excluded materials).
    (vii) Class IX--Repair parts and components including kits, 
assemblies and subassemblies, reparable and consumable items required 
for maintenance support of all equipment, excluding medical-peculiar 
repair parts; and
    (2) Will be shipped to one of the following locations:
    (i) Defense Distribution Depot, Susquehanna, PA: DoDAAC W25G1U or 
SW3124.
    (ii) Defense Distribution Depot, San Joaquin, CA: DoDAAC W62G2T or 
SW3224.
    (iii) Defense Distribution Depot, Albany, GA: DoDAAC SW3121.
    (iv) Defense Distribution Depot, Anniston, AL: DoDAAC W31G1Z or 
SW3120.
    (v) Defense Distribution Depot, Barstow, CA: DoDAAC SW3215.
    (vi) Defense Distribution Depot, Cherry Point, NC: DoDAAC SW3113.
    (vii) Defense Distribution Depot, Columbus, OH: DoDAAC SW0700.
    (viii) Defense Distribution Depot, Corpus Christi, TX: DoDAAC W45H08 
or SW3222.
    (ix) Defense Distribution Depot, Hill, UT: DoDAAC SW3210.
    (x) Defense Distribution Depot, Jacksonville, FL: DoDAAC SW3122.
    (xi) Defense Distribution Depot, Oklahoma City, OK: DoDAAC SW3211.
    (xii) Defense Distribution Depot, Norfolk, VA: DoDAAC SW3117.
    (xiii) Defense Distribution Depot, Puget Sound, WA: DoDAAC SW3216.
    (xiv) Defense Distribution Depot, Red River, TX: DoDAAC W45G19 or 
SW3227.
    (xv) Defense Distribution Depot, Richmond, VA: DoDAAC SW0400.
    (xvi) Defense Distribution Depot, San Diego, CA: DoDAAC SW3218.
    (xvii) Defense Distribution Depot, Tobyhanna, PA: DoDAAC W25G1W or 
SW3114.
    (xviii) Defense Distribution Depot, Warner Robins, GA: DoDAAC 
SW3119.
    (xix) Air Mobility Command Terminal, Charleston Air Force Base, 
Charleston, SC: Air Terminal Identifier Code CHS.
    (xx) Air Mobility Command Terminal, Naval Air Station, Norfolk, VA: 
Air Terminal Identifier Code NGU.
    (xxi) Air Mobility Command Terminal, Travis Air Force Base, 
Fairfield, CA: Air Terminal Identifier Code SUU.

[[Page 66]]

    (xxii) A location outside the contiguous United States when the 
shipment has been assigned Transportation Priority 1.
    (b) The following are excluded from the requirements of paragraph 
(a) of this subsection:
    (1) Shipments of bulk commodities.
    (2) Shipments to locations other than Defense Distribution Depots 
when the contract includes the clause at FAR 52.213-1, Fast Payment 
Procedures.

[72 FR 6483, Feb. 12, 2007]



Sec. 211.275-3  Contract clause.

    Use the clause at 252.211-7006, Radio Frequency Identification, in 
solicitations and contracts that will require shipment of items meeting 
the criteria at 211.275-2.

[70 FR 53968, Sept. 13, 2005]

                    Subpart 211.5_Liquidated Damages



Sec. 211.503  Contract clauses.

    (b) Use the clause at FAR 52.211-12, Liquidated Damages--
Construction, in all construction contracts exceeding $650,000, except 
cost-plus-fixed-fee contracts or contracts where the contractor cannot 
control the pace of the work. Use of the clause in contracts of $650,000 
or less is optional.

[60 FR 61594, Nov. 30, 1995. Redesignated at 66 FR 49861, Oct. 1, 2001; 
71 FR 75892, Dec. 19, 2006; 75 FR 45073, Aug. 2, 2010]

                Subpart 211.6_Priorities and Allocations



Sec. 211.602  General.

    DoD implementation of the Defense Priorities and Allocations System 
is in DoDD 4400.1, Defense Production Act Programs.

[64 FR 51075, Sept. 21, 1999]

                PART 212_ACQUISITION OF COMMERCIAL ITEMS

          Subpart 212.1_Acquisition of Commercial Items_General

Sec.

Sec. 212.102 Applicability.

  Subpart 212.2_Special Requirements for the Acquisition of Commercial 
                                  Items


Sec. 212.207 Contract type.

Sec. 212.211 Technical data.

Sec. 212.212 Computer software.

Sec. 212.270 Major weapon systems as commercial items.

   Subpart 212.3_Solicitation Provisions and Contract Clauses for the 
                     Acquisition of Commercial Items


Sec. 212.301 Solicitation provisions and contract clauses for the 
          acquisition of commercial items.

Sec. 212.302 Tailoring of provisions and clauses for the acquisition of 
          commercial items.

   Subpart 212.5_Applicability of Certain Laws to the Acquisition of 
                            Commercial Items


Sec. 212.503 Applicability of certain laws to executive agency contracts 
          for the acquisition of commercial items.

Sec. 212.504 Applicability of certain laws to subcontracts for the 
          acquisition of commercial items.

Sec. 212.570 Applicability of certain laws to contracts and subcontracts 
          for the acquisition of commercially available off-the-shelf 
          items.

Subpart 212.6_Streamlined Procedures for Evaluation and Solicitation for 
                            Commercial Items


Sec. 212.602 Streamlined evaluation of offers.

  Subpart 212.70_Pilot Program for Transition to Follow-On Contracting 
                After Use of Other Transaction Authority


Sec. 212.7000 Scope.

Sec. 212.7001 Definitions.

Sec. 212.7002 Pilot program.

Sec. 212.7002-1 Contracts under the program.

Sec. 212.7002-2 Subcontracts under the program.

Sec. 212.7003 Technical data and computer software.

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

    Source: 60 FR 61595, Nov. 30, 1995, unless otherwise noted.

          Subpart 212.1_Acquisition of Commercial Items_General

    Source: 73 FR 4114, Jan. 24, 2008, unless otherwise noted.

[[Page 67]]



Sec. 212.102  Applicability.

    (a)(i) When using FAR Part 12 procedures for acquisitions exceeding 
$1 million in value, the contracting officer shall--
    (A) Determine in writing that the acquisition meets the commercial 
item definition in FAR 2.101; and
    (B) Include the written determination in the contract file.
    (ii) Follow the procedures at PGI 212.102(a) regarding file 
documentation.

  Subpart 212.2_Special Requirements for the Acquisition of Commercial 
                                  Items



Sec. 212.207  Contract type.

    b) In accordance with Section 805 of the National Defense 
Authorization Act for Fiscal Year 2008 (Pub. L. 110-181), use of time-
and-materials and labor-hour contracts for the acquisition of commercial 
items is authorized only for the following:
    (i) Services acquired for support of a commercial item, as described 
in paragraph (5) of the definition of commercial item at FAR 2.101 (41 
U.S.C. 403(12)(E)).
    (ii) Emergency repair services.
    (iii) Any other commercial services only to the extent that the head 
of the agency concerned approves a written determination by the 
contracting officer that--
    (A) The services to be acquired are commercial services as defined 
in paragraph (6) of the definition of commercial item at FAR 2.101 (41 
U.S.C. 403(12)(F));
    (B) If the services to be acquired are subject to FAR 15.403-
1(c)(3)(ii), the offeror of the services has submitted sufficient 
information in accordance with that subsection;
    (C) Such services are commonly sold to the general public through 
use of time-and-materials or labor-hour contracts; and
    (D) The use of a time-and-materials or labor-hour contract type is 
in the best interest of the Government.

[74 FR 34264, July 15, 2009, as amended at 74 FR 35826, July 21, 2009]



Sec. 212.211  Technical data.

    The DoD policy for acquiring technical data for commercial items is 
at 227.7102.



Sec. 212.212  Computer software.

    (1) Departments and agencies shall identify and evaluate, at all 
stages of the acquisition process (including concept refinement, concept 
decision, and technology development), opportunities for the use of 
commercial computer software and other non-developmental software in 
accordance with Section 803 of the National Defense Authorization Act 
for Fiscal Year 2009 (Pub. L. 110-417).
    (2) See Subpart 208.74 when acquiring commercial software or 
software maintenance.  See 227.7202 for policy on the acquisition of 
commercial computer software and commercial computer software 
documentation.

[74 FR 34270, July 15, 2009]



Sec. 212.270  Major weapon systems as commercial items.

    The DoD policy for acquiring major weapon systems as commercial 
items is in Subpart 234.70.

[71 FR 58538, Oct. 4, 2006]

   Subpart 212.3_Solicitation Provisions and Contract Clauses for the 
                     Acquisition of Commercial Items



Sec. 212.301  Solicitation provisions and contract clauses for the 
          acquisition of commercial items.

    (f) The following additional provisions and clauses apply to DoD 
solicitations and contracts for the acquisition of commercial items. If 
the offeror has completed the provisions listed in paragraph (f)(i) or 
(ii) of this section electronically as part of its annual 
representations and certifications at https://orca.bpn.gov, the 
contracting officer may consider this information instead of requiring 
the offeror to complete these provisions for a particular solicitation.
    (i) Use one of the following provisions as prescribed in part 225:
    (A) 252.225-7000, Buy American Act--Balance of Payments Program 
Certificate.
    (B) 252.225-7020, Trade Agreements Certificate.

[[Page 68]]

    (C) 252.225-7035, Buy American Act--Free Trade Agreements--Balance 
of Payments Program Certificate.
    (ii) Use the provision at 252.212-7000, Offeror Representations and 
Certifications--Commercial Items, in all solicitations for commercial 
items exceeding the simplified acquisition threshold. If an exception to 
10 U.S.C. 2410i applies to a solicitation exceeding the simplified 
acquisition threshold (see 225.7603), indicate on an addendum that ``The 
certification in paragraph (b) of the provision at 252.212-7000 does not 
apply to this solicitation.''
    (iii) Use the clause at 252.212-7001, Contract Terms and Conditions 
Required to Implement Statutes or Executive Orders Applicable to Defense 
Acquisitions of Commercial Items, in all solicitations and contracts for 
commercial items, completing paragraphs (a) and (b), as appropriate.
    (iv) Use the provision at 252.209-7001, Disclosure of Ownership or 
Control by the Government of a Terrorist Country, as prescribed in 
209.104-70(a).
    (v) Use the clause at 252.232-7009, Mandatory Payment by 
Governmentwide Commercial Purchase Card, as prescribed in 232.1110.
    (vi) Use the clause at 252.211-7003, Item Identification, as 
prescribed at 211.274-4.
    (vii) Use the clause at 252.225-7040, Contractor Personnel 
Authorized to Accompany U.S. Armed Forces Deployed Outside the United 
States, as prescribed in 225.7402-4.
    (viii) Use the clause at 252.225-7043, Antiterrorism/Force 
Protection Policy for Defense Contractors Outside the United States, in 
solicitations and contracts that include the clause at 252.225-7040.
    (ix) Use the clause at 252.211-7006, Radio Frequency Identification, 
as prescribed in 211.275-3.
    (x) Use the clause at 252.232-7010, Levies on Contract Payments, as 
prescribed in 232.7102.
    (xi) Use the clause at 252.246-7003, Notification of Potential 
Safety Issues, as prescribed in 246.371.
    (xii) Use the provision at 252.247-7026, Evaluation Preference for 
Use of Domestic Shipyards--Applicable to Acquisition of Carriage by 
Vessel for DoD Cargo in the Coastwise or Noncontiguous Trade, as 
prescribed in 247.574(e).
    (xiii) Use the provision at 252.225-7010, Commercial Derivative 
Military Article--Specialty Metals Compliance Certificate, as prescribed 
in 225.7003-5(b).
    (xiv) Use the clause at 252.232-7011, Payments in Support of 
Emergencies and Contingency Operations, as prescribed in 232.908.

[60 FR 61595, Nov. 30, 1995]

    Editorial Note: For Federal Register citations affecting section 
212.301, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 212.302  Tailoring of provisions and clauses for the acquisition of 
          commercial items.

    (c) Tailoring inconsistent with customary commercial practice. The 
head of the contracting activity is the approval authority within the 
DoD for waivers under FAR 12.302(c).

   Subpart 212.5_Applicability of Certain Laws to the Acquisition of 
                            Commercial Items



Sec. 212.503  Applicability of certain laws to executive agency 
          contracts for the acquisition of commercial items.

    (a) The following laws are not applicable to contracts for the 
acquisition of commercial items:
    (i) 10 U.S.C. 2306(b), Prohibition on Contingent Fees.
    (ii) 10 U.S.C. 2324, Allowable Costs Under Defense Contracts.
    (iii) 10 U.S.C. 2384(b), Requirement to Identify Suppliers.
    (iv) 10 U.S.C. 2397(a)(1), Reports by Employees or Former Employees 
of Defense Contractors.
    (v) 10 U.S.C. 2397b(f), Limits on Employment for Former DoD 
Officials.
    (vi) 10 U.S.C. 2397c, Defense Contractor Requirements Concerning 
Former DoD Officials.
    (vii) 10 U.S.C. 2408(a), Prohibition on Persons Convicted of Defense 
Related Felonies.
    (viii) 10 U.S.C. 2410b, Contractor Inventory Accounting System 
Standards (see 252.242-7004).

[[Page 69]]

    (ix) 107 Stat 1720 (Section 843(a), Public Law 103-160), Reporting 
Requirement Regarding Dealings with Terrorist Countries.
    (x) Domestic Content Restrictions in the National Defense 
Appropriations Acts for Fiscal Years 1996 and Subsequent Years, unless 
the restriction specifically applies to commercial items. For the 
restriction that specifically applies to commercial ball or roller 
bearings as end items, see 225.7019-2(b) (Section 8064 of Public Law 
106-259).
    (xi) Section 8116 of the Defense Appropriations Act for Fiscal Year 
2010 (Pub. L. 111-118).
    (c) The applicability of the following laws has been modified in 
regard to contracts for the acquisition of commercial items:
    (i) 10 U.S.C. 2402, Prohibition on Limiting Subcontractor Direct 
Sales to the United States (see FAR 3.503 and 52.203-6).
    (ii) 10 U.S.C. 2306a, Truth in Negotiations Act (see FAR 15.403-
1(b)(3)).

[60 FR 61595, Nov. 30, 1995, as amended at 63 FR 11851, Mar. 11, 1998; 
63 FR 55040, Oct. 14, 1998; 65 FR 77828, Dec. 13, 2000; 67 FR 4208, Jan. 
29, 2002; 69 FR 65089, Nov. 10, 2004; 73 FR 76970, Dec. 18, 2008; 75 FR 
27947, May 19, 2010]



Sec. 212.504  Applicability of certain laws to subcontracts for the 
          acquisition of commercial items.

    (a) The following laws are not applicable to subcontracts at any 
tier for the acquisition of commercial items or commercial components:
    (i) 10 U.S.C. 2306(b) Prohibition on Contingent Fees.
    (ii) 10 U.S.C. 2313(c), Examination of Records of a Contractor.
    (iii) 10 U.S.C. 2320, Rights in Technical Data.
    (iv) 10 U.S.C. 2321, Validation of Proprietary Data Restrictions.
    (v) 10 U.S.C. 2324, Allowable Costs Under Defense Contracts.
    (vi) 10 U.S.C. 2327, Reporting Requirement Regarding Dealings with 
Terrorist Countries.
    (vii) 10 U.S.C. 2384(b), Requirement to Identify Suppliers.
    (viii) 10 U.S.C. 2391 note, Notification of Substantial Impact on 
Employment.
    (ix) 10 U.S.C. 2393, Prohibition Against Doing Business with Certain 
Offerors or Contractors.
    (x) 10 U.S.C. 2397(a)(1), Reports by Employees or Former Employees 
of Defense Contractors.
    (xi) 10 U.S.C. 2397b(f), Limits on Employment for Former DoD 
Officials.
    (xii) 10 U.S.C. 2397c, Defense Contractor Requirements Concerning 
Former DoD Officials.
    (xiii) 10 U.S.C. 2408(a) Prohibition on Persons Convicted of Defense 
Related Felonies.
    (xiv) 10 U.S.C. 2410b, Contractor Inventory Accounting System 
Standards.
    (xv) 10 U.S.C. 2501 note, Notification of Proposed Program 
Termination.
    (xvi) 10 U.S.C. 2534, Miscellaneous Limitations on the Procurement 
of Goods Other Than United States Goods.
    (xvii) 10 U.S.C. 2631, Transportation of Supplies by Sea (except as 
provided in the clause at 252.247-7023, Transportation of Supplies by 
Sea).
    (xviii) Domestic Content Restrictions in the National Defense 
Appropriations Acts for Fiscal Years 1996 and Subsequent Years, unless 
the restriction specifically applies to commercial items. For the 
restriction that specifically applies to commercial ball or roller 
bearings as end items, see 225.7009-2(b) (Section 8064 of Public Law 
106-259).
    (xix) Section 8116 of the Defense Appropriations Act for Fiscal Year 
2010 (Pub. L. 111-118).
    (b) Certain requirements of the following laws have been eliminated 
for subcontracts at any tier for the acquisition of commercial items or 
commercial components:
    (i) 10 U.S.C. 2393(d), Subcontractor Reports Under Prohibition 
Against Doing Business with Certain Offerors (see FAR 52.209-6).
    (ii) 10 U.S.C. 2402, Prohibition on Limiting Subcontractor Direct 
Sales to the United States (see FAR 3.503 and 52.203-6).

[60 FR 61595, Nov. 30, 1995, as amended at 61 FR 58488, Nov. 15, 1996; 
62 FR 5780, Feb. 7, 1997; 65 FR 14401, Mar. 16, 2000; 65 FR 39704, June 
27, 2000; 65 FR 77828, Dec. 13, 2000; 69 FR 63331, Nov. 1, 2004; 73 FR 
76970, Dec. 18, 2008; 75 FR 27947, May 19, 2010]

[[Page 70]]



Sec. 212.570  Applicability of certain laws to contracts and 
         
         subcontracts for the acquisition of commercially available 
          off-the-shelf items.

    Paragraph (a)(1) of 10 U.S.C. 2533b, Requirement to buy strategic 
materials critical to national security from American sources, is not 
applicable to contracts and subcontracts for the acquisition of 
commercially available off-the-shelf items, except as provided at 
225.7003-3(b)(2)(i).

[74 FR 37636, July 29, 2009]

Subpart 212.6_Streamlined Procedures for Evaluation and Solicitation for 
                            Commercial Items



Sec. 212.602  Streamlined evaluation of offers.

    (b)(i) For the acquisition of transportation and transportation-
related services, also consider evaluating offers in accordance with the 
criteria at 247.206(1).
    (ii) For the acquisition of transportation in supply contracts that 
will include a significant requirement for transportation of items 
outside the contiguous United States, also evaluate offers in accordance 
with the criterion at 247.301-71.
    (iii) For the direct purchase of ocean transportation services, also 
evaluate offers in accordance with the criteria at 247.573-2(c).

[65 FR 50143, Aug. 17, 2000, as amended at 70 FR 35544, June 21, 2005; 
72 FR 49205, Aug. 28, 2007]

  Subpart 212.70_Pilot Program for Transition to Follow-On Contracting 
                After Use of Other Transaction Authority

    Source: 69 FR 63330, Nov. 1, 2004, unless otherwise noted.



Sec. 212.7000  Scope.

    This subpart establishes the pilot program authorized by Section 847 
of the National Defense Authorization Act for Fiscal Year 2004 (Pub. L. 
108-136).



Sec. 212.7001  Definitions.

    As used in this subpart--
    Nontraditional defense contractor means a business unit that--
    (1) Has entered into an other transaction agreement with DoD; and
    (2) Has not, for a period of at least 1 year prior to the date of 
the other transaction agreement, entered into or performed on--
    (i) Any contract that is subject to full coverage under the cost 
accounting standards described in FAR Part 30; or
    (ii) Any other contract exceeding $500,000 to carry out prototype 
projects or to perform basic, applied, or advanced research projects for 
a Federal agency that is subject to the FAR.
    Other transaction means a transaction that--
    (1) Is other than a contract, grant, or cooperative agreement;
    (2) Is not subject to the FAR or its supplements; and
    (3) Is entered into in accordance with 32 CFR part 3.



Sec. 212.7002  Pilot program.



Sec. 212.7002-1  Contracts under the program.

    (a) The contracting officer may use FAR part 12 procedures to award 
a contract for an item or process that does not meet the definition of 
``commercial item,'' if the contract--
    (1) Is awarded to a nontraditional defense contractor;
    (2) Is a follow-on contract for the production of an item or process 
begun as a prototype project under an other transaction agreement or as 
a research project carried out in accordance with 10 U.S.C. 2371;
    (3) Does not exceed $50,000,000;
    (4) Is awarded on or before September 30, 2010; and
    (5) Is either--
    (i) A firm-fixed-price contract; or
    (ii) A fixed-price contract with economic price adjustment.
    (b) See 212.7003 for special procedures pertaining to technical data 
and computer software.

[69 FR 63330, Nov. 1, 2004, as amended at 71 FR 18669, Apr. 12, 2006; 73 
FR 21845, Apr. 23, 2008; 74 FR 2416, Jan. 15, 2009]

[[Page 71]]



Sec. 212.7002-2  Subcontracts under the program.

    (a) A subcontract for an item or process that does not meet the 
definition of ``commercial item'' may be treated as a subcontract for a 
commercial item, if the subcontract--
    (1) Is for the production of an item or process begun as a prototype 
project under an other transaction agreement or as a research project 
carried out in accordance with 10 U.S.C. 2371;
    (2) Does not exceed $50,000,000;
    (3) Is awarded on or before September 30, 2010;
    (4) Is awarded to a nontraditional defense contractor; and
    (5) Is either--
    (i) A firm-fixed-price subcontract; or
    (ii) A fixed-price subcontract with economic price adjustment.
    (b) See 212.7003 for special procedures pertaining to technical data 
and computer software.

[71 FR 18669, Apr. 12, 2006, as amended at 73 FR 21845, Apr. 23, 2008; 
74 FR 2416, Jan. 15, 2009]



Sec. 212.7003  Technical data and computer software.

    For purposes of establishing delivery requirements and license 
rights for technical data under 227.7102 and for computer software under 
227.7202, there shall be a rebuttable presumption that items or 
processes acquired under a contract or subcontract awarded in accordance 
with 212.7002 were developed in part with Federal funds and in part at 
private expense (i.e., mixed funding).
    (a) Delivery requirements. Acquire only the technical data and 
computer software that are necessary to satisfy agency needs. Follow the 
requirements at 227.7103-1 and 227.7103-2 for technical data, and 
227.7203-1 and 227.7203-2 for computer software.
    (b) License rights. Acquire only the license rights in technical 
data and computer software that are necessary to satisfy agency needs.
    (1) For technical data, use the clauses at 252.227-7013, Rights in 
Technical Data--Noncommercial Items, and 252.227-7037, Validation of 
Restrictive Markings on Technical Data.
    (2) For computer software, use the clauses at 252.227-7014, Rights 
in Noncommercial Computer Software and Noncommercial Computer Software 
Documentation, and 252.227-7019, Validation of Asserted Restrictions--
Computer Software.
    (3) Require the contractor to include the clauses prescribed by 
paragraphs (b)(1) and (2) of this section in subcontracts awarded in 
accordance with 212.7002-2.
    (4) When the standard license rights for items or processes 
developed with mixed funding do not provide the minimum rights necessary 
to satisfy agency needs, negotiate for special license rights in 
accordance with 227.7103-5(d) and 227.7203-5(d).

[71 FR 18669, Apr. 12, 2006]

[[Page 72]]

           SUBCHAPTER C_CONTRACTING METHODS AND CONTRACT TYPES

               PART 213_SIMPLIFIED ACQUISITION PROCEDURES

                        Subpart 213.1_Procedures

Sec.

Sec. 213.101 General.

Sec. 213.106-1-70 Soliciting competition--tiered evaluation of offers.

     Subpart 213.2_Actions at or Below the Micro-Purchase Threshold


Sec. 213.270 Use of the Governmentwide commercial purchase card.

              Subpart 213.3_Simplified Acquisition Methods


Sec. 213.301 Governmentwide commercial purchase card.

Sec. 213.302 Purchase orders.

Sec. 213.302-3 Obtaining contractor acceptance and modifying purchase 
          orders.

Sec. 213.302-5 Clauses.

Sec. 213.303 Blanket purchase agreements (BPAs).

Sec. 213.303-5 Purchases under BPAs.

Sec. 213.305 Imprest funds and third party drafts.

Sec. 213.305-3 Conditions for use.

Sec. 213.306 SF 44, Purchase Order-Invoice-Voucher.

Sec. 213.307 Forms.

                  Subpart 213.4_Fast Payment Procedure


Sec. 213.402 Conditions for use.

 Subpart 213.70_Simplified Acquisition Procedures Under the 8(a) Program


Sec. 213.7001 Procedures.

Sec. 213.7002 Purchase orders.

    Authority: 48 U.S.C. 421 and 48 CFR Chapter 1.

    Source: 64 FR 2596, Jan. 15, 1999, unless otherwise noted.

                        Subpart 213.1_Procedures



Sec. 213.101  General.

    Structure awards valued above the micro-purchase threshold (e.g., 
contract line items, delivery schedule, and invoice instructions) in a 
manner that will minimize the generation of invoices valued at or below 
the micro-purchase threshold.

[65 FR 46625, July 31, 2000]



Sec. 213.106-1-70  Soliciting competition--tiered evaluation of offers.

    See limitations on the use of tiered evaluation of offers at 
215.203-70.

[72 FR 42314, Aug. 2, 2007]

     Subpart 213.2_Actions at or Below the Micro-Purchase Threshold



Sec. 213.270  Use of the Governmentwide commercial purchase card.

    Use the Governmentwide commercial purchase card as the method of 
purchase and/or method of payment for purchases valued at or below the 
micro-purchase threshold. This policy applies to all types of contract 
actions authorized by the FAR unless--
    (a) The Deputy Secretary of Defense has approved an exception for an 
electronic commerce/electronic data interchange system or operational 
requirement that results in a more cost-effective payment process;
    (b)(1) A general or flag officer or a member of the Senior Executive 
Service (SES) makes a written determination that--
    (i) The source or sources available for the supply or service do not 
accept the purchase card; and
    (ii) The contracting office is seeking a source that accepts the 
purchase card.
    (2) To prevent mission delays, if an activity does not have a 
resident general or flag officer of SES member, delegation of this 
authority to the level of the senior local commander or director is 
permitted; or
    (c) The purchase or payment meets one or more of the following 
criteria:
    (1) The place of performance is entirely outside the United States 
and its outlying areas.
    (2) The purchase is a Standard Form 44 purchase for aviation fuel or 
oil.

[[Page 73]]

    (3) The purchase is an overseas transaction by a contracting officer 
in support of a contingency operation as defined in 10 U.S.C. 101(a)(13) 
or a humanitarian or peacekeeping operation as defined in 10 U.S.C. 
2302(8).
    (4) The purchase is a transaction in support of intelligence or 
other specialized activities addressed by Part 2.7 of Executive Order 
12333.
    (5) The purchase is for training exercises in preparation for 
overseas contingency, humanitarian, or peacekeeping operations.
    (6) The payment is made with an accommodation check.
    (7) The payment is for a transportation bill.
    (8) The purchase is under a Federal Supply Schedule contract that 
does not permit use of the Governmentwide commercial purchase card.
    (9) The purchase is for medical services and--
    (i) It involves a controlled substance or narcotic;
    (ii) It requires the submission of a Health Care Summary Record to 
document the nature of the care purchased;
    (iii) The ultimate price of the medical care is subject to an 
independent determination that changes the price paid based on 
application of a mandatory CHAMPUS Maximum Allowable Charge 
determination that reduces the Government liability below billed 
charges;
    (iv) The Government already has entered into a contract to pay for 
the services without the use of a purchase card;
    (v) The purchaser is a beneficiary seeking medical care; or
    (vi) The senior local commander or director of a hospital or 
laboratory determines that use of the purchase card is not appropriate 
or cost-effective. The Medical Prime Vendor Program and the DoD Medical 
Electronic Catalog Program are two examples where use of the purchase 
card may not be cost-effective.

[65 FR 46626, July 31, 2000, as amended at 70 FR 35544, June 21, 2005]

              Subpart 213.3_Simplified Acquisition Methods



Sec. 213.301  Governmentwide commercial purchase card.

    (1) ``United States,'' as used in this section, means the 50 States 
and the District of Columbia, the Commonwealth of Puerto Rico, the 
Virgin Islands, the Commonwealth of the Northern Mariana Islands, Guam, 
American Samoa, Wake Island, Johnston Island, Canton Island, the outer 
Continental Shelf lands, and any other place subject to the jurisdiction 
of the United States (but not including leased bases).
    (2) An individual appointed in accordance with 201.603-3(b) also may 
use the Governmentwide commercial purchase card to make a purchase that 
exceeds the micro-purchase threshold but does not exceed $25,000, if--
    (i) The purchase--
    (A) Is made outside the United States for use outside the United 
States; and
    (B) Is for a commercial item; but
    (C) Is not for work to be performed by employees recruited within 
the United States;
    (D) Is not for supplies or services originating from, or transported 
from or through, sources identified in FAR Subpart 25.7;
    (E) Is not for ball or roller bearings as end items;
    (F) Does not require access to classified or Privacy Act 
information; and
    (G) Does not require transportation of supplies by sea; and
    (ii) The individual making the purchase--
    (A) Is authorized and trained in accordance with agency procedures;
    (B) Complies with the requirements of FAR 8.002 in making the 
purchase; and
    (C) Seeks maximum practicable competition for the purchase in 
accordance with FAR 13.104(b).
    (3) A contracting officer supporting a contingency operation as 
defined in 10 U.S.C. 101(a)(13) or a humanitarian or peacekeeping 
operation as defined in 10 U.S.C. 2302(8) also may use the 
Governmentwide commercial purchase card to make a purchase that exceeds 
the micro-purchase threshold but does not exceed the simplified 
acquisition threshold, if--

[[Page 74]]

    (i) The supplies or services being purchased are immediately 
available;
    (ii) One delivery and one payment will be made; and
    (iii) The requirements of paragraphs (2)(i) and (ii) of this section 
are met.
    (4) Guidance on DoD purchase, travel, and fuel card programs is 
available at

http://www.acq.osd.mil/dpap/pdi/pc/docs/dod--charge--card--guide--
20080819.doc. Additional guidance on the fuel card programs is available 
at http://www.desc.dla.mil.

[64 FR 56705, Oct. 21, 1999; 64 FR 63380, Nov. 19, 1999, as amended at 
66 FR 55123, Nov. 1, 2001; 66 FR 56902, Nov. 13, 2001; 67 FR 38021, May 
31, 2002; 68 FR 56561, Oct. 1, 2003; 70 FR 75411, Dec. 20, 2005; 72 FR 
6484, Feb. 12, 2007; 73 FR 70906, Nov. 24, 2008]



Sec. 213.302  Purchase orders.



Sec. 213.302-3  Obtaining contractor acceptance and modifying purchase 
          orders.

    (1) Require written acceptance of purchase orders for classified 
acquisitions.
    (2) See PGI 213.302-3 for guidance on the use of unilateral 
modifications.
    (3) A supplemental agreement converts a unilateral purchase order to 
a bilateral agreement. If not previously included in the purchase order, 
incorporate the clause at 252.243-7001, Pricing of Contract 
Modifications, in the Standard Form 30, and obtain the contractor's 
acceptance by signature on the Standard Form 30.

[64 FR 2596, Jan. 15, 1999, as amended at 71 FR 3413, Jan. 23, 2006]



Sec. 213.302-5  Clauses.

    (a) Use the clause at 252.243-7001, Pricing of Contract 
Modifications, in all bilateral purchase orders.
    (d) When using the clause at FAR 52.213-4, delete the reference to 
the clause at FAR 52.225-1, Buy American Act-Supplies. Instead, if the 
Buy American Act applies to the acquisition, use the clause at--
    (i) 252.225-7001, Buy American Act and Balance of Payments Program, 
as prescribed at 225.1101(2); or
    (ii) 252.225-7036, Buy American Act--Free Trade Agreements--Balance 
of Payments Program, as prescribed at 225.1101(10).

[64 FR 24528, May 7, 1999, as amended at 65 FR 19850, Apr. 13, 2000; 65 
FR 39704, June 27, 2000; 68 FR 56561, Oct. 1, 2003; 69 FR 1927, Jan. 13, 
2004]



Sec. 213.303  Blanket purchase agreements (BPAs).



Sec. 213.303-5  Purchases under BPAs.

    (b) Individual purchases for subsistence may be made at any dollar 
value; however, the contracting officer must satisfy the competition 
requirements of FAR Part 6 for any action not using simplified 
acquisition procedures.



Sec. 213.305  Imprest funds and third party drafts.



Sec. 213.305-3  Conditions for use.

    (d)(i) On a very limited basis, installation commanders and 
commanders of other activities with contracting authority may be granted 
authority to establish imprest funds and third party draft 
(accommodation check) accounts. Use of imprest funds and third party 
drafts must comply with--
    (A) DoD 7000.14-R, DoD Financial Management Regulation, Volume 5, 
Disbursing Policy and Procedures; and
    (B) The Treasury Financial Manual, Volume I, Part 4, Chapter 3000.
    (ii) Use of imprest funds requires approval by the Director for 
Financial Commerce, Office of the Deputy Chief Financial Officer, Office 
of the Under Secretary of Defense (Comptroller), except as provided in 
paragraph (d)(iii) of this subsection.
    (iii) Imprest funds are authorized for use without further approval 
for--
    (A) Overseas transactions at or below the micro-purchase threshold 
in support of a contingency operation as defined in 10 U.S.C. 101(a)(13) 
or a humanitarian or peacekeeping operation as defined in 10 U.S.C. 
2302(8); and
    (B) Classified transactions.

[71 FR 3413, Jan. 23, 2006]



Sec. 213.306  SF 44, Purchase Order-Invoice-Voucher.

    (a)(1) The micro-purchase limitation applies to all purchases, 
except that purchases not exceeding the simplified

[[Page 75]]

acquisition threshold may be made for--
    (A) Aviation fuel and oil. The Aviation Into-plane Reimbursement 
(AIR) card may be used instead of an SF 44 for aviation fuel and oil 
(see http://www.desc.dla.mil);
    (B) Overseas transactions by contracting officers in support of a 
contingency operation as defined in 10 U.S.C. 101(a)(13) or a 
humanitarian or peacekeeping operation as defined in 10 U.S.C. 2302(8); 
and
    (C) Transactions in support of intelligence and other specialized 
activities addressed by Part 2.7 of Executive Order 12333.

[64 FR 2596, Jan. 15, 1999, as amended at 71 FR 3413, Jan. 23, 2006; 72 
FR 6484, Feb. 12, 2007]



Sec. 213.307  Forms.

    See PGI 213.307 for procedures on use of forms for purchases made 
using simplified acquisition procedures.

[71 FR 3413, Jan. 23, 2006]

                  Subpart 213.4_Fast Payment Procedure



Sec. 213.402  Conditions for use.

    (a) Individual orders may exceed the simplified acquisition 
threshold for--
    (i) Brand-name commissary resale subsistence; and
    (ii) Medical supplies for direct shipment overseas.

 Subpart 213.70_Simplified Acquisition Procedures Under the 8(a) Program



Sec. 213.7001  Procedures.

    For acquisitions that are otherwise appropriate to be conducted 
using procedures set forth in this part, and also eligible for the 8(a) 
Program, contracting officers may use--
    (a)(1) For sole source purchase orders not exceeding the simplified 
acquisition threshold, the procedures in 219.804-2(2); or
    (2) For other types of acquisitions, the procedures in Subpart 
219.8, excluding the procedures in 219.804-2(2); or
    (b) The procedures for award to the Small Business Administration in 
FAR Subpart 19.8.

[64 FR 2596, Jan. 15, 1999. Redesignated at 71 FR 3413, Jan. 23, 2006]



Sec. 213.7002  Purchase orders.

    The contracting officer need not obtain a contractor's written 
acceptance of a purchase order or modification of a purchase order for 
an acquisition under the 8(a) Program pursuant to 219.804-2(2).

[71 FR 3413, Jan. 23, 2006]

                         PART 214_SEALED BIDDING

                   Subpart 214.2_Solicitation of Bids

Sec.

Sec. 214.202 General rules for solicitation of bids.

Sec. 214.202-5 Descriptive literature.

           Subpart 214.4_Opening of Bids and Award of Contract


Sec. 214.404 Rejection of bids.

Sec. 214.404-1 Cancellation of invitations after opening.

Sec. 214.407 Mistakes in bids.

Sec. 214.407-3 Other mistakes disclosed before award.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36326, July 31, 1991, unless otherwise noted.

                   Subpart 214.2_Solicitation of Bids



Sec. 214.202  General rules for solicitation of bids.



Sec. 214.202-5  Descriptive literature.

    (c) Requirements of invitation for bids. When brand name or equal 
purchase descriptions are used, use of the provision at FAR 52.211-6, 
Brand Name or Equal, satisfies this requirement.

[56 FR 36326, July 31, 1991, as amended at 63 FR 11528, Mar. 9, 1998; 64 
FR 55633, Oct. 14, 1999; 69 FR 65090, Nov. 10, 2004]

[[Page 76]]

           Subpart 214.4_Opening of Bids and Award of Contract



Sec. 214.404  Rejection of bids.



Sec. 214.404-1  Cancellation of invitations after opening.

    The contracting officer shall make the written determinations 
required by FAR 14.404-1 (c) and (e).



Sec. 214.407  Mistakes in bids.



Sec. 214.407-3  Other mistakes disclosed before award.

    (e) Authority for making a determination under FAR 14.407-3(a), (b) 
and (d) is delegated for the defense agencies, without power of 
redelegation, as follows:
    (i) Defense Advanced Research Projects Agency: General Counsel, 
DARPA.
    (ii) Defense Information Systems Agency: General Counsel, DISA.
    (iii) Defense Intelligence Agency: Principal Assistant for 
Acquisition.
    (iv) Defense Logistics Agency:
    (A) General Counsel, DLA; and
    (B) Associate General Counsel, DLA.
    (v) National Geospatial-Intelligence Agency: General Counsel, NGA.
    (vi) Defense Threat Reduction Agency: General Counsel, DTRA.
    (vii) National Security Agency: Director of Procurement, NSA.
    (viii) Missile Defense Agency: General Counsel, MDA.
    (ix) Defense Contract Management Agency: General Counsel, DCMA.

[57 FR 42629, Sept. 15, 1992, as amended at 59 FR 27669, May 27, 1994; 
61 FR 50452, Sept. 26, 1996. Redesignated and amended at 62 FR 34122, 
June 24, 1997; 64 FR 51076, Sept. 21, 1999; 68 FR 7439, Feb. 14, 2003; 
69 FR 65090, Nov. 10, 2004; 74 FR 42780, Aug. 25, 2009]

                   PART 215_CONTRACTING BY NEGOTIATION

  Subpart 215.2_Solicitation and Receipt of Proposals and Information.

Sec.

Sec. 215.203-70 Requests for proposals--tiered evaluation of offers.

Sec. 215.270 Peer Reviews.

                     Subpart 215.3_Source Selection


Sec. 215.303 Responsibilities.

Sec. 215.304 Evaluation factors and significant subfactors.

Sec. 215.305 Proposal evaluation.

Sec. 215.370 Evaluation factor for employing or subcontracting with 
          members of the Selected Reserve.

Sec. 215.370-1 Definition.

Sec. 215.370-2 Evaluation factor.

Sec. 215.370-3 Solicitation provision and contract clause.

                     Subpart 215.4_Contract Pricing


Sec. 215.402 Pricing policy.

Sec. 215.403 Obtaining cost or pricing data.

Sec. 215.403-1 Prohibition on obtaining cost or pricing data (10 U.S.C. 
          2306a and 41 U.S.C. 254b).

Sec. 215.403-3 Requiring information other than cost or pricing data.

Sec. 215.403-5 Instructions for submission of cost or pricing data or 
          information other than cost or pricing data.

Sec. 215.404 Proposal analysis.

Sec. 215.404-1 Proposal analysis techniques.

Sec. 215.404-2 Information to support proposal analysis.

Sec. 215.404-3 Subcontract pricing considerations.

Sec. 215.404-4 Profit.

Sec. 215.404-70 DD Form 1547, Record of Weighted Guidelines Method 
          Application.

Sec. 215.404-71 Weighted guidelines method.

Sec. 215.404-71-1 General.

Sec. 215.404-71-2 Performance risk.

Sec. 215.404-71-3 Contract type risk and working capital adjustment.

Sec. 215.404-71-4 Facilities capital employed.

Sec. 215.404-71-5 Cost efficiency factor.

Sec. 215.404-72 Modified weighted guidelines method for nonprofit 
          organizations other than FFRDCs.

Sec. 215.404-73 Alternate structure approaches.

Sec. 215.404-74 Fee requirements for cost-plus-award-fee contracts.

Sec. 215.404-75 Fee requirements for FFRDCs.

Sec. 215.404-76 Reporting profit and fee statistics.

Sec. 215.406-1 Prenegotiation objectives.

Sec. 215.406-3 Documenting the negotiation.

Sec. 215.407-2 Make-or-buy programs.

Sec. 215.407-3 Forward pricing rate agreements.

Sec. 215.407-4 Should-cost review.

Sec. 215.407-5 Estimating systems.

Sec. 215.407-5-70 Disclosure, maintenance, and review requirements.

Sec. 215.408 Slicitation provisions and contract clauses.

Sec. 215.470 Estimated data prices.

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

    Source: 63 FR 55040, Oct. 14, 1998, unless otherwise noted.

[[Page 77]]

   Subpart 215.2_Solicitation and Receipt of Proposals and Information



Sec. 215.203-70  Requests for proposals--tiered evaluation of offers.

    (a) The tiered or cascading order of precedence used for tiered 
evaluation of offers shall be consistent with FAR part 19.
    (b) Consideration shall be given to the tiers of small businesses 
(e.g., 8(a), HUBZone small business, service-disabled veteran-owned 
small business, small business) before evaluating offers from other than 
small business concerns.
    (c) The contracting officer is prohibited from issuing a 
solicitation with a tiered evaluation of offers unless--
    (1) The contracting officer conducts market research, in accordance 
with FAR Part 10 and Part 210, to determine--
    (i) Whether the criteria in FAR part 19 are met for setting aside 
the acquisition for small business; or
    (ii) For a task or delivery order, whether there are a sufficient 
number of qualified small business concerns available to justify 
limiting competition under the terms of the contract; and
    (2) If the contracting officer cannot determine whether the criteria 
in paragraph (c)(1) of this section are met, the contracting officer 
includes a written explanation in the contract file as to why such a 
determination could not be made (Section 816 of Public Law 109-163).

[71 FR 53043, Sept. 8, 2006, as amended at 72 FR 42314, Aug. 2, 2007]



Sec. 215.270  Peer Reviews.

    Agency officials shall conduct Peer Reviews in accordance with 
201.170.

[74 FR 37626, July 29, 2009]

                     Subpart 215.3_Source Selection



Sec. 215.303  Responsibilities.

    (b)(2) For high-dollar value and other acquisitions, as prescribed 
by agency procedures, the source selection authority shall approve a 
source selection plan before the solicitation is issued. Follow the 
procedures at PGI 215.303(b)(2) for preparation of the source selection 
plan.

[71 FR 3414, Jan. 23, 2006]



Sec. 215.304  Evaluation factors and significant subfactors.

    (c)(i) In acquisitions that require use of the clause at FAR 52.219-
9, Small Business Subcontracting Plan, other than those based on the 
lowest price technically acceptable source selection process (see FAR 
15.101-2), the extent of participation of small businesses and 
historically black colleges or universities and minority institutions in 
performance of the contract shall be addressed in source selection. The 
contracting officer shall evaluate the extent to which offerors identify 
and commit to small business and historically black college or 
university and minority institution performance of the contract, whether 
as a joint venture, teaming arrangement, or subcontractor.
    (A) See PGI 215.304(c)(i)(A) for examples of evaluation factors.
    (B) Proposals addressing the extent of small business and 
historically black college or university and minority institution 
performance may be separate from subcontracting plans submitted pursuant 
to the clause at FAR 52.219-9 and should be structured to allow for 
consideration of offers from small businesses.
    (C) When an evaluation assesses the extent that small businesses and 
historically black colleges or universities and minority institutions 
are specifically identified in proposals, the small businesses and 
historically black colleges or universities and minority institutions 
considered in the evaluation shall be listed in any subcontracting plan 
submitted pursuant to FAR 52.219-9 to facilitate compliance with 
252.219-7003(g).
    (ii) In accordance with 10 U.S.C. 2436, consider the purchase of 
capital assets (including machine tools) manufactured in the United 
States, in source selections for all major defense acquisition programs 
as defined in 10 U.S.C. 2430.

[[Page 78]]

    (iii) See 247.573-2(c) for additional evaluation factors required in 
solicitations for the direct purchase of ocean transportation services.

[71 FR 3414, Jan. 23, 2006, as amended at 71 FR 14109, Mar. 21, 2006; 72 
FR 49205, Aug. 28, 2007]



Sec. 215.305  Proposal evaluation.

    (a)(2) Past performance evaluation. When a past performance 
evaluation is required by FAR 15.304, and the solicitation includes the 
clause at FAR 52.219-8, Utilization of Small Business Concerns, the 
evaluation factors shall include the past performance of offerors in 
complying with requirements of that clause. When a past performance 
evaluation is required by FAR 15.304, and the solicitation includes the 
clause at FAR 52.219-9, Small Business Subcontracting Plan, the 
evaluation factors shall include the past performance of offerors in 
complying with requirements of that clause.

[71 FR 3414, Jan. 23, 2006]



Sec. 215.370  Evaluation factor for employing or subcontracting with 
          members of the Selected Reserve.



Sec. 215.370-1  Definition.

    Selected Reserve, as used in this section, is defined in the 
provision at 252.215-7005, Evaluation Factor for Employing or 
Subcontracting with Members of the Selected Reserve.

[73 FR 62211, Oct. 20, 2008]



Sec. 215.370-2  Evaluation factor.

    In accordance with Section 819 of the National Defense Authorization 
Act for Fiscal Year 2006 (Pub. L. 109-163), the contracting officer may 
use an evaluation factor that considers whether an offeror intends to 
perform the contract using employees or individual subcontractors who 
are members of the Selected Reserve. See PGI 215.370-2 for guidance on 
use of this evaluation factor.

[73 FR 62211, Oct. 20, 2008]



Sec. 215.370-3  Solicitation provision and contract clause.

    (a) Use the provision at 252.215-7005, Evaluation Factor for 
Employing or Subcontracting with Members of the Selected Reserve, in 
solicitations that include an evaluation factor considering whether an 
offeror intends to perform the contract using employees or individual 
subcontractors who are members of the Selected Reserve.
    (b) Use the clause at 252.215-7006, Use of Employees or Individual 
Subcontractors Who are Members of the Selected Reserve, in solicitations 
that include the provision at 252.215-7005. Include the clause in the 
resultant contract only if the contractor stated in its proposal that it 
intends to perform the contract using employees or individual 
subcontractors who are members of the Selected Reserve, and that 
statement was used as an evaluation factor in the award decision.

[73 FR 62211, Oct. 20, 2008]

                     Subpart 215.4_Contract Pricing



Sec. 215.402  Pricing policy.

    Follow the procedures at PGI 215.402 when conducting cost or price 
analysis, particularly with regard to acquisitions for sole source 
commercial items.

[72 FR 30278, May 31, 2007]



Sec. 215.403  Obtaining cost or price data.



Sec. 215.403-1  Prohibition on obtaining cost or pricing data (10 U.S.C. 
          2306a and 41 U.S.C. 254b).

    (b) Exceptions to cost or pricing data requirements. Follow the 
procedures at PGI 215.403-1(b).
    (c) Standards for exceptions from cost or pricing data 
requirements--(1) Adequate price competition. For acquisitions under 
dual or multiple source programs:
    (A) The determination of adequate price competition must be made on 
a case-by-case basis. Even when adequate price competition exists, in 
certain cases it may be appropriate to obtain additional information to 
assist in price analysis.
    (B) Adequate price competition normally exists when--
    (i) Prices are solicited across a full range of step quantities, 
normally including a 0-100 percent split, from at least two offerors 
that are individually

[[Page 79]]

capable of producing the full quantity; and
    (ii) The reasonableness of all prices awarded is clearly established 
on the basis of price analysis (see FAR 15.404-1(b)).
    (3) Commercial items. (A) Follow the procedures at PGI 215.403-
1(c)(3)(A) for pricing commercial items.
    (B) By November 30th of each year, departments and agencies shall 
provide a report to the Director, Defense Procurement and Acquisition 
Policy (DPAP), ATTN: DPAP/CPF, of all contracting officer determinations 
that commercial item exceptions apply under FAR 15.403-1(b)(3), during 
the previous fiscal year, for any contract, subcontract, or modification 
expected to have a value of $15,000,000 or more. See PGI 215.403-
1(c)(3)(B) for the format and guidance for the report. The Director, 
DPAP, will submit a consolidated report to the congressional defense 
committees.
    (4) Waivers. (A) The head of the contracting activity may, without 
power of delegation, apply the exceptional circumstances authority when 
a determination is made that--
    (1) The property or services cannot reasonably be obtained under the 
contract, subcontract, or modification, without the granting of the 
waiver;
    (2) The price can be determined to be fair and reasonable without 
the submission of certified cost or pricing data; and
    (3) There are demonstrated benefits to granting the waiver. Follow 
the procedures at PGI 215.403-1(c)(4)(A) for determining when an 
exceptional case waiver is appropriate, for approval of such waivers, 
for partial waivers, and for waivers applicable to unpriced supplies or 
services.
    (B) By November 30th of each year, departments and agencies shall 
provide a report to the Director, DPAP, ATTN: DPAP/CPF, of all waivers 
granted under FAR 15.403-1(b)(4), during the previous fiscal year, for 
any contract, subcontract, or modification expected to have a value of 
$15,000,000 or more. See PGI 215.403-1(c)(4)(B) for the format and 
guidance for the report. The Director, DPAP, will submit a consolidated 
report to the congressional defense committees.
    (C) DoD has waived the requirement for submission of cost or pricing 
data for the Canadian Commercial Corporation and its subcontractors.
    (D) DoD has waived cost or pricing data requirements for nonprofit 
organizations (including education institutions) on cost-reimbursement-
no-fee contracts. The contracting officer shall require--
    (1) Submission of information other than cost or pricing data to the 
extent necessary to determine reasonableness and cost realism; and
    (2) Cost or pricing data from subcontractors that are not nonprofit 
organizations when the subcontractor's proposal exceeds the cost or 
pricing data threshold at FAR 15.403-4(a)(1).

[63 FR 55040, Oct. 14, 1998, as amended at 71 FR 69493, Dec. 1, 2006; 72 
FR 30278, May 31, 2007]



Sec. 215.403-3  Requiring information other than cost or pricing data.

    Follow the procedures at PGI 215.403-3.

[72 FR 30278, May 31, 2007]



Sec. 215.403-5  Instructions for submission of cost or pricing data or 
          information other than cost or pricing data.

    When the solicitation requires contractor compliance with the 
Contractor Cost Data Reporting System, follow the procedures at PGI 
215.403-5.

[71 FR 69494, Dec. 1, 2006]



Sec. 215.404  Proposal analysis.



Sec. 215.404-1  Proposal analysis techniques.

    (1) Follow the procedures at PGI 215.404-1 for proposal analysis.
    (2) For spare parts or support equipment, perform an analysis of--
    (i) Those line items where the proposed price exceeds by 25 percent 
or more the lowest price the Government has paid within the most recent 
12-month period based on reasonably available information;
    (ii) Those line items where a comparison of the item description and 
the proposal price indicates a potential for overpricing;

[[Page 80]]

    (iii) Significant high-dollar-value items. If there are no obvious 
high-dollar-value items, include an analysis of a random sample of 
items; and
    (iv) A random sample of the remaining low-dollar value items. Sample 
size may be determined by subjective judgment, e.g., experience with the 
offeror and the reliability of its estimating and accounting systems.

[63 FR 55040, Oct. 14, 1998, as amended at 71 FR 69494, Dec. 1, 2006; 72 
FR 30278, May 31, 2007]



Sec. 215.404-2  Information to support proposal analysis.

    See PGI 215.404-2 for guidance on obtaining field pricing or audit 
assistance.

[71 FR 69494, Dec. 1, 2006]



Sec. 215.404-3  Subcontract pricing considerations.

    Follow the procedures at PGI 215.404-3 when reviewing a 
subcontractor's proposal.

[71 FR 69494, Dec. 1, 2006]



Sec. 215.404-4  Profit.

    (b) Policy. (1) Contracting officers shall use a structured approach 
for developing a prenegotiation profit or fee objective on any 
negotiated contract action when cost or pricing data is obtained, except 
for cost-plus-award-fee contracts (see 215.404-74, 216.405-2, and FAR 
16.405-2) or contracts with Federally Funded Research and Development 
Centers (FFRDCs) (see 215.404-75). There are three structured 
approaches--
    (A) The weighted guidelines method;
    (B) The modified weighted guidelines method; and
    (C) An alternate structured approach.
    (c) Contracting officer responsibilities. (1) Also, do not perform a 
profit analysis when assessing cost realism in competitive acquisitions.
    (2) When using a structured approach, the contracting officer--
    (A) Shall use the weighted guidelines method (see 215.404-71), 
except as provided in paragraphs (c)(2)(B) and (c)(2)(C) of this 
subsection.
    (B) Shall use the modified weighted guidelines method (see 215.404-
72) on contract actions with nonprofit organizations other than FFRDCs.
    (C) May use an alternate structured approach (see 215.404-73) when--
    (1) The contract action is--
    (i) At or below the cost or pricing data threshold (see FAR 15.403-
4(a)(1));
    (ii) For architect-engineer or construction work;
    (iii) Primarily for delivery of material from subcontractors; or
    (iv) A termination settlement; or
    (2) The weighted guidelines method does not produce a reasonable 
overall profit objective and the head of the contracting activity 
approves use of the alternate approach in writing.
    (D) Shall use the weighted guidelines method to establish a basic 
profit rate under a formula-type pricing agreement, and may then use the 
basic rate on all actions under the agreement, provided that conditions 
affecting profit do not change.
    (E) Shall document the profit analysis in the contract file.
    (5) Although specific agreement on the applied weights or values for 
individual profit factors shall not be attempted, the contracting 
officer may encourage the contractor to--
    (A) Present the details of its proposed profit amounts in the 
weighted guidelines format or similar structured approached; and
    (B) Use the weighted guidelines method in developing profit 
objectives for negotiated subcontracts.
    (6) The contracting officer must also verify that relevant variables 
have not materially changed (e.g., performance risk, interest rates, 
progress payment rates, distribution of facilities capital).
    (d) Profit-analysis factors--(1) Common factors. The common factors 
are embodied in the DoD structured approaches and need not be further 
considered by the contracting officer.

[63 FR 55040, Oct. 14, 1998, as amended at 63 FR 63799, Nov. 17, 1998; 
65 FR 77829, Dec. 13, 2000; 66 FR 49863, Oct. 1, 2001; 71 FR 69494, Dec. 
1, 2006]



Sec. 215.404-70  DD Form 1547, Record of Weighted Guidelines Method 
          Application.

    Follow the procedures at PGI 215.404-70 for use of DD Form 1547 
whenever a

[[Page 81]]

structured approach to profit analysis is required.

[71 FR 69494, Dec. 1, 2006]



Sec. 215.404-71  Weighted guidelines method.



Sec. 215.404-71-1  General.

    (a) The weighted guidelines method focuses on four profit factors--
    (1) Performance risk;
    (2) Contract type risk;
    (3) Facilities capital employed; and
    (4) Cost efficiency.
    (b) The contracting officer assigns values to each profit factor; 
the value multiplied by the base results in the profit objective for 
that factor. Except for the cost efficiency special factor, each profit 
factor has a normal value and a designated range of values. The normal 
value is representative of average conditions on the prospective 
contract when compared to all goods and services acquired by DoD. The 
designated range provides values based on above normal or below normal 
conditions. In the price negotiation documentation, the contracting 
officer need not explain assignment of the normal value, but should 
address conditions that justify assignment of other than the normal 
value. The cost efficiency special factor has no normal value. The 
contracting officer shall exercise sound business judgment in selecting 
a value when this special factor is used (see 215.404-71-5).

[67 FR 20689, Apr. 26, 2002]



Sec. 215.404-71-2  Performance risk.

    (a) Description. This profit factor addresses the contractor's 
degree of risk in fulfilling the contract requirements. The factor 
consists of two parts:
    (1) Technical--the technical uncertainties of performance.
    (2) Management/cost control--the degree of management effort 
necessary--
    (i) To ensure that contract requirements are met; and
    (ii) To reduce and control costs.
    (b) Determination. The following extract from the DD Form 1547 is 
annotated to describe the process.

----------------------------------------------------------------------------------------------------------------
                                                     Assigned                                         Profit
       Item            Contractor risk factors       weighting    Assigned value  Base (item 20)     objective
----------------------------------------------------------------------------------------------------------------
21................  Technical...................             (1)             (2)             N/A             N/A
22................  Management/Cost Control.....             (1)             (2)             N/A             N/A
23................  Performance Risk (Composite)             N/A             (3)             (4)             (5)
----------------------------------------------------------------------------------------------------------------

    (1) Assign a weight (percentage) to each element according to its 
input to the total performance risk. The total of the two weights equals 
100 percent.
    (2) Select a value for each element from the list in paragraph (c) 
of this subsection using the evaluation criteria in paragraphs (d) and 
(e) of this subsection.
    (3) Compute the composite as shown in the following example:

------------------------------------------------------------------------
                                     Assigned     Assigned     Weighted
                                    weighting      value        value
                                    (percent)    (percent)    (percent)
------------------------------------------------------------------------
Technical........................           60          5.0          3.0
Management/Cost Control..........           40          4.0          1.6
Composite Value..................          100  ...........          4.6
------------------------------------------------------------------------

    (4) Insert the amount from Block 20 of the DD Form 1547. Block 20 is 
total contract costs, excluding facilities capital cost of money.
    (5) Multiply (3) by (4).
    (c) Values: Normal and designated ranges.

------------------------------------------------------------------------
                                         Normal
                                         value       Designated  range
                                       (percent)
------------------------------------------------------------------------
Standard............................            5  3% to 7%
Technology Incentive................            9  7% to 11%
------------------------------------------------------------------------

    (1) Standard. The standard designated range should apply to most 
contracts.

[[Page 82]]

    (2) Technology incentive. For the technical factor only, contracting 
officers may use the technology incentive range for acquisitions that 
include development, production, or application of innovative new 
technologies. The technology incentive range does not apply to efforts 
restricted to studies, analyses, or demonstrations that have a technical 
report as their primary deliverable.
    (d) Evaluation criteria for technical. (1) Review the contract 
requirements and focus on the critical performance elements in the 
statement of work or specifications. Factors to consider include--
    (i) Technology being applied or developed by the contractor;
    (ii) Technical complexity;
    (iii) Program maturity;
    (iv) Performance specifications and tolerances;
    (v) Delivery schedule; and
    (vi) Extent of a warranty or guarantee.
    (2) Above normal conditions. (i) The contracting officer may assign 
a higher than normal value in those cases where there is a substantial 
technical risk. Indicators are--
    (A) Items are being manufactured using specifications with stringent 
tolerance limits;
    (B) The efforts require highly skilled personnel or require the use 
of state-of-the-art machinery;
    (C) The services and analytical efforts are extremely important to 
the Government and must be performed to exacting standards;
    (D) The contractor's independent development and investment has 
reduced the Government's risk or cost;
    (E) The contractor has accepted an accelerated delivery schedule to 
meet DoD requirements; or
    (F) The contractor has assumed additional risk through warranty 
provisions.
    (ii) Extremely complex, vital efforts to overcome difficult 
technical obstacles that require personnel with exceptional abilities, 
experience, and professional credentials may justify a value 
significantly above normal.
    (iii) The following may justify a maximum value--
    (A) Development or initial production of a new item, particularly if 
performance or quality specifications are tight; or
    (B) A high degree of development or production concurrency.
    (3) Below normal conditions. (i) The contracting officer may assign 
a lower than normal value in those cases where the technical risk is 
low. Indicators are--
    (A) Requirements are relatively simple;
    (B) Technology is not complex;
    (C) Efforts do not require highly skilled personnel;
    (D) Efforts are routine;
    (E) Programs are mature; or
    (F) Acquisition is a follow-on effort or a repetitive type 
acquisition.
    (ii) The contracting officer may assign a value significantly below 
normal for--
    (A) Routine services;
    (B) Production of simple items;
    (C) Rote entry or routine integration of Government-furnished 
information; or
    (D) Simple operations with Government-furnished property.
    (4) Technology incentive range. (i) The contracting officer may 
assign values within the technology incentive range when contract 
performance includes the introduction of new, significant technological 
innovation. Use the technology incentive range only for the most 
innovative contract efforts. Innovation may be in the form of--
    (A) Development or application of new technology that fundamentally 
changes the characteristics of an existing product or system and that 
results in increased technical performance, improved reliability, or 
reduced costs; or
    (B) New products or systems that contain significant technological 
advances over the products or systems they are replacing.
    (ii) When selecting a value within the technology incentive range, 
the contracting officer should consider the relative value of the 
proposed innovation to the acquisition as a whole. When the innovation 
represents a minor benefit, the contracting officer should consider 
using values less than the norm. For innovative efforts that will have a

[[Page 83]]

major positive impact on the product or program, the contracting officer 
may use values above the norm.
    (e) Evaluation criteria for management/cost control. (1) The 
contracting officer should evaluate--
    (i) The contractor's management and internal control systems using 
contracting office information and reviews made by field contract 
administration offices or other DoD field offices;
    (ii) The management involvement expected on the prospective contract 
action;
    (iii) The degree of cost mix as an indication of the types of 
resources applied and value added by the contractor;
    (iv) The contractor's support of Federal socioeconomic programs;
    (v) The expected reliability of the contractor's cost estimates 
(including the contractor's cost estimating system);
    (vi) The adequacy of the contractor's management approach to 
controlling cost and schedule; and
    (vii) Any other factors that affect the contractor's ability to meet 
the cost targets (e.g., foreign currency exchange rates and inflation 
rates).
    (2) Above normal conditions. (i) The contracting officer may assign 
a higher than normal value when there is a high degree of management 
effort. Indicators of this are--
    (A) The contractor's value added is both considerable and reasonably 
difficult;
    (B) The effort involves a high degree of integration or 
coordination;
    (C) The contractor has a good record of past performance;
    (D) The contractor has a substantial record of active participation 
in Federal socioeconomic programs;
    (E) The contractor provides fully documented and reliable cost 
estimates;
    (F) The contractor makes appropriate make-or-buy decisions; or
    (G) The contractor has a proven record of cost tracking and control.
    (ii) The contracting officer may justify a maximum value when the 
effort--
    (A) Requires large scale integration of the most complex nature;
    (B) Involves major international activities with significant 
management coordination (e.g., offsets with foreign vendors); or
    (C) Has critically important milestones.
    (3) Below normal conditions. (i) The contracting officer may assign 
a lower than normal value when the management effort is minimal. 
Indicators of this are--
    (A) The program is mature and many end item deliveries have been 
made;
    (B) The contractor adds minimal value to an item;
    (C) The efforts are routine and require minimal supervision;
    (D) The contractor provides poor quality, untimely proposals;
    (E) The contractor fails to provide an adequate analysis of 
subcontractor costs;
    (F) The contractor does not cooperate in the evaluation and 
negotiation of the proposal;
    (G) The contractor's cost estimating system is marginal;
    (H) The contractor has made minimal effort to initiate cost 
reduction programs;
    (I) The contractor's cost proposal is inadequate;
    (J) The contractor has a record of cost overruns or another 
indication of unreliable cost estimates and lack of cost control; or
    (K) The contractor has a poor record of past performance.
    (ii) The following may justify a value significantly below normal--
    (A) Reviews performed by the field contract administration offices 
disclose unsatisfactory management and internal control systems (e.g., 
quality assurance, property control, safety, security); or
    (B) The effort requires an unusually low degree of management 
involvement.

[67 FR 20689, Apr. 26, 2002, as amended at 67 FR 49254, July 30, 2002]



Sec. 215.404-71-3  Contract type risk and working capital adjustment.

    (a) Description. The contract type risk factor focuses on the degree 
of cost risk accepted by the contractor under varying contract types. 
The working capital adjustment is an adjustment added to the profit 
objective for contract type risk. It only applies

[[Page 84]]

to fixed-price contracts that provide for progress payments. Though it 
uses a formula approach, it is not intended to be an exact calculation 
of the cost of working capital. Its purpose is to give general 
recognition to the contractor's cost of working capital under varying 
contract circumstances, financing policies, and the economic 
environment.
    (b) Determination. The following extract from the DD 1547 is 
annotated to explain the process.

----------------------------------------------------------------------------------------------------------------
                  Contractor risk
      Item            factors                             Assigned value      Base (item 20)    Profit objective
----------------------------------------------------------------------------------------------------------------
24.............  CONTRACT type      ..................  (1)                 (2)                (3)
                  risk.
                                    Cost financed       Length factor       Interest rate
25.............  WORKING capital    (5)                 (6)                 (7)                (8)
                  (4).
----------------------------------------------------------------------------------------------------------------

    (1) Select a value from the list of contract types in paragraph (c) 
of this subsection using the evaluation criteria in paragraph (d) of 
this subsection.
    (2) Insert the amount from Block 20, i.e., the total allowable costs 
excluding facilities capital cost of money.
    (3) Multiply (1) by (2).
    (4) Only complete this block when the prospective contract is a 
fixed-price contract containing provisions for progress payments.
    (5) Insert the amount computed per paragraph (e) of this subsection.
    (6) Insert the appropriate figure from paragraph (f) of this 
subsection.
    (7) Use the interest rate established by the Secretary of the 
Treasury (see http://www.treasurydirect.gov/govt/rates/tcir/tcir--
opdirsemi.htm). Do not use any other interest rate.
    (8) Multiply (5) by (6) by (7). This is the working capital 
adjustment. It shall not exceed 4 percent of the contract costs in Block 
20.
    (c) Values: Normal and designated ranges.

------------------------------------------------------------------------
                                                Normal      Designated
         Contract type             Notes        value          range
                                              (percent)      (percent)
------------------------------------------------------------------------
Firm-fixed-price, no financing          (1)          5.0         4 to 6.
Firm-fixed-price, with                  (6)          4.0      2.5 to 5.5
 performance-based payments...
Firm-fixed-price, with                  (2)          3.0         2 to 4.
 progress payments............
Fixed-price incentive, no               (1)          3.0         2 to 4.
 financing....................
Fixed-price incentive, with             (6)          2.0     0.5 to 3.5.
 performance-based payments...
Fixed-price with                        (3)  ...........  ..............
 redetermination provision....
Fixed-price incentive, with             (2)          1.0         0 to 2.
 progress payments............
Cost-plus-incentive-free......          (4)          1.0         0 to 2.
Cost-plus-fixed-fee...........          (4)          0.5         0 to 1.
Time-and-materials (including           (5)          0.5         0 to 1.
 overhaul contracts priced on
 time-and-materials basis)....
Labor-hour....................          (5)          0.5         0 to 1.
Firm-fixed-price, level-of-             (5)          0.5         0 to 1.
 effort.......................
------------------------------------------------------------------------

    (1) ``No financing'' means either that the contract does not provide 
progress payments or performance-based payments, or that the contract 
provides them only on a limited basis, such as financing of first 
articles. Do not compute a working capital adjustment.
    (2) When the contract contains provisions for progress payments, 
compute a working capital adjustment (Block 25).
    (3) For the purposes of assigning profit values, treat a fixed-price 
contract with redetermination provisions as if it were a fixed-price 
incentive contract with below normal conditions.
    (4) Cost-plus contracts shall not receive the working capital 
adjustment.
    (5) These types of contracts are considered cost-plus-fixed-fee 
contracts for the purposes of assigning profit values. They shall not 
receive the working capital adjustment in Block 25. However, they may 
receive higher than normal values within the designated range to the 
extent that portions of cost are fixed.
    (6) When the contract contains provisions for performance-based 
payments, do not compute a working capital adjustment.

[[Page 85]]

    (d) Evaluation criteria--(1) General. The contracting officer should 
consider elements that affect contract type risk such as--
    (i) Length of contract;
    (ii) Adequacy of cost data for projections;
    (iii) Economic environment;
    (iv) Nature and extent of subcontracted activity;
    (v) Protection provided to the contractor under contract provisions 
(e.g., economic price adjustment clauses);
    (vi) The ceilings and share lines contained in incentive provisions;
    (vii) Risks associated with contracts for foreign military sales 
(FMS) that are not funded by U.S. appropriations; and
    (viii) When the contract contains provisions for performance-based 
payments--
    (A) The frequency of payments;
    (B) The total amount of payments compared to the maximum allowable 
amount specified at FAR 32.1004(b)(2); and
    (C) The risk of the payment schedule to the contractor.
    (2) Mandatory. The contracting officer shall assess the extent to 
which costs have been incurred prior to the definitization of the 
contract action (also see 217.7404-6(a) and 243.204-70-6). The 
assessment shall include any reduced contractor risk on both the 
contract before definitization and the remaining portion of the 
contract. When costs have been incurred prior to definitization, 
generally regard the contract type risk to be in the low end of the 
designated range. If a substantial portion of the costs have been 
incurred prior to definitization, the contracting officer may assign a 
value as low as 0 percent, regardless of contract type.
    (3) Above normal conditions. The contracting officer may assign a 
higher than normal value when there is substantial contract type risk. 
Indicators of this are--
    (i) Efforts where there is minimal cost history;
    (ii) Long-term contracts without provisions protecting the 
contractor, particularly when there is considerable economic 
uncertainty;
    (iii) Incentive provisions (e.g., cost and performance incentives) 
that place a high degree of risk on the contractor;
    (iv) FMS sales (other than those under DoD cooperative logistics 
support arrangements or those made from U.S. Government inventories or 
stocks) where the contractor can demonstrate that there are substantial 
risks above those normally present in DoD contracts for similar items; 
or
    (v) An aggressive performance-based payment schedule that increases 
risk.
    (4) Below normal conditions. The contracting officer may assign a 
lower than normal value when the contract type risk is low. Indicators 
of this are--
    (i) Very mature product line with extensive cost history;
    (ii) Relative short-term contracts;
    (iii) Contractual provisions that substantially reduce the 
contractor's risk;
    (iv) Incentive provisions that place a low degree of risk on the 
contractor;
    (v) Performance-based payments totaling the maximum allowable 
amount(s) specified at FAR 32.1004(b)(2); or
    (vi) A performance-based payment schedule that is routine with 
minimal risk.
    (e) Costs financed. (1) Costs financed equal total costs multiplied 
by the portion (percent) of costs financed by the contractor.
    (2) Total costs equal Block 20 (i.e., all allowable costs excluding 
facilities capital cost of money), reduced as appropriate when--
    (i) The contractor has little cash investment (e.g., subcontractor 
progress payments liquidated late in period of performance);
    (ii) Some costs are covered by special financing provisions, such as 
advance payments; or
    (iii) The contract is multiyear and there are special funding 
arrangements.
    (3) The portion that the contractor finances is generally the 
portion not covered by progress payments, i.e., 100 percent minus the 
customary progress payment rate (see FAR 32.501). For example, if a 
contractor receives progress payments at 80 percent, the portion that 
the contractor finances is 20 percent. On contracts that provide

[[Page 86]]

progress payments to small businesses, use the customary progress 
payment rate for large businesses.
    (f) Contract length factor. (1) This is the period of time that the 
contractor has a working capital investment in the contract. It--
    (i) Is based on the time necessary for the contractor to complete 
the substantive portion of the work;
    (ii) Is not necessarily the period of time between contract award 
and final delivery (or final payment), as periods of minimal effort 
should be excluded;
    (iii) Should not include periods of performance contained in option 
provisions; and
    (iv) Should not, for multiyear contracts, include periods of 
performance beyond that required to complete the initial program year's 
requirements.
    (2) The contracting officer--
    (i) Should use the following table to select the contract length 
factor;
    (ii) Should develop a weighted average contract length when the 
contract has multiple deliveries; and
    (iii) May use sampling techniques provided they produce a 
representative result.

                                  Table
------------------------------------------------------------------------
                                                             Contract
    Period to perform substantive portion (in months)      length factor
------------------------------------------------------------------------
21 or less..............................................             .40
22 to 27................................................             .65
28 to 33................................................             .90
34 to 39................................................            1.15
40 to 45................................................            1.40
46 to 51................................................            1.65
52 to 57................................................            1.90
58 to 63................................................            2.15
64 to 69................................................            2.40
70 to 75................................................            2.65
76 or more..............................................            2.90
------------------------------------------------------------------------

    (3) Example: A prospective contract has a performance period of 40 
months with end items being delivered in the 34th, 36th, 38th, and 40th 
months of the contract. The average period is 37 months and the contract 
length factor is 1.15.

[63 FR 55040, Oct. 14, 1998, as amended at 64 FR 61032, Nov. 9, 1999; 66 
FR 63335, Dec. 6, 2001; 67 FR 20691, Apr. 26, 2002; 67 FR 49255, July 
30, 2002; 72 FR 14239, Mar. 27, 2007; 75 FR 48277, Aug. 10, 2010]



Sec. 215.404-71-4  Facilities capital employed.

    (a) Description. This factor focuses on encouraging and rewarding 
capital investment in facilities that benefit DoD. It recognizes both 
the facilities capital that the contractor will employ in contract 
performance and the contractor's commitment to improving productivity.
    (b) Contract facilities capital estimates. The contracting officer 
shall estimate the facilities capital cost of money and capital employed 
using--
    (1) An analysis of the appropriate Forms CASB-CMF and cost of money 
factors (48 CFR 9904.414 and FAR 31.205-10); and
    (2) DD Form 1861, Contract Facilities Capital Cost of Money.
    (c) Use of DD Form 1861. See PGI 215.404-71-4(c) for obtaining field 
pricing support for preparing DD Form 1861.
    (1) Purpose. The DD Form 1861 provides a means of linking the Form 
CASB-CMF and DD Form 1547, Record of Weighted Guidelines Application. 
It--
    (i) Enables the contracting officer to differentiate profit 
objectives for various types of assets (land, buildings, equipment). The 
procedure is similar to applying overhead rates to appropriate overhead 
allocation bases to determine contract overhead costs.
    (ii) Is designed to record and compute the contract facilities 
capital cost of money and capital employed which is carried forward to 
DD Form 1547.
    (2) Completion instructions. Complete a DD Form 1861 only after 
evaluating the contractor's cost proposal, establishing cost of money 
factors, and establishing a prenegotiation objective on cost. Complete 
the form as follows:
    (i) List overhead pools and direct-charging service centers (if 
used) in the same structure as they appear on the contractor's cost 
proposal and Form CASB-CMF. The structure and allocation base units-of-
measure must be compatible on all three displays.
    (ii) Extract appropriate contract overhead allocation base data, by 
year, from the evaluated cost breakdown or prenegotiation cost objective 
and list against each overhead pool and direct-charging service center.

[[Page 87]]

    (iii) Multiply each allocation base by its corresponding cost of 
money factor to get the facilities capital cost of money estimated to be 
incurred each year. The sum of these products represents the estimated 
contract facilities capital cost of money for the year's effort.
    (iv) Total contract facilities cost of money is the sum of the 
yearly amounts.
    (v) Since the facilities capital cost of money factors reflect the 
applicable cost of money rate in Column 1 of Form CASB-CMF, divide the 
contract cost of money by that same rate to determine the contract 
facilities capital employed.
    (d) Preaward facilities capital applications. To establish cost and 
price objectives, apply the facilities capital cost of money and capital 
employed as follows:
    (1) Cost of Money. (i) Cost Objective. Use the imputed facilities 
capital cost of money, with normal, booked costs, to establish a cost 
objective or the target cost when structuring an incentive type 
contract. Do not adjust target costs established at the outset even 
though actual cost of money rates become available during the period of 
contract performance.
    (ii) Profit Objective. When measuring the contractor's effort for 
the purpose of establishing a prenegotiation profit objective, restrict 
the cost base to normal, booked costs. Do not include cost of money as 
part of the cost base.
    (2) Facilities Capital Employed. Assess and weight the profit 
objective for risk associated with facilities capital employed in 
accordance with the profit guidelines at 215.404-71-4.
    (e) Determination. The following extract from the DD Form 1547 has 
been annotated to explain the process.

----------------------------------------------------------------------------------------------------------------
                                  Contractor facilities capital                       Amount          Profit
             Item                           employed              Assigned value     employed        objective
----------------------------------------------------------------------------------------------------------------
26............................  Land............................             N/A             (2)             N/A
27............................  Buildings.......................             N/A             (2)             N/A
28............................  Equipment.......................             (1)             (2)             (3)
----------------------------------------------------------------------------------------------------------------

    (1) Select a value from the list in paragraph (f) of this subsection 
using the evaluation criteria in paragraph (g) of this subsection.
    (2) Use the allocated facilities capital attributable to land, 
buildings, and equipment, as derived in DD Form 1861, Contract 
Facilities Capital Cost of Money.
    (i) In addition to the net book value of facilities capital 
employed, consider facilities capital that is part of a formal 
investment plan if the contractor submits reasonable evidence that--
    (A) Achievable benefits to DoD will result from the investment; and
    (B) The benefits of the investment are included in the forward 
pricing structure.
    (ii) If the value of intracompany transfers has been included in 
Block 20 at cost (i.e., excluding general and administrative (G&A) 
expenses and profit), add to the contractor's allocated facilities 
capital, the allocated facilities capital attributable to the buildings 
and equipment of those corporate divisions supplying the intracompany 
transfers. Do not make this addition if the value of intracompany 
transfers has been included in Block 20 at price (i.e., including G&A 
expenses and profit).
    (3) Multiply (1) by (2).
    (f) Values: Normal and designated ranges. These are the normal 
values and ranges. They apply to all situations.

------------------------------------------------------------------------
                                         Normal
             Asset type                  value       Designated  range
                                       (percent)
------------------------------------------------------------------------
Land................................            0  N/A
Buildings...........................            0  N/A
Equipment...........................         17.5  10 to 25
------------------------------------------------------------------------

    (g) Evaluation criteria. (1) In evaluating facilities capital 
employed, the contracting officer--
    (i) Should relate the usefulness of the facilities capital to the 
goods or services being acquired under the prospective contract;
    (ii) Should analyze the productivity improvements and other 
anticipated

[[Page 88]]

industrial base enhancing benefits resulting from the facilities capital 
investment, including--
    (A) The economic value of the facilities capital, such as physical 
age, undepreciated value, idleness, and expected contribution to future 
defense needs; and
    (B) The contractor's level of investment in defense related 
facilities as compared with the portion of the contractor's total 
business that is derived from DoD; and
    (iii) Should consider any contractual provisions that reduce the 
contractor's risk of investment recovery, such as termination protection 
clauses and capital investment indemnification.
    (2) Above normal conditions. (i) The contracting officer may assign 
a higher than normal value if the facilities capital investment has 
direct, identifiable, and exceptional benefits. Indicators are--
    (A) New investments in state-of-the-art technology that reduce 
acquisition cost or yield other tangible benefits such as improved 
product quality or accelerated deliveries; or
    (B) Investments in new equipment for research and development 
applications.
    (ii) The contracting officer may assign a value significantly above 
normal when there are direct and measurable benefits in efficiency and 
significantly reduced acquisition costs on the effort being priced. 
Maximum values apply only to those cases where the benefits of the 
facilities capital investment are substantially above normal.
    (3) Below normal conditions. (i) The contracting officer may assign 
a lower than normal value if the facilities capital investment has 
little benefit to DoD. Indicators are--
    (A) Allocations of capital apply predominantly to commercial item 
lines;
    (B) Investments are for such things as furniture and fixtures, home 
or group level administrative offices, corporate aircraft and hangars, 
gymnasiums; or
    (C) Facilities are old or extensively idle.
    (ii) The contracting officer may assign a value significantly below 
normal when a significant portion of defense manufacturing is done in an 
environment characterized by outdated, inefficient, and labor-intensive 
capital equipment.

[63 FR 55040, Oct. 14, 1998, as amended at 67 FR 20691, Apr. 26, 2002; 
67 FR 49255, July 30, 2002; 71 FR 69494, Dec. 1, 2006; 72 FR 14239, Mar. 
27, 2007; 73 FR 70906, Nov. 24, 2008]



Sec. 215.404-71-5  Cost efficiency factor.

    (a) This special factor provides an incentive for contractors to 
reduce costs. To the extent that the contractor can demonstrate cost 
reduction efforts that benefit the pending contract, the contracting 
officer may increase the prenegotiation profit objective by an amount 
not to exceed 4 percent of total objective cost (Block 20 of the DD Form 
1547) to recognize these efforts (Block 29).
    (b) To determine if using this factor is appropriate, the 
contracting officer shall consider criteria, such as the following, to 
evaluate the benefit the contractor's cost reduction efforts will have 
on the pending contract:
    (1) The contractor's participation in Single Process Initiative 
improvements;
    (2) Actual cost reductions achieved on prior contracts;
    (3) Reduction or elimination of excess or idle facilities;
    (4) The contractor's cost reduction initiatives (e.g., competition 
advocacy programs, technical insertion programs, obsolete parts control 
programs, spare parts pricing reform, value engineering, outsourcing of 
functions such as information technology). Metrics developed by the 
contractor such as fully loaded labor hours (i.e., cost per labor hour, 
including all direct and indirect costs) or other productivity measures 
may provide the basis for assessing the effectiveness of the 
contractor's cost reduction initiatives over time;
    (5) The contractor's adoption of process improvements to reduce 
costs;
    (6) Subcontractor cost reduction efforts;
    (7) The contractor's effective incorporation of commercial items and 
processes; or
    (8) The contractor's investment in new facilities when such 
investments contribute to better asset utilization or improved 
productivity.

[[Page 89]]

    (c) When selecting the percentage to use for this special factor, 
the contracting officer has maximum flexibility in determining the best 
way to evaluate the benefit the contractor's cost reduction efforts will 
have on the pending contract. However, the contracting officer shall 
consider the impact that quantity differences, learning, changes in 
scope, and economic factors such as inflation and deflation will have on 
cost reduction.

[67 FR 20692, Apr. 26, 2002, as amended at 67 FR 49255, July 30, 2002]



Sec. 215.404-72  Modified weighted guidelines method for nonprofit 
          organizations other than FFRDCs.

    (a) Definition. As used in this subpart, a nonprofit organization is 
a business entity--
    (1) That operates exclusively for charitable, scientific, or 
educational purposes;
    (2) Whose earnings do not benefit any private shareholder or 
individual;
    (3) Whose activities do not involve influencing legislation or 
political campaigning for any candidate for public office; and
    (4) That is exempted from Federal income taxation under section 501 
of the Internal Revenue Code.
    (b) For nonprofit organizations that are entities that have been 
identified by the Secretary of Defense or a Secretary of a Department as 
receiving sustaining support on a cost-plus-fixed-fee basis from a 
particular DoD department or agency, compute a fee objective for covered 
actions using the weighted guidelines method in 215.404-71, with the 
following modifications:
    (1) Modifications to performance risk (Blocks 21-23 of the DD Form 
1547). (i) If the contracting officer assigns a value from the standard 
designated range (see 215.404-71-2(c)), reduce the fee objective by an 
amount equal to 1 percent of the costs in Block 20 of the DD Form 1547. 
Show the net (reduced) amount on the DD Form 1547.
    (ii) Do not assign a value from the technology incentive designated 
range.
    (2) Modifications to contract type risk (Block 24 of the DD Form 
1547). Use a designated range of -1 percent to 0 percent instead of the 
values in 215.404-71-3. There is no normal value.
    (c) For all other nonprofit organizations except FFRDCs, compute a 
fee objective for covered actions using the weighted guidelines method 
in 215.404-71, modified as described in paragraph (b)(1) of this 
subsection.

[63 FR 63799, Nov. 17, 1998, as amended at 65 FR 77831, Dec. 13, 2000; 
67 FR 20692, Apr. 26, 2002; 67 FR 49255, July 30, 2002]



Sec. 215.404-73  Alternate structured approaches.

    (a) The contracting officer may use an alternate structured approach 
under 215.404-4(c).
    (b) The contracting officer may design the structure of the 
alternate, but it shall include--
    (1) Consideration of the three basic components of profit--
performance risk, contract type risk (including working capital), and 
facilities capital employed. However, the contracting officer is not 
required to complete Blocks 21 through 30 of the DD Form 1547.
    (2) Offset for facilities capital cost of money.
    (i) The contracting officer shall reduce the overall prenegotiation 
profit objective by the amount of facilities capital cost of money under 
Cost Accounting Standard (CAS) 414, Cost of Money as an Element of the 
Cost of Facilities Capital (48 CFR 9904.414). Cost of money under CAS 
417, Cost of Money as an Element of the Cost of Capital Assets Under 
Construction (48 CFR 9904.417), should not be used to reduce the overall 
prenegotiation profit objective. The profit amount in the negotiation 
summary of the DD Form 1547 must be net of the offset.
    (ii) This adjustment is needed for the following reason: The values 
of the profit factors used in the weighted guidelines method were 
adjusted to recognize the shift in facilities capital cost of money from 
an element of profit to an element of contract cost (see FAR 31.205-10) 
and reductions were made directly to the profit factors for performance 
risk. In order to ensure that this policy is applied to all DoD 
contracts that allow facilities capital cost of money, similar 
adjustments

[[Page 90]]

shall be made to contracts that use alternate structured approaches.

[63 FR 55040, Oct. 14, 1998, as amended at 67 FR 20692, Apr. 26, 2002; 
71 FR 69494, Dec. 1, 2006]



Sec. 215.404-74  Fee requirements for cost-plus-award-fee contracts.

    In developing a fee objective for cost-plus-award-fee contracts, the 
contracting officer shall--
    (a) Follow the guidance in FAR 16.405-2 and 216.405-2;
    (b) Not use the weighted guidelines method or alternate structured 
approach;
    (c) Apply the offset policy in 215.404-73(b)(2) for facilities 
capital cost of money, i.e., reduce the base fee by the amount of 
facilities capital cost of money; and
    (d) Not complete a DD Form 1547.

[63 FR 55040, Oct. 14, 1998, as amended at 67 FR 20692, Apr. 26, 2002]



Sec. 215.404-75  Fee requirements for FFRDCs.

    For nonprofit organizations that are FFRDCs, the contracting 
officer--
    (a) Should consider whether any fee is appropriate. Considerations 
shall include the FFRDC's--
    (1) Proportion of retained earnings (as established under generally 
accepted accounting methods) that relates to DoD contracted effort;
    (2) Facilities capital acquisition plans;
    (3) Working capital funding as assessed on operating cycle cash 
needs; and
    (4) Provision for funding unreimbursed costs deemed ordinary and 
necessary to the FFRDC.
    (b) Shall, when a fee is considered appropriate, establish the fee 
objective in accordance with FFRDC fee policies in the DoD FFRDC 
Management Plan.
    (c) Shall not use the weighted guidelines method or an alternate 
structured approach.

[63 FR 63800, Nov. 17, 1998]



Sec. 215.404-76  Reporting profit and fee statistics.

    Follow the procedures at PGI 215.404-76 for reporting profit and fee 
statistics.

[71 FR 69494, Dec. 1, 2006]



Sec. 215.406-1  Prenegotiation objectives.

    Follow the procedures at PGI 215.406-1 for establishing 
prenegotiation objectives.

[71 FR 69494, Dec. 1, 2006]



Sec. 215.406-3  Documenting the negotiation.

    Follow the procedures at PGI 215.406-3 for documenting the 
negotiation.

[71 FR 69494, Dec. 1, 2006]



Sec. 215.407-2  Make-or-buy programs.

    (e) Program requirements--(1) Items and work included. The minimum 
dollar amount is $1.5 million.

[63 FR 55040, Oct. 14, 1998, as amended at 75 FR 45073, Aug. 2, 2010]



Sec. 215.407-3  Forward pricing rate agreements.

    (b)(i) Use forward pricing rate agreement (FPRA) rates when such 
rates are available, unless waived on a case-by-case basis by the head 
of the contracting activity.
    (ii) Advise the ACO of each case waived.
    (iii) Contact the ACO for questions on FPRAs or recommended rates.



Sec. 215.407-4  Should-cost review.

    See PGI 215.407-4 for guidance on determining whether to perform a 
program or overhead should-cost review.

[71 FR 69495, Dec. 1, 2006]



Sec. 215.407-5  Estimating systems.



Sec. 215.407-5-70  Disclosure, maintenance, and review requirements.

    (a) Definitions. (1) Acceptable estimating system is defined in the 
clause at 252.215-7002, Cost Estimating System Requirements.
    (2) Contractor means a business unit as defined in FAR 2.101.
    (3) Estimating system is as defined in the clause at 252.215-7002, 
Cost Estimating System Requirements.

[[Page 91]]

    (4) Significant estimating system deficiency means a shortcoming in 
the estimating system that is likely to consistently result in proposal 
estimates for total cost or a major cost element(s) that do not provide 
an acceptable basis for negotiation of fair and reasonable prices.
    (b) Applicability. (1) DoD policy is that all contractors have 
acceptable estimating systems that consistently produce well-supported 
proposals that are acceptable as a basis for negotiation of fair and 
reasonable prices.
    (2) A large business contractor is subject to estimating system 
disclosure, maintenance, and review requirements if--
    (i) In its preceding fiscal year, the contractor received DoD prime 
contracts or subcontracts totaling $50 million or more for which cost or 
pricing data were required; or
    (ii) In its preceding fiscal year, the contractor received DoD prime 
contracts or subcontracts totaling $10 million or more (but less than 
$50 million) for which cost or pricing data were required and the 
contracting officer, with concurrence or at the request of the ACO, 
determines it to be in the best interest of the Government (e.g., 
significant estimating problems are believed to exist or the 
contractor's sales are predominantly Government).
    (c) Responsibilities. (1) The contracting officer shall--
    (i) Through use of the clause at 252.215-7002, Cost Estimating 
System Requirements, apply the disclosure, maintenance, and review 
requirements to large business contractors meeting the criteria in 
paragraph (b)(2)(i) of this subsection;
    (ii) Consider whether to apply the disclosure, maintenance, and 
review requirements to large business contractors under paragraph 
(b)(2)(ii) of this subsection; and
    (iii) Not apply the disclosure, maintenance, and review requirements 
to other than large business contractors.
    (2) The cognizant ACO, for contractors subject to paragraph (b)(2) 
of this subsection, shall--
    (i) Determine the acceptability of the disclosure and system; and
    (ii) Pursue correction of any deficiencies.
    (3) The cognizant auditor, on behalf of the ACO, serves as team 
leader in conducting estimating system reviews.
    (4) A contractor subject to estimating system disclosure, 
maintenance, and review requirements shall--
    (i) Maintain an acceptable system;
    (ii) Describe its system to the ACO:
    (iii) Provide timely notice of changes in the system; and
    (iv) Correct system deficiencies identified by the ACO.
    (d) Characteristics of an acceptable estimating system--(1) General. 
An acceptable system should provide for the use of appropriate source 
data, utilize sound estimating techniques and good judgment, maintain a 
consistent approach, and adhere to established policies and procedures.
    (2) Evaluation. In evaluating the acceptability of a contractor's 
estimating system, the ACO should consider whether the contractor's 
estimating system, for example--
    (i) Establishes clear responsibility for preparation, review, and 
approval of cost estimates;
    (ii) Provides a written description of the organization and duties 
of the personnel responsible for preparing, reviewing, and approving 
cost estimates;
    (iii) Assures that relevant personnel have sufficient training, 
experience, and guidance to perform estimating tasks in accordance with 
the contractor's established procedures;
    (iv) Identifies the sources of data and the estimating methods and 
rationale used in developing cost estimates;
    (v) Provides for appropriate supervision throughout the estimating 
process;
    (vi) Provides for consistent application of estimating techniques;
    (vii) Provides for detection and timely correction of errors;
    (viii) Protects against cost duplication and omissions;
    (ix) Provides for the use of historical experience, including 
historical vendor pricing information, where appropriate;
    (x) Requires use of appropriate analytical methods;
    (xi) Integrates information available from other management systems, 
where appropriate;

[[Page 92]]

    (xii) Requires management review including verification that the 
company's estimating policies, procedures, and practices comply with 
this regulation;
    (xiii) Provides for internal review of and accountability for the 
acceptability of the estimating system, including the comparison of 
projected results to actual results and an analysis of any differences;
    (xiv) Provides procedures to update cost estimates in a timely 
manner throughout the negotiation process; and
    (xv) Addresses responsibility for review and analysis of the 
reasonableness of subcontract prices.
    (3) Indicators of potentially significant estimating deficiencies. 
The following examples indicate conditions that may produce or lead to 
significant estimating deficiencies--
    (i) Failure to ensure that historical experience is available to and 
utilized by cost estimators, where appropriate;
    (ii) Continuing failure to analyze material costs or failure to 
perform subcontractor cost reviews as required;
    (iii) Consistent absence of analytical support for significant 
proposed cost amounts;
    (iv) Excessive reliance on individual personal judgments where 
historical experience or commonly utilized standards are available;
    (v) Recurring significant defective pricing findings within the same 
cost element(s);
    (vi) Failure to integrate relevant parts of other management systems 
(e.g., production control or cost accounting) with the estimating system 
so that the ability to generate reliable cost estimates is impaired; and
    (vii) Failure to provide established policies, procedures, and 
practices to persons responsible for preparing and supporting estimates.
    (e) Review procedures. Follow the procedures at PGI 215.407-5-70(e) 
for establishing and conducting estimating system reviews.
    (f) Disposition of survey team findings. Follow the procedures at 
PGI 215.407-5-70(f) for disposition of the survey team findings.
    (g) Impact of estimating system deficiencies on specific proposals. 
(1) Field pricing teams will discuss identified estimating system 
deficiencies and their impact in all reports on contractor proposals 
until the deficiencies are resolved.
    (2) The contracting officer responsible for negotiation of a 
proposal generated by an estimating system with an identified deficiency 
shall evaluate whether the deficiency impacts the negotiations. If it 
does not, the contracting officer should proceed with negotiations. If 
it does, the contracting officer should consider other alternatives, 
e.g.--
    (i) Allowing the contractor additional time to correct the 
estimating system deficiency and submit a corrected proposal;
    (ii) Considering another type of contract, e.g., FPIF instead of 
FFP;
    (iii) Using additional cost analysis techniques to determine the 
reasonableness of the cost elements affected by the system's deficiency;
    (iv) Segregating the questionable areas as a cost reimbursable line 
item;
    (v) Reducing the negotiation objective for profit or fee; or
    (vi) Including a contract (reopener) clause that provides for 
adjustment of the contract amount after award.
    (3) The contracting officer who incorporates a reopener clause into 
the contract is responsible for negotiating price adjustments required 
by the clause. Any reopener clause necessitated by an estimating 
deficiency should--
    (i) Clearly identify the amounts and items that are in question at 
the time of negotiation;
    (ii) Indicate a specific time or subsequent event by which the 
contractor will submit a supplemental proposal, including cost or 
pricing data, identifying the cost impact adjustment necessitated by the 
deficient estimating system;
    (iii) Provide for the contracting officer to unilaterally adjust the 
contract price if the contractor fails to submit the supplemental 
proposal; and
    (iv) Provide that failure of the Government and the contractor to 
agree to

[[Page 93]]

the price adjustment shall be a dispute under the Disputes clause.

[63 FR 55040, Oct. 14, 1998, as amended at 67 FR 49252, July 30, 2002; 
71 FR 69495, Dec. 1, 2006]



Sec. 215.408  Solicitation provisions and contract clauses.

    (1) Use the clause at 252.215-7000, Pricing Adjustments, in 
solicitations and contracts that contain the clause at--
    (i) FAR 52.215-11, Price Reduction for Defective Cost or Pricing 
Data--Modifications;
    (ii) FAR 52.215-12, Subcontractor Cost or Pricing Data; or
    (iii) FAR 52.215-13, Subcontractor Cost or Pricing Data--
Modifications.
    (2) Use the clause at 252.215-7002, Cost Estimating System 
requirements, in all solicitations and contracts to be award on the 
basis of cost or pricing data.

[63 FR 55040, Oct. 14, 1998, as amended at 72 FR 20760, Apr. 26, 2007; 
73 FR 27472, May 13, 2008; 75 FR 48279, Aug. 10, 2010]



Sec. 215.470  Estimated data prices.

    (a) DoD requires estimates of the prices of data in order to 
evaluate the cost to the Government of data items in terms of their 
management, product, or engineering value.
    (b) When data are required to be delivered under a contract, include 
DD Form 1423, Contract Data Requirements List, in the solicitation. See 
PGI 215.470(b) for guidance on the use of DD Form 1423.
    (c) The contracting officer shall ensure that the contract does not 
include a requirement for data that the contractor has delivered or is 
obligated to deliver to the government under another contract or 
subcontract, and that the successful offeror identifies any such data 
required by the solicitation. However, where duplicate data are desired, 
the contract price shall include the costs of duplication, but not of 
preparation, of such data.

[63 FR 55040, Oct. 14, 1998, as amended at 71 FR 69495, Dec. 1, 2006]

                       PART 216_TYPES OF CONTRACTS

                 Subpart 216.1_Selecting Contract Types

Sec.

Sec. 216.104-70 Research and development.

                   Subpart 216.2_Fixed-Price Contracts


Sec. 216.203 Fixed-price contracts with economic price adjustment.

Sec. 216.203-4 Contract clauses.

Sec. 216.203-4-70 Additional clauses.

               Subpart 216.3_Cost-Reimbursement Contracts


Sec. 216.306 Cost-plus-fixed-fee contracts.

                    Subpart 216.4_Incentive Contracts


Sec. 216.402 Application of predetermined, formula-type incentives.

Sec. 216.402-2 Technical performance incentives.

Sec. 216.403 Fixed-price incentive contracts.

Sec. 216.403-2 Fixed-price incentive (successive targets) contracts.

Sec. 216.405 Cost-reimbursement incentive contracts.

Sec. 216.405-1 Cost-plus-incentive-fee contracts.

Sec. 216.405-2 Cost-plus-award-fee contracts.

Sec. 216.470 Other applications of award fees.

               Subpart 216.5_Indefinite-Delivery Contracts


Sec. 216.501 General.

Sec. 216.501-1 Definitions.

Sec. 216.501-2 General.

Sec. 216.504 Indefinite-quantity contracts.

Sec. 216.505 Ordering.

Sec. 216.505-70 Orders under multiple award contracts.

Sec. 216.506 Solicitation provisions and contract clauses.

   Subpart 216.6_Time-and-Materials, Labor-Hour, and Letter Contracts


Sec. 216.601 Time-and-materials contracts.

Sec. 216.603 Letter contracts.

Sec. 216.603-2 Application.

Sec. 216.603-3 Limitations.

Sec. 216.603-4 Contract clauses.

                        Subpart 216.7_Agreements


Sec. 216.703 Basic ordering agreements.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36340, July 31, 1991, unless otherwise noted.

[[Page 94]]

                 Subpart 216.1_Selecting Contract Types



Sec. Sec. 216.104-70  Research and development.

    Follow the procedures at PGI 216.104-70 for selecting the 
appropriate research and development contract type.

[71 FR 39007, July 11, 2006]

                   Subpart 216.2_Fixed-Price Contracts



Sec. 216.203  Fixed-price contracts with economic price adjustment.



Sec. Sec. 216.203-4  Contract clauses.

    (1) Generally, use the clauses at FAR 52.216-2, Economic Price 
Adjustment--Standard Supplies, FAR 52.216-3, Economic Price Adjustment--
Semistandard Supplies, and FAR 52.216-4, Economic Price Adjustment--
Labor and Material, only when--
    (i) The total contract price exceeds the simplified acquisition 
threshold; and
    (ii) Delivery or performance will not be completed within 6 months 
after contract award.
    (2) Follow the procedures at PGI 216.203-4 when using an economic 
price adjustment clause based on cost indexes of labor or material.

[71 FR 39007, July 11, 2006]



Sec. 216.203-4-70  Additional clauses.

    (a) Price adjustment for basic steel, aluminum, brass, bronze, or 
copper mill products. (1) The price adjustment clause at 252.216-7000, 
Economic Price Adjustment--Basic Steel, Aluminum, Brass, Bronze, or 
Copper Mill Products, may be used in fixed-price supply contracts for 
basic steel, aluminum, brass, bronze, or copper mill products, such as 
sheets, plates, and bars, when an established catalog or market price 
exists for the particular product being acquired.
    (2) The 10 percent figure in paragraph (d)(1) of the clause shall 
not be exceeded unless approval is obtained at a level above the 
contracting officer.
    (b) Price adjustment for nonstandard steel items. (1) The price 
adjustment clause at 252.216-7001, Economic Price Adjustment--
Nonstandard Steel Items, may be used in fixed-price supply contracts 
when--
    (i) The contractor is a steel producer and actually manufacture the 
standard steel mill item referred to in the ``base steel index'' 
definition of the clause; and
    (ii) The items being acquired are nonstandard steel items made 
wholly or in part of standard steel mill items.
    (2) When this clause is included in invitations for bids, omit Note 
6 of the clause and all references to Note 6.
    (3) Solicitations shall instruct offerors to complete all blanks in 
accordance with the applicable notes.
    (4) When the clause is to provide for adjustment on a basis other 
than ``established price'' (see Note 6 of the clause), that price must 
be verified.
    (5) The ten percent figure in paragraph (e)(4) of the clause shall 
not be exceeded unless approval is obtained at a level above the 
contracting officer.
    (c) Price adjustment for wage rates or material prices controlled by 
a foreign government. (1) The price adjustment clause at 252.216-7003, 
Economic Price Adjustment--Wage Rates or Material Prices Controlled by a 
Foreign Government, may be used in fixed-price supply and service 
contracts when--
    (i) The contract is to be performed wholly or in part in a foreign 
country; and
    (ii) A foreign government controls wage rates or material prices and 
may, during contract performance, impose a mandatory change in wages or 
prices of material.
    (2) Verify the base wage rates and material prices prior to contract 
award and prior to making any adjustment in the contract price.

[56 FR 36340, July 31, 1991, as amended at 62 FR 34122, June 24, 1997; 
62 FR 40472, July 29, 1997]

               Subpart 216.3_Cost-Reimbursement Contracts



Sec. 216.306  Cost-plus-fixed-fee contracts.

    (c) Limitations. (i) Except as provided in paragraph (c)(ii) of this 
section, annual military construction appropriations acts prohibit the 
use of cost-plus-fixed-fee contracts that--
    (A) Are funded by a military construction appropriations act;

[[Page 95]]

    (B) Are estimated to exceed $25,000; and
    (C) Will be performed within the United States, except Alaska.
    (ii) The prohibition in paragraph (c)(i) of this section does not 
apply to contracts specifically approved in writing, setting forth the 
reasons therefor, in accordance with the following:
    (A) The Secretaries of the military departments are authorized to 
approve such contracts that are for environmental work only, provided 
the environmental work is not classified as construction, as defined by 
10 U.S.C. 2801.
    (B) The Secretary of Defense or designee must approve such contracts 
that are not for environmental work only or are for environmental work 
classified as construction.

[62 FR 1058, Jan. 8, 1997; 62 FR 1817, Jan. 13, 1997; 62 FR 49305, Sept. 
19, 1997; 71 FR 39007, July 11, 2006]

                    Subpart 216.4_Incentive Contracts



Sec. 216.402  Application of predetermined, formula-type incentives.



Sec. 216.402-2  Technical performance incentives.

    See PGI 216.402-2 for guidance on establishing performance 
incentives.

[71 FR 39007, July 11, 2006]



Sec. 216.403  Fixed-price incentive contracts.



Sec. 216.403-2  Fixed-price incentive (successive targets) contracts.

    See PGI 216.403-2 for guidance on the use of fixed-price incentive 
(successive targets) contracts.

[71 FR 39007, July 11, 2006]



Sec. 216.405  Cost-reimbursement incentive contracts.



Sec. 216.405-1  Cost-plus-incentive-fee contracts.

    See PGI 216.405-1 for guidance on the use of cost-plus-incentive-fee 
contracts.

[71 FR 39007, July 11, 2006]



Sec. 216.405-2  Cost-plus-award-fee contracts.

    (b) Application. The cost-plus-award-fee (CPAF) contract may include 
provisional award fee payments. A provisional award fee payment is a 
payment made within an evaluation period prior to a final evaluation for 
that period. The contracting officer may include provisional award fee 
payments in a CPAF contract on a case-by-case basis, provided those 
payments--
    (i) Are made no more frequently than monthly;
    (ii) Are limited to no more than--
    (A) For the initial award fee evaluation period, 50 percent of the 
award fee available for that period; and
    (B) For subsequent award fee evaluation periods, 80 percent of the 
evaluation score for the prior evaluation period times the award fee 
available for the current period, e.g., if the contractor received 90 
percent of the award fee available for the prior evaluation period, 
provisional payments for the current period shall not exceed 72 percent 
(90 percent x 80 percent) of the award fee available for the current 
period;
    (iii) Are superseded by an interim or final award fee evaluation for 
the applicable evaluation period. If provisional payments have exceeded 
the payment determined by the evaluation score for the applicable 
period, the contracting officer shall collect the debt in accordance 
with FAR 32.606; and
    (iv) May be discontinued, or reduced in such amounts deemed 
appropriate by the contracting officer, when the contracting officer 
determines that the contractor will not achieve a level of performance 
commensurate with the provisional payment. The contracting officer shall 
notify the contractor in writing of any discontinuance or reduction in 
provisional award fee payments.
    (c) Limitations. (i) The CPAF contract shall not be used--
    (A) To avoid--
    (1) Establishing cost-plus-fixed-fee contracts when the criteria for 
cost-plus-fixed-fee contracts apply; or
    (2) Developing objective targets so a cost-plus-incentive-fee 
contract can be used; or

[[Page 96]]

    (B) For either engineering development or operational system 
development acquisitions that have specifications suitable for 
simultaneous research and development and production, except a CPAF 
contract may be used for individual engineering development or 
operational system development acquisitions ancillary to the development 
of a major weapon system or equipment, where--
    (1) It is more advantageous; and
    (2) The purpose of the acquisition is clearly to determine or solve 
specific problems associated with the major weapon system or equipment.
    (ii) Do not apply the weighted guidelines method to CPAF contracts 
for either the base (fixed) fee or the award fee.
    (iii) The base fee shall not exceed 3 percent of the estimated cost 
of the contract exclusive of the fee.
    (S-70) See PGI 216.405-2 for guidance on the use of CPAF contracts.

[71 FR 39007, July 11, 2006]



Sec. 216.470  Other applications of award fees.

    See PGI 216.470 for guidance on other applications of award fees.

[71 FR 39008, July 11, 2006]

               Subpart 216.5_Indefinite-Delivery Contracts



Sec. 216.501  General.

    (a)(i) For items with a shelf-life of less than 6 months, consider 
the use of indefinite-delivery type contracts with orders to be placed 
either--
    (A) Directly by the users; or
    (B) By central purchasing offices with deliveries direct to users.
    (ii) Whenever an indefinite-delivery contract is issued, the issuing 
office must furnish all ordering offices sufficient information for the 
ordering office to complete its contract reporting responsibilities 
under 204.670-2. This data must be furnished to the ordering activity in 
sufficient time for the activity to prepare its report for the action 
within 3 working days of the order.

[56 FR 36340, July 31, 1991, as amended at 57 FR 42630, Sept. 15, 1992; 
63 FR 11529, Mar. 9, 1998]



Sec. 216.501-1  Definitions.

    Multiple award contract, as used in this subpart, means--
    (1) A multiple award task order contract entered into in accordance 
with FAR 16.504(c); or
    (2) Any other indefinite-delivery, indefinite-quantity contract that 
an agency enters into with two or more sources under the same 
solicitation.

[67 FR 56608, Oct. 25, 2002]



Sec. 216.501-2  General.

    (a) See 217.204(e) for limitations on the period for task order or 
delivery order contracts awarded by DoD pursuant to 10 U.S.C. 2304a.

[69 FR 13478, Mar. 23, 2004]



Sec. 216.504  Indefinite-quantity contracts.

    (c)(1)(ii)(D) Limitation on single-award contracts.

                                * * * * *

    (2) The head of the agency must notify the congressional defense 
committees within 30 days after any determination under this section and 
provide a copy of the determination and notification to the Deputy 
Director, Defense Procurement and Acquisition Policy (Contract Policy 
and International Contracting), OUSD (AT&L) DPAP/CPIC, 3060 Defense 
Pentagon, Washington, DC 20301-3060. If the award concerns intelligence 
or intelligence-related activities of DoD, notification shall also be 
provided to the Select Committee on Intelligence of the Senate and the 
Permanent Select Committee on Intelligence of the House of 
Representatives. (See sample notification at PGI 
216.504(c)(1)(ii)(D)(2).)

[75 FR 40717, July 13, 2010]



Sec. 216.505  Ordering.

    (1) Departments and agencies shall comply with the review, approval, 
and reporting requirements established in accordance with Subpart 217.78 
when placing orders under non-DoD contracts in amounts exceeding the 
simplified acquisition threshold.
    (2) Orders placed under indefinite-delivery contracts may be issued 
on DD

[[Page 97]]

Form 1155, Order for Supplies or Services.

[63 FR 11529, Mar. 9, 1998, as amended at 70 FR 29642, May 24, 2005; 71 
FR 14103, Mar. 21, 2006]



Sec. Sec. 216.505-70  Orders under multiple award contracts.

    (a) This subsection--
    (1) Implements Section 803 of the National Defense Authorization Act 
for Fiscal Year 2002 (Pub. L. 107-107) for the acquisition of services, 
and establishes similar policy for the acquisition of supplies;
    (2) Applies to orders for supplies or services exceeding $150,000 
placed under multiple award contracts;
    (3) Also applies to orders placed by non-DoD agencies on behalf of 
DoD; and
    (4) Does not apply to orders for architect-engineer services, which 
shall be placed in accordance with the procedures in FAR Subpart 36.6.
    (b) Each order exceeding $150,000 shall be placed on a competitive 
basis in accordance with paragraph (c) of this subsection, unless this 
requirement is waived on the basis of a justification that is prepared 
and approved in accordance with FAR 8.405-6 and includes a written 
determination that--
    (1) A statute expressly authorizes or requires that the purchase be 
made from a specified source; or
    (2) One of the circumstances described at FAR 16.505(b)(2)(i) 
through (iv) applies to the order. Follow the procedures at PGI 216.505-
70 if FAR 16.505(b)(2)(ii) or (iii) is deemed to apply.
    (c) An order exceeding $150,000 is placed on a competitive basis 
only if the contracting officer--
    (1) Provides a fair notice of the intent to make the purchase, 
including a description of the supplies to be delivered or the services 
to be performed and the basis upon which the contracting officer will 
make the selection, to all contractors offering the required supplies or 
services under the multiple award contract; and
    (2) Affords all contractors responding to the notice a fair 
opportunity to submit an offer and have that offer fairly considered.
    (d) When using the procedures in this subsection--
    (1) The contracting officer should keep contractor submission 
requirements to a minimum;
    (2) The contracting officer may use streamlined procedures, 
including oral presentations;
    (3) The competition requirements in FAR part 6 and the policies in 
FAR Subpart 15.3 do not apply to the ordering process, but the 
contracting officer shall consider price or cost under each order as one 
of the factors in the selection decision; and
    (4) The contracting officer should consider past performance on 
earlier orders under the contract, including quality, timeliness, and 
cost control.

[71 FR 14108, Mar. 21, 2006, as amended at 75 FR 45073, Aug. 2, 2010]



Sec. 216.506  Solicitation provisions and contract clauses.

    (d) If the contract is for the preparation of personal property for 
shipment or storage (see 247.271-4), substitute paragraph (f) at 
252.247-7015, Requirements, for paragraph (f) of the clause at FAR 
52.216-21, Requirements.

[63 FR 11529, Mar. 9, 1998]

   Subpart 216.6_Time-And-Materials, Labor-Hour, and Letter Contracts



Sec. 216.601  Time-and-materials contracts.

    (d) Limitations. (i) The determination and findings shall contain 
sufficient facts and rationale to justify that no other contract type is 
suitable. At a minimum, the determination and findings shall--
    (A) Include a description of the market research conducted;
    (B) Establish that it is not possible at the time of placing the 
contract or order to accurately estimate the extent or duration of the 
work or to anticipate costs with any reasonable degree of certainty;
    (C) Establish that the requirement has been structured to minimize 
the use of time-and-materials requirements (e.g., limiting the value or

[[Page 98]]

length of the time-and-materials portion of the contract or order; 
establishing fixed prices for portions of the requirement); and
    (D) Describe the actions planned to minimize the use of time-and-
materials contracts on future acquisitions for the same requirements.
    (ii) For indefinite-delivery contracts, the contracting officer 
shall--
    (A) Structure contracts that authorize time-and-materials orders to 
also authorize orders on a cost-reimbursement, incentive, or fixed-price 
basis, to the maximum extent practicable; and
    (B) Execute the determination and findings for--
    (1) Each order placed on a time-and-materials basis if the 
indefinite-delivery contract also authorizes orders on a cost-
reimbursement, incentive, or fixed-price basis; or
    (2) The basic contract if the indefinite-delivery contract only 
authorizes time-and-materials orders. The determination and findings 
shall--
    (i) Contain sufficient facts and rationale to justify why orders on 
a cost-reimbursement, incentive, and fixed-price basis are not 
practicable; and
    (ii) Be approved one level above the contracting officer.
    (e) Solicitation provisions. Use the provision at FAR 52.216-29, 
Time-and-Materials/Labor-Hour Proposal Requirements--Non-Commercial Item 
Acquisition with Adequate Price Competition, with 252.216-7002, 
Alternate A, in solicitations contemplating the use of a time-and-
materials or labor-hour contract type for non-commercial items if the 
price is expected to be based on adequate competition.

[71 FR 74471, Dec. 12, 2006, as amended at 73 FR 70912, Nov. 24, 2008]



Sec. 216.603  Letter contracts.



Sec. 216.603-2  Application.

    (c)(3) In accordance with 10 U.S.C. 2326, establish definitization 
schedules for letter contracts following the requirements at 217.7404-
3(a) instead of the requirements at FAR 16.603-2(c)(3).

[75 FR 32642, June 8, 2010]



Sec. 216.603-3  Limitations.

    See subpart 217.74 for additional limitations on the use of letter 
contracts.



Sec. 216.603-4  Contract clauses.

    (b)(2) See 217.7405(a) for additional guidance regarding use of the 
clause at FAR 52.216-24, Limitation of Government Liability.
    (3) Use the clause at 252.217-7027, Contract Definitization, in 
accordance with its prescription at 217.7405(b), instead of the clause 
at FAR 52.216-25, Contract Definitization.

[61 FR 7743, Feb. 29, 1996, as amended at 71 FR 58537, Oct. 4, 2006; 72 
FR 69159, Dec. 7, 2007]

                        Subpart 216.7_Agreements



Sec. 216.703  Basic ordering agreements.

    (c) Limitations. The period during which orders may be placed 
against a basic ordering agreement may not exceed 5 years.
    (d) Orders. Follow the procedures at PGI 216.703(d) for issuing 
orders under basic ordering agreements.

[71 FR 39008, July 11, 2006]

                  PART 217_SPECIAL CONTRACTING METHODS

                   Subpart 217.1_Multiyear Contracting

Sec.

Sec. 217.103 Definitions.

Sec. 217.170 General.

Sec. 217.171 Multiyear contracts for services.

Sec. 217.172 Multiyear contracts for supplies.

Sec. 217.173 Multiyear contracts for weapon systems.

Sec. 217.174 Mulityear contracts that employ economic order quantity 
          procurement.

Sec. 217.175 Multiyear contracts for electricity from renewable energy 
          sources.

                          Subpart 217.2_Options


Sec. 217.202 Use of options.

Sec. 217.204 Contracts.

Sec. 217.207 Exercise of options.

Sec. 217.208 Solicitation provisions and contract clauses.

Sec. 217.208-70 Additional clauses.

      Subpart 217.5_Interagency Acquisitions Under the Economy Act


Sec. 217.500 Scope of subpart.

Sec. 217.504 Ordering procedures.

            Subpart 217.6_Management and Operating Contracts


Sec. 217.600 Scope of subpart.

[[Page 99]]

              Subpart 217.70_Exchange of Personal Property


Sec. 217.7000 Scope of subpart.

Sec. 217.7001 Definitions.

Sec. 217.7002 Policy.

Sec. 217.7003 Purchase request.

Sec. 217.7004 Solicitation and award.

Sec. 217.7005 Solicitation provision.

  Subpart 217.71_Master Agreement for Repair and Alteration of Vessels


Sec. 217.7100 Scope of subpart.

Sec. 217.7101 Definitions.

Sec. 217.7102 General.

Sec. 217.7103 Master agreements and job orders.

Sec. 217.7103-1 Content and format of master agreements.

Sec. 217.7103-2 Period of agreement.

Sec. 217.7103-3 Solicitations for job orders.

Sec. 217.7103-4 Emergency work.

Sec. 217.7103-5 Repair costs not readily ascertainable.

Sec. 217.7103-6 Modification of master agreements.

Sec. 217.7104 Contract clauses.

Subpart 217.72 [Reserved]

           Subpart 217.73_Identification of Sources of Supply


Sec. 217.7300 Scope.

Sec. 217.7301 Policy.

Sec. 217.7302 Procedures.

Sec. 217.7303 Solicitation provision.

              Subpart 217.74_Undefinitized Contract Actions


Sec. 217.7400 Scope.

Sec. 217.7401 Definitions.

Sec. 217.7402 Exceptions.

Sec. 217.7403 Policy.

Sec. 217.7404 Limitations.

Sec. 217.7404-1 Authorization.

Sec. 217.7404-2 Price ceiling.

Sec. 217.7404-3 Definitization schedule.

Sec. 217.7404-4 Limitations on obligations.

Sec. 217.7404-5 Exceptions.

Sec. 217.7404-6 Allowable profit.

Sec. 217.7405 Plans and reports.

Sec. 217.7406 Contract clauses.

            Subpart 217.75_Acquisition of Replenishment Parts


Sec. 217.7500 Scope of subpart.

Sec. 217.7501 Definition.

Sec. 217.7502 General.

Sec. 217.7503 Spares acquisition integrated with production.

Sec. 217.7504 Acquisition of parts when data is not available.

Sec. 217.7505 Limitations on price increases.

Sec. 217.7506 Spare parts breakout program.

         Subpart 217.76_Contracts with Provisioning Requirements


Sec. 217.7601 Provisioning.

                   Subpart 217.77_Over and Above Work


Sec. 217.7701 Procedures.

Sec. 217.7702 Contract clause.

 Subpart 217.78_Contracts or Delivery Orders Issued by a Non-DoD Agency


Sec. 217.7800 Scope of subpart.

Sec. 217.7801 Definitions.

Sec. 217.7802 Policy.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36345, July 31, 1991, unless otherwise noted.

                   Subpart 217.1_Mulityear Contracting

    Source: 63 FR 11529, Mar. 9, 1998, unless otherwise noted.



Sec. 217.103  Definitions.

    As used in this subpart--
    Advance procurement means an exception to the full funding policy 
that allows acquisition of long lead time items (advance long lead 
acquisition) or economic order quantities (EOQ) of items (advance EOQ 
acquisition) in a fiscal year in advance of that in which the related 
end item is to be acquired. Advance procurements may include materials, 
parts, components, and effort that must be funded in advance to maintain 
a planned production schedule.
    Military installation means a base, camp, post, station, yard, 
center, or other activity under the jurisdiction of the Secretary of a 
military department or, in the case of an activity in a foreign country, 
under the operational control of the Secretary of a military department 
or the Secretary of Defense (10 U.S.C. 2801(c)(2)).

[68 FR 43332, July 22, 2003]



Sec. 217.170  General.

    (a) Before awarding a multiyear contract, the head of the agency 
must compare the cost of that contract to the cost of an annual 
procurement approach, using a present value analysis. Do not award the 
multiyear contract

[[Page 100]]

unless the analysis shows that the multiyear contract will result in the 
lower cost (10 U.S.C. 2306b(l)(7); Section 8008(a) of Public Law 105-56 
and similar sections in subsequent DoD appropriations acts).
    (b) Any requests for increased funding or reprogramming for 
procurement of a major system under a multiyear contract authorized 
under this section shall be accompanied by an explanation of how the 
request for increased funding affects the determinations made by the 
Secretary of Defense under 217.172(f)(2) (10 U.S.C. 2306b(i)(1)).
    (c) The head of the agency must provide written notice to the 
congressional defense committees at least 10 days before termination of 
any multiyear contract (10 U.S.C. 2306b(l)(6); 10 U.S.C. 2306c(d)(3); 
Section 8008(a) of Public Law 105-56 and similar sections in subsequent 
DoD appropriations acts).
    (d) Every multiyear contract must comply with FAR 17.104(c), unless 
an exception is approved through the budget process in coordination with 
the cognizant comptroller.
    (e)(1) DoD must receive authorization from, or provide notification 
to, Congress before entering into a multiyear contract for certain 
procurements, including those expected to--
    (i) Exceed $500 million for supplies (see 217.172(d); and 
217.172(f)(3)) or $625.5 million for services (see 217.171(a)(6);
    (ii) Employ economic order quantity procurement in excess of $20 
million in any one year (see 217.174(a)(1));
    (iii) Employ an unfunded contingent liability in excess of $20 
million (see 217.171(a)(4)(i) and 217.172(d)(1));
    (iv) Involve a contract for advance procurement leading to a 
multiyear contract that employs economic order quantity procurement in 
excess of $20 million in any one year (see 217.174(a)(2)); or
    (v) Include a cancellation ceiling in excess of $100 million (see 
217.171(a)(4)(ii) and 217.172(d)(2)).
    (2) A DoD component must submit a request for authority to enter 
into multiyear contracts described in paragraphs (d)(1)(i) through (iv) 
of this section as part of the component's budget submission for the 
fiscal year in which the multiyear contract will be initiated. DoD will 
include the request, for each candidate it supports, as part of the 
President's Budget for that year and in the Appendix to that budget as 
part of proposed legislative language for the appropriations bill for 
that year (Section 8008(b) of Public Law 105-56).
    (3) If the advisability of using a multiyear contract becomes 
apparent too late to satisfy the requirements in paragraph (d)(2) of 
this section, the request for authority to enter into a multiyear 
contract must be--
    (i) Formally submitted by the President as a budget amendment; or
    (ii) Made by the Secretary of Defense, in writing, to the 
congressional defense committees. (Section 8008(b) of Public Law 105-56)
    (4) Agencies must establish reporting procedures to meet the 
congressional notification requirements of paragraph (d)(1) of this 
section. The head of the agency must submit a copy of each notice to the 
Director of Defense Procurement and Acquisition Policy, Office of the 
Under Secretary of Defense (Acquisition, Technology, and Logistics) 
(OUSD(AT&L)DPAP), and to the Deputy Under Secretary of Defense 
(Comptroller) (Program/Budget) (OUSD (C) (P/B)).

[66 FR 63337, Dec. 6, 2001, as amended at 68 FR 7439, Feb. 14, 2003; 70 
FR 24324, May 9, 2005; 71 FR 75892, Dec. 19, 2006; 75 FR 9115, Mar. 1, 
2010; 75 FR 54526, Sept. 8, 2010; 75 FR 45073, Aug. 2, 2010]



Sec. 217.171  Multiyear contracts for services.

    (a) 10 U.S.C. 2306c. (1) The head of the agency may enter into a 
multiyear contract for a period of not more than 5 years for the 
following types of services (and items of supply relating to such 
services), even though funds are limited by statute to obligation only 
during the fiscal year for which they were appropriated:
    (i) Operation, maintenance, and support of facilities and 
installations.
    (ii) Maintenance or modification of aircraft, ships, vehicles, and 
other highly complex military equipment.
    (iii) Specialized training requiring high quality instructor skills 
(e.g., training for pilots and aircrew members or foreign language 
training).

[[Page 101]]

    (iv) Base services (e.g., ground maintenance, in-plane refueling, 
bus transportation, and refuse collection and disposal).
    (v) Environmental remediation services for--
    (A) An active military installation;
    (B) A military installation being closed or realigned under a base 
closure law as defined in 10 U.S.C. 2667(h)(2); or
    (C) A site formerly used by DoD.
    (2) The head of the agency must be guided by the following 
principles when entering into a multiyear contract for services:
    (i) The portion of the cost of any plant or equipment amortized as a 
cost of contract performance should not exceed the ratio between the 
period of contract performance and the anticipated useful commercial 
life of the plant or equipment. As used in this section, ``useful 
commercial life'' means the commercial utility of the facilities rather 
than the physical life, with due consideration given to such factors as 
the location, specialized nature, and obsolescence of the facilities.
    (ii) Consider the desirability of obtaining an option to extend the 
term of the contract for a reasonable period not to exceed 3 years at 
prices that do not include charges for plant, equipment, or other 
nonrecurring costs already amortized.
    (iii) Consider the desirability of reserving the right to take 
title, under the appropriate circumstances, to the plant or equipment 
upon payment of the unamortized portion of the cost.
    (3) Before entering into a multiyear contract for services, the head 
of the agency must make a written determination that--
    (i) There will be a continuing requirement for the services 
consistent with current plans for the proposed contract period;
    (ii) Furnishing the services will require--
    (A) A substantial initial investment in plant or equipment; or
    (B) The incurrence of substantial contingent liabilities for the 
assembly, training, or transportation of a specialized work force; and
    (iii) Using a multiyear contract will promote the best interests of 
the United States by encouraging effective competition and promoting 
economies in operations.
    (4) The head of the agency must provide written notice to the 
congressional defense committees at least 30 days before award of a 
multiyear contract for services that include--
    (i) An unfunded contingent liability in excess of $20 million 
(Section 8008(a) of Public Law 105-56 and similar sections in subsequent 
DoD appropriations acts); or
    (ii) A cancellation ceiling in excess of $100 million.
    (5) If the budget for a contract that contains a cancellation 
ceiling in excess of $100 million does not include proposed funding for 
the costs of contract cancellation up to the cancellation ceiling 
established in the contract--
    (i) The notification required by paragraph (a)(4) of this section 
shall include--
    (A) The cancellation ceiling amounts planned for each program year 
in the proposed multiyear contract, together with the reasons for the 
amounts planned;
    (B) The extent to which costs of contract cancellation are not 
included in the budget for the contract; and
    (C) A financial risk assessment of not including budgeting for costs 
of contract cancellation (10 U.S.C. 2306c(d)); and
    (ii) The head of the agency shall provide copies of the notification 
to the Office of Management and Budget at least 14 days before contract 
award in accordance with the procedures at PGI 217.1.
    (6) The head of the agency must not initiate a multiyear contract 
for services exceeding $625.5 million unless a law specifically provides 
authority for the contract.
    (b) 10 U.S.C. 2829. (1) The head of the agency may enter into 
multiyear contracts for supplies and services required for management, 
maintenance, and operation of military family housing and may pay the 
costs of such contracts for each year from annual appropriations for 
that year.

[[Page 102]]

    (2) The head of the agency may use this authority only if the term 
of the contract does not exceed 4 years.

[66 FR 63337, Dec. 6, 2001, as amended at 68 FR 43333, July 22, 2003; 70 
FR 24324, May 9, 2005; 71 FR 75892, Dec. 19, 2006; 75 FR 45073, Aug. 2, 
2010]



Sec. 217.172  Multiyear contracts for supplies.

    (a) This section applies to all multiyear contracts for supplies, 
including weapon systems and other multiyear acquisitions specifically 
authorized by law. For additional policies that apply only to multiyear 
contracts for weapon systems, see 217.173.
    (b) The head of the agency may enter into a multiyear contract for 
supplies if, in addition to the conditions listed in FAR 17.105-1(b), 
the use of such a contract will promote the national security of the 
United States (10 U.S.C. 2306b(a)(6)).
    (c) The head of the agency shall not enter into a multiyear contract 
unless--
    (1) The Secretary of Defense has submitted to Congress a budget 
request for full funding of units to be procured through the contract; 
and
    (2) In the case of a contract for procurement of aircraft, the 
budget request includes full funding of procurement funds for production 
beyond advance procurement activities of aircraft units to be produced 
in the fiscal year covered by the budget.
    (d)(1) The head of the agency must not enter into or extend a 
multiyear contract that exceeds $500 million (when entered into or 
extended until the Secretary of Defense identifies the contract and any 
extension in a report submitted to the congressional defense committees 
(10 U.S.C. 2306b(1)(5)).
    (2) In addition, for contracts equal to or greater than $500 
million, the head of the contracting activity must determine that the 
conditions required by paragraphs (f)(2)(i) through (vii) of this 
section will be met by such contract, in accordance with the Secretary's 
certification and determination required by paragraph (f)(2) of this 
section (10 U.S.C. 2306b(a)(1)(7)).
    (e) The head of the agency must provide written notice to the 
congressional defense committees at least 30 days before award of a 
multiyear contract that includes--
    (1) An unfunded contingent liability in excess of $20 million (10 
U.S.C. 2306b(l)(1)(B)(i)(II); Section 8008(a) of Public Law 105-56 and 
similar sections in subsequent DoD appropriations acts); or
    (2) A cancellation ceiling in excess of $100 million (10 U.S.C. 
2306b(g)).
    (f) The head of the agency shall ensure that the following 
conditions are satisfied before awarding a multiyear contract under the 
authority described in paragraph (b) of this section:
    (1) The multiyear exhibits required by DoD 7000.14-R, Financial 
Management Regulation, are included in the agency's budget estimate 
submission and the President's budget request.
    (2) The Secretary of Defense certifies to Congress in writing, by no 
later than March 1 of the year in which the Secretary requests 
legislative authority to enter into such contracts, that each of the 
conditions in paragraphs (f)(2)(i) through (vii) of this section is 
satisfied (10 U.S.C. 2306b(i)(1)(A)-(G).
    (i) The Secretary has determined that each of the requirements in 
FAR 17.105, paragraphs (b)(1) through (6) will be met by such contract 
and has provided the basis for such determination to the congressional 
defense committees (10 U.S.C. 2306b(i)(1)(A)).
    (ii) The Secretary's determination under paragraph (f)(2)(i) of this 
section was made after the completion of a cost analysis performed by 
the Cost Assessment and Program Evaluation (CAPE) of the Department of 
Defense and such analysis supports the findings (10 U.S.C. 
2306b(i)(1)(B)).
    (iii) The system being acquired pursuant to such contract has not 
been determined to have experienced cost growth in excess of the 
critical cost growth threshold pursuant to section 10 U.S.C. 2433(d) 
within 5 years prior to the date the Secretary anticipates such contract 
(or a contract for advance procurement entered into consistent with the 
authorization for such contract) will be awarded (10 U.S.C. 
2306b(i)(1)(C)).
    (iv) A sufficient number of end items of the system being acquired 
under such contract have been delivered at or within the most current 
estimates of

[[Page 103]]

the program acquisition unit cost or procurement unit cost for such 
system to determine that current estimates of such unit costs are 
realistic (10 U.S.C. 2306b(i)(1)(D)).
    (v) During the fiscal year in which such contract is to be awarded, 
sufficient funds will be available to perform the contract in such 
fiscal year, and the future-years defense program for such fiscal year 
will include the funding required to execute the program without 
cancellation (10 U.S.C. 2306b(i)(1)(E)).
    (vi) The contract is a fixed price type contract (10 U.S.C. 
2306b(i)(1)(F)).
    (vii) The proposed multiyear contract provides for production at not 
less than minimum economic rates, given the existing tooling and 
facilities. The head of the agency shall submit to USD(C)(P/B) 
information supporting the agency's determination that this requirement 
has been met (10 U.S.C. 2306b(i)(1)(G)).
    (viii) The head of the agency shall submit information supporting 
this certification to USD(C)(P/B) for transmission to Congress through 
the Secretary of Defense.
    (ix) In the case of a contract with a cancellation ceiling in excess 
of $100 million, if the budget for the contract does not include 
proposed funding for the costs of contract cancellation up to the 
cancellation ceiling established in the contract--
    (A) The head of the agency shall, as part of this certification, 
give written notification to the congressional defense committees of--
    (1) The cancellation ceiling amounts planned for each program year 
in the proposed multiyear contract, together with the reasons for the 
amounts planned;
    (2) The extent to which costs of contract cancellation are not 
included in the budget for the contract; and
    (3) A financial risk assessment of not including the budgeting for 
costs of contract cancellation (10 U.S.C. 2306b(g)); and
    (B) The head of the agency shall provide copies of the notification 
to the Office of Management and Budget at least 14 days before contract 
award in accordance with the procedures at PGI 217.1.
    (3) If the value of a multiyear contract for a particular system or 
component exceeds $500 million, use of a multiyear contract is 
specifically authorized by--
    (i) An appropriations act (10 U.S.C. 2306b(l)(3)); and
    (ii) A law other than an appropriations act (10 U.S.C. 2306b(i)(3)).
    (4) The contract is for the procurement of a complete and usable end 
item (10 U.S.C. 2306b(i)(4)(A)).
    (5) Funds appropriated for any fiscal year for advance procurement 
are obligated only for the procurement of those long-lead items that are 
necessary in order to meet a planned delivery schedule for complete 
major end items that are programmed under the contract to be acquired 
with funds appropriated for a subsequent fiscal year (including an 
economic order quantity of such long-lead items when authorized by law 
(10 U.S.C. 2306b(i)(4)(b)).
    (6) The Secretary may make the certification under paragraph (f)(2) 
of this section notwithstanding the fact that one or more of the 
conditions of such certification are not met if the Secretary determines 
that, due to exceptional circumstances, proceeding with a multiyear 
contract under this section is in the best interest of the Department of 
Defense and the Secretary provides the basis for such determination with 
the certification (10 U.S.C. 2306b(i)(5)).
    (7) The Secretary of Defense may not delegate this authority to make 
the certification under 217.172(f)(2) or the determination under 
217.172(f)(6) to an official below the level of the Under Secretary of 
Defense for Acquisition, Technology, and Logistics (10 U.S.C. 
2306b(i)(6)).
    (8) The Secretary of Defense shall send a notification containing 
the findings of the agency head under FAR 17.105(b), and the basis for 
such findings, 30 days prior to the award of a multiyear contract or a 
defense acquisition program that has been specifically authorized by law 
((10 U.S.C. 2306b(i)(7)).
    (9) All other requirements of law are met and there are no other 
statutory

[[Page 104]]

restrictions on using a multiyear contract for the specific system or 
component (10 U.S.C. 2306b(i)(2)). One such restriction may be the 
achievement of specified cost savings. If the agency finds, after 
negotiations with the contractor(s), that the specified savings cannot 
be achieved, the head of the agency shall assess the savings that, 
nevertheless, could be achieved by using a multiyear contract. If the 
savings are substantial, the head of the agency may request relief from 
the law's specific savings requirement. The request shall--
    (i) Quantify the savings that can be achieved;
    (ii) Explain any other benefits to the Government of using the 
multiyear contract;
    (iii) Include details regarding the negotiated contract terms and 
conditions; and
    (iv) Be submitted to OUSD (AT&L) DPAP for transmission to Congress 
via the Secretary of Defense and the President.
    (g) The Secretary of Defense may instruct the head of the agency 
proposing a multiyear contract to include in that contract negotiated 
priced options for varying the quantities of end items to be procured 
over the life of the contract (10 U.S.C. 2306b(j)).
    (h) The head of an agency shall not award a multiyear contract using 
fiscal year 2005 appropriated funds unless--
    (1) The Secretary of Defense has submitted to Congress a budget 
request for full funding of units to be procured through the contract;
    (2) Cancellation provisions in the contract do not include 
consideration of recurring manufacturing costs of the contractor 
associated with the production of unfunded units to be delivered under 
the contract; and
    (3) The contract provides that payments to the contractor under the 
contract shall not be made in advance of incurred costs on funded units 
(Section 8008 of Pub. L. 108-287).
    (i) Do not award a multiyear contract using fiscal year 2005 
appropriated funds that provides for a price adjustment based on a 
failure to award a follow-on contract (Section 8008 of Public Law 108-
287).

[66 FR 63338, Dec. 6, 2001, as amended at 68 FR 50475, Aug. 21, 2003; 70 
FR 24324, May 9, 2005; 75 FR 9115, Mar. 1, 2010; 75 FR 54526, Sept. 8, 
2010]



Sec. 217.173  Multiyear contracts for weapon systems.

    As authorized by 10 U.S.C. 2306b(h) and subject to the conditions in 
217.172(e), the head of the agency may enter into a multiyear contract 
for--
    (a) A weapon system and associated items, services, and logistics 
support for a weapon system; and
    (b) Advance procurement of components, parts, and materials 
necessary to manufacture a weapon system, including advance procurement 
to achieve economic lot purchases or more efficient production rates 
(see 217.174 regarding economic order quantity procurement).

[70 FR 24325, May 9, 2005]



Sec. 217.174  Multiyear contracts that employ economic order quantity 
          procurement.

    (a) The head of the agency must provide written notice to the 
congressional defense committees at least 30 days before awarding--
    (1) A multiyear contract providing for economic order quantity 
procurement in excess of $20 million in any one year (10 U.S.C. 
2306b(l)(1)(B)(i)(I)); or
    (2) A contract for advance procurement leading to a multiyear 
contract that employs economic order quantity procurement in excess of 
$20 million in any one year (10 U.S.C. 2306b(l)(1)(B)(ii); Section 
8008(a) of Public Law 105-56 and similar sections in subsequent DoD 
appropriations acts).
    (b) Before initiating an advance procurement, the contracting 
officer must verify that it is consistent with DoD policy (e.g., Chapter 
2 of DoD 5000.2-R, Mandatory Procedures for Major Defense Acquisition 
Programs (MDAPs) and Major Automated Information System (MAIS) 
Acquisition Programs, and the full funding policy in Volume 2A, Chapter 
1, of DoD 7000.14-R, Financial Management Regulation).

[[Page 105]]

    (c) See 217.172(e)(6) for additional provisions regarding 
procurement of economic order quantities of long-lead items.

[66 FR 63338, Dec. 6, 2001, as amended at 68 FR 50475, Aug. 21, 2003; 70 
FR 24325, May 9, 2005]



Sec. 217.175  Multiyear contracts for electricity from renewable energy 
          sources.

    (a) The head of the contracting activity may enter into a contract 
for a period not to exceed 10 years for the purchase of electricity from 
sources of renewable energy, as that term is defined in section 
203(b)(2) of the Energy Policy Act of 2005 (42 U.S.C. 15852(b)(2)).
    (b) Limitations. The head of the contracting activity may exercise 
the authority in paragraph (a) of this section to enter into a contract 
for a period in excess of five years only if the head of the contracting 
activity determines, on the basis of a business case analysis (see PGI 
217.1, Supplemental Information TAB, for a business case analysis 
template and guidance) prepared by the requiring activity, that--
    (1) The proposed purchase of electricity under such contract is cost 
effective; and
    (2) It would not be possible to purchase electricity from the source 
in an economical manner without the use of a contract for a period in 
excess of five years.
    (c) Nothing in this section shall be construed to preclude the DoD 
from using other multiyear contracting authority of DoD to purchase 
renewable energy.

[75 FR 34943, June 21, 2010]

                          Subpart 217.2_Options



Sec. 217.202  Use of options.

    (1) See PGI 217.202 for guidance on the use of options.
    (2) See 234.005-1 for limitations on the use of contract options for 
the provision of advanced component development or prototype of 
technology developed under the contract or the delivery of initial or 
additional prototype items.

[75 FR 32638, June 8, 2010]



Sec. 217.204  Contracts.

    (e)(i) Notwithstanding FAR 17.204(e), the ordering period of a task 
order or delivery order contract (including a contract for information 
technology) awarded by DoD pursuant to 10 U.S.C. 2304a--
    (A) May be for any period up to 5 years;
    (B) May be subsequently extended for one or more successive periods 
in accordance with an option provided in the contract or a modification 
of the contract; and
    (C) Shall not exceed 10 years unless the head of the agency 
determines in writing that exceptional circumstances require a longer 
ordering period.
    (ii) DoD must submit a report to Congress, annually through fiscal 
year 2009, when an ordering period is extended beyond 10 years in 
accordance with paragraph (e)(i)(C) of this section. Follow the 
procedures at PGI 217.204(e) for reporting requirements.
    (iii) Paragraph (e)(i) of this section does not apply to the 
following:
    (A) Contracts, including task or delivery order contracts, awarded 
under other statutory authority.
    (B) Advisory and assistance service task order contracts (authorized 
by 10 U.S.C. 2304b that are limited by statute to 5 years, with the 
authority to extend an additional 6 months (see FAR 16.505(c)).
    (C) Definite-quantity contracts.
    (D) GSA schedule contracts.
    (E) Multi-agency contracts awarded by agencies other than NASA, DoD, 
or the Coast Guard.
    (iv) Obtain approval from the senior procurement executive before 
issuing an order against a task or delivery order contract subject to 
paragraph (e)(i) of this section, if performance under the order is 
expected to extend more than 1 year beyond the 10-year limit or extended 
limit described in paragraph (e)(i)(C) of this section (see FAR 37.106 
for funding and term of service contracts).

[70 FR 73152, Dec. 9, 2005]



Sec. 217.207  Exercise of options.

    (c) In addition to the requirements at FAR 17.207(c), exercise an 
option only after determining that the contractor's

[[Page 106]]

record in the Central Contractor Registration database is active and the 
contractor's Data Universal Numbering System (DUNS) number, Commercial 
and Government Entity (CAGE) code, name, and physical address are 
accurately reflected in the contract document.

[74 FR 37644, July 29, 2009]



Sec. 217.208  Solicitation provisions and contract clauses.

    Sealed bid solicitations shall not include provisions for 
evaluations of options unless the contracting officer determines that 
there is a reasonable likelihood that the options will be exercised (10 
U.S.C. 2305(a)(5)). This limitation also applies to sealed bid 
solicitations for the contracts excluded by FAR 17.200.

[63 FR 11529, Mar. 9, 1998, as amended at 71 FR 27642, May 12, 2006]



Sec. 217.208-70  Additional clauses.

    (a) Use the clause at 252.217-7000, Exercise of Option to Fulfill 
Foreign Military Sales Commitments, when an option may be used for 
foreign military sale requirements.
    (1) Use Alternate I when the foreign military sale country is not 
known at the time of solicitation or award.
    (2) Do not use this clause in contracts for establishment or 
replenishment of DoD inventories or stocks, or acquisitions made under 
DoD cooperative logistics support arrangements.
    (b) When a surge option is needed in support of industrial 
capability production planning, use the clause at 252.217-7001, Surge 
Option, in solicitations and contracts.
    (1) Insert the percentage of increase the option represents in 
paragraph (a) of the clause to ensure adequate quantities are available 
to meet item requirements.
    (2) Change 30 days in paragraphs (b)(2) and (d)(1) to longer 
periods, if appropriate.
    (3) Change the 24-month period in paragraph (c)(3), if appropriate.

[63 FR 11529, Mar. 9, 1998, as amended at 71 FR 27642, May 12, 2006]

      Subpart 217.5_Interagency Acquisitions Under the Economy Act

    Source: 63 FR 11530, Mar. 9, 1998, unless otherwise noted.



Sec. 217.500  Scope of subpart.

    (b) Unless more specific statutory authority exists, the procedures 
in FAR Subpart 17.5, this subpart, and DODI 4000.19 apply to all 
purchases, except micro-purchases, made for DoD by another agency. This 
includes orders under a task or delivery order contract entered into by 
the other agency. (Pub. L. 105-261, Section 814.)

[64 FR 14400, Mar. 25, 1999]



Sec. 217.504  Ordering procedures.

    (a) When the requesting agency is within DoD, a copy of the executed 
D&F shall be furnished to the servicing agency as an attachment to the 
order. When a DoD contracting office is acting as the servicing agency, 
a copy of the executed D&F shall be obtained from the requesting agency 
and placed in the contract file for the Economy Act order.

            Subpart 217.6_Management and Operating Contracts



Sec. 217.600  Scope of subpart.

    FAR subpart 17.6 does not apply to DoD.

              Subpart 217.70_Exchange of Personal Property



Sec. 217.7000  Scope of subpart.

    This subpart prescribes policy and procedures for exchange of 
nonexcess personal property concurrent with an acquisition. Section 
201(c) of the Federal Property and Administrative Services Act of 1949, 
63 Stat. 384, as amended (40 U.S.C. 481(c)) permits exchange of personal 
property and application of the exchange allowance to the acquisition of 
similar property. This subpart does not authorize the sale of nonexcess 
personal property.



Sec. 217.7001  Definitions.

    As used in this subpart--

[[Page 107]]

    (a) Exchange (trade-in) property means property which--
    (1) Is not excess but is eligible for replacement (because of 
obsolescence, unserviceability, or other reason); and
    (2) Is applied as whole or partial payment toward the acquisition of 
similar items (i.e., items designed and constructed for the same 
purpose).
    (b) Property means items that fall within one of the generic 
categories listed in DoD 4140.1-R, DoD Materiel Management Regulation, 
Chapter 6.2, Exchange or Sale of Nonexcess Personal Property.

[56 FR 36345, July 31, 1991, as amended at 65 FR 39705, June 27, 2000]



Sec. 217.7002  Policy.

    DoD policy is to exchange, rather than replace, eligible nonexcess 
property whenever exchange promotes economical and efficient program 
accomplishment. Exchange policy, authority, and applicability are 
governed by--
    (a) The Federal Property Management Regulations issued by the 
Administrator of the General Services Administration; and
    (b) DoD 4140.1-R, Chapter 6.2.

[56 FR 36345, July 31, 1991, as amended at 65 FR 39705, June 27, 2000]



Sec. 217.7003  Purchase request.

    Ensure that the requiring activity provides all of the following in 
support of the purchase request--
    (a) A certification that the property is eligible for exchange and 
complies with all conditions and limitations of DoD 4140.1-R, Chapter 
6.2.
    (b) A written determination of economic advantage indicating--
    (1) The anticipated economic advantage to the Government from use of 
the exchange authority;
    (2) That exchange allowances shall be applied toward, or in partial 
payment of, the items to be acquired; and
    (3) That, if required, the exchange property has been rendered safe 
or innocuous or has been demilitarized;
    (c) All applicable approvals for the exchange; and
    (d) A description of the property available for exchange (e.g., 
nomenclature, location, serial number, estimated travel value).

[56 FR 36345, July 31, 1991, as amended at 65 FR 39705, June 27, 2000]



Sec. 217.7004  Solicitation and award.

    (a) Solicitations shall include a request for offerors to state 
prices--
    (1) For the new items being acquired without any exchange; and
    (2) For the new items with the exchange (trade-in allowance) for the 
exchange property listed.
    (b) The contracting officer is not obligated to award on an exchange 
basis. If the lowest evaluated offer is an offer for the new items 
without any exchange, the contracting officer may award on that basis 
and forgo the exchange.
    (c) Exchanges may be made only with the successful offeror. When the 
successful offer includes an exchange, award one contract for both the 
acquisition of the new property and the trade-in of the exchange 
property. The only exception is when the items must be acquired against 
a mandatory Federal supply schedule contract, in which case, award a 
separate contract for the exchange.



Sec. 217.7005  Solicitation provision.

    Use the provision at 252.217-7002, Offering Property for Exchange, 
when offering nonexcess personal property for exchange. Allow a minimum 
of 14 calendar days for the inspection period in paragraph (b) of the 
clause if the exchange property is in the contiguous United States. 
Allow at least 21 calendar days outside the contiguous United States.

[70 FR 35544, June 21, 2005]

  Subpart 217.71_Master Agreement for Repair and Alteration of Vessels



Sec. 217.7100  Scope of subpart.

    This subpart contains acquisition policies and procedures for master 
agreements for repair and alteration of vessels.



Sec. 217.7101  Definitions.

    (a) Master agreement for repair and alteration of vessels--

[[Page 108]]

    (1) Is a written instrument of understanding, negotiated between a 
contracting activity and a contractor that--
    (A) Contains contract clauses, terms, and conditions applying to 
future contracts for repairs, alterations, and/or additions to vessels; 
and
    (B) Contemplates separate future contracts that will incorporate by 
reference or attachment the required and applicable clauses agreed upon 
in the master agreement.
    (2) Is not a contract.
    (b) Job order--
    (1) Is a fixed price contract incorporating, by reference or 
attachment, a master agreement for repair and alteration of vessels;
    (2) May include clauses pertaining to subjects not covered by the 
master agreement; but applicable to the job order being awarded; and
    (3) Applies to a specific acquisition and sets forth the scope of 
work, price, delivery date, and other appropriate terms that apply to 
the particular job order.



Sec. 217.7102  General.

    (a) Activities shall enter into master agreements for repair and 
alteration of vessels with all prospective contractors located within 
the United States or its outlying areas, which--
    (1) Request ship repair work; and
    (2) Possess the organization and facilities to perform the work 
satisfactorily. (Issuance of a master agreement does not indicate 
approval of the contractor's facility for any particular acquisition and 
is not an affirmative determination of responsibility under FAR subpart 
9.1 for any particular acquisition.)
    (b) Activities may use master agreements in work with prospective 
contractors located outside the United States and its outlying areas.
    (c) Activities may issue job orders under master agreements to 
effect repairs, alterations, and/or additions to vessels belonging to 
foreign governments.
    (1) Contractors shall treat vessels of a foreign government as if 
they were vessels of the U.S. Government whenever requested to do so by 
the contracting officer.
    (2) Identify the vessel and the foreign government in the 
solicitation and job order.

[56 FR 36345, July 31, 1991, as amended at 70 FR 35544, June 21, 2005]



Sec. 217.7103  Master agreements and job orders.



Sec. 217.7103-1  Content and format of master agreements.

    Follow the procedures at PGI 217.7103-1 for preparation of master 
agreements.

[71 FR 27642, May 12, 2006]



Sec. 217.7103-2  Period of agreement.

    (a) Master agreements remain in effect until canceled by either the 
contractor or the contracting officer.
    (b) Master agreements can be canceled by either the contractor or 
the contracting officer by giving 30 days written notice to the other.
    (c) Cancellation of a master agreement does not affect the rights 
and liabilities under any job order existing at the time of 
cancellation. The contractor must continue to perform all work covered 
by any job order issued before the effective date of cancellation of the 
master agreement.



Sec. 217.7103-3  Solicitations for job orders.

    (a) When a requirement arises within the United States or its 
outlying areas for the type of work covered by the master agreement, 
solicit offers from prospective contractors that--
    (1) Previously executed a master agreement; or
    (2) Have not previously executed a master agreement, but possess the 
necessary qualifications to perform the work and agree to execute a 
master agreement before award of a job order.
    (b) Follow the procedures at PGI 217.7103-3 when preparing 
solicitations for job orders.

[56 FR 36345, July 31, 1991, as amended at 63 FR 55052, Oct. 14, 1998; 
63 FR 56290, Oct. 21, 1998; 70 FR 35545, June 21, 2005; 71 FR 27642, May 
12, 2006]



Sec. 217.7103-4  Emergency work.

    (a) The contracting officer, without soliciting offers, may issue a 
written

[[Page 109]]

job order to a contractor that has previously executed a master 
agreement when--
    (i) Delay in the performance of necessary repair work would endanger 
a vessel, its cargo or stores; or
    (ii) Military necessity requires immediate work on a vessel.
    (b) Follow the procedures at PGI 217.7103-4 when processing this 
type of undefinitized contract action.

[56 FR 36345, July 31, 1991. Redesignated and amended at 71 FR 27643, 
May 12, 2006]



Sec. 217.7103-5  Repair costs not readily ascertainable.

    Follow the procedures at PGI 217.7103-5 if the nature of any repairs 
is such that their extent and probable cost cannot be ascertained 
readily.

[71 FR 27643, May 12, 2006]



Sec. 217.7103-6  Modification of master agreements.

    (a) Review each master agreement at least annually before the 
anniversary of its effective date and revise it as necessary to conform 
to the requirements of the FAR and DFARS. Statutory or other mandatory 
changes may require review and revision earlier than one year.
    (b) A master agreement shall be changed only by modifying the master 
agreement itself. It shall not be changed through a job order.
    (c) A modification to a master agreement shall not affect job orders 
issued before the effective date of the modification.

[63 FR 11529, Mar. 9, 1998. Redesignated at 71 FR 27643, May 12, 2006]



Sec. 217.7104  Contract clauses.

    (a) Use the following clauses in solicitations for, and in, master 
agreements for repair and alteration of vessels:
    (1) 252.217-7003, Changes.
    (2) 252.217-7004, Job Orders and Compensation.
    (3) 252.217-7005, Inspection and Manner of Doing Work.
    (4) 252.217-7006, Title.
    (5) 252.217-7007, Payments.
    (6) 252.217-7008, Bonds.
    (7) 252.217-7009, Default.
    (8) 252.217-7010, Performance.
    (9) 252.217-7011, Access to Vessel.
    (10) 252.217-7012, Liability and Insurance.
    (11) 252.217-7013, Guarantees.
    (12) 252.217-7014, Discharge of Liens.
    (13) 252.217-7015, Safety and Health.
    (14) 252.217-7016, Plant Protection, as applicable.
    (b)(1) Incorporate in solicitations for, and in, job orders, the 
clauses in the master agreement, and any other clauses on subjects not 
covered by the master agreement, but applicable to the job order to be 
awarded.
    (2) Use the clause at 252.217-7016, Plant Protection, in job orders 
where performance is to occur at the contractor's facility.

Subpart 217.72 [Reserved]

           Subpart 217.73_Identification of Sources of Supply



Sec. 217.7300  Scope.

    This subpart implements 10 U.S.C. 2384. It contains policy and 
procedures for requiring contractors to identify the actual manufacturer 
of supplies furnished to DoD.



Sec. 217.7301  Policy.

    Contractors shall identify their sources of supply in contracts for 
supplies. Contractor identification of sources of supply enables 
solicitation, in subsequent acquisitions, of actual manufacturers or 
other suppliers of items. This enhances competition and potentially 
avoids payment of additional costs for no significant added value.



Sec. 217.7302  Procedures.

    (a) Whenever practicable, include a requirement for contractor 
identification of sources of supply in all contracts for the delivery of 
supplies. The identification shall include--
    (1) The item's actual manufacturer or producer, or all the 
contractor's sources for the item;
    (2) The item's national stock number (if there is one);
    (3) The item identification number used by--
    (i) The actual manufacturer or producer of the item; or

[[Page 110]]

    (ii) Each of the contractor's sources for the item; and
    (4) The source of any technical data delivered under the contract.
    (b) The requirement in paragraph (a) of this section does not apply 
to contracts that are--
    (1) For commercial items; or
    (2) Valued at or below the simplified acquisition threshold.

[56 FR 36345, July 31, 1991, as amended at 64 FR 2597, Jan. 15, 1999]



Sec. 217.7303  Solicitation provision.

    (a) Use the provision at 252.217-7026, Identification of Sources of 
Supply, or one substantially the same, in all solicitations for supplies 
when the acquisition is being conducted under other than full and open 
competition, except when--
    (1) Using FAR 6.302-5;
    (2) The contracting officer already has the information required by 
the provision (e.g., the information was obtained under other 
acquisitions);
    (3) The contract is for subsistence, clothing or textiles, fuels, or 
supplies purchased and used outside the United States;
    (4) The contracting officer determines that it would not be 
practicable to require offerors/contractors to provide the information, 
e.g., nonrepetitive local purchases; or
    (5) The contracting officer determines that the exception at 
217.7302(b) applies to all items under the solicitation.
    (b) If appropriate, use the provision at 252.217-7026, 
Identification of Sources of Supply, or one substantially the same, in 
service contracts requiring the delivery of supplies.

              Subpart 217.74_Undefinitized Contract Actions



Sec. 217.7400  Scope.

    This subpart prescribes policies and procedures implementing 10 
U.S.C. 2326.



Sec. 217.7401  Definitions.

    As used in this subpart--
    (a) Contract action means an action which results in a contract.
    (1) It includes contract modifications for additional supplies or 
services.
    (2) It includes task orders and delivery orders.
    (3) It does not include change orders, administrative changes, 
funding modifications, or any other contract modifications that are 
within the scope and under the terms of the contract, e.g., engineering 
change proposals, value engineering change proposals, and over and above 
work requests as described in Subpart 217.77. For policy relating to 
definitization of change orders, see 243.204-70.
    (b) Definitization means the agreement on, or determination of, 
contract terms, specifications, and price, which converts the 
undefinitized contract action to a definitive contract.
    (c) Qualifying proposal means a proposal containing sufficient 
information for the DoD to do complete and meaningful analyses and 
audits of the--
    (1) Information in the proposal; and
    (2) Any other information that the contracting officer has 
determined DoD needs to review in connection with the contract.
    (d) Undefinitized contract action means any contract action for 
which the contract terms, specifications, or price are not agreed upon 
before performance is begun under the action. Examples are letter 
contracts, orders under basic ordering agreements, and provisioned item 
orders, for which the price has not been agreed upon before performance 
has begun. For policy relating to definitization of change orders, see 
243.204-70.

[56 FR 36345, July 31, 1991, as amended at 75 FR 10191, Mar. 5, 2010; 75 
FR 48277, Aug. 10, 2010]



Sec. 217.7402  Exceptions.

    (a) The following undefinitized contract actions (UCAs) are not 
subject to this subpart. However, the contracting officer shall apply 
the policy and procedures to them to the maximum extent practicable 
(also see paragraph (b) of this section):
    (1) UCAs for foreign military sales;
    (2) Purchases at or below the simplified acquisition threshold;
    (3) Special access programs;
    (4) Congressionally mandated long-lead procurement contracts.

[[Page 111]]

    (b) If the contracting officer determines that it is impracticable 
to adhere to the policy and procedures of this subpart for a particular 
contract action that falls within one of the categories in paragraph 
(a)(1), (3), or (4) of this section, the contracting officer shall 
provide prior notice, through agency channels, to the Deputy Director, 
Defense Procurement and Acquisition Policy (Contract Policy and 
International Contracting), 3060 Defense Pentagon, Washington, DC 20301-
3060.

[75 FR 48277, Aug. 10, 2010]



Sec. 217.7403  Policy.

    DoD policy is that undefinitized contract actions shall--
    (a) Be used only when--
    (1) The negotiation of a definitive contract action is not possible 
in sufficient time to meet the Government's requirements; and
    (2) The Government's interest demands that the contractor be given a 
binding commitment so that contract performance can begin immediately.
    (b) Be as complete and definite as practicable under the particular 
circumstances.



Sec. 217.7404  Limitations.



Sec. 217.7404-1  Authorization.

    The contracting officer shall obtain approval from the head of the 
contracting activity before--
    (a) Entering into a UCA. The request for approval must fully explain 
the need to begin performance before definitization, including the 
adverse impact on agency requirements resulting from delays in beginning 
performance.
    (b) Including requirements for non-urgent spare parts and support 
equipment in a UCA. The request should show that inclusion of the non-
urgent items is consistent with good business practices and in the best 
interest of the United States.
    (c) Modifying the scope of a UCA when performance has already begun. 
The request should show that the modification is consistent with good 
business practices and in the best interests of the United States.



Sec. 217.7404-2  Price ceiling.

    UCAs shall include a not-to-exceed price.



Sec. 217.7404-3  Definitization schedule.

    (a) UCAs shall contain definitization schedules that provide for 
definitization by the earlier of--
    (1) The date that is 180 days after issuance of the action (this 
date may be extended but may not exceed the date that is 180 days after 
the contractor submits a qualifying proposal); or
    (2) The date on which the amount of funds obligated under the 
contract action is equal to more than 50 percent of the not-to-exceed 
price.
    (b) Submission of a qualifying proposal in accordance with the 
definitization schedule is a material element of the contract. If the 
contractor does not submit a timely qualifying proposal, the contracting 
officer may suspend or reduce progress payments under FAR 32.503-6, or 
take other appropriate action.

[56 FR 36345, July 31, 1991, as amended at 60 FR 29498, June 5, 1995; 63 
FR 67803, Dec. 9, 1998]



Sec. 217.7404-4  Limitations on obligations.

    (a) The Government shall not obligate more than 50 percent of the 
not-to-exceed price before definitization. However, if a contractor 
submits a qualifying proposal before 50 percent of the not-to-exceed 
price has been obligated by the Government, then the limitation on 
obligations before definitization may be increased to no more than 75 
percent (see 232.102-70 for coverage on provisional delivery payments).
    (b) In determining the appropriate amount to obligate, the 
contracting officer shall assess the contractor's proposal for the 
undefinitized period and shall obligate funds only in an amount 
consistent with the contractor's requirements for the undefinitized 
period.

[60 FR 29498, June 5, 1995, as amended at 74 FR 37650, July 29, 2009]

[[Page 112]]



Sec. 217.7404-5  Exceptions.

    (a) The limitations in 217.7404-2, 217.7404-3, and 217.7404-4 do not 
apply to UCAs for the purchase of initial spares.
    (b) The head of an agency may waive the limitations in 217.7404-2, 
217.7404-3, and 217.7404-4 for UCAs if the head of the agency determines 
that the waiver is necessary to support--
    (1) A contingency operation; or
    (2) A humanitarian or peacekeeping operation.

[60 FR 29498, June 5, 1995, as amended at 63 FR 67804, Dec. 9, 1998; 71 
FR 27643, May 12, 2006]



Sec. 217.7404-6  Allowable profit.

    When the final price of a UCA is negotiated after a substantial 
portion of the required performance has been completed, the head of the 
contracting activity shall ensure the profit allowed reflects--
    (a) Any reduced cost risk to the contractor for costs incurred 
during contract performance before negotiation of the final price;
    (b) The contractor's reduced cost risk for costs incurred during 
performance of the remainder of the contract; and
    (c) The requirements at 215.404-71-3(d)(2). The risk assessment 
shall be documented in the contract file.

[74 FR 37650, July 29, 2009]



Sec. 217.7405  Plans and reports.

    (a) To provide for enhanced management and oversight of UCAs, 
departments and agencies shall--
    (1) Prepare and maintain a Consolidated UCA Management Plan; and
    (2) Prepare semi-annual Consolidated UCA Management Reports 
addressing each UCA with an estimated value exceeding $5 million.
    (b) Consolidated UCA Management Reports and Consolidated UCA 
Management Plan updates shall be submitted to the Office of the 
Director, Defense Procurement and Acquisition Policy, by October 31 and 
April 30 of each year in accordance with the procedures at PGI 217.7405.
    (c) Consolidated UCA Management Reports shall include information 
about all change orders that are not forward priced (i.e., unpriced) and 
have an estimated value exceeding $5 million.

[74 FR 37650, July 29, 2009, as amended at 75 FR 48277, Aug. 10, 2010]



Sec. 217.7406  Contract clauses.

    (a) Use the clause at FAR 52.216-24, Limitation of Government 
Liability, in--
    (1) All UCAs;
    (2) Solicitations associated with UCAs;
    (3) Basic ordering agreements;
    (4) Indefinite-delivery contracts;
    (5) Any other type of contract providing for the use of UCAs; and
    (6) Unpriced change orders with an estimated value exceeding $5 
million.
    (b)(1) Use the clause at 252.217-7027, Contract Definitization, in--
    (i) All UCAs;
    (ii) Solicitations associated with UCAs;
    (iii) Basic ordering agreements;
    (iv) Indefinite-delivery contracts;
    (v) Any other type of contract providing for the use of UCAs; and
    (vi) Unpriced change orders with an estimated value exceeding $5 
million.
    (2) Insert the applicable information in paragraphs (a), (b), and 
(d) of the clause.
    (3) If, at the time of entering into the UCA or unpriced change 
order, the contracting officer knows that the definitive contract action 
will meet the criteria of FAR 15.403-1, 15.403-2, or 15.403-3 for not 
requiring submission of cost or pricing data, the words ``and cost or 
pricing data'' may be deleted from paragraph (a) of the clause.

[75 FR 48277, Aug. 10, 2010]

            Subpart 217.75_Acquisition of Replenishment Parts



Sec. 217.7500  Scope of subpart.

    This subpart provides guidance on additional requirements related to 
acquisition of replenishment parts.

[56 FR 36345, July 31, 1991, as amended at 71 FR 27643, May 12, 2006]



Sec. 217.7501  Definition.

    Replenishment parts, as used in this subpart, means repairable or

[[Page 113]]

consumable parts acquired after the initial provisioning process.

[71 FR 27643, May 12, 2006]



Sec. 217.7502  General.

    Departments and agencies--
    (a) May acquire replenishment parts concurrently with production of 
the end item.
    (b) Shall provide for full and open competition when fully adequate 
drawings and any other needed data are available with the right to use 
for acquisition purposes (see part 227). However--
    (1) When data is not available for a competitive acquisition, use 
one of the procedures in PGI 217.7504.
    (2) Replenishment parts must be acquired so as to ensure the safe, 
dependable, and effective operation of the equipment. Where this 
assurance is not possible with new sources, competition may be limited 
to the original manufacturer of the equipment or other sources that have 
previously manufactured or furnished the parts as long as the action is 
justified. See 209.270 for requirements applicable to replenishment 
parts for aviation or ship critical safety items.
    (c) Shall follow the limitations on price increases in 217.7505.

[56 FR 36345, July 31, 1991, as amended at 69 FR 55989, Sept. 17, 2004. 
Redesignated and amended at 71 FR 27643, May 12, 2006; 73 FR 1827, Jan. 
10, 2008]



Sec. 217.7503  Spares acquisition integrated with production.

    Follow the procedures at PGI 217.7503 for acquiring spare parts 
concurrently with the end item.

[71 FR 27643, May 12, 2006]



Sec. 217.7504  Acquisition of parts when data is not available.

    Follow the procedures at PGI 217.7504 when acquiring parts for which 
the Government does not have the necessary data.

[71 FR 27643, May 12, 2006]



Sec. 217.7505  Limitations on price increases.

    This section provides implementing guidance for section 1215 of 
Public Law 98-94 (10 U.S.C. 2452 note).
    (a) The contracting officer shall not award, on a sole source basis, 
a contract for any centrally managed replenishment part when the price 
of the part has increased by 25 percent or more over the most recent 12-
month period.
    (1) Before computing the percentage difference between the current 
price and the prior price, adjust for quantity, escalation, and other 
factors necessary to achieve comparability.
    (2) Departments and agencies may specify an alternate percentage or 
percentages for contracts at or below the simplified acquisition 
threshold.
    (b) The contracting officer may award a contract for a part, the 
price of which exceeds the limitation in paragraph (a) of this section, 
if the contracting officer certifies in writing to the head of the 
contracting activity before award that--
    (1) The contracting officer has evaluated the price of the part and 
concluded that the price increase is fair and reasonable; or
    (2) The national security interests of the United States require 
purchase of the part despite the price increase.
    (c) The fact that a particular price has not exceeded the limitation 
in paragraph (a) of this section does not relieve the contracting 
officer of the responsibility for obtaining a fair and reasonable price.
    (d) Contracting officers may include a provision in sole source 
solicitations requiring that the offeror supply with its proposal, price 
and quantity data on any government orders for the replenishment part 
issued within the most recent 12 months.

[56 FR 36345, July 31, 1991, as amended at 64 FR 2598, Jan. 15, 1999. 
Redesignated at 71 FR 27643, May 12, 2006]



Sec. 217.7506  Spare parts breakout program.

    See PGI 217.7506 and DoD 4140.1-R, DoD Supply Chain Materiel 
Management Regulation, Chapter 8, Section C8.3, for spare parts breakout 
requirements.

[71 FR 27643, May 12, 2006]

[[Page 114]]

         Subpart 217.76_Contracts with Provisioning Requirements



Sec. 217.7601  Provisioning.

    (a) Follow the procedures at PGI 217.7601 for contracts with 
provisioning requirements.
    (b) For technical requirements of provisioning, see DoD 4140.1-R, 
DoD Supply Chain Materiel Management Regulation, Chapter 2, Section 
C2.2.

[71 FR 27643, May 12, 2006]

                   Subpart 217.77_Over and Above Work



Sec. 217.7701  Procedures.

    Follow the procedures at PGI 217.7701 when acquiring over and above 
work.

[71 FR 27643, May 12, 2006]



Sec. 217.7702  Contract clause.

    Use the clause at 252.217-7028, Over and Above Work, in 
solicitations and contracts containing requirements for over and above 
work, except as provided for in subpart 217.71.

 Subpart 217.78_Contracts or Delivery Orders Issued by a Non-DoD Agency

    Source: 70 FR 29642, May 24, 2005, unless otherwise noted.



Sec. 217.7800  Scope of subpart.

    This subpart--
    (a) Implements section 854 of the National Defense Authorization Act 
for Fiscal Year 2005 (Pub. L. 108-375), section 801 of the National 
Defense Authorization Act for Fiscal Year 2008 (Pub. L. 110-181), and 
section 806 of the National Defense Authorization Act for Fiscal Year 
2010 (Pub. L. 111-84); and
    (b) Prescribes policy for the acquisition of supplies and services 
through the use of contracts or orders issued by non-DoD agencies.

[70 FR 29642, May 24, 2005, as amended at 74 FR 34270, July 15, 2009; 75 
FR 32640, June 8, 2010]



Sec. 217.7801  Definitions.

    As used in this subpart--
    Acquisition official means--
    (1) A DoD contracting officer; or
    (2) Any other DoD official authorized to approve a direct 
acquisition or an assisted acquisition on behalf of DoD.
    Assisted acquisition means the type of interagency contracting 
through which acquisition officials of a non-DoD agency award a contract 
or a task or delivery order for the acquisition of supplies or services 
on behalf of DoD.
    Direct acquisition means the type of interagency contracting through 
which DoD orders a supply or service from a Governmentwide acquisition 
contract maintained by a non-DoD agency.
    Governmentwide acquisition contract means a task or delivery order 
contract that--
    (1) Is entered into by a non-defense agency; and
    (2) May be used as the contract under which property or services are 
procured for one or more other departments or agencies of the Federal 
Government.
    Non-DoD agency means any department or agency of the Federal 
Government other than DoD.
    Non-DoD agency that is an element of the intelligence community 
means the Office of the Director of National Intelligence; the Central 
Intelligence Agency; the intelligence elements of the Federal Bureau of 
Investigation; the intelligence elements of the Department of Energy; 
the Bureau of Intelligence and Research of the Department of State; the 
Office of Intelligence and Analysis of the Department of the Treasury; 
and the elements of the Department of Homeland Security concerned with 
the analysis of intelligence information, including the Office of 
Intelligence of the Coast Guard.

[74 FR 34270, July 15, 2009, as amended at 75 FR 6820, Feb. 11, 2010; 75 
FR 32640, June 8, 2010]



Sec. 217.7802  Policy.

    (a) A DoD acquisition official may place an order, make a purchase, 
or otherwise acquire supplies or services for DoD in excess of the 
simplified acquisition threshold through a non-DoD agency in any fiscal 
year only if the head of the non-DoD agency has certified that the non-
DoD agency will

[[Page 115]]

comply with defense procurement requirements for the fiscal year to 
include applicable DoD financial management regulations.
    (1) This limitation shall not apply to the acquisition of supplies 
and services during any fiscal year for which there is in effect a 
written determination of the Under Secretary of Defense for Acquisition, 
Technology, and Logistics, that it is necessary in the interest of DoD 
to acquire supplies and services through the non-DoD agency during the 
fiscal year. A written determination with respect to a non-DoD agency 
shall apply to any category of acquisitions through the non-DoD agency 
that is specified in the determination.
    (2) Non-DoD agency certifications and additional information are 
available at http://www.acq.osd.mil/dpap/cpic/cp/interagency--
acquisition.html.
    (3) The limitation in paragraph (a) of this section does not apply 
to contracts entered into by a non-DoD agency that is an element of the 
intelligence community for the performance of a joint program conducted 
to meet the needs of DoD and the non-DoD agency.
    (b) Departments and agencies shall establish and maintain procedures 
for reviewing and approving orders placed for supplies and services 
under non-DoD contracts, whether through direct acquisition or assisted 
acquisition, when the amount of the order exceeds the simplified 
acquisition threshold. These procedures shall include--
    (1) Evaluating whether using a non-DoD contract for the acquisition 
is in the best interest of DoD. Factors to be considered include--
    (i) Satisfying customer requirements;
    (ii) Schedule;
    (iii) Cost effectiveness (taking into account discounts and fees); 
and
    (iv) Contract administration (including oversight);
    (2) Determining that the tasks to be accomplished or supplies to be 
provided are within the scope of the contract to be used;
    (3) Reviewing funding to ensure that it is used in accordance with 
appropriation limitations;
    (4) Providing unique terms, conditions, and requirements to the 
assisting agency for incorporation into the order or contract as 
appropriate to comply with all applicable DoD-unique statutes, 
regulations, directives, and other requirements; and
    (5) Collecting and reporting data on the use of assisted acquisition 
for analysis. Follow the reporting requirements in Subpart 204.6.

[74 FR 34270, July 15, 2009, as amended at 75 FR 6820, Feb. 11, 2010; 75 
FR 32640, June 8, 2010]

                     PART 218_EMERGENCY ACQUISITIONS

            Subpart 218.1_Available Acquisition Flexibilities

Sec.

Sec. 218.170 Additional acquisition flexibilities.

            Subpart 218.2_Emergency Acquisition Flexibilities


Sec. 218.201 Contingency operation.

Sec. 218.202 Defense or recovery from certain attacks.

Sec. 218.203 Incidents of national significance, emergency declaration, 
          or major disaster declaration.

Sec. 218.270 Head of contracting activity determinations.

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

    Source: 72 FR 2632, Jan. 22, 2007, unless otherwise noted.

            Subpart 218.1_Available Acquisition Flexibilities



Sec. 218.170  Additional acquisition flexibilities.

    Additional acquisition flexibilities available to DoD are as 
follows:
    (a) Circumstances permitting other than full and open competition. 
Use of the authority at FAR 6.302-2, Unusual and compelling urgency, may 
be appropriate under certain circumstances. See PGI 206.302-2.
    (b) Use of advance Military Interdepartmental Purchase Request 
(MIPR). For urgent requirements, the advance MIPR may be transmitted 
electronically. See PGI 208.7004-3.
    (c) Use of the Governmentwide commercial purchase card. 
Governmentwide commercial purchase cards do not have to be used for 
purchases valued at or below the micro-purchase threshold if the place 
of performance is entirely

[[Page 116]]

outside the United States. See 213.270(c)(1).
    (d) Master agreement for repair and alteration of vessels. The 
contracting officer, without soliciting offers, may issue a written job 
order for emergency work to a contractor that has previously executed a 
master agreement, when delay would endanger a vessel, its cargo or 
stores, or when military necessity requires immediate work on a vessel. 
See 217.7103-4, 252.217-7010, and PGI 217.7103-4.
    (e) Spare parts breakout program. An urgent immediate buy need not 
be delayed if an evaluation of the additional information cannot be 
completed in time to meet the required delivery date. See PGI 217.7506, 
paragraph 1-105(e).
    (f) Storage and disposal of toxic and hazardous materials. Under 
certain emergency situations, exceptions apply with regard to the 
prohibition on storage or disposal of non-DoD-owned toxic or hazardous 
materials on DoD installations. See 223.7102(a)(3) and (7).
    (g) Authorization Acts, Appropriations Acts, and other statutory 
restrictions on foreign acquisition. Acquisitions in the following 
categories are not subject to the restrictions of 225.7002, Restrictions 
on food, clothing, fabrics, specialty metals, and hand or measuring 
tools: (1) Acquisitions at or below the simplified acquisition 
threshold; (2) Acquisitions outside the United States in support of 
combat operations; (3) Acquisitions of perishable foods by or for 
activities located outside the United States for personnel of those 
activities; (4) Acquisitions of food, specialty metals, or hand or 
measuring tools in support of contingency operations, or for which the 
use of other than competitive procedures has been approved on the basis 
of unusual and compelling urgency in accordance with FAR 6.302-2; (5) 
Emergency acquisitions by activities located outside the United States 
for personnel of those activities; and (6) Acquisitions by vessels in 
foreign waters. See 225.7002-2.
    (h) Rights in technical data. The agency head may notify a person 
asserting a restriction that urgent or compelling circumstances (e.g., 
emergency repair or overhaul) do not permit the Government to continue 
to respect the asserted restriction. See 227.7102-2; 227.7103-5; 
227.7103-13; 227.7104; 227.7203-13; 252.227-7013; 252.227-7014; 252.227-
7015; 252.227-7018; and 252.227-7037.
    (i) Tax exemption in Spain. If copies of a contract are not 
available and duty-free import of equipment or materials is urgent, the 
contracting officer may send the Joint United States Military Group 
copies of the Letter of Intent or a similar document indicating the 
pending award. See PGI 229.7001.
    (j) Electronic submission and processing of payment requests. 
Contractors do not have to submit payment requests in electronic form 
for awards made to foreign vendors for work performed outside the United 
States or for purchases to support unusual or compelling needs of the 
type described in FAR 6.302-2. See 232.7002(a)(2) and (5).
    (k) Mortuary services. In an epidemic or other emergency, the 
contracting activity may obtain services beyond the capacity of the 
contractor's facilities from other sources. See 237.7003(b) and 252.237-
7003.

            Subpart 218.2_Emergency Acquisition Flexibilities



Sec. 218.201  Contingency operation.

    (1) Selection, appointment, and termination of appointment. 
Contracting officer qualification requirements pertaining to a 
baccalaureate degree and 24 semester credit hours of business related 
courses do not apply to DoD employees or members of the armed forces who 
are in a contingency contracting force. See 201.603-2(2).
    (2) Policy for unique item identification. Contractors will not be 
required to provide DoD unique item identification if the items, as 
determined by the head of the agency, are to be used to support a 
contingency operation. See 211.274-2(b).
    (3) Use of the Governmentwide commercial purchase card. 
Governmentwide commercial purchase cards do not have to be used for 
purchases valued at or below the micro-purchase threshold if the 
purchase or payment is for an overseas transaction by a contracting 
officer in support of a contingency operation, or for training exercises 
in preparation for overseas contingency, humanitarian, or peacekeeping 
operations. See 213.270(c)(3) and (5).

[[Page 117]]

    (4) Governmentwide commercial purchase card. A contracting office 
supporting a contingency operation or a humanitarian or peacekeeping 
operation may use the Governmentwide commercial purchase card to make a 
purchase that exceeds the micro-purchase threshold but does not exceed 
the simplified acquisition threshold if certain conditions are met. See 
213.301(3).
    (5) Imprest funds and third party drafts. Imprest funds are 
authorized for use without further approval for overseas transactions at 
or below the micro-purchase threshold in support of a contingency 
operation or a humanitarian or peacekeeping operation. See 213.305-
3(d)(iii)(A).
    (6) Standard Form (SF) 44, Purchase Order-Invoice-Voucher. SF 44s 
may be used for purchases not exceeding the simplified acquisition 
threshold for overseas transactions by contracting officers in support 
of a contingency operation or a humanitarian or peacekeeping operation. 
See 213.306(a)(1)(B).
    (7) Undefinitized contract actions. The head of the agency may waive 
certain limitations for undefinitized contract actions if the head of 
the agency determines that the waiver is necessary to support a 
contingency operation or a humanitarian or peacekeeping operation. See 
217.7404-5(b).
    (8) Prohibited sources. DoD personnel are authorized to make 
emergency acquisitions in direct support of U.S. or allied forces 
deployed in military contingency, humanitarian, or peacekeeping 
operations in a country or region subject to economic sanctions 
administered by the Department of the Treasury, Office of Foreign Assets 
Control. See 225.701-70.
    (9) Authorization Acts, Appropriations Acts, and other statutory 
restrictions on foreign acquisition. Acquisitions in the following 
categories are not subject to the restrictions of 225.7002, Restrictions 
on food, clothing, fabrics, specialty metals, and hand or measuring 
tools: (1) Acquisitions at or below the simplified acquisition 
threshold; (2) Acquisitions outside the United States in support of 
combat operations; (3) Acquisitions of perishable foods by or for 
activities located outside the United States for personnel of those 
activities; (4) Acquisitions of food, specialty metals, or hand or 
measuring tools in support of contingency operations, or for which the 
use of other than competitive procedures has been approved on the basis 
of unusual and compelling urgency in accordance with FAR 6.302-2; (5) 
Emergency acquisitions by activities located outside the United States 
for personnel of those activities; and (6) Acquisitions by vessels in 
foreign waters. See 225.7002-2.
    (10) Electronic submission and processing of payment requests. 
Contractors do not have to submit payment requests in electronic form 
for contracts awarded by deployed contracting officers in the course of 
military operations, including contingency operations or humanitarian or 
peacekeeping operations. See 232.7002(a)(4).



Sec. 218.202  Defense or recovery from certain attacks.

    Policy for unique item identification. Contractors will not be 
required to provide DoD unique item identification if the items, as 
determined by the head of the agency, are to be used to facilitate 
defense against or recovery from nuclear, biological, chemical, or 
radiological attack. See 211.274-2(b).



Sec. 218.203  Incidents of national significance, emergency declaration, 
          or major disaster declaration.

    (1) Establishing or maintaining alternative sources. PGI contains a 
sample format for Determination and Findings citing the authority of FAR 
6.202(a), regarding exclusion of a particular source in order to 
establish or maintain an alternative source or sources. Alternate 2 of 
the sample format addresses having a supplier available for furnishing 
supplies or services in case of a national emergency. See PGI 206.202.
    (2) Electronic submission and processing of payment requests. 
Contractors do not have to submit payment requests in electronic form 
for contracts awarded by contracting officers in the conduct of 
emergency operations, such as responses to natural disasters or national 
or civil emergencies. See 232.7002(a)(4).

[[Page 118]]



Sec. 218.270  Head of contracting activity determinations.

    For contract actions supporting contingency operations or 
facilitating defense against or recovery from nuclear, biological, 
chemical, or radiological attack, the term ``head of the agency'' is 
replaced with ``head of the contracting activity,'' as defined in FAR 
2.101, in the following locations:
    (a) FAR 2.101:
    (1) Definition of ``Micro-purchase threshold,'' paragraph (3).
    (2) Definition of ``Simplified acquisition threshold.''
    (b) FAR 12.102(f).
    (c) FAR 13.201(g).
    (d) FAR 13.500(e).
    (e) FAR 18.2.

[74 FR 2407, Jan. 15, 2009]

[[Page 119]]

                   SUBCHAPTER D_SOCIOECONOMIC PROGRAMS

                    PART 219_SMALL BUSINESS PROGRAMS

Sec.

Sec. 219.000 Scope of part.

Sec. 219.001 Definitions.

                         Subpart 219.2_Policies


Sec. 219.201 General policy.

Sec. 219.202 Specific policies.

Sec. 219.202-5 Data collection and reporting requirements.

    Subpart 219.4_Cooperation With the Small Business Administration


Sec. 219.401 General.

               Subpart 219.5_Set-Asides for Small Business


Sec. 219.502 Setting aside acquisitions.

Sec. 219.502-1 Requirements for setting aside acquisitions.

Sec. 219.502-2 Total set-asides.

Sec. 219.502-3 Partial set-asides.

Sec. 219.505 Rejecting Small Business Administration recommendations.

     Subpart 219.6_Certificates of Competency and Determinations of 
                             Responsibility


Sec. 219.602 Procedures.

         Subpart 219.7_The Small Business Subcontracting Program


Sec. 219.702 Statutory requirements.

Sec. 219.703 Eligibility requirements for participating in the program.

Sec. 219.704 Subcontracting plan requirements.

Sec. 219.705 Responsibilities of the contracting officer under the 
          subcontracting assistance program.

Sec. 219.705-4 Reviewing the subcontracting plan.

Sec. 219.706 Responsibilities of the cognizant administrative 
          contracting officer.

Sec. 219.708 Contract clauses.

 Subpart 219.8_Contracting With the Small Business Administration (The 
                              8(a) Program)


Sec. 219.800 General.

Sec. 219.803 Selecting acquisitions for the 8(a) Program.

Sec. 219.804 Evaluation, offering, and acceptance.

Sec. 219.804-1 Agency evaluation.

Sec. 219.805 Competitive 8(a).

Sec. 219.805-1 General.

Sec. 219.805-2 Procedures.

Sec. 219.806 Pricing the 8(a) contract.

Sec. 219.808 Contract negotiations.

Sec. 219.808-1 Sole source.

Sec. 219.811 Preparing the contracts.

Sec. 219.811-3 Contract clauses.

   Subpart 219.10_Small Business Competitiveness Demonstration Program


Sec. 219.1005 Applicability.

Sec. 219.1007 Procedures.

  Subpart 219.11_Price Evaluation Adjustments for Small Disadvantaged 
                            Business Concerns


Sec. 219.1101 General.

Sec. 219.1102 Applicability.

    Subpart 219.12_Small Disadvantaged Business Participation Program


Sec. 219.1203 Incentive subcontracting with small disadvantaged business 
          concerns.

Sec. 219.1204 Solicitation provisions and contract clauses.

   Subpart 219.13_Historically Underutilized Business Zone (HUBZone) 
                                 Program


Sec. 219.1307 Price evaluation preference for HUBZone small business 
          concerns.

Subpart 219.70 [Reserved]

               Subpart 219.71_Pilot Mentor-Protege Program


Sec. 219.7100 Scope.

Sec. 219.7101 Policy.

Sec. 219.7102 General.

Sec. 219.7103 Procedures.

Sec. 219.7103-1 General.

Sec. 219.7103-2 Contracting officer responsibilities.

Sec. 219.7104 Developmental assistance costs eligible for reimbursement 
          or credit.

Sec. 219.7105 Reporting.

Sec. 219.7106 Performance reviews.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36353, July 31, 1991, unless otherwise noted.



Sec. 219.000  Scope of part.

    This part also implements 10 U.S.C. 2323, which--
    (1) Is applicable to DoD through fiscal year 2009; and

[[Page 120]]

    (2) Establishes goals for awards to small disadvantaged business 
(SDB) concerns, historically black colleges and universities (HBCUs), 
and minority institutions (MIs). See 226.370 for policy on contracting 
with HBCU/MIs.

[72 FR 20762, Apr. 26, 2007]



Sec. 219.001  Definitions.

    Small disadvantaged business concern is defined:
    (1) At FAR 52.219-23(a) (i.e., a firm is considered a small 
disadvantaged business (SDB) concern by receiving certification by the 
Small Business Administration and meeting the other listed criteria), 
except as specified in paragraph (2) of this definition.
    (2) At FAR 52.219-23(a) or 52.219-1(b)(2) for the following purposes 
(i.e., a firm is considered an SDB concern by either receiving 
certification by the Small Business Administration and meeting the other 
listed criteria or self-representing its status for general statistical 
purposes):
    (i) A higher customary progress payment rate for SDB concerns (see 
232.501-1(a)(i) and 252.232-7004(c)).
    (ii) A lower threshold for inclusion of customary progress payments 
in contracts with SDB concerns (see 232.502-1).
    (iii) The prompt payment policy for SDB concerns in 232. 903 and 
232.905(2).
    (iv) Reporting contract actions with SDB concerns in the Federal 
Procurement Data System (FPDS).

[63 FR 64429, Nov. 20, 1999, as amended at 74 FR 37645, July 29, 2009]

                         Subpart 219.2_Policies



Sec. 219.201  General policy.

    (d) For the defense agencies, the director of the Office of Small 
Business Programs must be appointed by, be responsible to, and report 
directly to the director or deputy director of the defense agency.
    (8) The responsibility for assigning small business technical 
advisors is delegated to the head of the contracting activity.
    (10) Contracting activity small business specialists perform this 
function by--
    (A) Reviewing and making recommendations for all acquisitions 
(including orders placed against Federal Supply Schedule contracts) over 
$10,000, except those under the simplified acquisition threshold that 
are totally set aside for small business concerns in accordance with FAR 
19.502-2. Follow the procedures at PGI 219.201(d)(10) regarding such 
reviews.
    (B) Making the review before issuance of the solicitation or 
contract modification and documenting it on DD Form 2579, Small Business 
Coordination Record; and
    (C) Referring recommendations that have been rejected by the 
contracting officer to the Small Business Administration (SBA) 
procurement center representative. If an SBA procurement center 
representative is not assigned, see FAR 19.402(a).
    (11) Also conduct annual reviews to assess--
    (A) The extent of consolidation of contract requirements that has 
occurred (see 207.170); and
    (B) The impact of those consolidations on the availability of small 
business concerns to participate in procurements as both contractors and 
subcontractors.
    (e) For information on the appointment and functions of small 
business specialists, see PGI 219.201(e).
    (f) The Directors, Office of Small Business Programs, of the 
military departments and defense agencies are responsible for 
determining whether use of the price evaluation adjustment to achieve a 
small disadvantaged business goal has caused non-SDB firms in a 
particular North American Industry Classification System Industry 
Subsector to bear an undue burden or other inappropriate effect. A copy 
of each determination shall be forwarded to the Office of Small Business 
Programs, Office of the Under Secretary of Defense (Acquisition, 
Technology, and Logistics), simultaneously with submittal to

[[Page 121]]

the Office of Federal Procurement Policy.

[56 FR 36353, July 31, 1991, as amended at 63 FR 41973, Aug. 6, 1998; 64 
FR 2598, Jan. 15, 1999; 65 FR 39705, June 27, 2000; 65 FR 50149, Aug. 
17, 2000; 65 FR 63807, Oct. 25, 2000; 69 FR 55987, Sept. 17, 2004; 71 FR 
44927, Aug. 8, 2006; 73 FR 46813, Aug. 12, 2008; 75 FR 45074, Aug. 2, 
2010]



Sec. 219.202  Specific policies.



Sec. 219.202-5  Data collection and reporting requirements.

    Determine the premium percentage to be entered in the Federal 
Procurement Data System (FPDS) as follows:
    (1) For small disadvantaged business or historically black college 
and university/minority institution set-asides, divide the difference 
between the fair market price and the award price by the fair market 
price.
    (2) For price evaluation adjustment awards (see FAR Subpart 19.11), 
divide the difference between the low responsive offer and the award 
price by the low responsive offer.
    (3) For partial small business set-asides with preferential 
consideration for small disadvantaged business concerns, divide the 
difference between the award price on the non-set-aside portion and the 
award price on the set-aside portion by the award price on the non-set-
aside portion.
    (b) Within 60 days after the end of each fiscal year, departments 
and agencies shall submit the report to the Secretary of Defense, who 
will report to the SBA on behalf of all DoD departments and agencies. 
Reports must include--
    (i) Justification for failure to meet goals established by the 
Office of the Secretary of Defense; and
    (ii) Planned actions for increasing participation by such firms in 
future contract awards.

[56 FR 36353, July 31, 1991, as amended at 63 FR 41973, Aug. 6, 1998; 65 
FR 63804, Oct. 25, 2000; 74 FR 37645, July 29, 2009]

    Subpart 219.4_Cooperation With the Small Business Administration



Sec. 219.401  General.

    (b) The contracting activity small business specialist is the 
primary activity focal point for interface with the SBA.

               Subpart 219.5_Set-Asides for Small Business



Sec. 219.502  Setting aside acquisitions.



Sec. 219.502-1  Requirements for setting aside acquisitions.

    Do not set aside acquisitions for--
    (1) Supplies which were developed and financed, in whole or in part, 
by Canadian sources under the U.S.-Canadian Defense Development Sharing 
Program; or
    (2) Architect-engineer services for military construction or family 
housing projects of $350,000 or more (10 U.S.C. 2855), including 
indefinite delivery and indefinite quantity contracts if the value of 
all anticipated orders is expected to total $350,000 or more.

[58 FR 28465, May 13, 1993, as amended at 69 FR 31909, June 8, 2004; 75 
FR 45074, Aug. 2, 2010]



Sec. 219.502-2  Total set-asides.

    (a) Unless the contracting officer determines that the criteria for 
set-aside cannot be met, set aside for small business concerns 
acquisitions for--
    (i) Construction, including maintenance and repairs, under $2.5 
million;
    (ii) Dredging under $1.5 million; and
    (iii) Architect-engineer services for military construction or 
family housing projects of under $350,000.

[58 FR 28465, May 13, 1993, as amended at 69 FR 31909, June 8, 2004; 71 
FR 75892, Dec. 19, 2006; 75 FR 45074, Aug. 2, 2010]



Sec. 219.502-3  Partial set-asides.

    (c)(1) If the North American Industry Classification System Industry 
Subsector of the acquisition is one in which use of a price evaluation 
adjustment for small disadvantaged business concerns is currently 
authorized (see FAR 19.201(b)), apply the adjustment to the non-set-
aside portion.

[65 FR 50149, Aug. 17, 2000]



Sec. 219.505  Rejecting Small Business Administration recommendations.

    (b) The designee shall be at a level no lower than chief of the 
contracting office.

[[Page 122]]

     Subpart 219.6_Certificates of Competency and Determinations of 
                             Responsibility



Sec. 219.602  Procedures.

    When making a nonresponsibility determination for a small business 
concern, follow the procedures at PGI 219.602.

[72 FR 20762, Apr. 26, 2007]

         Subpart 219.7_The Small Business Subcontracting Program



Sec. 219.702  Statutory requirements.

    (1) Section 834 of Public Law 101-189, as amended (15 U.S.C. 637 
note), requires DoD to establish a test program to determine whether 
comprehensive subcontracting plans on a corporate, division, or plant-
wide basis will reduce administrative burdens while enhancing 
subcontracting opportunities for small and small disadvantaged business 
concerns. See PGI 219.702 for the requirements of the test program.
    (2) Comprehensive subcontracting plans shall not be subject to 
application of liquidated damages during the period of the test program 
(Section 402, Pub. L. 101-574).

[72 FR 20762, Apr. 26, 2007]



Sec. 219.703  Eligibility requirements for participating in the program.

    (a) Qualified nonprofit agencies for the blind and other severely 
disabled, that have been approved by the Committee for Purchase from 
People Who Are Blind or Severely Disabled under the Javits-Wagner-O'Day 
Act (41 U.S.C. 46-48), are eligible to participate in the program as a 
result of 10 U.S.C. 2410d and Section 9077 of Pub. L. 102-396 and 
similar sections in subsequent Defense appropriations acts. Under this 
authority, subcontracts awarded to such entities may be counted toward 
the prime contractor's small business subcontracting goal.
    (2)(A) To be eligible as an SDB subcontractor, a concern must meet 
the definition in 219.001.
    (B) To be eligible as a historically black college or university or 
minority institution subcontractor, such entity must meet the definition 
in the clause at 252.219-7003, Small Business Subcontracting Plan (DoD 
Contracts).
    (b) A contractor may also rely on the written representation as to 
status of--
    (i) A historically black college or university or minority 
institution; or
    (ii) A qualified nonprofit agency for the blind or other severely 
disabled approved by the Committee for Purchase from People Who Are 
Blind or Severely Disabled.

[57 FR 42630, Sept. 15, 1992, as amended at 58 FR 28465, May 13, 1993; 
60 FR 13075, Mar. 10, 1995; 60 FR 41157, Aug. 11, 1995; 60 FR 61596, 
Nov. 30, 1995; 61 FR 50535, Sept. 26, 1996; 63 FR 11530, Mar. 9, 1998; 
63 FR 41974, Aug. 6, 1998; 64 FR 51076, Sept. 21, 1999; 64 FR 62986, 
Nov. 18, 1999; 72 FR 20762, Apr. 26, 2007]



Sec. 219.704  Subcontracting plan requirements.

    (1) The goal for use of small disadvantaged business concerns shall 
include subcontracts with historically black colleges and universities 
and minority institutions (see Subpart 226.70), in addition to 
subcontracts with small disadvantaged business concerns. Subcontracts 
with historically black colleges and universities and minority 
institutions do not have to be included in the small disadvantaged 
business goal in commercial items subcontracting plans.
    (2) In those subcontracting plans which specifically identify small 
businesses, prime contractors shall notify the administrative 
contracting officer of any substitutions of firms that are not small 
business firms, for the small business firms specifically identified in 
the subcontracting plan. Notifications shall be in writing and shall 
occur within a reasonable period of time after award of the subcontract. 
Contractor-specified formats shall be acceptable.
    (3) See 215.304 for evaluation of offers in acquisitions that 
require a subcontracting plan.

[72 FR 20762, Apr. 26, 2007]

[[Page 123]]



Sec. 219.705  Responsibilities of the contracting officer under the 
          subcontracting assistance program.



Sec. 219.705-4  Reviewing the subcontracting plan.

    (d) Challenge any subcontracting plan that does not contain positive 
goals and consider the extent to which an offeror plans to use 
competition restricted to historically black colleges and universities 
or minority institutions. A small disadvantaged business goal of less 
than five percent must be approved one level above the contracting 
officer.

[56 FR 36353, July 31, 1991, as amended at 63 FR 41974, Aug. 6, 1998; 69 
FR 67855, Nov. 22, 2004]



Sec. 219.706  Responsibilities of the cognizant administrative 
          contracting officer.

    (a)(i) The contract administration office also is responsible for 
reviewing, evaluating, and approving master subcontracting plans.
    (ii) The small business specialist supports the administrative 
contracting officer in evaluating a contractor's performance and 
compliance with its subcontracting plan.



Sec. 219.708  Contract clauses.

    (b)(1)(A) Use the clause at 252.219-7003, Small Business 
Subcontracting Plan (DoD Contracts), in solicitations and contracts that 
contain the clause at FAR 52.219-9, Small Business Subcontracting Plan.
    (B) In contracts with contractors that have comprehensive 
subcontracting plans approved under the test program described in 
219.702, use the clause at 252.219-7004, Small Business Subcontracting 
Plan (Test Program), instead of the clauses at 252.219-7003, Small 
Business Subcontracting Plan (DoD Contracts), and FAR 52.219-9, Small 
Business Subcontracting Plan.
    (2) In contracts with contractors that have comprehensive 
subcontracting plans approved under the test program described in 
219.702, do not use the clause at FAR 52.219-16, Liquidated Damages--
Subcontracting Plan.
    (c)(1) Do not use the clause at FAR 52.219-10, Incentive 
Subcontracting Program, in contracts with contractors that have 
comprehensive subcontracting plans approved under the test program 
described in 219.702.

[56 FR 36353, July 31, 1991, as amended at 56 FR 67213, Dec. 30, 1991; 
61 FR 39901, July 31, 1996; 63 FR 64429, Nov. 20, 1998; 65 FR 52952, 
Aug. 31, 2000; 72 FR 20762, Apr. 26, 2007; 74 FR 34265, July 15, 2009]

 Subpart 219.8_Contracting With the Small Business Administration (The 
                              8(a) Program)



Sec. 219.800  General.

    (a) By Partnership Agreement (PA) between the Small Business 
Administration (SBA) and the Department of Defense (DoD), the SBA has 
delegated to the Under Secretary of Defense (Acquisition, Technology, 
and Logistics) its authority under paragraph 8(a)(1)(A) of the Small 
Business Act (15 U.S.C. 637(a)) to enter into 8(a) prime contracts, and 
its authority under 8(a)(1)(B) of the Small Business Act to award the 
performance of those contracts to eligible 8(a) Program participants. 
However, the SBA remains the prime contractor on all 8(a) contracts, 
continues to determine eligibility of concerns for contract award, and 
retains appeal rights under FAR 19.810. The SBA delegates only the 
authority to sign contracts on its behalf. Consistent with the 
provisions of the PA, this authority is hereby redelegated to DoD 
contracting officers. A copy of the PA, which includes the PA's 
expiration date, is available at PGI 219.800.
    (b) Contracts awarded under the PA may be awarded directly to the 
8(a) participant on either a sole source or competitive basis. An SBA 
signature on the contract is not required.
    (c) Notwithstanding the PA, the contracting officer may elect to 
award a contract pursuant to the provisions of FAR Subpart 19.8.

[67 FR 11436, Mar. 14, 2002, as amended at 72 FR 20762, Apr. 26, 2007]



Sec. 219.803  Selecting acquisitions for the 8(a) Program.

    When selecting acquisitions for the 8(a) Program, follow the 
procedures at PGI 219.803.

[72 FR 20762, Apr. 26, 2007]

[[Page 124]]



Sec. 219.804  Evaluation, offering, and acceptance.

    When processing requirements under the PA, follow the procedures at 
PGI 219.804.

[72 FR 20762, Apr. 26, 2007]



Sec. 219.804-1  Agency evaluation.

    (f) The 8(a) firms should be offered the opportunity to give a 
technical presentation.

[63 FR 41974, Aug. 6, 1998]



Sec. 219.805  Competitive 8(a).



Sec. 219.805-1  General.

    (b)(2)(A) For acquisitions that exceed the competitive threshold, 
the SBA also may accept the requirement for a sole source 8(a) award on 
behalf of a small business concern owned by a Native Hawaiian 
Organization (Section 8020 of Pub. L. 109-148).
    (B) Native Hawaiian Organization, as used in this subsection and as 
defined by 15 U.S.C. 637(a)(15) and 13 CFR 124.3, means any community 
service organization serving Native Hawaiians in the State of Hawaii--
    (1) That is a not-for-profit organization chartered by the State of 
Hawaii;
    (2) That is controlled by Native Hawaiians; and
    (3) Whose business activities will principally benefit such Native 
Hawaiians.

[70 FR 43073, July 26, 2005, as amended at 71 FR 34832, June 16, 2006]



Sec. 219.805-2  Procedures.

    When processing requirements under the PA, follow the procedures at 
PGI 219.805-2 for requesting eligibility determinations.

[72 FR 20762, Apr. 26, 2007]



Sec. 219.806  Pricing the 8(a) contract.

    For requirements processed under the PA cited in 219.800--
    (1) The contracting officer shall obtain cost or pricing data from 
the 8(a) contractor, if required by FAR subpart 15.4; and
    (2) SBA concurrence in the negotiated price is not required. 
However, except for purchase orders not exceeding the simplified 
acquisition threshold, the contracting officer shall notify the SBA 
prior to withdrawing a requirement from the 8(a) Program due to failure 
to agree on price or other terms and conditions.

[63 FR 33588, June 19, 1998, as amended at 67 FR 11437, Mar. 14, 2002; 
67 FR 49256, July 30, 2002]



Sec. 219.808  Contract negotiations.



Sec. 219.808-1  Sole source.

    For sole source requirements processed under the PA, follow the 
procedures at PGI 219.808-1.

[72 FR 20762, Apr. 26, 2007]



Sec. 219.811  Preparing the contracts.

    When preparing awards under the PA, follow the procedures at PGI 
219.811.

[72 FR 20762, Apr. 26, 2007]



Sec. 219.811-3  Contract clauses.

    (1) Use the clause at 252.219-7009, Section 8(a) Direct Award, 
instead of the clauses at FAR 52.219-11, Special 8(a) Contract 
Conditions, FAR 52.219-12, Special 8(a) Subcontract Conditions, and FAR 
52.219-17, Section 8(a) Award, in solicitations and contracts processed 
in accordance with the PA cited in 219.800.
    (2) Use the clause at FAR 52.219-18, Notification of Competition 
Limited to Eligible 8(a) Concerns, with 252.219-7010, Alternate A, in 
solicitations and contracts processed in accordance with the PA cited in 
219.800.
    (3) Use the clause at 252.219-7011, Notification to Delay 
Performance, in solicitations and purchase orders issued under the PA 
cited in 219.800.

[63 FR 33588, June 19, 1998, as amended at 67 FR 11437, Mar. 14, 2002; 
72 FR 20762, Apr. 26, 2007]

   Subpart 219.10_Small Business Competitiveness Demonstration Program



Sec. 219.1005  Applicability.

    (a)(i) Architect-engineering services in support of military 
construction projects or military family housing projects are exempt 
from the Small

[[Page 125]]

Business Competitiveness Demonstration Program, except for the emerging 
small business (ESB) set-aside requirements. Accordingly, these shall--
    (A) Be reviewed for possible award under the 8(a) Program regardless 
of dollar value.
    (B) Not be set aside for small business if the estimated value is 
$350,000 or more (including indefinite delivery-indefinite quantity 
contracts if the value of all anticipated orders exceeds $350,000).
    (C) Be considered for ESB set-aside if the estimated value is both 
less than the emerging small business reserve amount and less than 
$350,000.
    (D) Be considered for small business set-aside if the estimated 
value is less than $350,000, regardless of whether small business set-
asides for other architect-engineer services are prohibited under the 
Small Business Competitiveness Demonstration Program, when an ESB set-
aside is not appropriate.
    (ii) All requirements of the Small Business Competitiveness 
Demonstration Program apply to architect-engineer services in support of 
other than military construction projects or military housing objects, 
which otherwise meet criteria in FAR subpart 19.10.
    (b) The targeted industry categories for DoD are:

------------------------------------------------------------------------
    North American Industry Classification System (NAICS)        NAICS
                         Description                              Code
------------------------------------------------------------------------
(1) Pharmaceutical Preparation Manufacturing.................     325412
(2) Ammunition (except Small Arms) Manufacturing.............     332993
(3) Other Ordnance and Accessories Manufacturing.............     332995
(4) Turbine and Turbine Generator Set Unit Manufacturing.....     333611
(5) Aircraft Engine and Engine Parts Manufacturing (including     336412
 Research and Development)...................................
(6) Guided Missile and Space Vehicle Manufacturing (including     336414
 Research and Development)...................................
(7) Other Guided Missile and Space Vehicle Parts and              336419
 Auxiliary Equipment Manufacturing (including Research and
 Development)................................................
(8) Military Armored Vehicle, Tank and Tank Component             336992
 Manufacturing...............................................
(9) Search and Navigation System and Instrument Manufacturing     334511
(10) (i) Cellular and Other Wireless Telecommunications......     517212
    (ii) Satellite Telecommunications........................     517410
    (iii) Other Telecommunications...........................     517910
------------------------------------------------------------------------


[56 FR 36353, July 31, 1991, as amended at 59 FR 27670, May 27, 1994; 62 
FR 34122, June 24, 1997; 63 FR 41974, Aug. 6, 1998; 65 FR 50149, Aug. 
17, 2000; 66 FR 49861, Oct. 1, 2001; 68 FR 50476, Aug. 21, 2003; 69 FR 
31909, June 8, 2004; 75 FR 45074, Aug. 2, 2010]



Sec. 219.1007  Procedures.

    (a)(2) When it is not practical to mark the face page of an award 
document, alternative means may be used to identify the contract as an 
award under the Small Business Competitiveness Demonstration Program.
    (b)(1) The Director, Small Business Programs, Office of the Under 
Secretary of Defense (Acquisition, Technology, and Logistics) 
(OUSD(AT&L)), will determine whether reinstatement of small business 
set-asides is necessary to meet the agency goal and will recommend 
reinstatement to the Director of Defense Procurement and Acquisition 
Policy (OUSD(AT&L)). Military departments and defense agencies shall not 
reinstate small business set-asides unless directed by the Director of 
Defense Procurement and Acquisition Policy.
    (d) Reporting requirements are at 204.670-2.

[65 FR 39705, June 27, 2000, as amended at 68 FR 7439, Feb. 14, 2003; 70 
FR 6374, Feb. 7, 2005; 73 FR 46813, Aug. 12, 2008]

   Subpart 219.11_Price Evaluation Adjustment for Small Disadvantaged 
                            Business Concerns



Sec. 219.1101  General.

    The determination to use or suspend the price evaluation adjustment 
for DoD acquisitions can be found at http://www.acq.osd.mil/dpap/dars/
classdev/index.htm.

[72 FR 20763, Apr. 26, 2007]

[[Page 126]]



Sec. 219.1102  Applicability.

    (b) The price evaluation adjustment also shall not be used in 
acquisitions that are for commissary or exchange resale.
    (c) Also, do not use the price evaluation adjustment in acquisitions 
that use tiered evaluation of offers, until a tier is reached that 
considers offers from other than small business concerns.

[63 FR 41974, Aug. 6, 1998, as amended at 71 FR 53043, Sept. 8, 2006]

    Subpart 219.12_Small Disadvantaged Business Participation Program

    Source: 63 FR 64429, Nov. 20, 1998, unless otherwise noted.



Sec. 219.1203  Incentive subcontracting with small disadvantaged 
          business concerns.

    The contracting officer shall encourage increased subcontracting 
opportunities for SDB concerns in negotiated acquisitions by providing 
monetary incentives in the North American Industry Classification System 
Industry Subsectors for which use of an evaluation factor or subfactor 
for participation of SDB concerns is currently authorized (see FAR 
19.201(b)). Incentives for exceeding SDB subcontracting targets shall be 
paid only if an SDB subcontracting target was exceeded as a result of 
actual subcontract awards to SDBs, and not a result of developmental 
assistance credit under the Pilot Mentor-Prot[eacute]g[eacute] Program 
(see Subpart 219.71).

[63 FR 64429, Nov. 20, 1998, as amended at 65 FR 50149, Aug. 17, 2000]



Sec. 219.1204  Solicitation provisions and contract clauses.

    (c) The contracting officer shall, when contracting by negotiation, 
insert in solicitations and contracts containing the clause at FAR 
52.219-25, Small Disadvantaged Business Participation Program-
Disadvantaged Status and Reporting, a clause substantially the same as 
the clause at FAR 52.219-26, Small Disadvantaged Business Participation 
Program-Incentive Subcontracting, when authorized (see FAR 19.1203). The 
contracting officer may include an award fee provision in lieu of the 
incentive; in such cases, however, the contracting officer shall not use 
the clause at FAR 52.219-26. Do not use award fee provisions in 
contracts with contractors that have comprehensive subcontracting plans 
approved under the test program described in 219.702.

[63 FR 64429, Nov. 20, 1998, as amended at 74 FR 34265, July 15, 2009]

   Subpart 219.13_Historically Underutilized Business Zone (HUBZone) 
                                 Program



Sec. 219.1307  Price evaluation preference for HUBZone small business 
          concerns.

    (a) Also, do not use the price evaluation preference in acquisitions 
that use tiered evaluation of offers, until a tier is reached that 
considers offers from other than small business concerns.

[71 FR 53043, Sept. 8, 2006]

Subpart 219.70 [Reserved]

               Subpart 219.71_Pilot Mentor-Protege Program

    Source: 65 FR 6555, Feb. 10, 2000, unless otherwise noted.



Sec. 219.7100  Scope.

    This subpart implements the Pilot Mentor-Prot[eacute]g[eacute] 
Program (hereafter referred to as the ``Program'') established under 
Section 831 of the National Defense Authorization Act for Fiscal Year 
1991 (Public Law 101-510; 10 U.S.C. 2302 note). The purpose of the 
Program is to provide incentives for DoD contractors to assist protege 
firms in enhancing their capabilities and to increase participation of 
such firms in Government and commercial contracts.

[66 FR 47108, Sept. 11, 2001, as amended at 69 FR 74995, Dec. 15, 2004]

[[Page 127]]



Sec. 219.7101  Policy.

    DoD policy and procedures for implementation of the Program are 
contained in Appendix I, Policy and Procedures for the DoD Pilot Mentor-
Protege Program.



Sec. 219.7102  General.

    The Program includes--
    (a) Mentor firms that are prime contractors with at least one active 
subcontracting plan negotiated under FAR Subpart 19.7 or under the DoD 
Comprehensive Subcontracting Test Program.
    (b) Protege firms that are--
    (1)(i) small disadvantaged business concerns as defined at 
219.001(1);
    (ii) Business entities owned and controlled by an Indian tribe;
    (iii) business entities owned and controlled by a Native Hawaiian 
Organization;
    (iv) Qualified organizations employing the severely disabled;
    (v) Women-owned small business concerns;
    (vi) Service-disabled veteran-owned small business concerns; or
    (vii) HUBZone small business concerns;
    (2) Eligible for receipt of Federal contracts; and
    (3) Selected by the mentor firm.
    (c) Mentor-protege agreements that establish a developmental 
assistance program for a protege firm.
    (d) Incentives that DoD may provide to mentor firms, including--
    (1) Reimbursement for developmental assistance costs through--
    (i) A separately priced contract line item on a DoD contract; or
    (ii) A separate contract, upon written determination by the 
cognizant Component Director, Small Business Programs (SBP), that 
unusual circumstances justify reimbursement using a separate contract; 
or
    (2) Credit toward applicable subcontracting goals, established under 
a subcontracting plan negotiated under FAR Subpart 19.7 or under the DoD 
Comprehensive Subcontracting Test Program, for developmental assistance 
costs that are not reimbursed.

[65 FR 6555, Feb. 10, 2000; 65 FR 30191, May 10, 2000, as amended at 66 
FR 47108, Sept. 11, 2001; 69 FR 74995, Dec. 15, 2004; 70 FR 29645, May 
24, 2005; 73 FR 46813, Aug. 12, 2008]



Sec. 219.7103  Procedures.



Sec. 219.7103-1  General.

    The procedures for application, acceptance, and participation in the 
Program are in Appendix I, Policy and Procedures for the DoD Pilot 
Mentor-Prot[eacute]g[eacute] Program. The Director, SBP, of each 
military department or defense agency has the authority to approve 
contractors as mentor firms, approve mentor-prot[eacute]g[eacute] 
agreements, and forward approved mentor-prot[eacute]g[eacute] agreements 
to the contracting officer when funding is available.

[69 FR 74995, Dec. 15, 2004, as amended by 73 FR 46813, Aug. 12, 2008]



Sec. 219.7103-2  Contracting officer responsibilities.

    Contracting officers must--
    (a) Negotiate an advance agreement on the treatment of developmental 
assistance costs for either credit or reimbursement if the mentor firm 
proposes such an agreement, or delegate authority to negotiate to the 
administrative contracting officer (see FAR 31.109).
    (b) Modify (without consideration) applicable contract(s) to 
incorporate the clause at 252.232-7005, Reimbursement of Subcontractor 
Advance Payments--DoD Pilot Mentor-Protege Program, when a mentor firm 
provides advance payments to a protege firm under the Program and the 
mentor firm requests reimbursement of advance payments.
    (c) Modify (without consideration) applicable contract(s) to 
incorporate other than customary progress payments for protege firms in 
accordance with FAR 32.504(c) if a mentor firm provides such payments to 
a protege firm and the mentor firm requests reimbursement.
    (d) Modify applicable contract(s) to establish a contract line item 
for reimbursement of developmental assistance costs if--
    (1) A DoD program manager or the cognizant Component Director, SBP,

[[Page 128]]

has made funds available for that purpose; and
    (2) The contractor has an approved mentor-prot[eacute]g[eacute] 
agreement.
    (e) Negotiate and award a separate contract for reimbursement of 
developmental assistance costs only if--
    (1) Funds are available for that purpose;
    (2) The contractor has an approved mentor-prot[eacute]g[eacute] 
agreement; and
    (3) The cognizant Component Director, SBP, has made a determination 
in accordance with 219.7102(d)(1)(ii).
    (f) Not authorize reimbursement for costs of assistance furnished to 
a prot[eacute]g[eacute] firm in excess of $1,000,000 in a fiscal year 
unless a written determination from the cognizant Component Director, 
SBP, is obtained.
    (g) Advise contractors of reporting requirements in Appendix I.
    (h) Provide a copy of the approved Mentor-Protege agreement to the 
Defense Contract Management Agency administrative contracting officer 
responsible for conducting the annual performance review (see appendix 
I, section I-113).

[65 FR 6555, Feb. 10, 2000; 65 FR 30191, May 10, 2000, as amended at 65 
FR 50150, Aug. 17, 2000; 66 FR 47109, Sept. 11, 2001; 69 FR 74995, Dec. 
15, 2004; 73 FR 46814, Aug. 12, 2008]



Sec. 219.7104  Developmental assistance costs eligible for reimbursement 
          or credit.

    (a) Developmental assistance provided under an approved mentor-
protege agreement is distinct from, and must not duplicate, any effort 
that is the normal and expected product of the award and administration 
of the mentor firm's subcontracts. The mentor firm must accumulate and 
charge costs associated with the latter in accordance with its approved 
accounting practices. Mentor firm costs that are eligible for 
reimbursement are set forth in appendix I.
    (b) Before incurring any costs under the Program, mentor firms must 
establish the accounting treatment of developmental assistance costs 
eligible for reimbursement or credit. Advance agreements are encouraged. 
To be eligible for reimbursement under the Program, the mentor firm must 
incur the costs before October 1, 2013.
    (c) If the mentor firm is suspended or debarred while performing 
under an approved mentor-protege agreement, the mentor firm may not be 
reimbursed or credited for developmental assistance costs incurred more 
than 30 days after the imposition of the suspension or debarment.
    (d) Developmental assistance costs incurred by a mentor firm before 
October 1, 2013, that are eligible for crediting under the Program, may 
be credited toward subcontracting plan goals as set forth in appendix I.

[65 FR 6555, Feb. 10, 2000; 65 FR 30191, May 10, 2000, as amended at 67 
FR 77937, Dec. 20, 2002; 70 FR 29645, May 24, 2005]



Sec. 219.7105  Reporting.

    Mentor and protege firms must report on the progress made under 
mentor-protege agreements as indicated in appendix I, section I-112.

[65 FR 6555, Feb. 10, 2000, as amended at 69 FR 74996, Dec. 15, 2004]



Sec. 219.7106  Performance reviews.

    The Defense Contract Management Agency will conduct annual 
performance reviews of all mentor-protege agreements as indicated in 
appendix I, section I-113. The determinations made in these reviews 
should be a major factor in determinations of amounts of reimbursement, 
if any, that the mentor firm is eligible to receive in the remaining 
years of the Program participation term under the agreement.

[65 FR 50150, Aug. 17, 2000, as amended at 69 FR 74996, Dec. 15, 2004]

      PART 222_APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

Sec.

Sec. 222.001 Definitions.

                   Subpart 222.1_Basic Labor Policies


Sec. 222.101 Labor relations.

Sec. 222.101-1 General.

Sec. 222.101-3 Reporting labor disputes.

Sec. 222.101-3-70 Impact of labor disputes on defense programs.

Sec. 222.101-4 Removal of items from contractors' facilities affected by 
          work stoppages.

Sec. 222.101-70 Acquisition of stevedoring services during labor 
          disputes.

[[Page 129]]


Sec. 222.102 Federal and State labor requirements.

Sec. 222.102-1 Policy.

Sec. 222.103 Overtime.

Sec. 222.103-4 Approvals.

       Subpart 222.3_Contract Work Hours and Safety Standards Act


Sec. 222.302 Liquidated damages and overtime pay.

   Subpart 222.4_Labor Standards for Contracts Involving Construction


Sec. 222.402 Applicability.

Sec. 222.402-70 Installation support contracts.

Sec. 222.403 Statutory and regulatory requirements.

Sec. 222.403-4 Department of Labor regulations.

Sec. 222.404 Davis-Bacon Act wage determinations.

Sec. 222.404-2 General requirements.

Sec. 222.406 Administration and enforcement.

Sec. 222.406-1 Policy.

Sec. 222.406-6 Payrolls and statements.

Sec. 222.406-8 Investigations.

Sec. 222.406-9 Withholding from or suspension of contract payments.

Sec. 222.406-10 Disposition of disputes concerning construction contract 
          labor standards enforcement.

Sec. 222.406-13 Semiannual enforcement reports.

             Subpart 222.6_Walsh-Healey Public Contracts Act


Sec. 222.604 Exemptions.

Sec. 222.604-2 Regulatory exemptions.

               Subpart 222.8_Equal Employment Opportunity


Sec. 222.806 Inquiries.

Sec. 222.807 Exemptions.

         Subpart 222.10_Service Contract Act of 1965, as Amended


Sec. 222.1003 Applicability.

Sec. 222.1003-1 General.

Sec. 222.1008 Procedures for obtaining wage determinations.

Sec. 222.1008-1 Obtaining wage determinations.

 Subpart 222.13_Special Disabled Veterans, Veterans of the Vietnam Era, 
                       and Other Eligible Veterans


Sec. 222.1305 Waivers.

Sec. 222.1308 Complaint procedures.

Sec. 222.1310 Solicitation provision and contract clauses.

              Subpart 222.14_Employment of the Handicapped


Sec. 222.1403 Waivers.

Sec. 222.1406 Complaint procedures.

             Subpart 222.17_Combating Trafficking in Persons


Sec. 222.1703 Policy.

Sec. 222.1704 Violations and remedies.

 Subpart 222.70_Restrictions on the Employment of Personnel for Work on 
       Construction and Service Contracts in Noncontiguous States


Sec. 222.7000 Scope of subpart.

Sec. 222.7001 Definition.

Sec. 222.7002 General.

Sec. 222.7003 Waivers.

Sec. 222.7004 Contract clause.

           Subpart 222.71_Right of First Refusal of Employment


Sec. 222.7101 Policy.

Sec. 222.7102 Contract clause.

    Subpart 222.72_Compliance with Labor Laws of Foreign Governments


Sec. 222.7201 Contract clauses.

  Subpart 222.73_Limitations Applicable to Contracts Performed on Guam


Sec. 222.7300 Scope of subpart.

Sec. 222.7301 Prohibition on use of nonimmigrant aliens.

Sec. 222.7302 Contract clause.

    Subpart 222.74_Restrictions on the Use of Mandatory Arbitration 
                               Agreements


Sec. 222.7400 Scope of subpart.

Sec. 222.7401 Policy.

Sec. 222.7402 Applicability.

Sec. 222.7403 Waiver.

Sec. 222.7404 Contract clause.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36358, July 31, 1991, unless otherwise noted.



Sec. 222.001  Definitions.

    Labor advisor, as used in this part, means the departmental or 
agency headquarters labor advisor.

[56 FR 36358, July 31, 1991, as amended at 72 FR 20763, Apr. 26, 2007]

[[Page 130]]

                   Subpart 222.1_Basic Labor Policies



Sec. 222.101  Labor relations.



Sec. 222.101-1  General.

    Follow the procedures at PGI 222.101-1 for referral of labor 
relations matters to the appropriate authorities.

[71 FR 18670, Apr. 12, 2006]



Sec. 222.101-3  Reporting labor disputes.

    Follow the procedures at PGI 222.101-3 for reporting labor disputes.

[71 FR 18670, Apr. 12, 2006]



Sec. 222.101-3-70  Impact of labor disputes on defense programs.

    (a) Each department and agency shall determine the degree of impact 
of potential or actual labor disputes on its own programs and 
requirements. For guidance on determining the degree of impact, see PGI 
222.101-3-70(a).
    (b) Each contracting activity shall obtain and develop data 
reflecting the impact of a labor dispute on its requirements and 
programs. Upon determining that the impact of the labor dispute is 
significant, the head of the contracting activity shall submit a report 
of findings and recommendations to the labor advisor in accordance with 
departmental procedures. This reporting requirement is assigned Report 
Control Symbol DD-AT&L(AR)1153 and must include the information 
specified at PGI 222.101-3-70(b).

[71 FR 18670, Apr. 12, 2006]



Sec. 222.101-4  Removal of items from contractors' facilities affected 
          by work stoppages.

    (a) When a contractor is unable to deliver urgent and critical items 
because of a work stoppage at its facility, the contracting officer, 
before removing any items from the facility, shall--
    (i) Before initiating any action, contact the labor advisor to 
obtain the opinion of the national office of the Federal Mediation and 
Conciliation Service or other mediation agency regarding the effect 
movement of the items would have on labor negotiations. Normally 
removals will not be made if they will adversely affect labor 
negotiations.
    (ii) Upon the recommendation of the labor advisor, provide a written 
request for removal of the material to the cognizant contract 
administration office. Include in the request the information specified 
at PGI 222.101-4(a)(ii).
    (iii) With the assistance of the labor advisor or the commander of 
the contract administration office, attempt to have both the management 
and the labor representatives involved agree to shipment of the material 
by normal means.
    (iv) If agreement for removal of the needed items cannot be reached 
following the procedures in paragraphs (a) (i) through (iii) of this 
subsection, the commander of the contract administration office, after 
obtaining approval from the labor advisor, may seek the concurrence of 
the parties to the dispute to permit movement of the material by 
military vehicles with military personnel. On receipt of such 
concurrences, the commander may proceed to make necessary arrangements 
to move the material.
    (v) If agreement for removal of the needed items cannot be reached 
following any of the procedures in paragraphs (a) (i) through (iv) of 
this subsection, refer the matter to the labor advisor with the 
information required by 222.101-3-70(b). If the labor advisor is 
unsuccessful in obtaining concurrence of the parties for the movement of 
the material and further action to obtain the material is deemed 
necessary, refer the matter to the agency head. Upon review and 
verification that the items are urgently or critically needed and cannot 
be moved with the consent of the parties, the agency head, on a 
nondelegable basis, may order removal of the items from the facility.

[56 FR 36358, July 31, 1991, as amended at 71 FR 18670, Apr. 12, 2006]



Sec. 222.101-70  Acquisition of stevedoring services during labor 
          disputes.

    (a) Use the following procedures only in the order listed when a 
labor dispute delays performance of a contract for stevedoring services 
which are urgently needed.
    (1) Attempt to have management and labor voluntarily agree to exempt 
military supplies from the labor dispute by

[[Page 131]]

continuing the movement of such material.
    (2) Divert vessels to alternate ports able to provide necessary 
stevedoring services.
    (3) Consider contracting with reliable alternative sources of supply 
within the stevedoring industry.
    (4) Utilize civil service stevedores to perform the work performed 
by contract stevedores.
    (5) Utilize military personnel to handle the cargo which was being 
handled by contract stevedores prior to the labor dispute.
    (b) Notify the labor advisor when a deviation from the procedures in 
paragraph (a) of this subsection is required.



Sec. 222.102  Federal and State labor requirements.



Sec. 222.102-1  Policy.

    (1) Direct all inquiries from contractors or contractor employees 
regarding the applicability or interpretation of Occupational Safety and 
Health Act (OSHA) regulations to the Department of Labor.
    (2) Upon request, provide the address of the appropriate field 
office of the Occupational Safety and Health Administration of the 
Department of Labor.
    (3) Do not initiate any application for the suspension or relaxation 
of labor requirements without prior coordination with the labor advisor. 
Any requests for variances or alternative means of compliance with OSHA 
requirements must be approved by the Occupational Safety and Health 
Administration of the Department of Labor.

[71 FR 18670, Apr. 12, 2006]



Sec. 222.103  Overtime.



Sec. 222.103-4  Approvals.

    (a) The department/agency approving official shall--
    (i) Obtain the concurrence of other appropriate approving officials; 
and
    (ii) Seek agreement as to the contracts under which overtime 
premiums will be approved when--
    (A) Two or more contracting offices have current contracts at the 
same contractor facility; and
    (B) The approval of overtime by one contracting office will affect 
the performance or cost of contracts of another office. In the absence 
of evidence to the contrary, a contracting officer may rely on a 
contractor's statement that approval of overtime premium pay for one 
contract will not affect performance or payments under any other 
contract.

       Subpart 222.3_Contract Work Hours and Safety Standards Act



Sec. 222.302  Liquidated damages and overtime pay.

    Upon receipt of notification of Contract Work Hours and Safety 
Standards Act violations, the contracting officer shall--
    (1) Immediately withhold such funds as are available;
    (2) Give the contractor written notification of the withholding and 
a statement of the basis for the liquidated damages assessment. The 
written notification shall also inform the contractor of its 60 days 
right to appeal the assessment, through the contracting officer, to the 
agency official responsible for acting on such appeals; and
    (3) If funds available for withholding are insufficient to cover 
liquidated damages, ask the contractor to pay voluntarily such funds as 
are necessary to cover the total liquidated damage assessment.
    (d)(i) The assessment shall become the final administrative 
determination of contractor liability for liquidated damages when--
    (A) The contractor fails to appeal to the contracting agency within 
60 days from the date of the withholding of funds;
    (B) The department agency, following the contractor's appeals, 
issues a final order which affirms the assessment of liquidated damages 
or waives damages of $500 or less; or
    (C) The Secretary of Labor takes final action on a recommendation of 
the agency head to waive or adjust liquidated damages in excess of $500.
    (ii) Upon final administrative determination of the contractor's 
liability for liquidated damages, the contracting officer shall transmit 
withheld

[[Page 132]]

or collected funds determined to be owed the Government as liquidated 
damages to the servicing finance and accounting officer for crediting to 
the appropriate Government Treasury account. The contracting officer 
shall return any excess withheld funds to the contractor.

   Subpart 222.4_Labor Standards for Contracts Involving Construction



Sec. 222.402  Applicability.



Sec. 222.402-70  Installation support contracts.

    (a) Apply both the Service Contract Act (SCA) and the Davis-Bacon 
Act (DBA) to installation support contracts if--
    (1) The contract is principally for services but also requires a 
substantial and segregable amount of construction, alteration, 
renovation, painting, or repair work; and
    (2) The aggregate dollar value of such construction work exceeds or 
is expected to exceed $2,000.
    (b) SCA coverage under the contract. Contract installation support 
requirements, such as plant operation and installation services (i.e., 
custodial, snow removal, etc.) are subject to the SCA. Apply SCA clauses 
and minimum wage and fringe benefit requirements to all contract service 
calls or orders for such maintenance and support work.
    (c) DBA coverage under the contract. Contract construction, 
alteration, renovation, painting, and repair requirements (i.e., roof 
shingling, building structural repair, paving repairs, etc.) are subject 
to the DBA. Apply DBA clauses and minimum wage requirements to all 
contract service calls or orders for construction, alteration, 
renovation, painting, or repairs to buildings or other works.
    (d) Repairs versus maintenance. Some contract work may be 
characterized as either DBA painting/repairs or SCA maintenance. For 
example, replacing broken windows, spot painting, or minor patching of a 
wall could be covered by either the DBA or the SCA. In those instances 
where a contract service call or order requires construction trade 
skills (i.e., carpenter, plumber, painter, etc.), but it is unclear 
whether the work required is SCA maintenance or DBA painting/repairs, 
apply the following rules--
    (1) Individual service calls or orders which will require a total of 
32 or more work-hours to perform shall be considered to be repair work 
subject to the DBA.
    (2) Individual service calls or orders which will require less than 
32 work-hours to perform shall be considered to be maintenance subject 
to the SCA.
    (3) Painting work of 200 square feet or more to be performed under 
an individual service call or order shall be considered to be subject to 
the DBA regardless of the total work-hours required.
    (e) The determination of labor standards application shall be made 
at the time the solicitation is prepared in those cases where 
requirements can be identified. Otherwise, the determination shall be 
made at the time the service call or order is placed against the 
contract. The service call or order shall identify the labor standards 
law and contract wage determination which will apply to the work 
required.
    (f) Contracting officers may not avoid application of the DBA by 
splitting individual tasks between orders or contracts.



Sec. 222.403  Statutory and regulatory requirements.



Sec. 222.403-4  Department of Labor regulations.

    Direct all questions regarding Department of Labor regulations to 
the labor advisor.



Sec. 222.404  Davis-Bacon Act wage determinations.

    Not later than April 1 of each year, each department and agency 
shall furnish the Administrator, Wage and Hour Division, with a general 
outline of its proposed construction program for the coming fiscal year. 
The Department of Labor uses this information to determine where general 
wage determination surveys will be conducted.
    (1) Indicate by individual project of $500,000 or more--
    (i) The anticipated type of construction;
    (ii) The estimated dollar value; and

[[Page 133]]

    (iii) The location in which the work is to be performed (city, town, 
village, county, or other civil subdivision of the state).
    (2) The report format is contained in Department of Labor All Agency 
Memo 144, December 27, 1985.
    (3) The report control number is 1671-DOL-AN.



Sec. 222.404-2  General requirements.

    (c)(5) Follow the procedures at PGI 222.404-2(c)(5) when seeking 
clarification of the proper application of construction wage rate 
schedules.

[72 FR 20764, Apr. 26, 2007]



Sec. 222.406  Administration and enforcement.



Sec. 222.406-1  Policy.

    (a) General. The program shall also include--
    (i) Training appropriate contract administration, labor relations, 
inspection, and other labor standards enforcement personnel in their 
responsibilities; and
    (ii) Periodic review of field enforcement activities to ensure 
compliance with applicable regulations and instructions.
    (b) Preconstruction letters and conferences. (1) Promptly after 
award of the contract, the contracting officer shall provide a 
preconstruction letter to the prime contractor. This letter should 
accomplish the following, as appropriate--
    (A) Indicate that the labor standards requirements contained in the 
contract are based on the following statutes and regulations--
    (1) Davis-Bacon Act;
    (2) Contract Work Hours and Safety Standards Act;
    (3) Copeland (Anti-Kickback) Act;
    (4) Parts 3 and 5 of the Secretary of Labor's Regulations (parts 3 
and 5, subtitle A, title 29, CFR); and
    (5) Executive Order 11246 (Equal Employment Opportunity);
    (B) Call attention to the labor standards requirements in the 
contract which relate to--
    (1) Employment of foremen, laborers, mechanics, and others;
    (2) Wages and fringe benefits payments, payrolls, and statements;
    (3) Differentiation between subcontractors and suppliers;
    (4) Additional classifications;
    (5) Benefits to be realized by contractors and subcontractors in 
keeping complete work records;
    (6) Penalties and sanctions for violations of the labor standards 
provisions; and
    (7) The applicable provisions of FAR 22.403; and
    (C) Ensure that the contractor sends a copy of the preconstruction 
letter to each subcontractor.
    (2) Before construction begins, the contracting officer shall confer 
with the prime contractor and any subcontractor designated by the prime 
to emphasize their labor standards obligations under the contract when--
    (A) The prime contractor has not performed previous Government 
contracts;
    (B) The prime contractor experienced difficulty in complying with 
labor standards requirements on previous contracts; or
    (C) It is necessary to determine whether the contractor and its 
subcontractors intend to pay any required fringe benefits in the manner 
specified in the wage determination or to elect a different method of 
payment. If the latter, inform the contractor of the requirements of FAR 
22.406-2.



Sec. 222.406-6  Payrolls and statements.

    (a) Submission. Contractors who do not use Department of Labor Form 
WH 347 or its equivalent must submit a DD Form 879, Statement of 
Compliance, with each payroll report.



Sec. 222.406-8  Investigations.

    (a) Before beginning an investigation, the investigator shall inform 
the contractor of the general scope of the investigation, and that the 
investigation will include examining pertinent records and interviewing 
employees. In conducting the investigation, follow the procedures at PGI 
222.406-8(a).
    (c) Contractor notification. (4)(A) Notify the contractor by 
certified mail of any finding that it is liable for liquidated damages 
under the Contract Work Hours and Safety Standards Act (CWHSSA). The 
notification shall inform the contractor that--

[[Page 134]]

    (1) It has 60 days after receipt of the notice to appeal the 
assessment of liquidated damages; and
    (2) The appeal must demonstrate either that the alleged violations 
did not occur at all, occurred inadvertently notwithstanding the 
exercise of due care, or the assessment was computed improperly.
    (B) If an appeal is received, the contracting officer shall process 
the appeal in accordance with department or agency regulations.
    (d) Contracting officer's report. Forward a detailed enforcement 
report or summary report to the agency head in accordance with agency 
procedures. Include in the report, as a minimum, the information 
specified at PGI 222.406-8(d).

[56 FR 36358, July 31, 1991, as amended at 71 FR 18670, Apr. 12, 2006]



Sec. 222.406-9  Withholding from or suspension of contract payments.

    (a) Withholding from contract payments. The contracting officer 
shall contact the labor advisor for assistance when payments due a 
contractor are not available to satisfy that contractor's liability for 
Davis-Bacon or CWHSSA wage underpayments or liquidated damages.
    (c) Disposition of contract payments withheld or suspended--(3) 
Limitation on forwarding or returning funds. When disposition of 
withheld funds remains the final action necessary to close out a 
contract, the Department of Labor has given blanket approval to forward 
withheld funds to the Comptroller General pending completion of an 
investigation or other administrative proceedings.
    (4) Liquidated damages. (A) The agency head may adjust liquidated 
damages of $500 or less when the amount assessed is incorrect or waive 
the assessment when the violations--
    (1) Were nonwillful or inadvertent; and
    (2) Occurred notwithstanding the exercise of due care by the 
contractor, its subcontractor, or their agents.
    (B) The agency head may recommend to the Administrator, Wage and 
Hour Division, that the liquidated damages over $500 be adjusted because 
the amount assessed is incorrect. The agency head may also recommend the 
assessment be waived when the violations--
    (1) Were nonwillful or inadvertent; and
    (2) Occurred notwithstanding the exercise of due care by the 
contractor, the subcontractor, or their agents.



Sec. 222.406-10  Disposition of disputes concerning construction 
          contract labor standards enforcement.

    (d) Forward the contracting officer's findings and the contractor's 
statement through the labor advisor.



Sec. 222.406-13  Semiannual enforcement reports.

    Forward these reports through the head of the contracting activity 
to the labor advisor within 15 days following the end of the reporting 
period. These reports shall not include information from investigations 
conducted by the Department of Labor. These reports shall contain the 
following information, as applicable, for construction work subject to 
the Davis-Bacon Act and the CWHSSA--
    (1) Period covered;
    (2) Number of prime contracts awarded;
    (3) Total dollar amount of prime contracts awarded;
    (4) Number of contractors/subcontractors against whom complaints 
were received;
    (5) Number of investigations conducted;
    (6) Number of contractors/subcontractors found in violation;
    (7) Amount of wage restitution found due under--
    (i) Davis-Bacon Act
    (ii) CWHSSA;
    (8) Number of employees due wage restitution under--
    (i) Davis-Bacon Act
    (ii) CWHSSA;
    (9) Amount of liquidated damages assessed under the CWHSSA--
    (i) Total amount
    (ii) Number of contracts involved;
    (10) Number of employees and amount paid/withheld under--
    (i) Davis-Bacon Act
    (ii) CWHSSA
    (iii) Copeland Act; and
    (11) Preconstruction activities--

[[Page 135]]

    (i) Number of compliance checks performed
    (ii) Preconstruction letters sent.

             Subpart 222.6_Walsh-Healey Public Contracts Act



Sec. 222.604  Exemptions.



Sec. 222.604-2  Regulatory exemptions.

    (b) Submit all applications for such exemptions through contracting 
channels to the labor advisor.

[56 FR 36358, July 31, 1991, as amended at 65 FR 14398, Mar. 16, 2000]

               Subpart 222.8_Equal Employment Opportunity



Sec. 222.806  Inquiries.

    (b) Refer inquiries through the labor advisor.



Sec. 222.807   Exemptions.

    (c) Follow the procedures at PGI 222.807(c) when submitting a 
request for an exemption.

[71 FR 18670, Apr. 12, 2006]

         Subpart 222.10_Service Contract Act of 1965, as Amended



Sec. 222.1003  Applicability.



Sec. 222.1003-1  General.

    For contracts having a substantial amount of construction, 
alteration, renovation, painting, or repair work, see 222.402-70.



Sec. 222.1008  Procedures for obtaining wage determinations.



Sec. 222.1008-1  Obtaining wage determinations.

    Follow the procedures at PGI 222.1008-1 regarding use of the Service 
Contract Act Directory of Occupations when preparing the e98.

[72 FR 20764, Apr. 26, 2007]

 Subpart 222.13_Special Disabled Veterans, Veterans of the Vietnam Era, 
                       and Other Eligible Veterans

    Source: 71 FR 18670, Apr. 12, 2006, unless otherwise noted.



Sec. 222.1305  Waivers.

    (c) Follow the procedures at PGI 222.1305(c) for submission of 
waiver requests.



Sec. 222.1308  Complaint procedures.

    The contracting officer shall--
    (1) Forward each complaint received as indicated in FAR 22.1308; and
    (2) Notify the complainant of the referral. The contractor in 
question shall not be advised in any manner or for any reason of the 
complainant's name, the nature of the complaint, or the fact that the 
complaint was received.



Sec. 222.1310  Solicitation provision and contract clauses.

    (a)(1) Use of the clause at FAR 52.222-35, Equal Opportunity for 
Special Disabled Veterans, Veterans of the Vietnam Era, and Other 
Eligible Veterans, with its paragraph (c), Listing Openings, also 
satisfies the requirement of 10 U.S.C. 2410k.

              Subpart 222.14_Employment of the Handicapped



Sec. 222.1403  Waivers.

    (c) The contracting officer shall submit a waiver request through 
contracting channels to the labor advisor. If the request is justified, 
the labor advisor will endorse the request and forward it for action 
to--
    (i) The agency head for waivers under FAR 22.1403(a). For the 
defense agencies, waivers must be approved by the Under Secretary of 
Defense for Acquisition.
    (ii) The Secretary of Defense, without the power of redelegation, 
for waivers under FAR 22.1403(b).



Sec. 222.1406  Complaint procedures.

    The contracting officer shall notify the complainant of such 
referral. The contractor in question shall not be advised in any manner 
or for any reason

[[Page 136]]

of the complainant's name, the nature of the complaint, or the fact that 
the complaint was received.

[71 FR 18671, Apr. 12, 2006]

             Subpart 222.17_Combating Trafficking in Persons

    Source: 71 FR 62563, Oct. 26, 2006, unless otherwise noted.



Sec. 222.1703  Policy.

    See PGI 222.1703 for additional information regarding DoD policy for 
combating trafficking in persons outside the United States.

[73 FR 4115, Jan. 24, 2008]



Sec. 222.1704  Violations and remedies.

    Follow the procedures at PGI 222.1704 for notifying the Combatant 
Commander if a violation occurs.

[73 FR 4115, Jan. 24, 2008]

 Subpart 222.70_Restrictions on the Employment of Personnel for Work on 
       Construction and Service Contracts in Noncontiguous States

    Source: 65 FR 14403, Mar. 16, 2000, unless otherwise noted.



Sec. 222.7000  Scope of subpart.

    (a) This subpart implements Section 8071 of the Fiscal Year 2000 
Defense Appropriations Act, Public Law 106-79, and similar sections in 
subsequent Defense Appropriations Acts.
    (b) This subpart applies only--
    (1) To construction and service contracts to be performed in whole 
or in part within a noncontiguous State; and
    (2) When the unemployment rate in the noncontiguous State is in 
excess of the national average rate of unemployment as determined by the 
Secretary of Labor.



Sec. 222.7001  Definition.

    ``Noncontiguous State,'' as used in this subpart, means Alaska, 
Hawaii, Puerto Rico, the Northern Mariana Islands, American Samoa, Guam, 
the U.S. Virgin Islands, Baker Island, Howland Island, Jarvis Island, 
Johnston Atoll, Kingman Reef, Midway Islands, Navassa Island, Palmyra 
Atoll, and Wake Island.

[65 FR 50151, Aug. 17, 2000]



Sec. 222.7002  General.

    A contractor awarded a contract subject to this subpart must employ, 
for the purpose of performing that portion of the contract work within 
the noncontiguous State, individuals who are residents of that 
noncontiguous State and who, in the case of any craft or trade, possess 
or would be able to acquire promptly the necessary skills to perform 
this contract.



Sec. 222.7003  Waivers.

    The head of the agency may waive the requirements of 222.7002 on a 
case-by-case basis in the interest of national security.

[65 FR 50151, Aug. 17, 2000]



Sec. 222.7004  Contract clause.

    Use the clause at 252.222-7000, Restrictions on Employment of 
Personnel, in all solicitations and contracts subject to this subpart. 
Insert the name of the appropriate noncontiguous State in paragraph (a) 
of the clause.

           Subpart 222.71_Right of First Refusal of Employment

    Source: 57 FR 52593, Nov. 4, 1992, unless otherwise noted.



Sec. 222.7101  Policy.

    (a) DoD policy is to minimize the adverse impact on civil service 
employees affected by the closure of military installations. One means 
of implementing this policy is to give employees adversely affected by 
closure of a military installation the right of first refusal for jobs 
created by award of contracts arising from the closure effort that the 
employee is qualified to fill.
    (b) Closure efforts include the acquisitions for preparing the 
installation for closure (such as environmental restoration and 
utilities modification)

[[Page 137]]

and maintaining the property after closure (such as security and fire 
prevention services).



Sec. 222.7102  Contract clause.

    Use the clause at 252.222-7001, Right of First Refusal of 
Employment--Closure of Military Installations, in all solicitations and 
contracts arising from the closure of the military installation where 
the contract will be performed.

    Subpart 222.72_Compliance with Labor Laws of Foreign Governments



Sec. 222.7201  Contract clauses.

    (a) Use the clause at 252.222-7002, Compliance with Local Labor Laws 
(Overseas), in solicitations and contracts for services or construction 
to be performed outside the United States and its outlying areas.
    (b) Use the clause at 252.222-7003, Permit from Italian Inspectorate 
of Labor, in solicitations and contracts for porter, janitorial, or 
ordinary facility and equipment maintenance services to be performed in 
Italy.
    (c) Use the clause at 252.222-7004, Compliance with Spanish Social 
Security Laws and Regulations, in solicitations and contracts for 
services or construction to be performed in Spain.

[62 FR 34122, June 24, 1997, as amended at 70 FR 35545, June 21, 2005]

  Subpart 222.73_Limitations Applicable to Contracts Performed on Guam

    Source: 64 FR 52672, Sept. 30, 1999, unless otherwise noted.



Sec. 222.7300  Scope of subpart.

    This subpart--
    (a) Implements Section 390 of the National Defense Authorization Act 
for Fiscal Year 1998 (Pub. L. 105-85); and
    (b) Applies to contracts for base operations support on Guam that--
    (1) Are awarded as a result of a competition conducted under OMB 
Circular A-76; and
    (2) Are entered into or modified on or after November 18, 1997.

[72 FR 20764, Apr. 26, 2007]



Sec. 222.7301  Prohibition on use of nonimmigrant aliens.

    (a) Any alien who is issued a visa or otherwise provided 
nonimmigrant status under Section 101(a)(15)(H)(ii) of the Immigration 
and Nationality Act (8 U.S.C. 1101(a)(15)(H)(ii)) is prohibited from 
performing work under a contract for base operations support on Guam.
    (b) Lawfully admitted citizens of the freely associated states of 
the Republic of the Marshall Islands, the Federated States of 
Micronesia, or the Republic of Palau are not subject to the prohibition 
in paragraph (a) of this section.

[64 FR 52672, Sept. 30, 1999, as amended at 72 FR 20764, Apr. 26, 2007]



Sec. 222.7302  Contract clause.

    Use the clause at 252.222-7005, Prohibition on Use of Nonimmigrant 
Aliens--Guam, in solicitations and contracts subject to this subpart.

[72 FR 20764, Apr. 26, 2007]

    Subpart 222.74_Restrictions on the Use of Mandatory Arbitration 
                               Agreements

    Source: 75 FR 27947, May 19, 2010, unless otherwise noted.



Sec. 222.7400  Scope of subpart.

    This subpart implements section 8116 of the Defense Appropriations 
Act for Fiscal Year 2010 (Pub. L. 111-118).



Sec. 222.7401  Policy.

    (a) Departments and agencies are prohibited from using funds 
appropriated or otherwise made available by the Fiscal Year 2010 Defense 
Appropriations Act (Pub. L. 111-118) for any contract (including task or 
delivery orders and bilateral modifications adding new work) in excess 
of $1 million, unless the contractor agrees not to--
    (1) Enter into any agreement with any of its employees or 
independent contractors that requires, as a condition of employment, 
that the employee or independent contractor agree to resolve through 
arbitration--
    (i) Any claim under title VII of the Civil Rights Act of 1964; or

[[Page 138]]

    (ii) Any tort related to or arising out of sexual assault or 
harassment, including assault and battery, intentional infliction of 
emotional distress, false imprisonment, or negligent hiring, 
supervision, or retention; or
    (2) Take any action to enforce any provision of an existing 
agreement with an employee or independent contractor that mandates that 
the employee or independent contractor resolve through arbitration--
    (i) Any claim under title VII of the Civil Rights Act of 1964; or
    (ii) Any tort related to or arising out of sexual assault or 
harassment, including assault and battery, intentional infliction of 
emotional distress, false imprisonment, or negligent hiring, 
supervision, or retention.
    (b) After June 17, 2010, no funds appropriated or otherwise made 
available by the Fiscal Year 2010 Defense Appropriations Act (Pub. L. 
111-118) may be expended unless the contractor certifies that it 
requires each covered subcontractor to agree not to enter into, and not 
to take any action to enforce, any provision of any agreement, as 
described in paragraph (a) of this section, with respect to any employee 
or independent contractor performing work related to such subcontract.



Sec. 222.7402  Applicability.

    This requirement does not apply to the acquisition of commercial 
items.



Sec. 222.7403  Waiver.

    The Secretary of Defense may waive the applicability of paragraphs 
(a) or (b) of 222.7401, in accordance with PGI 222.7403, to a particular 
contract or subcontract, if the Secretary or the Deputy Secretary 
personally determines that the waiver is necessary to avoid harm to 
national security interests of the United States, and that the term of 
the contract or subcontract is not longer than necessary to avoid such 
harm. The Secretary of Defense shall transmit the determination to 
Congress and simultaneously publish it in the Federal Register, not less 
than 15 business days before the contract or subcontract addressed in 
the determination may be awarded.



Sec. 222.7404  Contract clause.

    Use the clause at 252.222-7006 Restrictions on the Use of Mandatory 
Arbitration Agreements, in all solicitations and contracts valued in 
excess of $1 million utilizing funds appropriated or otherwise made 
available by the Fiscal Year 2010 Defense Appropriations Act (Pub. L. 
111-118), except in contracts for the acquisition of commercial items, 
including commercially available off-the-shelf items.

  PART 223_ENVIRONMENT, ENERGY AND WATER EFFICIENCY, RENEWABLE ENERGY 
       TECHNOLOGIES, OCCUPATIONAL SAFETY, AND DRUG-FREE WORKPLACE

Subpart 223.3_Hazardous Material Identification and Material Safety Data

Sec.

Sec. 223.302 Policy.

Sec. 223.303 Contract clause.

Sec. 223.370 Safety precautions for ammunition and explosives.

Sec. 223.370-1 Scope.

Sec. 223.370-2 Definition.

Sec. 223.370-3 Policy.

Sec. 223.370-4 Procedures.

Sec. 223.370-5 Contract clauses.

                Subpart 223.4_Use of Recovered Materials


Sec. 223.405 Procedures.

                    Subpart 223.5_Drug-Free Workplace


Sec. 223.570 Drug-free work force.

Sec. 223.570-1 Policy.

Sec. 223.570-2 Contract clause.

                Subpart 223.8_Ozone-Depleting Substances


Sec. 223.803 Policy.

Subpart 223.70 [Reserved]

  Subpart 223.71_Storage and Disposal of Toxic and Hazardous Materials


Sec. 223.7100 Policy.

Sec. 223.7101 Procedures.

Sec. 223.7102 Exceptions.

Sec. 223.7103 Contract clause.

Subpart 223.72_Safeguarding Sensitive Conventional Arms, Ammunition, and 
                               Explosives


Sec. 223.7200 Definition.

Sec. 223.7201 Policy.

[[Page 139]]


Sec. 223.7202 Preaward responsibilities.

Sec. 223.7203 Contract clause.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36365, July 31, 1991, unless otherwise noted.

Subpart 223.3_Hazardous Material Identification and Material Safety Data



Sec. 223.302  Policy.

    (e) The contracting officer shall also provide hazard warning 
labels, that are received from apparent successful offerors, to the 
cognizant safety officer.

[70 FR 73150, Dec. 9, 2005]



Sec. 223.303  Contract clause.

    Use the clause at 252.223-7001, Hazard Warning Labels, in 
solicitations and contracts which require submission of hazardous 
material data sheets (see FAR 23.302(c)).

[56 FR 67215, Dec. 30, 1991]



Sec. 223.370  Safety precautions for ammunition and explosives.



Sec. 223.370-1  Scope.

    (a) This section applies to all acquisitions involving the use of 
ammunition and explosives, including acquisitions for--
    (1) Development;
    (2) Testing;
    (3) Research;
    (4) Manufacturing;
    (5) Handling or loading;
    (6) Assembling;
    (7) Packaging;
    (8) Storage;
    (9) Transportation;
    (10) Renovation;
    (11) Demilitarization;
    (12) Modification;
    (13) Repair;
    (14) Disposal;
    (15) Inspection; or
    (16) Any other use, including acquisitions requiring the use or the 
incorporation of materials listed in paragraph (b) of this subsection 
for initiation, propulsion, or detonation as an integral or component 
part of an explosive, an ammunition, or explosive end item or weapon 
system.
    (b) This section does not apply to acquisitions solely for--
    (1) Inert components containing no explosives, propellants, or 
pyrotechnics;
    (2) Flammable liquids;
    (3) Acids;
    (4) Oxidizers;
    (5) Powdered metals; or
    (6) Other materials having fire or explosive characteristics.



Sec. 223.370-2  Definition.

    Ammunition and explosives, as used in this section, is defined in 
the clause at 252.223-7002, Safety Precautions for Ammunition and 
Explosives.



Sec. 223.370-3  Policy.

    (a) DoD policy is to ensure that its contractors take reasonable 
precautions in handling ammunition and explosives so as to minimize the 
potential for mishaps.
    (b) This policy is implemented by DoD Manual 4145.26-M, DoD 
Contractors' Safety Manual for Ammunition and Explosives, which is 
incorporated into contracts under which ammunition and explosives are 
handled. The manual contains mandatory safety requirements for 
contractors. When work is to be performed on a Government-owned 
installation, the contracting officer may use the ammunition and 
explosives regulation of the DoD component or installation as a 
substitute for, or supplement to, DoD Manual 4145.26-M, as long as the 
contract cites these regulations.

[56 FR 36365, July 31, 1991, as amended at 70 FR 73150, Dec. 9, 2005]



Sec. 223.370-4  Procedures.

    Follow the procedures at PGI 223.370-4.

[70 FR 73151, Dec. 9, 2005]



Sec. 223.370-5  Contract clauses.

    Use the clauses at 252.223-7002, Safety Precautions for Ammunition 
and Explosives, and 252.223-7003, Change in Place of Performance--
Ammunition and Explosives, in all solicitations and contracts for 
acquisition to which this section applies.

[[Page 140]]

                Subpart 223.4_Use of Recovered Materials



Sec. 223.405  Procedures.

    Follow the procedures at PGI 223.405.

[70 FR 73151, Dec. 9, 2005]

                    Subpart 223.5_Drug-Free Workplace

    Source: 57 FR 32737, July 23, 1992, unless otherwise noted.



Sec. 223.570  Drug-free work force.



Sec. 223.570-1  Policy.

    DoD policy is to ensure that its contractors maintain a program for 
achieving a drug-free work force.

[57 FR 32737, July 23, 1992. Redesignated at 70 FR 73151, Dec. 9, 2005]



Sec. 223.570-2  Contract clause.

    (a) Use the clause at 252.223-7004, Drug-Free Work Force, in all 
solicitations and contracts--
    (1) That involve access to classified information; or
    (2) When the contracting officer determines that the clause is 
necessary for reasons of national security or for the purpose of 
protecting the health or safety of those using or affected by the 
product of, or performance of, the contract.
    (b) Do not use the clause in solicitations and contracts--
    (1) For commercial items;
    (2) When performance or partial performance will be outside the 
United States and its outlying areas, unless the contracting officer 
determines such inclusion to be in the best interest of the Government; 
or
    (3) When the value of the acquisition is at or below the simplified 
acquisition threshold.

[57 FR 32737, July 23, 1992, as amended at 64 FR 2598, Jan. 15, 1999; 70 
FR 35545, June 21, 2005. Redesignated at 70 FR 73151, Dec. 9, 2005]

                Subpart 223.8_Ozone-Depleting Substances



Sec. 223.803  Policy.

    No DoD contract may include a specification or standard that 
requires the use of a class I ozone-depleting substance or that can be 
met only through the use of such a substance unless the inclusion of the 
specification or standard is specifically authorized at a level no lower 
than a general or flag officer or a member of the Senior Executive 
Service of the requiring activity in accordance with Section 326, Public 
Law 102-484 (10 U.S.C. 2301 (repealed) note). This restriction is in 
addition to any imposed by the Clean Air Act and applies after June 1, 
1993, to all DoD contracts, regardless of place of performance.

[71 FR 75892, Dec. 19, 2006]

Subpart 223.70 [Reserved]

  Subpart 223.71_Storage and Disposal of Toxic and Hazardous Materials

    Source: 58 FR 28466, May 13, 1993, unless otherwise noted.



Sec. 223.7100  Policy.

    10 U.S.C. 2692 prohibits storage or disposal of non-DoD-owned toxic 
or hazardous materials on DoD installations, except as provided in 
223.7102. DoD Instruction 4715.6, Environmental Compliance, implements 
10 U.S.C. 2692.

[58 FR 28466, May 13, 1993, as amended at 67 FR 61516, Oct. 1, 2002]



Sec. 223.7101  Procedures.

    (a) If the contracting officer is uncertain as to whether particular 
activities are prohibited or fall under one of the exceptions in 
223.7102, the contracting officer should seek advice from the cognizant 
office of counsel.
    (b) When storage, treatment, or disposal of non-DoD-owned toxic or 
hazardous materials is authorized in accordance with this subpart, the 
contract or authorization should specify the types, conditions, and 
quantities of toxic or hazardous materials that may

[[Page 141]]

be temporarily stored, treated, or disposed of in connection with the 
contract or as a result of the authorized commercial use of a DoD 
industrial-type facility.

[60 FR 61597, Nov. 30, 1995]



Sec. 223.7102  Exceptions.

    (a) The prohibition of 10 U.S.C. 2692 does not apply to--
    (1) The storage of strategic and critical materials in the National 
Defense Stockpile under an agreement for such storage with the 
Administrator of General Services Administration;
    (2) The temporary storage or disposal of explosives in order to 
protect the public or to assist agencies responsible for Federal law 
enforcement in storing or disposing of explosives when no alternative 
solution is available, if such storage or disposal is made in accordance 
with an agreement between the Secretary of Defense and the head of the 
Federal agency concerned;
    (3) The temporary storage or disposal of explosives in order to 
provide emergency lifesaving assistance to civil authorities;
    (4) The disposal of excess explosives produced under a DoD contract, 
if the head of the military department concerned determines, in each 
case, that an alternative feasible means of disposal is not available to 
the contractor, taking into consideration public safety, available 
resources of the contractor, and national defense production 
requirements;
    (5) The temporary storage of nuclear materials or nonnuclear 
classified materials in accordance with an agreement with the Secretary 
of Energy;
    (6) The storage of materials that constitute military resources 
intended to be used during peacetime civil emergencies in accordance 
with applicable DoD regulations;
    (7) The temporary storage of materials of other Federal agencies in 
order to provide assistance and refuge for commercial carriers of such 
material during a transportation emergency;
    (8) The storage of any material that is not owned by DoD, if the 
Secretary of the military department concerned determines that the 
material is required or generated by a private person in connection with 
the authorized and compatible use by that person of an industrial-type 
DoD facility; or
    (9) The treatment and disposal of any non-DoD-owned material if the 
Secretary of the military department concerned--
    (i) Determines that the material is required or generated by a 
private person in connection with the authorized and compatible 
commercial use by that person of an industrial-type facility of that 
military department; and
    (ii) Enters into a contract with that person that--
    (A) Is consistent with the best interest of national defense and 
environmental security; and
    (B) Provides for that person's continued financial and environmental 
responsibility and liability with regard to the material.
    (b) The Secretary of Defense, where DoD Instruction 4715.6 applies, 
may grant exceptions to the prohibition of 10 U.S.C. 2692 when essential 
to protect the health and safety of the public from imminent danger.

[58 FR 28466, May 13, 1993, as amended at 60 FR 13076, Mar. 10, 1995; 60 
FR 61597, Nov. 30, 1995; 67 FR 61516, Oct. 1, 2002]



Sec. 223.7103  Contract clause.

    (a) Use the clause at 252.223-7006, Prohibition on Storage and 
Disposal of Toxic and Hazardous Materials, in all solicitations and 
contracts which require, may require, or permit contractor performance 
on a DoD installation.
    (b) Use the clause at 252.223-7006 with its Alternate I, when the 
Secretary of the military department issues a determination under the 
exception at 223.7102(a)(9).

[60 FR 13076, Mar. 10, 1995]

Subpart 223.72_Safeguarding Sensitive Conventional Arms, Ammunition, and 
                               Explosives

    Source: 61 FR 7743, Feb. 29, 1996, unless otherwise noted.



Sec. 223.7200  Definition.

    ``Arms, ammunition, and explosives (AA&E),'' as used in this 
subpart, means those items within the scope (chapter 1, paragraph B) of 
DoD 5100.76-

[[Page 142]]

M, Physical Security of Sensitive Conventional Arms, Ammunition, and 
Explosives.



Sec. 223.7201  Policy.

    (a) The requirements of DoD 5100.76-M, Physical Security of 
Sensitive Conventional Arms, Ammunition, and Explosives, shall be 
applied to contracts when--
    (1) AA&E will be provided to the contractor or subcontractor as 
Government-furnished property; or
    (2) The principal development, production, manufacture, or purchase 
of AA&E is for DoD use.
    (b) The requirements of DoD 5100.76-M need not be applied to 
contracts when--
    (1) The AA&E to be acquired under the contract is a commercial item 
within the meaning of FAR 2.101; or
    (2) The contract will be performed in a Government-owned contractor-
operated ammunition production facility. However, if subcontracts issued 
under such a contract will meet the criteria of paragraph (a) of this 
section, the requirements of DoD 5100.76-M shall apply.



Sec. 223.7202  Preaward responsibilities.

    When an acquisition involves AA&E, technical or requirements 
personnel shall specify in the purchase request--
    (a) That AA&E is involved; and
    (b) Which physical security requirements of DoD 5100.76-M apply.



Sec. 223.7203  Contract clause.

    Use the clause at 252.223-7007, Safeguarding Sensitive Conventional 
Arms, Ammunition, and Explosives, in all solicitations and contracts to 
which DoD 5100.76-M applies, in accordance with the policy at 223.7201. 
Complete paragraph (b) of the clause based on information provided by 
cognizant technical or requirements personnel.

[61 FR 7743, Feb. 29, 1996; 61 FR 18195, Apr. 24, 1996]

        PART 224_PROTECTION OF PRIVACY AND FREEDOM OF INFORMATION

             Subpart 224.1_Protection of Individual Privacy

Sec.

Sec. 224.103 Procedures.

                Subpart 224.2_Freedom of Information Act


Sec. 224.203 Policy.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36367, July 31, 1991, unless otherwise noted.

             Subpart 224.1_Protection of Individual Privacy



Sec. 224.103  Procedures.

    (b)(2) DoD rules and regulations are contained in DoDD 5400.11, 
Department of Defense Privacy Program, and DoD 5400.11-R, Department of 
Defense Privacy Program.

                Subpart 224.2_Freedom of Information Act



Sec. 224.203  Policy.

    (a) DoD implementation is in DoDD 5400.7, DoD Freedom of Information 
Act Program, and DoD 5400.7-R, DoD Freedom of Information Act Program.

[56 FR 36367, July 31, 1991. Redesignated at 62 FR 34122, June 24, 1997]

                      PART 225_FOREIGN ACQUISITION

Sec.

Sec. 225.001 General.

Sec. 225.003 Definitions.

Sec. 225.004 Reporting of acquisition of end products manufactured 
          outside the United States.

                 Subpart 225.1_Buy American Act_Supplies


Sec. 225.101 General.

Sec. 225.103 Exceptions.

Sec. 225.104 Nonavailable articles.

Sec. 225.105 Determining reasonableness of cost.

Sec. 225.170 Acquisition from or through other Government agencies.

[[Page 143]]

          Subpart 225.2_Buy American Act_Construction Materials


Sec. 225.202 Exceptions.

Sec. 225.206 Noncompliance.

       Subpart 225.3_Contracts Performed Outside the United States


Sec. 225.301 Contractor personnel in a designated operational area or 
          supporting a diplomatic or consular mission outside the United 
          States.

Sec. 225.301-1 Scope.

Sec. 225.301-4 Contract clause.

                     Subpart 225.4_Trade Agreements


Sec. 225.401 Exceptions.

Sec. 225.401-70 End products subject to trade agreements.

Sec. 225.401-71 Products or services in support of operations in Iraq or 
          Afghanistan.

Sec. 225.402 General.

Sec. 225.403 World Trade Organization Government Procurement Agreement 
          and Free Trade Agreements.

Sec. 225.408 Procedures.

        Subpart 225.5_Evaluating Foreign Offers_Supply Contracts


Sec. 225.502 Application.

Sec. 225.503 Group offers.

Sec. 225.504 Evaluation examples.

                    Subpart 225.7_Prohibited Sources


Sec. 225.701 Restrictions.

Sec. 225.701-70 Exception.

      Subpart 225.8_Other International Agreements and Coordination


Sec. 225.770 Prohibition on acquisition of United States Munitions List 
          items from Communist Chinese military companies.

Sec. 225.770-1 Definitions.

Sec. 225.770-2 Prohibition.

Sec. 225.770-3 Exceptions.

Sec. 225.770-4 Identifying USML items.

Sec. 225.770-5 Waiver of prohibition.

Sec. 225.802 Procedures.

Sec. 225.802-70 Contracts for performance outside the United States and 
          Canada.

Sec. 225.802-71 End use certificates.

Sec. 225.870 Contracting with Canadian contractors.

Sec. 225.870-1 General.

Sec. 225.870-2 Solicitation of Canadian contractors.

Sec. 225.870-3 Submission of offers.

Sec. 225.870-4 Contracting procedures.

Sec. 225.870-5 Contract administration.

Sec. 225.870-6 Termination procedures.

Sec. 225.870-7 Acceptance of Canadian supplies.

Sec. 225.870-8 Industrial security.

Sec. 225.871 North Atlantic Treaty Organization (NATO) cooperative 
          projects.

Sec. 225.871-1 Scope.

Sec. 225.871-2 Definitions.

Sec. 225.871-3 General.

Sec. 225.871-4 Statutory waivers.

Sec. 225.871-5 Directed subcontracting.

Sec. 225.871-6 Disposal of property.

Sec. 225.871-7 Congressional notification.

Sec. 225.872 Contracting with qualifying country sources.

Sec. 225.872-1 General.

Sec. 225.872-2 Applicability.

Sec. 225.872-3 Solicitation procedures.

Sec. 225.872-4 Individual determinations.

Sec. 225.872-5 Contract administration.

Sec. 225.872-6 Audit.

Sec. 225.872-7 Industrial security for qualifying countries.

Sec. 225.872-8 Subcontracting with qualifying country sources.

Sec. 225.873 Waiver of United Kingdom commercial exploitation levies.

Sec. 225.873-1 Policy.

Sec. 225.873-2 Procedures.

                    Subpart 225.9_Customs and Duties


Sec. 225.900-70 Definition.

Sec. 225.901 Policy.

Sec. 225.902 Procedures.

Sec. 225.903 Exempted supplies.

        Subpart 225.10_Additional Foreign Acquisition Regulations


Sec. 225.1070 Clause deviations in overseas contracts.

       Subpart 225.11_Solicitation Provisions and Contract Clauses


Sec. 225.1100 Scope of subpart.

Sec. 225.1101 Acquisition of supplies.

Sec. 225.1103 Other provisions and clauses.

   Subpart 225.70_Authorization Acts, Appropriations Acts, and Other 
              Statutory Restrictions on Foreign Acquisition


Sec. 225.7000 Scope of subpart.

Sec. 225.7001 Definitions.

Sec. 225.7002 Restrictions on food, clothing, fabrics, and hand or 
          measuring tools.

Sec. 225.7002-1 Restrictions.

Sec. 225.7002-2 Exceptions.

Sec. 225.7002-3 Contract clauses.

Sec. 225.7003 Restrictions on acquisition of specialty metals.

Sec. 225.7003-1 Definitions.

Sec. 225.7003-2 Restrictions.

Sec. 225.7003-3 Exceptions.

Sec. 225.7003-4 One-time waiver.

Sec. 225.7003-5 Solicitation provision and contract clauses.

Sec. 225.7004 Restriction on acquisition of foreign buses.

[[Page 144]]


Sec. 225.7004-1 Restriction.

Sec. 225.7004-2 Applicability.

Sec. 225.7004-3 Exceptions.

Sec. 225.7004-4 Waiver.

Sec. 225.7005 Restriction on certain chemical weapons antidote.

Sec. 225.7005-1 Restriction.

Sec. 225.7005-2 Exception.

Sec. 225.7005-3 Waiver.

Sec. 225.7006 Restrictions on air circuit breakers for naval vessels.

Sec. 225.7006-1 Restriction.

Sec. 225.7006-2 Exceptions.

Sec. 225.7006-3 Waiver.

Sec. 225.7006-4 Solicitation provision and contract clause.

Sec. 225.7007 Restrictions on anchor and mooring chain.

Sec. 225.7007-1 Restrictions.

Sec. 225.7007-2 Waiver.

Sec. 225.7007-3 Contract clause.

Sec. 225.7008 Waiver of restrictions of 10 U.S.C. 2534.

Sec. 225.7009 Restriction on ball and roller bearings.

Sec. 225.7009-1 Scope.

Sec. 225.7009-2 Restriction.

Sec. 225.7009-3 Exception.

Sec. 225.7009-4 Waiver.

Sec. 225.7009-5 Contract clause.

Sec. 225.7010 [Reserved]

Sec. 225.7011 Restriction on carbon, alloy, and armor steel plate.

Sec. 225.7011-1 Restriction.

Sec. 225.7011-2 Waiver.

Sec. 225.7011-3 Contract clause.

Sec. 225.7012 Restriction on supercomputers.

Sec. 225.7012-1 Restriction.

Sec. 225.7012-2 Waiver.

Sec. 225.7012-3 Contract clause.

Sec. 225.7013 Restrictions on construction or repair of vessels in 
          foreign shipyards.

Sec. 225.7014 Restrictions on military construction.

Sec. 225.7015 Restriction on overseas architect-engineer services.

Sec. 225.7016 Restriction on Ballistic Missile Defense research, 
          development, test, and evaluation.

Sec. 225.7016-1 Definitions.

Sec. 225.7016-2 Restriction.

Sec. 225.7016-3 Exceptions.

Sec. 225.7016-4 Solicitation provision.

        Subpart 225.71_Other Restrictions on Foreign Acquisition


Sec. 225.7100 Scope of subpart.

Sec. 225.7101 Definitions.

Sec. 225.7102 Forgings.

Sec. 225.7102-1 Policy.

Sec. 225.7102-2 Exceptions.

Sec. 225.7102-3 Waiver.

Sec. 225.7102-4 Contract clause.

 Subpart 225.72_Reporting Contract Performance Outside the United States


Sec. 225.7201 Policy.

Sec. 225.7202 Exception.

Sec. 225.7203 Contracting officer distribution of reports.

Sec. 225.7204 Solicitation provision and contract clauses.

         Subpart 225.73_Acquisitions for Foreign Military Sales


Sec. 225.7300 Scope of subpart.

Sec. 225.7301 General.

Sec. 225.7302 Guidance.

Sec. 225.7303 Pricing acquisitions for FMS.

Sec. 225.7303-1 Contractor sales to other foreign customers.

Sec. 225.7303-2 Cost of doing business with a foreign government or an 
          international organization.

Sec. 225.7303-3 Government-to-government agreements.

Sec. 225.7303-4 Contingent fees.

Sec. 225.7303-5 Acquisitions wholly paid for from nonrepayable funds.

Sec. 225.7304 FMS customer involvement.

Sec. 225.7305 Limitation of liability.

Sec. 225.7306 Offset arrangements.

Sec. 225.7307 Contract clauses.

      Subpart 225.74_Defense Contractors Outside the United States


Sec. 225.7401 Contracts requiring performance or delivery in a foreign 
          country.

Sec. 225.7402 Contractor personnel authorized to accompany U.S. Armed 
          Forces deployed outside the United States.

Sec. 225.7402-1 Scope.

Sec. 225.7402-2 Definition.

Sec. 225.7402-3 Government support.

Sec. 225.7402-4 Law of war training.

Sec. 225.7402-5 Contract clauses.

Sec. 225.7403 Antiterrorism/force protection.

Sec. 225.7403-1 General.

Sec. 225.7403-2 Contract clause.

               Subpart 225.75_Balance of Payments Program


Sec. 225.7500 Scope of subpart.

Sec. 225.7501 Policy.

Sec. 225.7502 Procedures.

Sec. 225.7503 Contract clauses.

             Subpart 225.76_Secondary Arab Boycott of Israel


Sec. 225.7601 Restriction.

Sec. 225.7602 Procedures.

Sec. 225.7603 Exceptions.

Sec. 225.7604 Waivers.

Sec. 225.7605 Solicitation provision.

[[Page 145]]

    Subpart 225.77_Acquisitions in Support of Operations in Iraq or 
                               Afghanistan


Sec. 225.7700 Scope.

Sec. 225.7701 Definitions.

Sec. 225.7702 Acquisition of small arms.

Sec. 225.7703 Acquisition of products or services other than small arms.

Sec. 225.7703-1 Acquisition procedures.

Sec. 225.7703-2 Determination requirements.

Sec. 225.7703-3 Evaluating offers.

Sec. 225.7703-4 Reporting requirement.

Sec. 225.7703-5 Solicitation provisions and contract clauses.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36367, July 31, 1991, unless otherwise noted.



Sec. 225.001  General.

    For guidance on evaluating offers of foreign end products, see PGI 
225.001.

[70 FR 73154, Dec. 9, 2005]



Sec. 225.003  Definitions.

    As used in this part--
    (1) Caribbean Basin country end product includes petroleum or any 
product derived from petroleum.
    (2) Defense equipment means any equipment, item of supply, 
component, or end product purchased by DoD.
    (3) Domestic concern means--
    (i) A concern incorporated in the United States (including a 
subsidiary that is incorporated in the United States, even if the parent 
corporation is a foreign concern; or
    (ii) An unincorporated concern having its principal place of 
business in the United States.
    (4) Domestic end product has the meaning given in the clauses at 
252.225-7001, Buy American Act and Balance of Payments Program; and 
252.225-7036, Buy American Act--Free Trade Agreements--Balance of 
Payments Program, instead of the meaning in FAR 25.003.
    (5) Eligible product means, instead of the definition in FAR 
25.003--
    (i) A foreign end product that--
    (A) Is in a category listed in 225.401-70; and
    (B) Is not subject to discriminatory treatment, due to the 
applicability of a trade agreement to a particular acquisition;
    (ii) A foreign construction material that is not subject to 
discriminatory treatment, due to the applicability of a trade agreement 
to a particular acquisition; or
    (iii) A foreign service that is not subject to discriminatory 
treatment, due to the applicability of a trade agreement to a particular 
acquisition.
    (6) Foreign concern means any concern other than a domestic concern.
    (7) Free Trade Agreement country does not include Oman.
    (8) Nonqualifying country means a country other than the United 
States or a qualifying country.
    (9) Nonqualifying country component means a component mined, 
produced, or manufactured in a nonqualifying country.
    (10) Qualifying country means a country with a reciprocal defense 
procurement memorandum of understanding or international agreement with 
the United States in which both countries agree to remove barriers to 
purchases of supplies produced in the other country or services 
performed by sources of the other country, and the memorandum or 
agreement complies, where applicable, with the requirements of section 
36 of the Arms Export Control Act (22 U.S.C. 2776) and with 10 U.S.C. 
2457. Accordingly, the following are qualifying countries:

Australia
Austria
Belgium
Canada
Denmark
Egypt
Finland
France
Germany
Greece
Israel
Italy
Luxembourg
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
Turkey
United Kingdom of Great Britain and Northern Ireland.
    (11) Qualifying country component and qualifying country end product 
are defined in the clauses at 252.225-7001, Buy American Act and Balance 
of Payments Program; and 252.225-7036, Buy

[[Page 146]]

American Act--Free Trade Agreements--Balance of Payments Program. 
Qualifying country end product is also defined in the clause at 252.225-
7021, Trade Agreements.
    (12) Qualifying country offer means an offer of a qualifying country 
end product, including the price of transportation to destination.
    (13) Source, when restricted by words such as foreign, domestic, or 
qualifying country, means the actual manufacturer or producer of the end 
product or component.

[68 FR 15618, Mar. 31, 2003, as amended at 69 FR 1927, Jan. 13, 2004; 70 
FR 73153, Dec. 9, 2005; 73 FR 76971, Dec. 18, 2008; 74 FR 37651, July 
29, 2009; 75 FR 34945, June 21, 2010]



Sec. 225.004  Reporting of acquisition of end products manufactured 
          outside the United States.

    Follow the procedures at PGI 225.004 for entering the data upon 
which the report required by FAR 25.004 will be based.

[71 FR 62559, Oct. 26, 2006]

                 Subpart 225.1_Buy American Act_Supplies

    Source: 68 FR 15618, Mar. 31, 2003, unless otherwise noted.



Sec. 225.101  General.

    (a) For DoD, the following two-part test determines whether a 
manufactured end product is a domestic end product:
    (i) The end product is manufactured in the United States; and
    (ii) The cost of its U.S. and qualifying country components exceeds 
50 percent of the cost of all its components. This test is applied to 
end products only and not to individual components.
    (c) Additional exceptions that allow the purchase of foreign end 
products are listed at 225.103.



Sec. 225.103  Exceptions.

    (a)(i)(A) Public interest exceptions for certain countries are in 
225.872.
    (B) For procurements covered by the World Trade Organization 
Government Procurement Agreement, the Under Secretary of Defense 
(Acquisition, Technology, and Logistics) has determined that it is 
inconsistent with the public interest to apply the Buy American Act to 
end products that are substantially transformed in the United States.
    (ii)(A) Normally, use the evaluation procedures in Subpart 225.5, 
but consider recommending a public interest exception if the purposes of 
the Buy American Act are not served, or in order to meet a need set 
forth in 10 U.S.C. 2533. For example, a public interest exception may be 
appropriate--
    (1) If accepting the low domestic offer will involve substantial 
foreign expenditures, or accepting the low foreign offer will involve 
substantial domestic expenditures;
    (2) To ensure access to advanced state-of-the-art commercial 
technology; or
    (3) To maintain the same source of supply for spare and replacement 
parts (also see paragraph (b)(iii)(B) of this section)--
    (i) For an end item that qualifies as a domestic end product; or
    (ii) In order not to impair integration of the military and 
commercial industrial base.
    (B) Except as provided in PGI 225.872-4, process a determination for 
a public interest exception after consideration of the factors in 10 
U.S.C. 2533--
    (1) At a level above the contracting officer for acquisitions valued 
at or below the simplified acquisition threshold;
    (2) By the head of the contracting activity for acquisitions with a 
value greater than the simplified acquisition threshold but less than 
$1.5 million; or
    (3) By the agency head for acquisitions valued at $1.5 million or 
more.
    (b)(i) A determination that an article, material, or supply is not 
reasonably available is required when domestic offers are insufficient 
to meet the requirement and award is to be made on other than a 
qualifying country or eligible end product.
    (ii) Except as provided in FAR 25.103(b)(3), the determination shall 
be approved--
    (A) At a level above the contracting officer for acquisitions valued 
at or below the simplified acquisition threshold;

[[Page 147]]

    (B) By the chief of the contracting office for acquisitions with a 
value greater than the simplified acquisition threshold but less than 
$1.5 million; or
    (C) By the head of the contracting activity or immediate deputy for 
acquisitions valued at $1.5 million or more.
    (iii) A separate determination as to whether an article is 
reasonably available is not required for the following articles. DoD has 
already determined that these articles are not reasonably available from 
domestic sources:
    (A) End products or components listed in 225.104(a).
    (B) Spare or replacement parts that must be acquired from the 
original foreign manufacturer or supplier.
    (C) Foreign drugs acquired by the Defense Supply Center, 
Philadelphia, when the Director, Pharmaceuticals Group, Directorate of 
Medical Materiel, determines that only the requested foreign drug will 
fulfill the requirements.
    (iv) Under coordinated acquisition (see Subpart 208.70), the 
determination is the responsibility of the requiring department when the 
requiring department specifies acquisition of a foreign end product.
    (c) The cost of a domestic end product is unreasonable if it is not 
the low evaluated offer when evaluated under Subpart 225.5.

[68 FR 15618, Mar. 31, 2003, as amended at 70 FR 2362, Jan. 13, 2005; 73 
FR 4113, Jan. 24, 2008; 75 FR 45074, Aug. 2, 2010]



Sec. 225.104  Nonavailable articles.

    (a) DoD has determined that the following articles also are 
nonavailable in accordance with FAR 25.103(b):
    (i) Aluminum clad steel wire.
    (ii) Sperm oil.



Sec. 225.105  Determining reasonableness of cost.

    (b) Use an evaluation factor of 50 percent instead of the factors 
specified in FAR 25.105(b).



Sec. 225.170  Acquisition from or through other Government agencies.

    Contracting activities must apply the evaluation procedures in 
Subpart 225.5 when using Federal supply schedules.

          Subpart 225.2_Buy American Act_Construction Materials



Sec. 225.202  Exceptions.

    (a)(2) A nonavailability determination is not required for 
construction materials listed in FAR 25.104(a) or in 225.104(a). For 
other materials, a nonavailability determination shall be approved at 
the levels specified in 225.103(b)(ii). Use the estimated value of the 
construction materials to determine the approval level.

[65 FR 19851, Apr. 13, 2000, as amended at 68 FR 15619, Mar. 31, 2003]



Sec. 225.206  Noncompliance.

    (c)(4) Prepare any report of noncompliance in accordance with the 
procedures at 209.406-3 or 209.407-3.

[64 FR 62986, Nov. 18, 1999]

       Subpart 225.3_Contracts Performed Outside the United States

    Source: 73 FR 16774, Mar. 31, 2008, unless otherwise noted.



Sec. 225.301  Contractor personnel in a designated operational area or 
          
          supporting a diplomatic or consular mission outside the United 
          States.



Sec. 225.301-1  Scope.

    (a) Performance in a designated operational area, as used in this 
section, means performance of a service or construction, as required by 
the contract. For supply contracts, the term includes services 
associated with the acquisition of supplies (e.g., installation or 
maintenance), but does not include production of the supplies or 
associated overhead functions.
    (c) For DoD, this section also applies to all personal services 
contracts.



Sec. 225.301-4  Contract clause.

    (1) Use the clause at FAR 52.225-19, Contractor Personnel in a 
Designated Operational Area or Supporting a Diplomatic or Consular 
Mission Outside the United States, in accordance with the prescription 
at FAR 25.301-4, except that--

[[Page 148]]

    (i) The clause shall also be used in personal services contracts 
with individuals; and
    (ii) The clause shall not be used when all contractor personnel 
performing outside the United States will be covered by the clause at 
252.225-7040.
    (2) When using the clause at FAR 52.225-19, the contracting officer 
shall inform the contractor that the Synchronized Predeployment and 
Operational Tracker (SPOT) is the appropriate automated system to use 
for the list of contractor personnel required by paragraph (g) of the 
clause. Information on the SPOT system is available at http://
www.dod.mil/bta/products/spot.html and http://www.acq.osd.mil/log/PS/
spot.html.

[73 FR 16774, Mar. 31, 2008, as amended at 74 FR 34265, July 15, 2009]

                     Subpart 225.4_Trade Agreements

    Source: 65 FR 19852, Apr. 13, 2000, unless otherwise noted.



Sec. 225.401  Exceptions.

    (a)(2) If a department or agency considers an individual acquisition 
of a product to be indispensable for national security or national 
defense purposes and appropriate for exclusion from the provisions of 
FAR Subpart 25.4, it may submit a request with supporting rationale to 
the Director of Defense Procurement and Acquisition Policy 
(OUSD(AT&L)DPAP). Approval by OUSD(AT&L)DPAP is not required if--
    (A) Purchase from foreign sources is restricted by statute (see 
Subpart 225.70);
    (B) Another exception in FAR 25.401 applies to the acquisition; or
    (C) Competition from foreign sources is restricted under Subpart 
225.71.

[68 FR 15619, Mar. 31, 2003]



Sec. 225.401-70  End products subject to trade agreements.

    Acquisitions of end products in the following Federal supply groups 
(FSG) are covered by trade agreements if the value of the acquisition is 
at or above the applicable trade agreement threshold and no exception 
applies. If an end product is not in one of the listed groups, the trade 
agreements do not apply. The definition of Caribbean Basin country end 
products in FAR 25.003 excludes those end products that are not eligible 
for duty-free treatment under 19 U.S.C. 2703(b). Therefore certain 
watches, watch parts, and luggage from certain Caribbean Basin countries 
are not eligible products. However, 225.003 expands the definition of 
Caribbean Basin country end products to include petroleum and any 
product derived from petroleum, in accordance with Section 8094 of Pub. 
L. 103-139.

 
              FSG                          Category/Description
 
22                               Railway equipment
23                               Motor vehicles, trailers, and cycles
                                  (except 2350 and buses under 2310)
24                               Tractors
25                               Vehicular equipment components
26                               Tires and tubes
29                               Engine accessories
30                               Mechanical power transmission equipment
32                               Woodworking machinery and equipment
34                               Metalworking machinery
35                               Service and trade equipment
36                               Special industry machinery (except
                                  3690)
37                               Agricultural machinery and equipment
38                               Construction, mining, excavating, and
                                  highway maintenance equipment
39                               Materials handling equipment
40                               Rope, cable, chain and fittings
41                               Refrigeration and air conditioning
                                  equipment
42                               Fire fighting, rescue and safety
                                  equipment
43                               Pumps and compressors
44                               Furnace, steam plant and drying
                                  equipment (except 4470)
45                               Plumbing, heating, and sanitation
                                  equipment
46                               Water purification and sewage treatment
                                  equipment
47                               Piping, tubing, hose, and fitting
48                               Valves
49                               Maintenance and repair shop equipment
                                  (except 4920-4927, 4931-4935, 4960)
53                               Hardware and abrasives
54                               Prefabricated structures and
                                  scaffolding
55                               Lumber, millwork, plywood, and veneer
56                               Construction and building materials
61                               Electric wire, and power and
                                  distribution equipment
62                               Lighting fixtures and lamps
63                               Alarm and signal systems

[[Page 149]]

 
65                               Medical, dental, and veterinary
                                  equipment and supplies
66                               Instruments and laboratory equipment
                                  (except aircraft clocks under 6645)--
                                  See FAR 25.003 exclusion of certain
                                  watches and watch parts for certain
                                  Caribbean Basin countries
67                               Photographic equipment
68                               Chemicals and chemical products
69                               Training aids and devices
70                               General purpose ADPE, software,
                                  supplies, and support equipment
71                               Furniture
72                               Household and commercial furnishings
                                  and appliances
73                               Food preparation and serving equipment
74                               Office machines, visible record
                                  equipment and ADP equipment
75                               Office supplies and devices
76                               Books, maps, and other publications
77                               Musical instruments, phonographs, and
                                  home type radios
78                               Recreational and athletic equipment
79                               Cleaning equipment and supplies
80                               Brushes, paints, sealers, and adhesives
81                               Containers, packaging and packing
                                  supplies (except 8140)
83                               Pins, needles, and sewing kits (only
                                  part of 8315) and flag staffs,
                                  flagpoles, and flagstaff trucks (only
                                  part of 8345)
84                               Luggage (only 8460)--See FAR 25.003 for
                                  exclusion of luggage for Caribbean
                                  Basin countries
85                               Toiletries
87                               Agricultural supplies
88                               Live animals
89                               Tobacco products (only 8975)
91                               Fuels, oils, and waxes
93                               Nonmetallic fabricated materials
94                               Nonmetallic crude materials
96                               Ores, minerals, and their primary
                                  products
99                               Miscellaneous
 


[65 FR 19852, Apr. 13, 2000, as amended at 68 FR 15619, Mar. 31, 2003; 
69 FR 1927, Jan. 13, 2004; 70 FR 2363, Jan. 13, 2005; 70 FR 73154, Dec. 
9, 2005; 71 FR 9270, Feb. 23, 2006]



Sec. 225.401-71  Products or services in support of operations in Iraq 
          or Afghanistan.

    When acquiring products or services, other than small arms, in 
support of operations in Iraq or Afghanistan--
    (a) If using the procedure specified in 225.7703-1(a)(1), the 
purchase restriction at FAR 25.403(c) does not apply with regard to 
products or services from Iraq.
    (b) If using a procedure specified in 225.7703-1(a)(2) or (3), the 
procedures of subpart 25.4 are not applicable.

[75 FR 18039, Apr. 8, 2010]



Sec. 225.402  General.

    To estimate the value of the acquisition, use the total estimated 
value of end products covered by trade agreements (see 225.401-70).

[70 FR 2363, Jan. 13, 2005]



Sec. 225.403  World Trade Organization Government Procurement Agreement 
          and Free Trade Agreements.

    (c) For acquisitions of supplies covered by the World Trade 
Organization Government Procurement Agreement, acquire only U.S.-made, 
qualifying country, or designated country end products unless--
    (i) The contracting officer determines that offers of U.S.-made, 
qualifying country, or designated country end products from responsive, 
responsible offerors are either--
    (A) Not received; or
    (B) Insufficient to fill the Government's requirements. In this 
case, accept all responsive, responsible offers of U.S.-made, qualifying 
country, and eligible products before accepting any other offers; or
    (ii) A national interest waiver under 19 U.S.C. 2512(b)(2) is 
granted on a case-by-case basis. Except as delegated in paragraphs 
(c)(i)(A) and (B) of this section, submit any request for a national 
interest waiver to the Director of Defense Procurement and Acquisition 
Policy in accordance with department or agency procedures. Include 
supporting rationale with the request.
    (A) The head of the contracting activity may approve a national 
interest waiver for a purchase by an overseas purchasing activity, if 
the waiver is supported by a written statement from the requiring 
activity that the products being acquired are critical for the support 
of U.S. forces stationed abroad.
    (B) The Commander or Director, Defense Energy Support Center, may 
approve national interest waivers for purchases of fuel for use by U.S. 
forces overseas.

[68 FR 15619, Mar. 31, 2003, as amended at 70 FR 2363, Jan. 13, 2005]

[[Page 150]]



Sec. 225.408  Procedures.

    (a)(4) The requirements of FAR 25.408(a)(4), on submission of offers 
in U.S. dollars, do not apply to overseas acquisitions or to Defense 
Energy Support Center post, camp, or station overseas requirements.

[70 FR 73154, Dec. 9, 2005]

        Subpart 225.5_Evaluating Foreign Offers_Supply Contracts

    Source: 68 FR 15620, Mar. 31, 2003, unless otherwise noted.



Sec. 225.502  Application.

    (b) Use the following procedures instead of the procedures in FAR 
25.502(b) for acquisitions subject to the World Trade Organization 
Government Procurement Agreement:
    (i) Consider only offers of U.S.-made, qualifying country, or 
designated country end products, except as permitted by 225.403 or 
225.7703-1.
    (ii) If price is the determining factor, award on the low offer.
    (c) Use the following procedures instead of those in FAR 25.502(c) 
for acquisitions subject to the Buy American Act or the Balance of 
Payments Program:
    (i)(A) If the acquisition is subject only to the Buy American Act or 
the Balance of Payments Program, then only qualifying country end 
products are exempt from application of the Buy American Act or Balance 
of Payments Program evaluation factor.
    (B) If the acquisition is also subject to a Free Trade Agreement, 
then eligible products of the applicable Free Trade Agreement country 
are also exempt from application of the Buy American Act or Balance of 
Payments Program evaluation factor.
    (ii) If price is the determining factor, use the following 
procedures:
    (A) If the low offer is a domestic offer, award on that offer.
    (B) If there are no domestic offers, award on the low offer (see 
example in 225.504(1)).
    (C) If the low offer is a foreign offer that is exempt from 
application of the Buy American Act or Balance of Payments Program 
evaluation factor, award on that offer. (If the low offer is a 
qualifying country offer from a country listed at 225.872-1(b), execute 
a determination in accordance with 225.872-4.)
    (D) If the low offer is a foreign offer that is not exempt from 
application of the Buy American Act or Balance of Payments Program 
evaluation factor, and there is another foreign offer that is exempt and 
is lower than the lowest domestic offer, award on the low foreign offer 
(see example in 225.504(2)).
    (E) Otherwise, apply the 50 percent evaluation factor to the low 
foreign offer.
    (1) If the price of the low domestic offer is less than the 
evaluated price of the low foreign offer, award on the low domestic 
offer (see example in 225.504(3)).
    (2) If the evaluated price of the low foreign offer remains less 
than the low domestic offer, award on the low foreign offer (see example 
in 225.504(4)).
    (iii) If price is not the determining factor, use the following 
procedures:
    (A) If there are domestic offers, apply the 50 percent Buy American 
Act or Balance of Payments Program evaluation factor to all foreign 
offers unless an exemption applies.
    (B) Evaluate in accordance with the criteria of the solicitation.
    (C) If these procedures will not result in award on a domestic 
offer, reevaluate offers without the 50 percent factor. If this will 
result in award on an offer to which the Buy American Act or Balance of 
Payments Program applies, but evaluation in accordance with paragraph 
(c)(ii) of this section would result in award on a domestic offer, 
proceed with award only after execution of a determination in accordance 
with 225.103(a)(ii)(B), that domestic preference would be inconsistent 
with the public interest.
    (iv) If the solicitation includes the provision at 252.225-7023, 
Preference for Products or Services from Iraq or Afghanistan, use the 
evaluation procedures at 225.7703-3.

[68 FR 15620, Mar. 31, 2003, as amended at 69 FR 1928, Jan. 13, 2004; 69 
FR 74992, Dec. 15, 2004; 70 FR 2363, Jan. 13, 2005; 73 FR 53152, Sept. 
15, 2008]

[[Page 151]]



Sec. 225.503  Group offers.

    Evaluate group offers in accordance with FAR 25.503, but apply the 
evaluation procedures of 225.502.



Sec. 225.504  Evaluation examples.

    For examples that illustrate the evaluation procedures in 
225.502(c)(ii), see PGI 225.504.

[70 FR 73154, Dec. 9, 2005]

                    Subpart 225.7_Prohibited Sources



Sec. 225.701  Restrictions.

    See 209.104-1(g) for restrictions on contracting with firms owned or 
controlled by foreign governments.

[70 FR 73154, Dec. 9, 2005]



Sec. 225.701-70  Exception.

    DoD personnel are authorized to make emergency acquisitions in 
direct support of U.S. or allied forces deployed in military 
contingency, humanitarian, or peacekeeping operations in a country or 
region subject to economic sanctions administered by the Department of 
the Treasury, Office of Foreign Assets Control.

[68 FR 7441, Feb. 14, 2003]



Sec. 225.770  Prohibition on acquisition of United States Munitions List 
          items from Communist Chinese military companies.

    This section implements Section 1211 of the National Defense 
Authorization Act for Fiscal Year 2006 (Pub. L. 109-163). See PGI 
225.770 for additional information relating to this statute, the terms 
used in this section, and the United States Munitions List.

[71 FR 53046, Sept. 8, 2006]



Sec. 225.770-1  Definitions.

    As used in this section--
    (a) Communist Chinese military company and United States Munitions 
List are defined in the clause at 252.225-7007, Prohibition on 
Acquisition of United States Munitions List Items from Communist Chinese 
Military Companies.
    (b) Component means an item that is useful only when used in 
conjunction with an end item (22 CFR 121.8).
    (c) Part means any single unassembled element of a major or minor 
component, accessory, or attachment, that is not normally subject to 
disassembly without the destruction or impairment of design use (22 CFR 
121.8).

[71 FR 53046, Sept. 8, 2006]



Sec. 225.770-2  Prohibition.

    Do not acquire supplies or services covered by the United States 
Munitions List (USML) (22 CFR part 121), through a contract or 
subcontract at any tier, from any Communist Chinese military company. 
This prohibition does not apply to components and parts of covered items 
unless the components and parts are themselves covered by the USML.

[71 FR 53046, Sept. 8, 2006]



Sec. 225.770-3  Exceptions.

    The prohibition in 225.770-2 does not apply to supplies or services 
acquired--
    (a) In connection with a visit to the People's Republic of China by 
a vessel or an aircraft of the U.S. armed forces;
    (b) For testing purposes; or
    (c) For the purpose of gathering intelligence.

[71 FR 53046, Sept. 8, 2006]



Sec. 225.770-4  Identifying USML items.

    (a) Before issuance of a solicitation, the requiring activity shall 
notify the contracting officer in writing whether the items to be 
acquired are covered by the USML. The notification shall identify any 
covered item(s) and shall provide the pertinent USML reference(s) from 
22 CFR Part 121.
    (b) The USML includes defense articles and defense services that 
fall into 21 categories. Since not all USML items are themselves 
munitions (e.g., protective personnel equipment, military training 
equipment), the requiring activity should consult the USML before 
concluding that an item is or is not covered by the USML.

[71 FR 53046, Sept. 8, 2006]



Sec. 225.770-5  Waiver of prohibition.

    (a) The prohibition in 225.770-2 may be waived, on a case-by-case 
basis, if an official identified in paragraph (b) of this subsection 
determines that a waiver is necessary for national security purposes.

[[Page 152]]

    (b) The following officials are authorized, without power of 
delegation, to make the determination specified in paragraph (a) of this 
subsection:
    (1) The Under Secretary of Defense (Acquisition, Technology, and 
Logistics).
    (2) The Secretaries of the military departments.
    (3) The Component Acquisition Executive of the Defense Logistics 
Agency.
    (c) The official granting a waiver shall notify the congressional 
defense committees within 30 days after the date of the waiver.

[71 FR 53046, Sept. 8, 2006]

      Subpart 225.8_Other International Agreements and Coordination

    Source: 68 FR 15621, Mar. 31, 2003, unless otherwise noted.



Sec. 225.802  Procedures.

    (b) Information on memoranda of understanding and other 
international agreements is available at PGI 225.802(b).

[70 FR 73154, Dec. 9, 2005]



Sec. 225.802-70  Contracts for performance outside the United States and 
          Canada.

    Follow the procedures at PGI 225.802-70 when placing a contract 
requiring performance outside the United States and Canada. Also see 
Subpart 225.74, Defense Contractors Outside the United States.

[70 FR 23801, May 5, 2005]



Sec. 225.802-71  End use certificates.

    Contracting officers considering the purchase of an item from a 
foreign source may encounter a request for the signing of a certificate 
to indicate that the Armed Forces of the United States is the end user 
of the item, and that the U.S. Government will not transfer the item to 
third parties without authorization from the Government of the country 
selling the item. When encountering this situation, refer to DoD 
Directive 2040.3, End Use Certificates, for guidance.



Sec. 225.870  Contracting with Canadian contractors.



Sec. 225.870-1  General.

    (a) The Canadian Government guarantees to the U.S. Government all 
commitments, obligations, and covenants of the Canadian Commercial 
Corporation under any contract or order issued to the Corporation by any 
contracting office of the U.S. Government. The Canadian Government has 
waived notice of any change or modification that may be made, from time 
to time, in these commitments, obligations, or covenants.
    (b) For production planning purposes, Canada is part of the defense 
industrial base (see 225.870-2(b)).
    (c) The Canadian Commercial Corporation will award and administer 
contracts with contractors located in Canada, except for--
    (1) Negotiated acquisitions for experimental, developmental, or 
research work under projects other than the Defense Development Sharing 
Program;
    (2) Acquisitions of unusual or compelling urgency;
    (3) Acquisitions at or below the simplified acquisition threshold; 
or
    (4) Acquisitions made by DoD activities located in Canada.
    (d) For additional information on production rights, data, and 
information; services provided by Canadian Commercial Corporation; 
audit; and inspection, see PGI 225.870-1(d).

[68 FR 15621, Mar. 31, 2003, as amended at 70 FR 73154, Dec. 9, 2005]



Sec. 225.870-2  Solicitation of Canadian contractors.

    (a) If requested, furnish a solicitation to the Canadian Commercial 
Corporation even if no Canadian firm is solicited.
    (b) Handle acquisitions at or below the simplified acquisition 
threshold directly with Canadian firms and not through the Canadian 
Commercial Corporation.

[68 FR 15621, Mar. 31, 2003, as amended at 72 FR 20758, Apr. 26, 2007]



Sec. 225.870-3  Submission of offers.

    (a) As indicated in 225.870-4, the Canadian Commercial Corporation 
is the

[[Page 153]]

prime contractor. To indicate acceptance of offers by individual 
Canadian companies, the Canadian Commercial Corporation issues a letter 
supporting the Canadian offer and containing the following information:
    (1) Name of the Canadian offeror.
    (2) Confirmation and endorsement of the offer in the name of the 
Canadian Commercial Corporation.
    (3) A statement that the Corporation shall subcontract 100 percent 
with the offeror.
    (b) When a Canadian offer cannot be processed through the Canadian 
Commercial Corporation in time to meet the date for receipt of offers, 
the Corporation may permit Canadian firms to submit offers directly. 
However, the contracting officer shall receive the Canadian Commercial 
Corporation's endorsement before contract award.
    (c) The Canadian Commercial Corporation will submit all sealed bids 
in terms of U.S. currency. Do not adjust contracts awarded under sealed 
bidding for losses or gains from fluctuation in exchange rates.
    (d) Except for sealed bids, the Canadian Commercial Corporation 
normally will submit offers and quotations in terms of Canadian 
currency. The Corporation may, at the time of submitting an offer, elect 
to quote and receive payment in terms of U.S. currency, in which case 
the contract--
    (1) Shall provide for payment in U.S. currency; and
    (2) Shall not be adjusted for losses or gains from fluctuation in 
exchange rates.



Sec. 225.870-4  Contracting procedures.

    (a) Except for contracts described in 225.870-1(c)(1) through (4), 
award individual contracts covering purchases from suppliers located in 
Canada to the Canadian Commercial Corporation, 11th Floor, 50 O'Connor 
Street, Ottawa, Ontario, Canada, K1A-0S6.
    (b) Direct communication with the Canadian supplier is authorized 
and encouraged in connection with all technical aspects of the contract, 
provided the Corporation's approval is obtained on any matters involving 
changes to the contract.
    (c) Identify in the contract, the type of currency, i.e., U.S. or 
Canadian. Contracts that provide for payment in Canadian currency 
shall--
    (1) Quote the contract price in terms of Canadian dollars and 
identify the amount by the initials ``CN'', e.g., $1,647.23CN; and
    (2) Clearly indicate on the face of the contract the U.S./Canadian 
conversion rate at the time of award and the U.S. dollar equivalent of 
the Canadian dollar contract amount.



Sec. 225.870-5  Contract administration.

    Follow the contract administration procedures at PGI 225.870-5.

[70 FR 73155, Dec. 9, 2005]



Sec. 225.870-6  Termination procedures.

    When contract termination is necessary, follow the procedures at 
249.7000.

[71 FR 27645, May 12, 2006]



Sec. 225.870-7  Acceptance of Canadian supplies.

    For information on the acceptance of Canadian supplies, see PGI 
225.870-7.

[70 FR 73155, Dec. 9, 2005]



Sec. 225.870-8  Industrial security.

    Industrial security for Canada shall be in accordance with the U.S.-
Canada Industrial Security Agreement of March 31, 1952, as amended.



Sec. 225.871  North Atlantic Treaty Organization (NATO) cooperative 
          projects.



Sec. 225.871-1  Scope.

    This section implements 22 U.S.C. 2767 and 10 U.S.C. 2350b.

[70 FR 73155, Dec. 9, 2005]



Sec. 225.871-2  Definitions.

    As used in this section--
    (a) Cooperative project means a jointly managed arrangement--
    (1) Described in a written agreement between the parties;
    (2) Undertaken to further the objectives of standardization, 
rationalization, and interoperability of the armed forces of NATO member 
countries; and
    (3) Providing for--
    (i) One or more of the other participants to share with the United 
States the cost of research and development,

[[Page 154]]

testing, evaluation, or joint production (including follow-on support) 
of certain defense articles;
    (ii) Concurrent production in the United States and in another 
member country of a defense article jointly developed; or
    (iii) Acquisition by the United States of a defense article or 
defense service from another member country.
    (b) Other participant means a cooperative project participant other 
than the United States.



Sec. 225.871-3  General.

    (a) Cooperative project authority. (1) Departments and agencies, 
that have authority to do so, may enter into cooperative project 
agreements with NATO or with one or more member countries of NATO under 
DoDD 5530.3, International Agreements.
    (2) Under laws and regulations governing the negotiation and 
implementation of cooperative project agreements, departments and 
agencies may enter into contracts, or incur other obligations, on behalf 
of other participants without charge to any appropriation or contract 
authorization.
    (3) Agency heads are authorized to solicit and award contracts to 
implement cooperative projects.
    (b) Contracts implementing cooperative projects shall comply with 
all applicable laws relating to Government acquisition, unless a waiver 
is granted under 225.871-4. A waiver of certain laws and regulations may 
be obtained if the waiver--
    (1) Is required by the terms of a written cooperative project 
agreement;
    (2) Will significantly further NATO standardization, 
rationalization, and interoperability; and
    (3) Is approved by the appropriate DoD official.



Sec. 225.871-4  Statutory waivers.

    (a) For contracts or subcontracts placed outside the United States, 
the Deputy Secretary of Defense may waive any provision of law that 
specifically prescribes--
    (1) Procedures for the formation of contracts;
    (2) Terms and conditions for inclusion in contracts;
    (3) Requirements or preferences for--
    (i) Goods grown, produced, or manufactured in the United States or 
in U.S. Government-owned facilities; or
    (ii) Services to be performed in the United States; or
    (4) Requirements regulating the performance of contracts.
    (b) There is no authority for waiver of--
    (1) Any provision of the Arms Export Control Act (22 U.S.C. 2751);
    (2) Any provision of 10 U.S.C. 2304;
    (3) The cargo preference laws of the United States, including the 
Military Cargo Preference Act of 1904 (10 U.S.C. 2631) and the Cargo 
Preference Act of 1954 (46 U.S.C. 1241(b)); or
    (4) Any of the financial management responsibilities administered by 
the Secretary of the Treasury.
    (c) To request a waiver under a cooperative project, follow the 
procedures at PGI 225.871-4.
    (d) Obtain the approval of the Deputy Secretary of Defense before 
committing to make a waiver in an agreement or a contract.

[68 FR 15621, Mar. 31, 2003, as amended at 71 FR 62565, Oct. 26, 2006]



Sec. 225.871-5  Directed Subcontracting.

    (a) The Director of Defense Procurement and Acquisition Policy may 
authorize the direct placement of subcontracts with particular 
subcontractors. Directed subcontracting is not authorized unless 
specifically addressed in the cooperative project agreement.
    (b) In some instances, it may not be feasible to name specific 
subcontractors at the time the agreement is concluded. However, the 
agreement shall clearly state the general provisions for work sharing at 
the prime and subcontract level. For additional information on 
cooperative project agreements, see PGI 225.871-5.

[68 FR 15621, Mar. 31, 2003, as amended at 70 FR 73155, Dec. 9, 2005]



Sec. 225.871-6  Disposal of property.

    Dispose of property that is jointly acquired by the members of a 
cooperative project under the procedures established in the agreement or 
in a manner consistent with the terms of the agreement, without regard 
to any laws of

[[Page 155]]

the United States applicable to the disposal of property owned by the 
United States.

[70 FR 73155, Dec. 9, 2005]



Sec. 225.871-7  Congressional notification.

    (a) Congressional notification is required when DoD makes a 
determination to award a contract or subcontract to a particular entity, 
if the determination was not part of the certification made under 22 
U.S.C. 2767(f) before finalizing the cooperative agreement.
    (1) Departments and agencies shall provide a proposed Congressional 
notice to the Director of Defense Procurement and Acquisition Policy in 
sufficient time to forward to Congress before the time of contract 
award.
    (2) The proposed notice shall include the reason it is necessary to 
use the authority to designate a particular contractor or subcontractor.
    (b) Congressional notification is also required each time a 
statutory waiver under 225.871-4 is incorporated in a contract or a 
contract modification, if such information was not provided in the 
certification to Congress before finalizing the cooperative agreement.



Sec. 225.872  Contracting with qualifying country sources.



Sec. 225.872-1  General.

    (a) As a result of memoranda of understanding and other 
international agreements, DoD has determined it inconsistent with the 
public interest to apply restrictions of the Buy American Act or the 
Balance of Payments Program to the acquisition of qualifying country end 
products from the following qualifying countries:

    Australia
    Belgium
    Canada
    Denmark
    Egypt
    Federal Republic of Germany
    Finland
    France
    Greece
    Israel
    Italy
    Luxembourg
    Netherlands
    Norway
    Portugal
    Spain
    Sweden
    Switzerland
    Turkey
    United Kingdom of Great Britain and Northern Ireland.

    (b) Individual acquisitions of qualifying country end products from 
the following qualifying country may, on a purchase-by-purchase basis 
(see 225.872-4), be exempted from application of the Buy American Act 
and the Balance of Payments Program as inconsistent with the public 
interest: Austria.
    (c) The determination in paragraph (a) of this subsection does not 
limit the authority of the Secretary concerned to restrict acquisitions 
to domestic sources or reject an otherwise acceptable offer from a 
qualifying country source when considered necessary for national defense 
reasons.

[68 FR 15621, Mar. 31, 2003, as amended at 69 FR 8116, Feb. 23, 2004; 75 
FR 32641, June 8, 2010]



Sec. 225.872-2  Applicability.

    (a) This section applies to all acquisitions of supplies except 
those restricted by--
    (1) U.S. National Disclosure Policy, DoDD 5230.11, Disclosure of 
Classified Military Information to Foreign Governments and International 
Organizations;
    (2) U.S. defense mobilization base requirements purchased under the 
authority of FAR 6.302-3(a)(2)(i), except for quantities in excess of 
that required to maintain the defense mobilization base. This 
restriction does not apply to Canadian planned producers.
    (i) Review individual solicitations to determine whether this 
restriction applies.
    (ii) Information concerning restricted items may be obtained from 
the Deputy Under Secretary of Defense (Industrial Affairs);
    (3) Other U.S. laws or regulations (e.g., the annual DoD 
appropriations act); and
    (4) U.S. industrial security requirements.
    (b) This section does not apply to construction contracts.

[[Page 156]]



Sec. 225.872-3  Solicitation procedures.

    (a) Except for items developed under the U.S./Canadian Development 
Sharing Program, use the criteria for soliciting and awarding contracts 
to small business concerns under FAR Part 19 without regard to whether 
there are potential qualifying country sources for the end product. Do 
not consider an offer of a qualifying country end product if the 
solicitation is identified for the exclusive participation of small 
business concerns.
    (b) Send solicitations directly to qualifying country sources. 
Solicit Canadian sources through the Canadian Commercial Corporation in 
accordance with 225.870.
    (c) Use international air mail if solicitation destinations are 
outside the United States and security classification permits such use.
    (d) If unusual technical or security requirements preclude the 
acquisition of otherwise acceptable defense equipment from qualifying 
country sources, review the need for such requirements. Do not impose 
unusual technical or security requirements solely for the purpose of 
precluding the acquisition of defense equipment from qualifying 
countries.
    (e) Do not automatically exclude qualifying country sources from 
submitting offers because their supplies have not been tested and 
evaluated by the department or agency.
    (1) Consider the adequacy of qualifying country service testing on a 
case-by-case basis. Departments or agencies that must limit 
solicitations to sources whose items have been tested and evaluated by 
the department or agency shall consider supplies from qualifying country 
sources that have been tested and accepted by the qualifying country for 
service use.
    (2) The department or agency may perform a confirmatory test, if 
necessary.
    (3) Apply U.S. test and evaluation standards, policies, and 
procedures when the department or agency decides that confirmatory tests 
of qualifying country end products are necessary.
    (4) If it appears that these provisions might adversely delay 
service programs, obtain the concurrence of the Under Secretary of 
Defense (Acquisition, Technology, and Logistics), before excluding the 
qualifying country source from consideration.
    (f) Permit industry representatives from a qualifying country to 
attend symposia, program briefings, prebid conferences (see FAR 14.207 
and 15.201(c)), and similar meetings that address U.S. defense equipment 
needs and requirements. When practical, structure these meetings to 
allow attendance by representatives of qualifying country concerns.

[68 FR 15621, Mar. 31, 2003, as amended at 72 FR 20758, Apr. 26, 2007]



Sec. 225.872-4  Individual determinations.

    If the offer of an end product from a qualifying country source 
listed in 225.872-1(b), as evaluated, is low or otherwise eligible for 
award, prepare a determination and findings exempting the acquisition 
from the Buy American Act and the Balance of Payments Program as 
inconsistent with the public interest, unless another exception such as 
the Trade Agreements Act applies. Follow the procedures at PGI 225.872-
4.

[70 FR 73155, Dec. 9, 2005]



Sec. 225.872-5  Contract administration.

    (a) Arrangements exist with some qualifying countries to provide 
reciprocal contract administration services. Some arrangements are at no 
cost to either government. To determine whether such an arrangement has 
been negotiated and what contract administration functions are covered, 
contact the Deputy Director of Defense Procurement and Acquisition 
Policy (Contract Policy and International Contracting), ((703) 697-9351, 
DSN 227-9351).
    (b) Follow the contract administration procedures at PGI 225.872-
5(b).
    (c) Information on quality assurance delegations to foreign 
governments is in Subpart 246.4, Government Contract Quality Assurance.

[68 FR 15621, Mar. 31, 2003, as amended at 70 FR 73155, Dec. 9, 2005; 72 
FR 30278, May 31, 2007]



Sec. 225.872-6  Audit.

    (a) Memoranda of understanding with some qualifying countries 
contain annexes that provide for reciprocal ``no-

[[Page 157]]

cost'' audits of contracts and subcontracts (pre- and post-award).
    (b) To determine if such an annex is applicable to a particular 
qualifying country, contact the Deputy Director of Defense Procurement 
and Acquisition Policy (Contract Policy and International Contracting), 
((703) 697-9351, DSN 227-9351).
    (c) Handle requests for audits in qualifying countries in accordance 
with 215.404-2(c), but follow the additional procedures at PGI 225.872-
6(c).

[68 FR 15621, Mar. 31, 2003, as amended at 70 FR 73155, Dec. 9, 2005; 72 
FR 30278, May 31, 2007]



Sec. 225.872-7  Industrial security for qualifying countries.

    The required procedures for safeguarding classified defense 
information necessary for the performance of contracts awarded to 
qualifying country sources are in the DoD Industrial Security Regulation 
DoD 5220.22-R (implemented for the Army by AR 380-49; for the Navy by 
SECNAV Instruction 5510.1H; for the Air Force by AFI 31-601; for the 
Defense Information Systems Agency by DCA Instruction 240-110-8; and for 
the National Imagery and Mapping Agency by NIMA Instruction 5220.22).



Sec. 225.872-8  Subcontracting with qualifying country sources.

    In reviewing contractor subcontracting procedures, the contracting 
officer shall ensure that the contract does not preclude qualifying 
country sources from competing for subcontracts, except when restricted 
by national security interest reasons, mobilization base considerations, 
or applicable U.S. laws or regulations (see the clause at 252.225-7002, 
Qualifying Country Sources as Subcontractors).



Sec. 225.873  Waiver of United Kingdom commercial exploitation levies.



Sec. 225.873-1  Policy.

    DoD and the Government of the United Kingdom (U.K.) have agreed to 
waive U.K. commercial exploitation levies and U.S. nonrecurring cost 
recoupment charges on a reciprocal basis. For U.K. levies to be waived, 
the offeror or contractor shall identify the levies and the contracting 
officer shall request a waiver before award of the contract or 
subcontract under which the levies are charged.



Sec. 225.873-2  Procedures.

    When an offeror or a contractor identifies a levy included in an 
offered or contract price, follow the procedures at PGI 225.873-2.

[70 FR 73155, Dec. 9, 2005]

                    Subpart 225.9_Customs and Duties

    Source: 68 FR 15626, Mar. 31, 2003, unless otherwise noted.



Sec. 225.900-70  Definition.

    ``Component,'' as used in this subpart, means any item supplied to 
the Government as part of an end product or of another component.

[74 FR 68383, Dec. 24, 2009]



Sec. 225.901  Policy.

    Unless the supplies are entitled to duty-free treatment under a 
special category in the Harmonized Tariff Schedule of the United States 
(e.g., the Caribbean Basin Economic Recovery Act or a Free Trade 
Agreement), or unless the supplies already have entered into the customs 
territory of the United States and the contractor already has paid the 
duty, DoD will issue duty-free entry certificates for--
    (1) Qualifying country supplies (end products and components);
    (2) Eligible products (end products but not components) under 
contracts covered by the World Trade Organization Government Procurement 
Agreement or a Free Trade Agreement; and
    (3) Other foreign supplies for which the contractor estimates that 
duty will exceed $200 per shipment into the customs territory of the 
United States.

[68 FR 15626, Mar. 31, 2003, as amended at 69 FR 1928, Jan. 13, 2004; 70 
FR 2363, Jan. 13, 2005]



Sec. 225.902  Procedures.

    Follow the entry and release procedures at PGI 225.902.

[70 FR 73155, Dec. 9, 2005]

[[Page 158]]



Sec. 225.903  Exempted supplies.

    (b)(i) For an explanation of the term ``supplies,'' see PGI 
225.903(b)(i).
    (ii) The duty-free certificate shall be printed, stamped, or typed 
on the face of, or attached to, Customs Form 7501. A duly designated 
officer or civilian official of the appropriate department or agency 
shall execute the certificate in the format provided at PGI 
225.903(b)(ii).

[70 FR 73155, Dec. 9, 2005]

        Subpart 225.10_Additional Foreign Acquisition Regulations



Sec. 225.1070  Clause deviations in overseas contracts.

    See 201.403(2) for approval authority for clause deviations in 
overseas contracts with governments of North Atlantic Treaty 
Organization (NATO) countries or other allies or with United Nations or 
NATO organizations.

[65 FR 19856, Apr. 13, 2000]

       Subpart 225.11_Solicitation Provisions and Contract Clauses

    Source: 68 FR 16526, Mar. 31, 2003, unless otherwise noted.



Sec. 225.1100  Scope of subpart.

    This subpart prescribes the clauses that implement Subparts 225.1 
through 225.10. The clauses that implement Subparts 225.70 through 
225.75 are prescribed within those subparts.



Sec. 225.1101  Acquisition of supplies.

    (1) Use the provision at 252.225-7000, Buy American Act--Balance of 
Payments Program Certificate, instead of the provision at FAR 52.225-2, 
Buy American Act Certificate. Use the provision in any solicitation that 
includes the clause at 252.225-7001, Buy American Act and Balance of 
Payments Program.
    (2) Use the clause at 252.225-7001, Buy American Act and Balance of 
Payments Program, instead of the clause at FAR 52.225-1, Buy American 
Act--Supplies, in solicitations and contracts unless-
    (i) All line items will be acquired from a particular source or 
sources under the authority of FAR 6.302-3;
    (ii) All line items must be domestic or qualifying country end 
products in accordance with Subpart 225.70. (However, the clause may 
still be required if Subpart 225.70 requires manufacture of the end 
product in the United States or in the United States or Canada, without 
a corresponding requirement for use of domestic components);
    (iii) An exception to the Buy American Act or Balance of Payments 
Program applies (see FAR 25.103, 225.103, and 225.7501);
    (iv) One or both of the following clauses will apply to all line 
items in the contract:
    (A) 252.225-7021, Trade Agreements.
    (B) 252.225-7036, Buy American Act--Free Trade Agreements--Balance 
of Payments Program; or
    (v) All line items will be acquired using a procedure specified in 
225.7703-1(a).
    (3) Use the clause at 252.225-7002, Qualifying Country Sources as 
Subcontractors, in solicitations and contracts that include one of the 
following clauses:
    (i) 252.225-7001, Buy American Act and Balance of Payments Program.
    (ii) 252.225-7021, Trade Agreements.
    (iii) 252.225-7036, Buy American Act--Free Trade Agreements--Balance 
of Payments Program.
    (4) Use the clause at 252.225-7013, Duty-Free Entry, instead of the 
clause at FAR 52.225-8. Do not use the clause for acquisitions of 
supplies that will not enter the customs territory of the United States.
    (5) Except as provided in paragraph (7) of this section, use the 
provision at 252.225-7020, Trade Agreements Certificate, instead of the 
provision at FAR 52.225-6, Trade Agreements Certificate, in 
solicitations that include the clause at 252.225-7021, Trade Agreements.
    (6)(i) Use the clause at 252.225-7021, Trade Agreements, instead of 
the clause at FAR 52.225-5, Trade Agreements, if the Trade Agreements 
Act applies.
    (ii) Use the clause with its Alternate I in solicitations and 
contracts that include the clause at 252.225-7024, Requirement for 
Products or Services

[[Page 159]]

from Iraq or Afghanistan, unless the clause at 252.225-7024 has been 
modified to provide a preference only for the products of Afghanistan.
    (iii) Do not use the clause if--
    (A) Purchase from foreign sources is restricted, unless the 
contracting officer anticipates a waiver of the restriction; or
    (B) The clause at 252.225-7026, Acquisition Restricted to Products 
or Services from Iraq or Afghanistan, is included in the solicitation 
and contract.
    (iv) The acquisition of eligible and noneligible products under the 
same contract may result in the application of trade agreements to only 
some of the items acquired. In such case, indicate in the Schedule those 
items covered by the Trade Agreements clause.
    (7) Use the provision at 252.225-7022, Trade Agreements 
Certificate--Inclusion of Iraqi End Products, instead of the provision 
at FAR 52.225-6, Trade Agreements Certificate, in solicitations that 
include the clause at 252.225-7021, Trade Agreements, with its Alternate 
I.
    (8) Use the provision at 252.225-7032, Waiver of United Kingdom 
Levies-Evaluation of Offers, in solicitations if a U.K. firm is expected 
to--
    (i) Submit an offer; or
    (ii) Receive a subcontract exceeding $1 million.
    (9) Use the clause at 252.225-7033, Waiver of United Kingdom Levies, 
in solicitations and contracts if a U.K. firm is expected to--
    (i) Submit an offer; or
    (ii) Receive a subcontract exceeding $1 million.
    (10) Use the provision at 252.225-7035, Buy American Act--Free Trade 
Agreements--Balance of Payments Program Certificate, instead of the 
provision at FAR 52.225-4, Buy American Act--Free Trade Agreements--
Israeli Trade Act Certificate, in solicitations that include the clause 
at 252.225-7036, Buy American Act--Free Trade Agreements--Balance of 
Payments Program. Use the provision with its Alternate I when the clause 
at 252.225-7036 is used with its Alternate I.
    (11)(i) Except as provided in paragraph (11)(ii) of this section, 
use the clause at 252.225-7036, Buy American Act--Free Trade 
Agreements--Balance of Payments Program, instead of the clause at FAR 
52.225-3, Buy American Act--Free Trade Agreements--Israeli Trade Act, in 
solicitations and contracts for the items listed at 225.401-70, when the 
estimated value equals or exceeds $25,000, but is less than $203,000, 
and a Free Trade Agreement applies to the acquisition.
    (A) Use the basic clause when the estimated value equals or exceeds 
$70,079.
    (B) Use the clause with its Alternate I when the estimated value 
equals or exceeds $25,000 but is less than $70,079.
    (ii) Do not use the clause if--
    (A) Purchase from foreign sources is restricted (see 225.401(a)(2)), 
unless the contracting officer anticipates a waiver of the restriction
    (B) Acquiring information technology that is a commercial item, 
using fiscal year 2004 or subsequent funds (Section 535 of Division F of 
the Consolidated Appropriations Act, 2004 (Pub. L. 108-199), and the 
same provision in subsequent appropriations acts).
    (iii) The acquisition of eligible and noneligible products under the 
same contract may result in the application of a Free Trade Agreement to 
only some of the items acquired. In such case, indicate in the Schedule 
those items covered by the Buy American Act--Free Trade Agreements--
Balance of Payments Program clause; or
    (C) Using a procedure specified in 225.7703-1(a).

[68 FR 15626, Mar. 31, 2003; 68 FR 25088, May 9, 2003, as amended at 69 
FR 1928, Jan. 13, 2004; 71 FR 9271, Feb. 23, 2006; 71 FR 58540, Oct. 4, 
2006; 73 FR 4116, Jan. 24, 2008; 73 FR 53152, Sept. 15, 2008; 74 FR 
34265, July 15, 2009; 75 FR 32638, June 8, 2010]



Sec. 225.1103  Other provisions and clauses.

    (1) Unless the contracting officer knows that the prospective 
contractor is not a domestic concern, use the clause at 252.225-7005, 
Identification of Expenditures in the United States, in solicitations 
and contracts that--
    (i) Exceed the simplified acquisition threshold; and
    (ii) Are for the acquisition of--
    (A) Supplies for use outside the United States;
    (B) Construction to be performed outside the United States; or

[[Page 160]]

    (C) Services to be performed primarily outside the United States.
    (2) Use the clause at 252.225-7041, Correspondence in English, in 
solicitations and contracts when contract performance will be wholly or 
in part in a foreign country.
    (3) Use the provision at 252.225-7042, Authorization to Perform, in 
solicitations when contract performance will be wholly or in part in a 
foreign country.
    (4) Unless an exception in 225.770-3 applies, use the clause at 
252.225-7007, Prohibition on Acquisition of United States Munitions List 
Items from Communist Chinese Military Companies, in solicitations and 
contracts involving the delivery of items covered by the United States 
Munitions List.

[68 FR 16526, Mar. 31, 2003, as amended at 71 FR 39006, July 11, 2006; 
71 FR 53046, Sept. 8, 2006]

   Subpart 225.70_Authorization Acts, Appropriations Acts, and Other 
              Statutory Restrictions on Foreign Acquisition



Sec. 225.7000  Scope of subpart.

    (a) This subpart contains restrictions on the acquisition of foreign 
products and services, imposed by DoD appropriations and authorization 
acts and other statutes. Refer to the acts to verify current 
applicability of the restrictions.
    (b) Nothing in this subpart affects the applicability of the Buy 
American Act or the Balance of Payments Program.

[56 FR 36367, July 31, 1991, as amended at 62 FR 2856, Jan. 17, 1997; 68 
FR 15627, Mar. 31, 2003]



Sec. 225.7001  Definitions.

    As used in this subpart--
    (a) Bearing components is defined in the clause at 252.225-7016, 
Restriction on Acquisition of Ball and Roller Bearings.
    (b) ``Component'' is defined in the clauses at 252.225-7009, 
Restriction on Acquisition of Certain Articles Containing Specialty 
Metals; 252.225-7012, Preference for Certain Domestic Commodities, and 
252.225-7016, Restriction on Acquisition of Ball and Roller Bearings, 
except that for use in 225.7007, the term has the meaning given in the 
clause at 252.225-7019, Restriction on Acquisition of Anchor and Mooring 
Chain.
    (c) ``End product'' is defined in the clause at 252.225-7012, 
Preference for Certain Domestic Commodities.
    (d) Hand or measuring tools means those tools listed in Federal 
supply classifications 51 and 52, respectively.
    (e) Specialty metals is defined in the clause at 252.225-7014, 
Preference for Domestic Specialty Metals.

[61 FR 10899, Mar. 18, 1996, as amended at 61 FR 50453, Sept. 26, 1996; 
67 FR 20697, Apr. 26, 2002; 71 FR 14111, Mar. 21, 2006; 74 FR 37636, 
July 29, 2009; 74 FR 68383, Dec. 24, 2009]



Sec. 225.7002  Restrictions on food, clothing, fabrics, and hand or 
          measuring tools.



Sec. 225.7002-1  Restrictions.

    The following restrictions implement 10 U.S.C. 2533a (the ``Berry 
Amendment''). Except as provided in subsection 225.7002-2, do not 
acquire--
    (a) Any of the following items, either as end products or 
components, unless the items have been grown, reprocessed, reused, or 
produced in the United States:
    (1) Food.
    (2) Clothing and the materials and components thereof, other than 
sensors, electronics, or other items added to, and not normally 
associated with, clothing and the materials and components thereof. 
Clothing includes items such as outerwear, headwear, underwear, 
nightwear, footwear, hosiery, handwear, belts, badges, and insignia. For 
additional guidance and examples, see PGI 225.7002-1(a)(2).
    (3) Tents, tarpaulins, or covers.
    (4) Cotton and other natural fiber products.
    (5) Woven silk or woven silk blends.
    (6) Spun silk yarn for cartridge cloth.
    (7) Synthetic fabric or coated synthetic fabric, including all 
textile fibers and yarns that are for use in such fabrics.
    (8) Canvas products.
    (9) Wool (whether in the form of fiber or yarn or contained in 
fabrics, materials, or manufactured articles).

[[Page 161]]

    (10) Any item of individual equipment (Federal Supply Class 8465) 
manufactured from or containing any of the fibers, yarns, fabrics, or 
materials listed in this paragraph (a).
    (b) Hand or measuring tools, unless the tools were produced in the 
United States.

[67 FR 20697, Apr. 26, 2002, as amended at 71 FR 39009, July 11, 2006; 
71 FR 58537, Oct. 4, 2006; 72 FR 2638, Jan. 22, 2007; 74 FR 37636, July 
29, 2009]



Sec. 225.7002-2  Exceptions.

    Acquisitions in the following categories are not subject to the 
restrictions in 225.7002-1:
    (a) Acquisitions at or below the simplified acquisition threshold.
    (b) Acquisitions of any of the items in 225.7002-1(a), if the 
Secretary concerned determines that items grown, reprocessed, reused, or 
produced in the United States cannot be acquired as and when needed in a 
satisfactory quality and sufficient quantity at U.S. market prices. (See 
the requirement in 205.301 for synopsis within 7 days after contract 
award when using this exception.)
    (1) The following officials are authorized, without power of 
redelegation, to make such a domestic nonavailability determination:
    (i) The Under Secretary of Defense (Acquisition, Technology, and 
Logistics).
    (ii) The Secretary of the Army.
    (iii) The Secretary of the Navy.
    (iv) The Secretary of the Air Force.
    (v) The Director of the Defense Logistics Agency.
    (2) The supporting documentation for the determination shall 
include--
    (i) An analysis of alternatives that would not require a domestic 
nonavailability determination; and
    (ii) A written certification by the requiring activity, with 
specificity, why such alternatives are unacceptable.
    (3) Defense agencies other than the Defense Logistics Agency shall 
follow the procedures at PGI 225.7002-2(b)(3) when submitting a request 
for a domestic nonavailability determination.
    (4) Follow the procedures at PGI 225.7002-2(b)(4) for reciprocal use 
of domestic nonavailability determinations.
    (c) Acquisitions of items listed in FAR 25.104(a), unless the items 
are hand or measuring tools.
    (d) Acquisitions outside the United States in support of combat 
operations.
    (e) Acquisitions of perishable foods by or for activities located 
outside the United States for personnel of those activities.
    (f) Acquisitions of food or hand or measuring tools--
    (1) In support of contingency operations; or
    (2) For which the use of other than competitive procedures has been 
approved on the basis of unusual and compelling urgency in accordance 
with FAR 6.302-2.
    (g) Emergency acquisitions by activities located outside the United 
States for personnel of those activities.
    (h) Acquisitions by vessels in foreign waters.
    (i) Acquisitions of items specifically for commissary resale.
    (j) Acquisitions of incidental amounts of cotton, other natural 
fibers, or wool incorporated in an end product, for which the estimated 
value of the cotton, other natural fibers, or wool--
    (1) Is not more than 10 percent of the total price of the end 
product; and
    (2) Does not exceed the simplified acquisition threshold.
    (k) Acquisitions of waste and byproducts of cotton or wool fiber for 
use in the production of propellants and explosives.
    (l) Acquisitions of foods manufactured or processed in the United 
States, regardless of where the foods (and any component if applicable) 
were grown or produced. However, in accordance with Section 8118 of the 
DoD Appropriations Act for Fiscal Year 2005 (Pub. L. 108-287), this 
exception does not apply to fish, shellfish, or seafood manufactured or 
processed in the United States or fish, shellfish, or seafood contained 
in foods manufactured or processed in the United States.
    (m) Acquisitions of fibers and yarns that are for use in synthetic 
fabric or coated synthetic fabric (but not the purchase of the synthetic 
or coated synthetic fabric itself), if--
    (1) The fabric is to be used as a component of an end product that 
is not a

[[Page 162]]

textile product. Examples of textile products, made in whole or in part 
of fabric, include--
    (i) Draperies, floor coverings, furnishings, and bedding (Federal 
Supply Group 72, Household and Commercial Furnishings and Appliances);
    (ii) Items made in whole or in part of fabric in Federal Supply 
Group 83, Textile/leather/furs/apparel/findings/tents/flags, or Federal 
Supply Group 84, Clothing, Individual Equipment and Insignia;
    (iii) Upholstered seats (whether for household, office, or other 
use); and
    (iv) Parachutes (Federal Supply Class 1670); or
    (2) The fibers and yarns are para-aramid fibers and continuous 
filament para-aramid yarns manufactured in a qualifying country.
    (n) Acquisitions of chemical warfare protective clothing when the 
acquisition furthers an agreement with a qualifying country. (See 
225.003(10) and the requirement in 205.301 for synopsis within 7 days 
after contract award when using this exception.)

[67 FR 20697, Apr. 26, 2002, as amended at 68 FR 7442, Feb. 14, 2003; 69 
FR 26509, May 13, 2004; 69 FR 31910, June 8, 2004; 70 FR 43073, July 26, 
2005; 71 FR 34833, June 16, 2006; 71 FR 58537, Oct. 4, 2006; 72 FR 
20765, Apr. 26, 2007; 72 FR 63123, Nov. 8, 2007; 73 FR 11356, Mar. 3, 
2008; 73 FR 76971, Dec. 18, 2008; 74 FR 37636, July 29, 2009; 74 FR 
52896, Oct. 15, 2009; 75 FR 34945, June 21, 2010]



Sec. 225.7002-3  Contract clauses.

    Unless an exception applies--
    (a) Use the clause at 252.225-7012, Preference for Certain Domestic 
Commodities, in solicitations and contracts exceeding the simplified 
acquisition threshold.
    (b) Use the clause at 252.225-7015, Restriction on Acquisition of 
Hand or Measuring Tools, in solicitations and contracts exceeding the 
simplified acquisition threshold that require delivery of hand or 
measuring tools.

[61 FR 50453, Sept. 26, 1996, as amended at 67 FR 20698, Apr. 26, 2002; 
68 FR 15627, Mar. 31, 2003; 74 FR 37636, July 29, 2009]



Sec. 225.7003  Restrictions on acquisition of specialty metals.



Sec. 225.7003-1  Definitions.

    As used in this section--
    (a) Assembly, commercial derivative military article, commercially 
available off-the-shelf item, component, electronic component, end item, 
high performance magnet, required form, and subsystem are defined in the 
clause at 252.225-7009, Restriction on Acquisition of Certain Articles 
Containing Specialty Metals.
    (b) Automotive item--
    (1) Means a self-propelled military transport tactical vehicle, 
primarily intended for use by military personnel or for carrying cargo, 
such as--
    (i) A high-mobility multipurpose wheeled vehicle;
    (ii) An armored personnel carrier; or
    (iii) A troop/cargo-carrying truckcar, truck, or van; and
    (2) Does not include--
    (i) A commercially available off-the-shelf vehicle; or
    (ii) Construction equipment (such as bulldozers, excavators, lifts, 
or loaders) or other self-propelled equipment (such as cranes or 
aircraft ground support equipment).
    (c) Produce and specialty metal are defined in the clauses at 
252.225-7008, Restriction on Acquisition of Specialty Metals, and 
252.225-7009, Restriction on Acquisition of Certain Articles Containing 
Specialty Metals.

[74 FR 37636, July 29, 2009]



Sec. 225.7003-2  Restrictions.

    The following restrictions implement 10 U.S.C. 2533b. Except as 
provided in 225.7003-3--
    (a) Do not acquire the following items, or any components of the 
following items, unless any specialty metals contained in the items or 
components are melted or produced in the United States (also see 
guidance at PGI 225.7003-2(a)):
    (1) Aircraft.
    (2) Missile or space systems.
    (3) Ships.
    (4) Tank or automotive items.
    (5) Weapon systems.
    (6) Ammunition.
    (b) Do not acquire a specialty metal (e.g., raw stock, including 
bar, billet, slab, wire, plate, and sheet; castings; and forgings) as an 
end item, unless the specialty metal is melted or produced in the United 
States. This restriction applies to specialty metal acquired by a 
contractor for delivery to DoD as an

[[Page 163]]

end item, in addition to specialty metal acquired by DoD directly from 
the entity that melted or produced the specialty metal.

[74 FR 37636, July 29, 2009]



Sec. 225.7003-3  Exceptions.

    Procedures for submitting requests to the Under Secretary of Defense 
(Acquisition, Technology, and Logistics) (USD(AT&L)) for a determination 
or approval as required in paragraph (b)(5), (c), or (d) of this 
subsection are at PGI 225.7003-3.
    (a) Acquisitions in the following categories are not subject to the 
restrictions in 225.7003-2:
    (1) Acquisitions at or below the simplified acquisition threshold.
    (2) Acquisitions outside the United States in support of combat 
operations.
    (3) Acquisitions in support of contingency operations.
    (4) Acquisitions for which the use of other than competitive 
procedures has been approved on the basis of unusual and compelling 
urgency in accordance with FAR 6.302-2.
    (5) Acquisitions of items specifically for commissary resale.
    (6) Acquisitions of items for test and evaluation under the foreign 
comparative testing program (10 U.S.C. 2350a(g)). However, this 
exception does not apply to any acquisitions under follow-on production 
contracts.
    (b) One or more of the following exceptions may apply to an end item 
or component that includes any of the following, under a prime contract 
or subcontract at any tier. The restrictions in 225.7003-2 do not apply 
to the following:
    (1) Electronic components, unless the Secretary of Defense, upon the 
recommendation of the Strategic Materials Protection Board pursuant to 
10 U.S.C. 187, determines that the domestic availability of a particular 
electronic component is critical to national security.
    (2)(i) Commercially available off-the-shelf (COTS) items containing 
specialty metals, except the restrictions do apply to contracts or 
subcontracts for the acquisition of--
    (A) Specialty metal mill products, such as bar, billet, slab, wire, 
plate, and sheet, that have not been incorporated into end items, 
subsystems, assemblies, or components. Specialty metal supply contracts 
issued by COTS producers are not subcontracts for the purposes of this 
exception;
    (B) Forgings or castings of specialty metals, unless the forgings or 
castings are incorporated into COTS end items, subsystems, or 
assemblies;
    (C) Commercially available high performance magnets that contain 
specialty metal, unless such high performance magnets are incorporated 
into COTS end items or subsystems (see PGI 225.7003-3(b)(6) for a table 
of applicability of specialty metals restrictions to magnets); and
    (D) COTS fasteners, unless--
    (1) The fasteners are incorporated into COTS end items, subsystems, 
or assemblies; or
    (2) The fasteners qualify for the commercial item exception in 
paragraph (b)(3) of this subsection.
    (ii) If this exception is used for an acquisition of COTS end items 
valued at $5 million or more per item, the acquiring department or 
agency shall submit an annual report to the Director, Defense 
Procurement and Acquisition Policy, in accordance with the procedures at 
PGI 225.7003-3(b)(2).
    (3) Fasteners that are commercial items and are acquired under a 
contract or subcontract with a manufacturer of such fasteners, if the 
manufacturer has certified that it will purchase, during the relevant 
calendar year, an amount of domestically melted or produced specialty 
metal, in the required form, for use in the production of fasteners for 
sale to DoD and other customers, that is not less than 50 percent of the 
total amount of the specialty metal that the manufacturer will purchase 
to carry out the production of such fasteners for all customers.
    (4) Items listed in 225.7003-2(a), manufactured in a qualifying 
country or containing specialty metals melted or produced in a 
qualifying country.
    (5) Specialty metal in any of the items listed in 225.7003-2 if the 
USD(AT&L), or an official authorized in accordance with paragraph 
(b)(5)(i) of this subsection, determines that specialty metal melted or 
produced in the United States cannot be acquired as

[[Page 164]]

and when needed at a fair and reasonable price in a satisfactory 
quality, a sufficient quantity, and the required form (i.e., a domestic 
nonavailability determination). See guidance in PGI 225.7003-3(b)(5).
    (i) The Secretary of the military department concerned is 
authorized, without power of redelegation, to make a domestic 
nonavailability determination that applies to only one contract.
    The supporting documentation for the determination shall include--
    (A) An analysis of alternatives that would not require a domestic 
nonavailability determination; and
    (B) Written documentation by the requiring activity, with 
specificity, why such alternatives are unacceptable.
    (ii) A domestic nonavailability determination that applies to more 
than one contract (i.e., a class domestic nonavailability 
determination), requires the approval of the USD(AT&L).
    (A) At least 30 days before making a domestic nonavailability 
determination that would apply to more than one contract, the USD(AT&L) 
will, to the maximum extent practicable, and in a manner consistent with 
the protection of national security and confidential business 
information--
    (1) Publish a notice on the Federal Business Opportunities Web site 
(http://www.FedBizOpps.gov or any successor site) of the intent to make 
the domestic nonavailability determination; and
    (2) Solicit information relevant to such notice from interested 
parties, including producers of specialty metal mill products.
    (B) The USD(AT&L)--
    (1) Will take into consideration all information submitted in 
response to the notice in making a class domestic nonavailability 
determination;
    (2) May consider other relevant information that cannot be made part 
of the public record consistent with the protection of national security 
information and confidential business information; and
    (3) Will ensure that any such domestic nonavailability determination 
and the rationale for the determination are made publicly available to 
the maximum extent consistent with the protection of national security 
and confidential business information.
    (6) End items containing a minimal amount of otherwise noncompliant 
specialty metals (i.e., specialty metals not melted or produced in the 
United States that are not covered by another exception listed in this 
paragraph (b)), if the total weight of noncompliant specialty metal does 
not exceed 2 percent of the total weight of all specialty metal in the 
end item. This exception does not apply to high performance magnets 
containing specialty metals. See PGI 225.7003-3(b)(6) for a table of 
applicability of specialty metals restrictions to magnets.
    (c) Compliance for commercial derivative military articles. The 
restrictions at 225.7003-2(a) do not apply to an item acquired under a 
prime contract if--
    (1) The offeror has certified, and subsequently demonstrates, that 
the offeror and its subcontractor(s) will individually or collectively 
enter into a contractual agreement or agreements to purchase a 
sufficient quantity of domestically melted or produced specialty metal 
in accordance with the provision at 252.225-7010; and
    (2) The USD(AT&L), or the Secretary of the military department 
concerned, determines that the item is a commercial derivative military 
article (defense agencies see procedures at PGI 225.7003-3). The 
contracting officer shall submit the offeror's certification and a 
request for a determination to the appropriate official, through agency 
channels, and shall notify the offeror when a decision has been made.
    (d) National security waiver. The USD(AT&L) may waive the 
restrictions at 225.7003-2 if the USD(AT&L) determines in writing that 
acceptance of the item is necessary to the national security interests 
of the United States (see procedures at PGI 225.7003-3). This authority 
may not be delegated.
    (1) The written determination of the USD(AT&L)--
    (i) Shall specify the quantity of end items to which the national 
security waiver applies;
    (ii) Shall specify the time period over which the national security 
waiver applies; and
    (iii) Shall be provided to the congressional defense committees 
before the determination is executed, except that

[[Page 165]]

in the case of an urgent national security requirement, the 
determination may be provided to the congressional defense committees up 
to 7 days after it is executed.
    (2) After making such a determination, the USD(AT&L) will--
    (i) Ensure that the contractor or subcontractor responsible for the 
noncompliant specialty metal develops and implements an effective plan 
to ensure future compliance; and
    (ii) Determine whether or not the noncompliance was knowing and 
willful. If the USD(AT&L) determines that the noncompliance was knowing 
and willful, the appropriate debarring and suspending official shall 
consider suspending or debarring the contractor or subcontractor until 
such time as the contractor or subcontractor has effectively addressed 
the issues that led to the noncompliance.
    (3) Because national security waivers will only be granted when the 
acquisition in question is necessary to the national security interests 
of the United States, the requirement for a plan will be applied as a 
condition subsequent, and not a condition precedent, to the granting of 
a waiver.

[74 FR 37636, July 29, 2009, as amended at 75 FR 48280, Aug. 10, 2010]



Sec. 225.7003-4  One-time waiver.

    DoD may accept articles containing specialty metals that are not in 
compliance with the specialty metals clause of the contract if--
    (a) Final acceptance takes place before September 30, 2010;
    (b) The specialty metals were incorporated into items (whether end 
items or components) produced, manufactured, or assembled in the United 
States before October 17, 2006;
    (c) The contracting officer determines in writing that--
    (1) It would not be practical or economical to remove or replace the 
specialty metals incorporated in such items or to substitute items 
containing compliant materials;
    (2) The contractor and any subcontractor responsible for providing 
items containing non-compliant specialty metals have in place an 
effective plan to ensure compliance with the specialty metals clause of 
the contract for future items produced, manufactured, or assembled in 
the United States; and
    (3) The non-compliance was not knowing or willful;
    (d) The determination is approved by--
    (1) The USD(AT&L); or
    (2) The service acquisition executive of the military department 
concerned; and
    (e) Not later than 15 days after approval of the determination, the 
contracting officer posts a notice on the Federal Business Opportunities 
Web site at http://www.FedBizOpps.gov, stating that a waiver for the 
contract has been granted under Section 842(b) of the National Defense 
Authorization Act for Fiscal Year 2007 (Pub. L. 109-364).

[74 FR 37636, July 29, 2009]



Sec. 225.7003-5  Solicitation provision and contract clauses.

    (a) Unless the acquisition is wholly exempt from the specialty 
metals restrictions at 225.7003-2 because the acquisition is covered by 
an exception in 225.7003-3(a) or (d) (but see paragraph (d) of this 
subsection)--
    (1) Use the clause at 252.225-7008, Restriction on Acquisition of 
Specialty Metals, in solicitations and contracts that--
    (i) Exceed the simplified acquisition threshold; and
    (ii) Require the delivery of specialty metals as end items.
    (2) Use the clause at 252.225-7009, Restriction on Acquisition of 
Certain Articles Containing Specialty Metals, in solicitations and 
contracts that--
    (i) Exceed the simplified acquisition threshold; and
    (ii) Require delivery of any of the following items, or components 
of the following items, if such items or components contain specialty 
metal:
    (A) Aircraft.
    (B) Missile or space systems.
    (C) Ships.
    (D) Tank or automotive items.
    (E) Weapon systems.
    (F) Ammunition.
    (b) Use the provision at 252.225-7010, Commercial Derivative 
Military Article--Specialty Metals Compliance Certificate, in 
solicitations--

[[Page 166]]

    (1) That contain the clause at 252.225-7009; and
    (2) For which the contracting officer anticipates that one or more 
offers of commercial derivative military articles may be received.
    (c) If an agency cannot reasonably determine at time of acquisition 
whether some or all of the items will be used in support of combat 
operations or in support of contingency operations, the contracting 
officer should not rely on the exception at 225.7003-3(a)(2) or (3), but 
should include the appropriate specialty metals clause or provision in 
the solicitation and contract.
    (d) If the solicitation and contract require delivery of a variety 
of contract line items containing specialty metals, but only some of the 
items are subject to domestic specialty metals restrictions, identify in 
the Schedule those items that are subject to the restrictions.

[74 FR 37636, July 29, 2009; 75 FR 48280, Aug. 10, 2010]



Sec. 225.7004  Restriction on acquisition of foreign buses.



Sec. 225.7004-1  Restriction.

    In accordance with 10 U.S.C. 2534, do not acquire a multipassenger 
motor vehicle (bus) unless it is manufactured in the United States or 
Canada.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7004-2  Applicability.

    Apply this restriction if the buses are purchased, leased, rented, 
or made available under contracts for transportation services.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7004-3  Exceptions.

    This restriction does not apply in any of the following 
circumstances:
    (a) Buses manufactured outside the United States and Canada are 
needed for temporary use because buses manufactured in the United States 
or Canada are not available to satisfy requirements that cannot be 
postponed. Such use may not, however, exceed the lead time required for 
acquisition and delivery of buses manufactured in the United States or 
Canada.
    (b) The requirement for buses is temporary in nature. For example, 
to meet a special, nonrecurring requirement or a sporadic and infrequent 
recurring requirement, buses manufactured outside the United States and 
Canada may be used for temporary periods of time. Such use may not, 
however, exceed the period of time needed to meet the special 
requirement.
    (c) Buses manufactured outside the United States and Canada are 
available at no cost to the U.S. Government.
    (d) The acquisition is for an amount at or below the simplified 
acquisition threshold.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7004-4  Waiver.

    The waiver criteria at 225.7008(a) apply to this restriction.

[68 FR 15627, Mar. 31, 2003, as amended at 74 FR 37639, July 29, 2009]



Sec. 225.7005  Restriction on certain chemical weapons antidote.



Sec. 225.7005-1  Restriction.

    In accordance with 10 U.S.C. 2534, do not acquire chemical weapons 
antidote contained in automatic injectors, or the components for such 
injectors, unless the chemical weapons antidote or component is 
manufactured in the United States or Canada by a company that--
    (a) Has received all required regulatory approvals; and
    (b) Has the plant, equipment, and personnel to perform the contract 
in the United States or Canada at the time of contract award.

[74 FR 68384, Dec. 24, 2009]



Sec. 225.7005-2  Exception.

    This restriction does not apply if the acquisition is for an amount 
at or below the simplified acquisition threshold.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7005-3  Waiver.

    The waiver criteria at 225.7008(a) apply to this restriction.

[68 FR 15627, Mar. 31, 2003, as amended at 74 FR 37639, July 29, 2009]

[[Page 167]]



Sec. 225.7006  Restriction on air circuit breakers for naval vessels.



Sec. 225.7006-1  Restriction.

    In accordance with 10 U.S.C. 2534, do not acquire air circuit 
breakers for naval vessels unless they are manufactured in the United 
States or Canada.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7006-2  Exceptions.

    This restriction does not apply if the acquisition is--
    (a) For an amount at or below the simplified acquisition threshold; 
or
    (b) For spare or repair parts needed to support air circuit breakers 
manufactured outside the United States. Support includes the purchase of 
spare air circuit breakers when those from alternate sources are not 
interchangeable.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7006-3  Waiver.

    (a) The waiver criteria at 225.7008(a) apply to this restriction.
    (b) The Under Secretary of Defense (Acquisition, Technology, and 
Logistics) has waived the restriction for air circuit breakers 
manufactured in the United Kingdom. See 225.7008(b) for applicability.

[68 FR 15627, Mar. 31, 2003, as amended at 74 FR 37639, July 29, 2009]



Sec. 225.7006-4  Solicitation provision and contract clause.

    (a) Use the provision at 252.225-7037, Evaluation of Offers for Air 
Circuit Breakers, in solicitations requiring air circuit breakers for 
naval vessels unless--
    (1) An exception applies; or
    (2) A waiver has been granted, other than the waiver for the United 
Kingdom, which has been incorporated into the provision.
    (b) Use the clause at 252.225-7038, Restriction on Acquisition of 
Air Circuit Breakers, in solicitations and contracts requiring air 
circuit breakers for naval vessels unless--
    (1) An exception applies; or
    (2) A waiver has been granted, other than the waiver for the United 
Kingdom, which has been incorporated into the clause.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7007  Restrictions on anchor and mooring chain.



Sec. 225.7007-1  Restrictions.

    (a) In accordance with Section 8041 of the Fiscal Year 1991 DoD 
Appropriations Act (Public Law 101-511) and similar sections in 
subsequent DoD appropriations acts, do not acquire welded shipboard 
anchor and mooring chain, four inches or less in diameter, unless--
    (1) It is manufactured in the United States, including cutting, heat 
treating, quality control, testing, and welding (both forging and shot 
blasting process); and
    (2) The cost of the components manufactured in the United States 
exceeds 50 percent of the total cost of components.
    (b) 10 U.S.C. 2534 also restricts acquisition of welded shipboard 
anchor and mooring chain, four inches or less in diameter, when used as 
a component of a naval vessel. However, the Appropriations Act 
restriction described in paragraph (a) of this subsection takes 
precedence over the restriction of 10 U.S.C. 2534.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7007-2  Waiver.

    (a) The Secretary of the department responsible for acquisition may 
waive the restriction in 225.7007-1(a), on a case-by-case basis, if--
    (1) Sufficient domestic suppliers are not available to meet DoD 
requirements on a timely basis; and
    (2) The acquisition is necessary to acquire capability for national 
security purposes.
    (b) Document the waiver in a written determination and findings 
containing--
    (1) The factors supporting the waiver; and
    (2) A certification that the acquisition must be made in order to 
acquire capability for national security purposes.

[[Page 168]]

    (c) Provide a copy of the determination and findings to the House 
and Senate Committees on Appropriations.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7007-3  Contract clause.

    Unless a waiver has been granted, use the clause at 252.225-7019, 
Restriction on Acquisition of Anchor and Mooring Chain, in solicitations 
and contracts requiring welded shipboard anchor or mooring chain four 
inches or less in diameter.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7008  Waiver of restrictions of 10 U.S.C. 2534.

    (a) When specifically authorized by reference elsewhere in this 
subpart, the restrictions on certain foreign purchases under 10 U.S.C. 
2534(a) may be waived as follows:
    (1)(i) The Under Secretary of Defense (Acquisition, Technology, and 
Logistics) (USD(AT&L)), without power of delegation, may waive a 
restriction for a particular item for a particular foreign country upon 
determination that--
    (A) United States producers of the item would not be jeopardized by 
competition from a foreign country, and that country does not 
discriminate against defense items produced in the United States to a 
greater degree than the United States discriminates against defense 
items produced in that country; or
    (B) Application of the restriction would impede cooperative programs 
entered into between DoD and a foreign country, or would impede the 
reciprocal procurement of defense items under a memorandum of 
understanding providing for reciprocal procurement of defense items 
under 225.872, and that country does not discriminate against defense 
items produced in the United States to a greater degree than the United 
States discriminates against defense items produced in that country.
    (ii) A notice of the determination to exercise the waiver authority 
shall be published in the Federal Register and submitted to the 
congressional defense committees at least 15 days before the effective 
date of the waiver.
    (iii) The effective period of the waiver shall not exceed 1 year.
    (iv) For contracts entered into prior to the effective date of a 
waiver, provided adequate consideration is received to modify the 
contract, the waiver shall be applied as directed or authorized in the 
waiver to--
    (A) Subcontracts entered into on or after the effective date of the 
waiver; and
    (B) Options for the procurement of items that are exercised after 
the effective date of the waiver, if the option prices are adjusted for 
any reason other than the application of the waiver.
    (2) The head of the contracting activity may waive a restriction on 
a case-by-case basis upon execution of a determination and findings that 
any of the following applies:
    (i) The restriction would cause unreasonable delays.
    (ii) Satisfactory quality items manufactured in the United States or 
Canada are not available.
    (iii) Application of the restriction would result in the existence 
of only one source for the item in the United States or Canada.
    (iv) Application of the restriction is not in the national security 
interests of the United States.
    (v) Application of the restriction would adversely affect a U.S. 
company.
    (3) A restriction is waived when it would cause unreasonable costs. 
The cost of an item of U.S. or Canadian origin is unreasonable if it 
exceeds 150 percent of the offered price, inclusive of duty, of items 
that are not of U.S. or Canadian origin.
    (b) In accordance with the provisions of paragraphs (a)(1)(i) 
through (iii) of this section, the USD(AT&L) has waived the restrictions 
of 10 U.S.C. 2534(a) for certain items manufactured in the United 
Kingdom, including air circuit breakers for naval vessels (see 
225.7006). This waiver applies to--
    (1) Procurements under solicitations issued on or after August 4, 
1998; and
    (2) Subcontracts and options under contracts entered into prior to 
August 4, 1998, under the conditions described in paragraph (a)(1)(iv) 
of this section.

[74 FR 37639, July 29, 2009]

[[Page 169]]



Sec. 225.7009  Restriction on ball and roller bearings.



Sec. 225.7009-1  Scope.

    This section implements Section 8065 of the Fiscal Year 2002 DoD 
Appropriations Act (Pub. L. 107-117) and the same restriction in 
subsequent DoD appropriations acts.

[71 FR 14111, Mar. 21, 2006]



Sec. 225.7009-2  Restriction.

    Do not acquire ball and roller bearings or bearing components unless 
the bearings and bearing components are manufactured in the United 
States or Canada.

[71 FR 14111, Mar. 21, 2006]



Sec. 225.7009-3  Exception.

    The restriction in 225.7009-2 does not apply to contracts or 
subcontracts for the acquisition of commercial items, except for 
commercial ball and roller bearings acquired as end items.

[71 FR 14111, Mar. 21, 2006]



Sec. 225.7009-4  Waiver.

    The Secretary of the department responsible for acquisition or, for 
the Defense Logistics Agency, the Component Acquisition Executive, may 
waive the restriction in 225.7009-2, on a case-by-case basis, by 
certifying to the House and Senate Committees on Appropriations that--
    (a) Adequate domestic supplies are not available to meet DoD 
requirements on a timely basis; and
    (b) The acquisition must be made in order to acquire capability for 
national security purposes.

[71 FR 14111, Mar. 21, 2006]



Sec. 225.7009-5  Contract clause.

    Use the clause at 252.225-7016, Restriction on Acquisition of Ball 
and Roller Bearings, in solicitations and contracts, unless--
    (a) The items being acquired are commercial items other than ball or 
roller bearings acquired as end items;
    (b) The items being acquired do not contain ball and roller 
bearings; or
    (c) A waiver has been granted in accordance with 225.7009-4.

[71 FR 14112, Mar. 21, 2006]



Sec. 225.7010  [Reserved]



Sec. 225.7011  Restriction on carbon, alloy, and armor steel plate.



Sec. 225.7011-1  Restriction.

    (a) In accordance with Section 8111 of the Fiscal Year 1992 DoD 
Appropriations Act (Pub. L. 102-172) and similar sections in subsequent 
DoD appropriations acts, do not acquire any of the following types of 
carbon, alloy, or armor steel plate for use in a Government-owned 
facility or a facility under the control of (e.g., leased by) DoD, 
unless it is melted and rolled in the United States or Canada:
    (1) Carbon, alloy, or armor steel plate in Federal Supply Class 
9515.
    (2) Carbon, alloy, or armor steel plate described by specifications 
of the American Society for Testing Materials or the American Iron and 
Steel Institute.
    (b) This restriction--
    (1) Applies to the acquisition of carbon, alloy, or armor steel 
plate as a finished steel mill product that may be used ``as is'' or may 
be used as an intermediate material for the fabrication of an end 
product; and
    (2) Does not apply to the acquisition of an end product (e.g., a 
machine tool), to be used in the facility, that contains carbon, alloy, 
or armor steel plate as a component.

[71 FR 75894, Dec. 19, 2006]



Sec. 225.7011-2  Waiver.

    The Secretary of the department responsible for acquisition may 
waive this restriction, on a case-by-case basis, by certifying to the 
House and Senate Committees on Appropriations that--
    (a) Adequate U.S. or Canadian supplies are not available to meet DoD 
requirements on a timely basis; and
    (b) The acquisition must be made in order to acquire capability for 
national security purposes.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7011-3  Contract clause.

    Unless a waiver has been granted, use the clause at 252.225-7030, 
Restriction on Acquisition of Carbon, Alloy, and

[[Page 170]]

Armor Steel Plate, in solicitations and contracts that'
    (a) Require the delivery to the Government of carbon, alloy, or 
armor steel plate that will be used in a Government-owned facility or a 
facility under the control of DoD; or
    (b) Require contractors operating in a Government-owned facility or 
a facility under the control of DoD to purchase carbon, alloy, or armor 
steel plate.

[68 FR 15627, Mar. 31, 2003, as amended at 71 FR 75894, Dec. 19, 2006]



Sec. 225.7012  Restriction on supercomputers.



Sec. 225.7012-1  Restriction.

    In accordance with Section 8112 of Public Law 100-202, and similar 
sections in subsequent DoD appropriations acts, do not purchase a 
supercomputer unless it is manufactured in the United States.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7012-2  Waiver.

    The Secretary of Defense may waive this restriction, on a case-by-
case basis, after certifying to the Armed Services and Appropriations 
Committees of Congress that--
    (a) Adequate U.S. supplies are not available to meet requirements on 
a timely basis; and
    (b) The acquisition must be made in order to acquire capability for 
national security purposes.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7012-3  Contract clause.

    Unless a waiver has been granted, use the clause at 252.225-7011, 
Restriction on Acquisition of Supercomputers, in solicitations and 
contracts for the acquisition of supercomputers.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7013  Restrictions on construction or repair of vessels in 
          foreign shipyards.

    In accordance with 10 U.S.C. 7309 and 7310--
    (a) Do not award a contract to construct in a foreign shipyard--
    (1) A vessel for any of the armed forces; or
    (2) A major component of the hull or superstructure of a vessel for 
any of the armed forces; and
    (b) Do not overhaul, repair, or maintain in a foreign shipyard, a 
naval vessel (or any other vessel under the jurisdiction of the 
Secretary of the Navy) homeported in the United States. This restriction 
does not apply to voyage repairs.

[68 FR 15627, Mar. 31, 2003, as amended at 71 FR 58537, Oct. 4, 2006]



Sec. 225.7014  Restrictions on military construction.

    (a) For restriction on award of military construction contracts to 
be performed in the United States outlying areas in the Pacific and on 
Kwajalein Atoll, or in countries bordering the Arabian Gulf, see 
236.273(a).
    (b) For restriction on acquisition of steel for use in military 
construction projects, see 236.274.

[74 FR 2417, Jan. 15, 2009]



Sec. 225.7015  Restriction on overseas architect-engineer services.

    For restriction on award of architect-engineer contracts to be 
performed in Japan, in any North Atlantic Treaty Organization member 
country, or in countries bordering the Arabian Gulf, see 236.602-70.

[68 FR 15627, Mar. 31, 2003]



Sec. 225.7016  Restriction on Ballistic Missile Defense research, 
          development, test, and evaluation.

[68 FR 15627, Mar. 31, 2003. Redesignated at 74 FR 53413, Oct. 19, 2009]



Sec. 225.7016-1  Definitions.

    Competent, foreign firm, and U.S. firm are defined in the provision 
at 252.225-7018, Notice of Prohibition of Certain Contracts with Foreign 
Entities for the Conduct of Ballistic Missile Defense Research, 
Development, Test, and Evaluation.

[68 FR 15627, Mar. 31, 2003. Redesignated at 74 FR 53413, Oct. 19, 2009]



Sec. 225.7016-2  Restriction.

    In accordance with Section 222 of the DoD Authorization Act for 
Fiscal Years 1988 and 1989 (Pub. L. 100-180), do

[[Page 171]]

not use any funds appropriated to or for the use of DoD to enter into or 
carry out a contract with a foreign government or firm, including any 
contract awarded as a result of a broad agency announcement, if the 
contract provides for the conduct of research, development, test, and 
evaluation (RDT&E) in connection with the Ballistic Missile Defense 
Program.

[68 FR 15627, Mar. 31, 2003. Redesignated at 74 FR 53413, Oct. 19, 2009]



Sec. 225.7016-3  Exceptions.

    This restriction does not apply--
    (a) To contracts awarded to a foreign government or firm if the 
contracting officer determines that--
    (1) The contract will be performed within the United States;
    (2) The contract is exclusively for RDT&E in connection with 
antitactical ballistic missile systems; or
    (3) The foreign government or firm agrees to share a substantial 
portion of the total contract cost. Consider the foreign share as 
substantial if it is equitable with respect to the relative benefits 
that the United States and the foreign parties will derive from the 
contract. For example, if the contract is more beneficial to the foreign 
party, its share of the cost should be correspondingly higher; or
    (b) If the head of the contracting activity certifies in writing, 
before contract award, that a U.S. firm cannot competently perform a 
contract for RDT&E at a price equal to or less than the price at which a 
foreign government or firm would perform the RDT&E. The contracting 
officer or source selection authority, as applicable, shall make a 
determination, in accordance with PGI 225.7016-3 (b), that will be the 
basis for the certification.

[68 FR 15627, Mar. 31, 2003, as amended at 71 FR 62565, Oct. 26, 2006. 
Redesignated and amended at 74 FR 53413, Oct. 19, 2009]



Sec. 225.7016-4  Solicitation provision.

    Unless foreign participation is otherwise excluded, use the 
provision at 252.225-7018, Notice of Prohibition of Certain Contracts 
With Foreign Entities for the Conduct of Ballistic Missile Defense 
Research, Development, Test, and Evaluation, in competitively negotiated 
solicitations for RDT&E in connection with the Ballistic Missile Defense 
Program.

[68 FR 15627, Mar. 31, 2003. Redesignated at 74 FR 53413, Oct. 19, 2009]

        Subpart 225.71_Other Restrictions on Foreign Acquisition

    Source: 68 FR 15631, Mar. 31, 2003, unless otherwise noted.



Sec. 225.7100  Scope of subpart.

    This subpart contains foreign product restrictions that are based on 
policies designed to protect the defense industrial base.



Sec. 225.7101  Definitions.

    ``Component'' and ``domestic manufacture,'' as used in this subpart, 
are defined in the clause at 252.225-7025, Restriction on Acquisition of 
Forgings.

[74 FR 68384, Dec. 24, 2009]



Sec. 225.7102  Forgings.



Sec. 225.7102-1  Policy.

    When acquiring the following forging items, whether as end items or 
components, acquire items that are of domestic manufacture to the 
maximum extent practicable:

------------------------------------------------------------------------
                   Items                             Categories
------------------------------------------------------------------------
Ship propulsion shafts....................  Excludes service and landing
                                             craft shafts.
Periscope tubes...........................  All.
Ring forgings for bull gears..............  All greater than 120 inches
                                             in diameter.
------------------------------------------------------------------------



Sec. 225.7102-2  Exceptions.

    The policy in 225.7102-1 does not apply to acquisitions--
    (a) Using simplified acquisition procedures, unless the restricted 
item is the end item being purchased;
    (b) Overseas for overseas use; or
    (c) When the quantity acquired exceeds the amount needed to maintain 
the U.S. defense mobilization base (provided the excess quantity is an 
economical purchase quantity). The requirement for domestic manufacture 
does not apply to the quantity above that required to maintain the base, 
in which case, qualifying country sources may compete.

[[Page 172]]



Sec. 225.7102-3  Waiver.

    Upon request from a contractor, the contracting officer may waive 
the requirement for domestic manufacture of the items listed in 
225.7102-1.



Sec. 225.7102-4  Contract clause.

    Use the clause at 252.225-7025, Restriction on Acquisition of 
Forgings, in solicitations and contracts, unless--
    (a) The supplies being acquired do not contain any of the items 
listed in 225.7102-1; or
    (b) An exception in 225.7102-2 applies. If an exception applies to 
only a portion of the acquisition, specify the excepted portion in the 
solicitation and contract.

 Subpart 225.72_Reporting Contract Performance Outside the United States

    Source: 70 FR 20839, Apr. 22, 2005, unless otherwise noted.



Sec. 225.7201  Policy.

    (a) 10 U.S.C. 2410g requires offerors and contractors to notify DoD 
of any intention to perform a DoD contract outside the United States and 
Canada when the contract could be performed inside the United States or 
Canada.
    (b) DoD requires contractors to report the volume, type, and nature 
of contract performance outside the United States.



Sec. 225.7202  Exception.

    This subpart does not apply to contracts for commercial items, 
construction, ores, natural gas, utilities, petroleum products and 
crudes, timber (logs), or subsistence.



Sec. 225.7203  Contracting officer distribution of reports.

    Follow the procedures at PGI 225.7203 for distribution of reports 
submitted with offers in accordance with the provision at 252.225-7003, 
Report of Intended Performance Outside the United States and Canada--
Submission with Offer.



Sec. 225.7204  Solicitation provision and contract clauses.

    Except for acquisitions described in 225.7202--
    (a) Use the provision at 252.225-7003, Report of Intended 
Performance Outside the United States and Canada--Submission with Offer, 
in solicitations with a value exceeding $12.5 million;
    (b) Use the clause at 252.225-7004, Report of Intended Performance 
Outside the United States and Canada--Submission after Award, in 
solicitations and contracts with a value exceeding $12.5 million; and
    (c) Use the clause at 252.225-7006, Quarterly Reporting of Actual 
Contract Performance Outside the United States, in solicitations and 
contracts with a value exceeding $650,000.

[70 FR 20839, Apr. 22, 2005, as amended at 71 FR 75892, Dec. 19, 2006; 
75 FR 45074, Aug. 2, 2010]

         Subpart 225.73_Acquisitions for Foreign Military Sales



Sec. 225.7300  Scope of subpart.

    (a) This subpart contains policies and procedures for acquisitions 
for foreign military sales (FMS) under the Arms Export Control Act (22 
U.S.C. Chapter 39). Section 22 of the Arms Export Control Act (22 U.S.C. 
2762) authorizes DoD to enter into contracts for resale to foreign 
countries or international organizations.
    (b) This subpart does not apply to--
    (1) FMS made from inventories or stocks;
    (2) Acquisitions for replenishment of inventories or stocks; or
    (3) Acquisitions made under DoD cooperative logistic supply support 
arrangements.

[63 FR 43889, Aug. 17, 1998]



Sec. 225.7301  General.

    (a) The U.S. Government sells defense articles and services to 
foreign governments or international organizations through FMS 
agreements. The agreement is documented in a Letter of Offer and 
Acceptance (LOA) (see DoD 5105.38-M, Security Assistance Management 
Manual).
    (b) Conduct FMS acquisitions under the same acquisition and contract

[[Page 173]]

management procedures used for other defense acquisitions.
    (c) Follow the additional procedures at PGI 225.7301(c) for 
preparation of solicitations and contracts that include FMS 
requirements.
    (d) See 229.170 for policy on contracts financed under U.S. 
assistance programs that involve payment of foreign country value added 
taxes or customs duties.

[70 FR 73155, Dec. 9, 2005]



Sec. 225.7302  Guidance.

    For guidance on the role of the contracting officer in FMS programs 
that will require an acquisition, see PGI 225.7302.

[70 FR 73155, Dec. 9, 2005]



Sec. 225.7303  Pricing acquisitions for FMS.

    (a) Price FMS contracts using the same principles used in pricing 
other defense contracts. However, application of the pricing principles 
in FAR parts 15 and 31 to an FMS contract may result in prices that 
differ from other defense contract prices for the same item due to the 
considerations in this section.
    (b) If the foreign government has conducted a competition resulting 
in adequate price competition (see FAR 15.403-1(b)(1)), the contracting 
officer shall not require the submission of cost or pricing data. The 
contracting officer should consult with the foreign government through 
security assistance personnel to determine if adequate price competition 
has occurred.

[64 FR 49683, Sept. 14, 1999, as amended at 68 FR 15632, Mar. 31, 2003]



Sec. 225.7303-1  Contractor sales to other foreign customers.

    If the contractor has made sales of the item required for the 
foreign military sale to foreign customers under comparable conditions, 
including quantity and delivery, price the FMS contract in accordance 
with FAR part 15.



Sec. 225.7303-2  Cost of doing business with a foreign government or an 
          international organization.

    (a) In pricing FMS contracts where non-U.S. Government prices as 
described in 225.7303-1 do not exist, except as provided in 225.7303-5, 
recognize the reasonable and allocable costs of doing business with a 
foreign government or international organization, even though such costs 
might not be recognized in the same amounts in pricing other defense 
contracts. Examples of such costs include, but are not limited to, the 
following:
    (1) Selling expenses (not otherwise limited by FAR Part 31), such 
as--
    (i) Maintaining international sales and service organizations;
    (ii) Sales commissions and fees in accordance with FAR Subpart 3.4;
    (iii) Sales promotions, demonstrations, and related travel for sales 
to foreign governments. Section 126.8 of the International Traffic in 
Arms Regulations (22 CFR 126.8) may require Government approval for 
these costs to be allowable, in which case the appropriate Government 
approval shall be obtained; and
    (iv) Configuration studies and related technical services undertaken 
as a direct selling effort to a foreign country.
    (2) Product support and post-delivery service expenses, such as--
    (i) Operations or maintenance training, training or tactics films, 
manuals, or other related data; and
    (ii) Technical field services provided in a foreign country related 
to accident investigations, weapon system problems, or operations/
tactics enhancement, and related travel to foreign countries.
    (3) Offset costs (also see 225.7306).
    (i) A U.S. defense contractor may recover all costs incurred for 
offset agreements with a foreign government or international 
organization if the LOA is financed wholly with customer cash or 
repayable foreign military finance credits.
    (ii) The U.S. Government assumes no obligation to satisfy or 
administer the offset requirement or to bear any of the associated 
costs.
    (4) Costs that are the subject of advance agreement under the 
appropriate provisions of FAR part 31; or where the advance 
understanding places a limit on the amounts of cost that will be 
recognized as allowable in defense contract pricing, and the agreement 
contemplated that it will apply only to

[[Page 174]]

DoD contracts for the U.S. Government's own requirement (as 
distinguished from contracts for FMS).
    (b) Costs not allowable under FAR Part 31 are not allowable in 
pricing FMS contracts, except as noted in paragraphs (c) and (e) of this 
subsection.
    (c) The limitations for major contractors on independent research 
and development and bid and proposal (IR&D/B&P) costs for projects that 
are of potential interest to DoD, in 231.205-18(c)(iii), do not apply to 
FMS contracts, except as provided in 225.7303-5. The allowability of 
IR&D/B&P costs on contracts for FMS not wholly paid for from funds made 
available on a nonrepayable basis is limited to the contract's allocable 
share of the contractor's total IR&D/B&P expenditures. In pricing 
contracts for such FMS--
    (1) Use the best estimate of reasonable costs in forward pricing; 
and
    (2) Use actual expenditures, to the extent that they are reasonable, 
in determining final cost.
    (d) Under paragraph (e)(1)(A) of Section 21 of the Arms Export 
Control Act (22 U.S.C. 2761), the United States must charge for 
administrative services to recover the estimated cost of administration 
of sales made under the Army Export Control Act.
    (e) The limitations in 231.205-1 on allowability of costs associated 
with leasing Government equipment do not apply to FMS contracts.

[56 FR 36367, July 31, 1991, as amended at 56 FR 67216, Dec. 30, 1991; 
57 FR 42631, Sept. 15, 1992; 57 FR 53600, Nov. 12, 1992; 59 FR 50511, 
Oct. 4, 1994; 61 FR 7744, Feb. 29, 1996; 61 FR 18987, Apr. 30, 1996; 63 
FR 43889, Aug. 17, 1998; 64 FR 8729, Feb. 23, 1999; 64 FR 49684, Sept. 
14, 1999; 68 FR 15632, Mar. 31, 2003; 70 FR 73155, Dec. 9, 2005; 74 FR 
68382, Dec. 24, 2009]



Sec. 225.7303-3  Government-to-government agreements.

    If a government-to-government agreement between the United States 
and a foreign government for the sale, coproduction, or cooperative 
logistic support of a specifically defined weapon system, major end 
item, or support item, contains language in conflict with the provisions 
of this section, the language of the government-to-government agreement 
prevails.



Sec. 225.7303-4  Contingent fees.

    (a) Except as provided in paragraph (b) of this subsection, 
contingent fees are generally allowable under DoD contracts, provided--
    (1) The fees are paid to a bona fide employee or a bona fide 
established commercial or selling agency maintained by the prospective 
contractor for the purpose of securing business (see FAR Part 31 and FAR 
Subpart 3.4); and
    (2) The contracting officer determines that the fees are fair and 
reasonable.
    (b)(1) Under DoD 5105.38-M, LOAs for requirements for the 
governments of Australia, Taiwan, Egypt, Greece, Israel, Japan, Jordan, 
Republic of Korea, Kuwait, Pakistan, Philippines, Saudi Arabia, Turkey, 
Thailand, or Venezuela (Air Force) shall provide that all U.S. 
Government contracts resulting from the LOAs prohibit the reimbursement 
of contingent fees as an allowable cost under the contract, unless the 
contractor identifies the payments and the foreign customer approves the 
payments in writing before contract award (see 225.7307(a)).
    (2) For FMS to countries not listed in paragraph (b)(1) of this 
subsection, contingent fees exceeding $50,000 per FMS case are 
unallowable under DoD contracts, unless the contractor identifies the 
payment and the foreign customer approves the payment in writing before 
contract award.

[68 FR 15633, Mar. 31, 2003, as amended at 70 FR 73155, Dec. 9, 2005]



Sec. 225.7303-5  Aquisitions wholly paid for from nonrepayable funds.

    (a) In accordance with 22 U.S.C. 2762(d), price FMS wholly paid for 
from funds made available on a nonrepayable basis on the same costing 
basis with regard to profit, overhead, IR&D/B&P, and other costing 
elements as is applicable to acquisitions of like items purchased by DoD 
for its own use.
    (b) Direct costs associated with meeting a foreign customer's 
additional or unique requirements are allowable under such contracts. 
Indirect burden rates applicable to such direct costs

[[Page 175]]

are permitted at the same rates applicable to acquisitions of like items 
purchased by DoD for its own use.
    (c) A U.S. defense contractor may not recover costs incurred for 
offset agreements with a foreign government or international 
organization if the LOA is financed with funds made available on a 
nonrepayable basis.

[61 FR 18988, Apr. 30, 1996; 61 FR 49531, Sept. 20, 1996, as amended at 
63 FR 43890, Aug. 17, 1998; 64 FR 49684, Sept. 14, 1999; 68 FR 15633, 
Mar. 31, 2003]



Sec. 225.7304  FMS customer involvement.

    (a) FMS customers may request that a defense article or defense 
service be obtained from a particular contractor. In such cases, FAR 
6.302-4 provides authority to contract without full and open 
competition. The FMS customer may also request that a subcontract be 
placed with a particular firm. The contracting officer shall honor such 
requests from the FMS customer only if the LOA or other written 
direction sufficiently fulfills the requirements of FAR Subpart 6.3.
    (b) FMS customers should be encouraged to participate with U.S. 
Government acquisition personnel in discussions with industry to--
    (1) Develop technical specifications;
    (2) Establish delivery schedules;
    (3) Identify any special warranty provisions or other requirements 
unique to the FMS customer; and
    (4) Review prices of varying alternatives, quantities, and options 
needed to make price-performance tradeoffs.
    (c) Do not disclose to the FMS customer any data, including cost or 
pricing data, that is contractor proprietary unless the contractor 
authorizes its release.
    (d) Except as provided in paragraph (e)(3) of this section, the 
degree of FMS customer participation in contract negotiations is left to 
the discretion of the contracting officer after consultation with the 
contractor. The contracting officer shall provide an explanation to the 
FMS customer if its participation in negotiations will be limited. 
Factors that may limit FMS customer participation include situations 
where--
    (1) The contract includes requirements for more than one FMS 
customer;
    (2) The contract includes unique U.S. requirements; or
    (3) Contractor proprietary data is a subject of negotiations.
    (e) Do not allow representatives of the FMS customer to--
    (1) Direct the exclusion of certain firms from the solicitation 
process (they may suggest the inclusion of certain firms);
    (2) Interfere with a contractor's placement of subcontracts; or
    (3) Observe or participate in negotiations between the U.S. 
Government and the contractor involving cost or pricing data, unless a 
deviation is granted in accordance with Subpart 201.4.
    (f) Do not accept directions from the FMS customer on source 
selection decisions or contract terms (except that, upon timely notice, 
the contracting officer may attempt to obtain any special contract 
provisions, warranties, or other unique requirements requested by the 
FMS customer).
    (g) Do not honor any requests by the FMS customer to reject any bid 
or proposal.
    (h) If an FMS customer requests additional information concerning 
FMS contract prices, the contracting officer shall, after consultation 
with the contractor, provide sufficient information to demonstrate the 
reasonableness of the price and reasonable responses to relevant 
questions concerning contract price. This information--
    (1) May include tailored responses, top-level pricing summaries, 
historical prices, or an explanation of any significant differences 
between the actual contract price and the estimated contract price 
included in the initial LOA; and
    (2) May be provided orally, in writing, or by any other method 
acceptable to the contracting officer.

[67 FR 70325, Nov. 22, 2002]



Sec. 225.7305  Limitation of liability.

    Advise the contractor when the foreign customer will assume the risk 
for loss or damage under the appropriate limitation of liability 
clause(s) (see FAR Subpart 46.8). Consider the costs

[[Page 176]]

of necessary insurance, if any, obtained by the contractor to cover the 
risk of loss or damage in establishing the FMS contract price.

[56 FR 36367, July 31, 1991, as amended at 68 FR 15633, Mar. 31, 2003]



Sec. 225.7306  Offset arrangements.

    In accordance with the Presidential policy statement of April 16, 
1990, DoD does not encourage, enter into, or commit U.S. firms to FMS 
offset arrangements. The decision whether to engage in offsets, and the 
responsibility for negotiating and implementing offset arrangements, 
resides with the companies involved. (Also see 225.7303-2(a)(3).)

[70 FR 73155, Dec. 9, 2005]



Sec. 225.7307  Contract clauses.

    (a) Use the clause at 252.225-7027, Restriction on Contingent Fees 
for Foreign Military Sales, in solicitations and contracts for FMS. 
Insert in paragraph (b)(1) of the clause the name(s) of any foreign 
country customer(s) listed in 225.7303-4(b).
    (b) Use the clause at 252.225-7028, Exclusionary Policies and 
Practices of Foreign Governments, in solicitations and contracts for the 
purchase of supplies and services for international military education 
training and FMS.

[68 FR 15633, Mar. 31, 2003. Redesignated at 70 FR 73155, Dec. 9, 2005]

      Subpart 225.74_Defense Contractors Outside the United States

    Source: 70 FR 23801, May 5, 2005, unless otherwise noted.



Sec. 225.7401  Contracts requiring performance or delivery in a foreign 
          country.

    (a) If an acquisition requires performance of work in a foreign 
country by contractor personnel other than host country personnel, or 
delivery of items to a Unified Combatant Command designated operational 
area, follow the procedures at PGI 225.7401(a).
    (b) For work performed in Germany, eligibility for logistics support 
or base privileges of contractor employees is governed by U.S.-German 
bilateral agreements. Follow the procedures in Army in Europe Regulation 
715-9, available at http://www.per.hqusareur.army.mil/cpd/docper/
default.htm. Follow the procedures in Army in Europe Regulation 715-9, 
available at http://www.per.hqusareur.army.mil/cpd/docper/
GermanyDefault.aspx.
    (c) For work performed in Japan or Korea, see PGI 225.7401(c) for 
information on bilateral agreements and policy relating to contractor 
employees in Japan or Korea.

[70 FR 23801, May 5, 2005, as amended at 71 FR 39009, July 11, 2006; 72 
FR 14239, Mar. 27, 2007]



Sec. 225.7402  Contractor personnel authorized to accompany U.S. Armed 
          Forces deployed outside the United States.

    For additional information on contractor personnel authorized to 
accompany the U.S. Armed Forces, see PGI 225.7402.

[73 FR 16774, Mar. 31, 2008]



Sec. 225.7402-1  Scope.

    (a) This section applies to contracts that involve contractor 
personnel authorized to accompany U.S. Armed Forces deployed outside the 
United States in--
    (1) Contingency operations;
    (2) Humanitarian or peacekeeping operations; or
    (3) Other military operations or military exercises, when designated 
by the combatant commander.
    (b) Any of the types of operations listed in paragraph (a) of this 
subsection may include stability operations such as--
    (1) Establishment or maintenance of a safe and secure environment; 
or
    (2) Provision of emergency infrastructure reconstruction, 
humanitarian relief, or essential governmental services (until feasible 
to transition to local government).

[73 FR 16774, Mar. 31, 2008]



Sec. 225.7402-2  Definition.

    See PGI 225.7402-2 for additional information on designated 
operational areas.

[73 FR 16774, Mar. 31, 2008]

[[Page 177]]



Sec. 225.7402-3  Government support.

    (a) Government support that may be authorized or required for 
contractor personnel performing in a designated operational area may 
include, but is not limited to, the types of support listed in PGI 
225.7402-3(a).
    (b) The agency shall provide logistical or security support only 
when the appropriate agency official, in accordance with agency 
guidance, determines in coordination with the combatant commander that--
    (1) Such Government support is available and is needed to ensure 
continuation of essential contractor services; and
    (2) The contractor cannot obtain adequate support from other sources 
at a reasonable cost.
    (c) The contracting officer shall specify in the solicitation and 
contract--
    (1) Valid terms, approved by the combatant commander, that specify 
the responsible party, if a party other than the combatant commander is 
responsible for providing protection to the contractor personnel 
performing in the designated operational area as specified in 225.7402-
1;
    (2) If medical or dental care is authorized beyond the standard 
specified in paragraph (c)(2)(i) of the clause at 252.225-7040, 
Contractor Personnel Authorized to Accompany U.S. Armed Forces Deployed 
Outside the United States; and
    (3) Any other Government support to be provided, and whether this 
support will be provided on a reimbursable basis, citing the authority 
for the reimbursement.
    (d) The contracting officer shall provide direction to the 
contractor, if the contractor is required to reimburse the Government 
for medical treatment or transportation of contractor personnel to a 
selected civilian facility in accordance with paragraph (c)(2)(ii) of 
the clause at 252.225-7040.
    (e) Contractor personnel must have a letter of authorization (LOA) 
issued by a contracting officer in order to process through a deployment 
center or to travel to, from, or within the designated operational area. 
The LOA also will identify any additional authorizations, privileges, or 
Government support that the contractor personnel are entitled to under 
the contract. For a sample LOA, see PGI 225.7402-3(e).

[73 FR 16774, Mar. 31, 2008]



Sec. 225.7402-4  Law of war training.

    (a) Basic training. Basic law of war training is required for all 
contractor personnel authorized to accompany U.S. Armed Forces deployed 
outside the United States. The basic training normally will be provided 
through a military-run training center. The contracting officer may 
authorize the use of an alternate basic training source, provided the 
servicing DoD legal advisor concurs with the course content. An example 
of an alternate source of basic training is the Web-based training 
provided by the Defense Acquisition University at https://acc.dau.mil/
CommunityBrowser.aspx?id=18014&lang=

en-US.
    (b) Advanced law of war training. (1) The types of personnel that 
must obtain advanced law of war training include the following:
    (i) Private security contractors.
    (ii) Security guards in or near areas of military operations.
    (iii) Interrogators, linguists, interpreters, guards, report 
writers, information technology technicians, or others who will come 
into contact with enemy prisoners of war, civilian internees, retained 
persons, other detainees, terrorists, or criminals who are captured, 
transferred, confined, or detained during or in the aftermath of 
hostilities.
    (iv) Other personnel when deemed necessary by the contracting 
officer.
    (2) If contractor personnel will be required to obtain advanced law 
of war training, the solicitation and contract shall specify--
    (i) The types of personnel subject to advanced law of war training 
requirements;
    (ii) Whether the training will be provided by the Government or the 
contractor;
    (iii) If the training will be provided by the Government, the source 
of the training; and
    (iv) If the training will be provided by the contractor, a 
requirement for coordination of the content with the servicing DoD legal 
advisor to ensure

[[Page 178]]

that training content is commensurate with the duties and 
responsibilities of the personnel to be trained.

[74 FR 2420, Jan. 15, 2009]



Sec. 225.7402-5  Contract clauses.

    (a) Use the clause at 252.225-7040, Contractor Personnel Authorized 
to Accompany U.S. Armed Forces Deployed Outside the United States, 
instead of the clause at FAR 52.225-19, Contractor Personnel in a 
Designated Operational Area or Supporting a Diplomatic or Consular 
Mission Outside the United States, in solicitations and contracts that 
authorize contractor personnel to accompany U.S. Armed Forces deployed 
outside the United States in--
    (1) Contingency operations;
    (2) Humanitarian or peacekeeping operations; or
    (3) Other military operations or military exercises, when designated 
by the combatant commander.
    (b) For additional guidance on clauses to consider when using the 
clause at 252.225-7040, see PGI 225.7402-4(b).

[73 FR 16774, Mar. 31, 2008. Redesignated at 74 FR 2420, Jan. 15, 2009]



Sec. 225.7403  Antiterrorism/force protection.



Sec. 225.7403-1  General.

    Information and guidance pertaining to DoD antiterrorism/force 
protection policy for contracts that require performance or travel 
outside the United States can be obtained from the offices listed in PGI 
225.7403-1.



Sec. 225.7403-2  Contract clause.

    Use the clause at 252.225-7043, Antiterrorism/Force Protection 
Policy for Defense Contractors Outside the United States, in 
solicitations and contracts that require performance or travel outside 
the United States, except for contracts with--
    (a) Foreign governments;
    (b) Representatives of foreign governments; or
    (c) Foreign corporations wholly owned by foreign governments.

               Subpart 225.75_Balance of Payments Program

    Source: 67 FR 20694, Apr. 26, 2002, unless otherwise noted.



Sec. 225.7500  Scope of subpart.

    This subpart provides policies and procedures implementing the 
Balance of Payments Program. It applies to contracts for the acquisition 
of--
    (a) Supplies for use outside the United States; and
    (b) Construction to be performed outside the United States.



Sec. 225.7501  Policy.

    Acquire only domestic end products for use outside the United 
States, and use only domestic construction material for construction to 
be performed outside the United States, including end products and 
construction material for foreign military sales, unless--
    (a) Before issuing the solicitation--
    (1) The estimated cost of the acquisition or the value of a 
particular construction material is at or below the simplified 
acquisition threshold;
    (2) The end product or particular construction material is--
    (i) Listed in FAR 25.104 or 225.104(a)(iii);
    (ii) A petroleum product;
    (iii) A spare part for foreign-manufactured vehicles, equipment, 
machinery, or systems, provided the acquisition is restricted to the 
original manufacturer or its supplier;
    (iv) An industrial gas;
    (v) A brand drug specified by the Defense Medical Materiel Board; or
    (vi) Information technology that is a commercial item, using fiscal 
year 2004 or subsequent funds (Section 535 of Division F of the 
Consolidated Appropriations Act, 2004 (Pub. L. 108-199), and the same 
provision in subsequent appropriations acts);
    (3) The acquisition is covered by the World Trade Organization 
Government Procurement Agreement;
    (4) The acquisition of foreign end products or construction material 
is required by a treaty or executive agreement between governments;

[[Page 179]]

    (5) Use of a procedure specified in 225.7703-1(a) is authorized for 
an acquisition in support of operations in Iraq or Afghanistan;
    (6) The end product is acquired for commissary resale; or
    (7) The contracting officer determines that a requirement can best 
be filled by a foreign end product or construction material, including 
determinations that--
    (i) A subsistence product is perishable and delivery from the United 
States would significantly impair the quality at the point of 
consumption;
    (ii) An end product or construction material, by its nature or as a 
practical matter, can best be acquired in the geographic area concerned, 
e.g., ice or books; or bulk material, such as sand, gravel, or other 
soil material, stone, concrete masonry units, or fired brick;
    (iii) A particular domestic construction material is not available;
    (iv) The cost of domestic construction material would exceed the 
cost of foreign construction material by more than 50 percent, 
calculated on the basis of--
    (A) A particular construction material; or
    (B) The comparative cost of application of the Balance of Payments 
Program to the total acquisition; or
    (v) Use of a particular domestic construction material is 
impracticable;
    (b) After receipt of offers--
    (1) The evaluated low offer (see Subpart 225.5) is an offer of an 
end product that--
    (i) Is a qualifying country end product;
    (ii) Is an eligible product; or
    (iii) Is a nonqualifying country end product, but application of the 
Balance of Payments Program evaluation factor would not result in award 
on a domestic offer; or
    (2) The construction material is an eligible product; or
    (c) At any time during the acquisition process, the head of the 
agency determines that it is not in the public interest to apply the 
restrictions of the Balance of Payments Program to the end product or 
construction material.

[67 FR 20694, Apr. 26, 2002, as amended at 67 FR 77939, Dec. 20, 2002; 
69 FR 1928, Jan. 13, 2004; 70 FR 2363, Jan. 13, 2005; 70 FR 73155, Dec. 
9, 2005; 71 FR 58540, Oct. 4, 2006; 73 FR 53153, Sept. 15, 2008]



Sec. 225.7502  Procedures.

    If the Balance of Payments Program applies to the acquisition, 
follow the procedures at PGI 225.7502.

[71 FR 62566, Oct. 26, 2006]



Sec. 225.7503  Contract clauses.

    Unless the entire acquisition is exempt from the Balance of Payments 
Program--
    (a) Use the clause at 252.225-7044, Balance of Payments Program--
Construction Material, in solicitations and contracts for construction 
to be performed outside the United States with a value greater than the 
simplified acquisition threshold but less than $7,804,000.
    (b) Use the clause at 252.225-7045, Balance of Payments Program--
Construction Material Under Trade Agreements, in solicitations and 
contracts for construction to be performed outside the United States 
with a value of $7,804,000 or more. For acquisitions with a value of 
$7,804,000 or more, but less than $9,110,318, use the clause with its 
Alternate I.

[71 FR 9271, Feb. 23, 2006, as amended at 73 FR 4116, Jan. 24, 2008; 75 
FR 32637, June 8, 2010]

             Subpart 225.76_Secondary Arab Boycott of Israel

    Source: 71 FR 39006, July 11, 2006, unless otherwise noted.



Sec. 225.7601  Restriction.

    In accordance with 10 U.S.C. 2410i, do not enter into a contract 
with a foreign entity unless it has certified that it does not comply 
with the secondary Arab boycott of Israel.



Sec. 225.7602  Procedures.

    For contracts awarded to the Canadian Commercial Corporation (CCC), 
the CCC will submit a certification from its proposed subcontractor with

[[Page 180]]

the other required precontractual information (see 225.870).



Sec. 225.7603  Exceptions.

    This restriction does not apply to--
    (a) Purchases at or below the simplified acquisition threshold;
    (b) Contracts for consumable supplies, provisions, or services for 
the support of United States forces or of allied forces in a foreign 
country; or
    (c) Contracts pertaining to the use of any equipment, technology, 
data, or services for intelligence or classified purposes, or to the 
acquisition or lease thereof, in the interest of national security.



Sec. 225.7604  Waivers.

    The Secretary of Defense may waive this restriction on the basis of 
national security interests. To request a waiver, follow the procedures 
at PGI 225.7604.

[71 FR 62566, Oct. 26, 2006]



Sec. 225.7605  Solicitation provision.

    Unless an exception applies or a waiver has been granted in 
accordance with 225.7604, use the provision at 252.225-7031, Secondary 
Arab Boycott of Israel, in all solicitations.

    Subpart 225.77_Acquisitions in Support of Operations in Iraq or 
                               Afghanistan

    Source: 73 FR 53153, Sept. 15, 2008, unless otherwise noted.



Sec. 225.7700  Scope.

    This subpart implements Section 886 and Section 892 of the National 
Defense Authorization Act for Fiscal Year 2008 (Public Law 110-181).



Sec. 225.7701  Definitions.

    As used in this subpart--
    Product from Iraq or Afghanistan means a product that is mined, 
produced, or manufactured in Iraq or Afghanistan.
    Service from Iraq or Afghanistan means a service (including 
construction) that is performed in Iraq or Afghanistan predominantly by 
citizens or permanent resident aliens of Iraq or Afghanistan.
    Small arms means pistols and other weapons less than 0.50 caliber.
    Source from Iraq or Afghanistan means a source that--
    (1) Is located in Iraq or Afghanistan; and
    (2) Offers products or services from Iraq or Afghanistan.

[73 FR 53153, Sept. 15, 2008, as amended at 75 FR 18039, Apr. 8, 2010]



Sec. 225.7702  Acquisition of small arms.

    (a) Except as provided in paragraph (b) of this section, when 
acquiring small arms for assistance to the Army of Iraq, the Army of 
Afghanistan, the Iraqi Police Forces, the Afghani Police Forces, or 
other Iraqi or Afghani security organizations--
    (1) Use full and open competition to the maximum extent practicable, 
consistent with the provisions of 10 U.S.C. 2304;
    (2) If use of other than full and open competition is justified in 
accordance with FAR Subpart 6.3, ensure that--
    (i) No responsible U.S. manufacturer is excluded from competing for 
the acquisition; and
    (ii) Products manufactured in the United States are not excluded 
from the competition; and
    (3) If the exception at FAR 6.302-2 (unusual and compelling urgency) 
applies, do not exclude responsible U.S. manufacturers or products 
manufactured in the United States from the competition for the purpose 
of administrative expediency. However, such an offer may be rejected if 
it does not meet delivery schedule requirements.
    (b) Paragraph (a)(2) of this section does not apply when--
    (1) The exception at FAR 6.302-1 (only one or a limited number of 
responsible sources) applies, and the only responsible source or sources 
are not U.S. manufacturers or are not offering products manufactured in 
the United States; or
    (2) The exception at FAR 6.302-4 (international agreement) applies, 
and United States manufacturers or products manufactured in the United 
States are not the source(s) specified in the written directions of the 
foreign government reimbursing the agency for the cost of the 
acquisition of the property or services for such government.

[[Page 181]]



Sec. 225.7703  Acquisition of products or services other than small 
          arms.



Sec. 225.7703-1  Acquisition procedures.

    (a) Subject to the requirements of 225.7703-2, a product or service 
(including construction), other than small arms, in support of 
operations in Iraq or Afghanistan, may be acquired by--
    (1) Providing a preference for products or services from Iraq or 
Afghanistan in accordance with the evaluation procedures at 225.7703-3;
    (2) Limiting competition to products or services from Iraq or 
Afghanistan; or
    (3) Using procedures other than competitive procedures to award a 
contract to a particular source or sources from Iraq or Afghanistan. 
When other than competitive procedures are used, the contracting officer 
shall document the contract file with the rationale for selecting the 
particular source(s).
    (b) For acquisitions conducted using a procedure specified in 
paragraph (a) of this subsection, the justification and approval 
addressed in FAR Subpart 6.3 is not required.



Sec. 225.7703-2  Determination requirements.

    Before use of a procedure specified in 225.7703-1(a), a written 
determination must be prepared and executed as follows:
    (a) For products or services to be used only by the military forces, 
police, or other security personnel of Iraq or Afghanistan, the 
contracting officer shall--
    (1) Determine in writing that the product or service is to be used 
only by the military forces, police, or other security personnel of Iraq 
or Afghanistan; and
    (2) Include the written determination in the contract file.
    (b) For products or services not limited to use by the military 
forces, police, or other security personnel of Iraq or Afghanistan, the 
following requirements apply:
    (1) The appropriate official specified in paragraph (b)(2) of this 
subsection must determine in writing that it is in the national security 
interest of the United States to use a procedure specified in 225.7703-
1(a), because--
    (i) The procedure is necessary to provide a stable source of jobs in 
Iraq or Afghanistan; and
    (ii) Use of the procedure will not adversely affect--
    (A) Operations in Iraq or Afghanistan (including security, 
transition, reconstruction, and humanitarian relief activities); or
    (B) The U.S. industrial base. The authorizing official generally may 
presume that there will not be an adverse effect on the U.S. industrial 
base. However, when in doubt, the authorizing official should coordinate 
with the applicable subject matter expert specified in PGI 225.7703-
2(b).
    (2) Determinations may be made for an individual acquisition or a 
class of acquisitions meeting the criteria in paragraph (b)(1) of this 
subsection as follows:
    (i) The head of the contacting activity is authorized to make a 
determination that applies to an individual acquisition with a value of 
less than $85.5 million.
    (ii) The Director, Defense Procurement and Acquisition Policy, and 
the following officials, without power of redelegation, are authorized 
to make a determination that applies to an individual acquisition with a 
value of $85.5 million or more or to a class of acquisitions:
    (A) Defense Logistics Agency Component Acquisition Executive.
    (B) Army Acquisition Executive.
    (C) Navy Acquisition Executive.
    (D) Air Force Acquisition Executive.
    (E) Commander of the Joint Contracting Command--Iraq/Afghanistan 
(JCC-I/A).
    (3) The contracting officer--
    (i) Shall include the applicable written determination in the 
contract file; and
    (ii) Shall ensure that each contract action taken pursuant to the 
authority of a class determination is within the scope of the class 
determination, and shall document the contract file for each action 
accordingly.
    (c) See PGI 225.7703-2(c) for formats for use in preparation of the 
determinations required by this subsection.

[73 FR 53153, Sept. 15, 2008, as amended at 75 FR 18039, Apr. 8, 2010; 
75 FR 45074, Aug. 2, 2010]

[[Page 182]]



Sec. 225.7703-3  Evaluating offers.

    (a) Evaluate offers submitted in response to solicitations that 
include the provision at 252.225-7023, Preference for Products or 
Services from Iraq or Afghanistan, as follows:
    (1) If the low offer is an offer of a product or service from Iraq 
or Afghanistan, award on that offer.
    (2) If there are no offers of a product or service from Iraq or 
Afghanistan, award on the low offer.
    (3) Otherwise, apply the evaluation factor specified in the 
solicitation to the low offer.
    (i) If the price of the low offer of a product or service from Iraq 
or Afghanistan is less than the evaluated price of the low offer, award 
on the low offer of a product or service from Iraq or Afghanistan.
    (ii) If the evaluated price of the low offer remains less than the 
low offer of a product or service from Iraq or Afghanistan, award on the 
low offer.
    (b) If the provision at 252.225-7023 is modified to provide a 
preference exclusively for products or services from Iraq or 
Afghanistan, also modify the evaluation procedures in paragraph (a) of 
this subsection to remove ``or Afghanistan'' or ``Iraq or'', 
respectively, wherever the phrase appears.



Sec. 225.7703-4  Reporting requirement.

    The following organizations shall submit periodic reports to the 
Deputy Director, Contingency Contracting & Acquisition Policy, Defense 
Procurement and Acquisition Policy, in accordance with PGI 225.7703-4, 
to address the organization's use of the procedures authorized by this 
section:
    (a) The Joint Contracting Command (Iraq/Afghanistan).
    (b) The Department of the Army, except for contract actions reported 
by the Joint Contracting Command.
    (c) The Department of the Navy.
    (d) The Department of the Air Force.
    (e) The Defense Logistics Agency.
    (f) The other defense agencies and other DoD components that execute 
reportable contract actions.

[73 FR 53153, Sept. 15, 2008, as amended at 75 FR 18039, Apr. 8, 2010]



Sec. 225.7703-5  Solicitation provisions and contract clauses.

    (a) Use the provision at 252.225-7023, Preference for Products or 
Services from Iraq or Afghanistan, in solicitations that provide a 
preference for products or services from Iraq or Afghanistan in 
accordance with 225.7703-1(a)(1). The contracting officer--
    (1) May modify the provision to provide a preference exclusively for 
products or services from Iraq or exclusively for products or services 
from Afghanistan by removing ``or Afghanistan'' or ``Iraq or'', 
respectively, wherever the phrase appears in the provision. If this 
provision is so modified, the clause at 252.225-7024 shall be modified 
accordingly; and
    (2) May modify the 50 percent evaluation factor in accordance with 
contracting office procedures.
    (b) Use the clause at 252.225-7024, Requirement for Products or 
Services from Iraq or Afghanistan, in solicitations that include the 
provision at 252.225-7023, Preference for Products or Services from Iraq 
or Afghanistan, and in the resulting contract. If the provision at 
252.225-7023 has been modified to provide a preference exclusively for 
Iraq or exclusively for Afghanistan, in accordance with paragraph (a)(1) 
of this subsection, the clause at 252.225-7024 shall be modified 
accordingly.
    (c)(1) Use the clause at 252.225-7026, Acquisition Restricted to 
Products or Services from Iraq or Afghanistan, in solicitations and 
contracts that--
    (i) Are restricted to the acquisition of products or services from 
Iraq or Afghanistan in accordance with 225.7703-1(a)(2); or
    (ii) Will be directed to a particular source or sources from Iraq or 
Afghanistan in accordance with 225.7703-1(a)(3).
    (2) The contracting officer may modify the clause to restrict the 
acquisition to products or services from Iraq, or to restrict the 
acquisition to products or services from Afghanistan, by removing ``or 
Afghanistan'' or ``Iraq or'', respectively, wherever the phrase appears 
in the clause.
    (d) When the Trade Agreements Act applies to the acquisition, use 
the appropriate clause and provision as prescribed at 225.1101 (5), (6), 
or (7).

[[Page 183]]

    (e) Do not use any of the following provisions or clauses in 
solicitations or contracts that include the provision at 252.225-7023, 
the clause at 252.225-7024, or the clause at 252.225-7026:
    (1) 252.225-7000, Buy American Act--Balance of Payments Program 
Certificate.
    (2) 252.225-7001, Buy American Act and Balance of Payments Program.
    (3) 252.225-7002, Qualifying Country Sources as Subcontractors.
    (4) 252.225-7035, Buy American Act--Free Trade Agreements--Balance 
of Payments Program Certificate.
    (5) 252.225-7036, Buy American Act--Free Trade Agreements--Balance 
of Payments Program.
    (6) 252.225-7044, Balance of Payments Program--Construction 
Material.
    (7) 252.225-7045, Balance of Payments Program--Construction Material 
Under Trade Agreements.
    (f) Do not use the following clause or provision in solicitations or 
contracts that include the clause at 252.225-7026:
    (1) 252.225-7020, Trade Agreements Certificate.
    (2) 252.225-7021, Trade Agreements.
    (3) 252.225-7022, Trade Agreements Certificate--Inclusion of Iraqi 
End Products.

[73 FR 53153, Sept. 15, 2008, as amended at 75 FR 18039, Apr. 8, 2010]

                  PART 226_OTHER SOCIOECONOMIC PROGRAMS

                 Subpart 226.1_Indian Incentive Program

Sec.

Sec. 226.103 Procedures.

Sec. 226.104 Contract clause.

Subpart 226.3_Historically Black Colleges and Universities and Minority 
                              Institutions


Sec. 226.370 Contracting with historically black colleges and 
          universities and minority institutions.

Sec. 226.370-1 General.

Sec. 226.370-2 Definitions.

Sec. 226.370-3 Policy.

Sec. 226.370-4 Set-aside criteria.

Sec. 226.370-5 Set-aside procedures.

Sec. 226.370-6 Eligibility for award.

Sec. 226.370-7 Protesting a representation.

Sec. 226.370-8 Goals and incentives for subcontracting with HBCU/MIs.

Sec. 226.370-9 Solicitation provision and contract clause.

Subpart 226.70 [Reserved]

        Subpart 226.71_Preference for Local and Small Businesses


Sec. 226.7100 Scope of subpart.

Sec. 226.7101 Definition.

Sec. 226.7102 Policy.

Sec. 226.7103 Procedure.

Sec. 226.7104 Other considerations.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36388, July 31, 1991, unless otherwise noted.

                 Subpart 226.1_Indian Incentive Program



Sec. 226.103  Procedures.

    Follow the procedures at PGI 226.103 when submitting a request for 
funding of an Indian incentive.

[70 FR 73149, Dec. 9, 2005]



Sec. 226.104  Contract clause.

    Use the clause at 252.226-7001, Utilization of Indian Organizations, 
Indian-Owned Economic Enterprises, and Native Hawaiian Small Business 
Concerns, in solicitations and contracts for supplies or services 
exceeding $500,000 in value.

[68 FR 56562, Oct. 1, 2003, as amended at 69 FR 55991, Sept. 17, 2004]

Subpart 226.3_Historically Black Colleges and Universities and Minority 
                              Institutions

    Source: 70 FR 73149, Dec. 9, 2005, unless otherwise noted.



Sec. 226.370  Contracting with historically black colleges and 
          universities and minority institutions.



Sec. 226.370-1  General.

    This section implements the historically black college and 
university (HBCU) and minority institution (MI) provisions of 10 U.S.C. 
2323.



Sec. 226.370-2  Definitions.

    Definitions of HBCUs and MIs are in the clause at 252.226-7000, 
Notice of Historically Black College or University and Minority 
Institution Set-Aside.

[[Page 184]]



Sec. 226.370-3  Policy.

    DoD will use outreach efforts, technical assistance programs, 
advance payments, HBCU/MI set-asides, and evaluation preferences to meet 
its contract and subcontract goals for use of HBCUs and MIs.



Sec. 226.370-4  Set-aside criteria.

    Set aside acquisitions for exclusive HBCU and MI participation when 
the acquisition is for research, studies, or services of the type 
normally acquired from higher educational institutions and there is a 
reasonable expectation that--
    (a) Offers will be submitted by at least two responsible HBCUs or 
MIs that can comply with the subcontracting limitations in the clause at 
FAR 52.219-14, Limitations on Subcontracting;
    (b) Award will be made at not more than 10 percent above fair market 
price; and
    (c) Scientific or technological talent consistent with the demands 
of the acquisition will be offered.



Sec. 226.370-5  Set-aside procedures.

    (a) As a general rule, use competitive negotiation for HBCU/MI set-
asides.
    (b) When using a broad agency announcement (FAR 35.016) for basic or 
applied research, make partial set-asides for HBCU/MIs as explained in 
235.016.
    (c) Follow the special synopsis instructions in 205.207(d). 
Interested HBCU/MIs must provide evidence of their capability to perform 
the contract, and a positive statement of their eligibility, within 15 
days of publication of the synopsis in order for the acquisition to 
proceed as an HBCU/MI set-aside.
    (d) Cancel the set-aside if the low responsible offer exceeds the 
fair market price (defined in FAR part 19) by more than 10 percent.



Sec. 226.370-6  Eligibility for award.

    (a) To be eligible for award as an HBCU or MI under the preference 
procedures of this subpart, an offeror must--
    (1) Be an HBCU or MI, as defined in the clause at 252.226-7000, 
Notice of Historically Black College or University and Minority 
Institution Set-Aside, at the time of submission of its initial offer 
including price; and
    (2) Provide the contracting officer with evidence of its HBCU or MI 
status upon request.
    (b) The contracting officer shall accept an offeror's HBCU or MI 
status under the provision at FAR 52.226-2, Historically Black College 
or University and Minority Institution Representation, unless--
    (1) Another offeror challenges the status; or
    (2) The contracting officer has reason to question the offeror's 
HBCU/MI status. (A list of HBCU/MIs is published periodically by the 
Department of Education.)



Sec. 226.370-7  Protesting a representation.

    Any offeror or other interested party may challenge an offeror's 
HBCU or MI representation by filing a protest with the contracting 
officer. The protest must contain specific detailed evidence supporting 
the basis for the challenge. Such protests are handled in accordance 
with FAR 33.103 and are decided by the contracting officer.



Sec. 226.370-8  Goals and incentives for subcontracting with HBCU/MIs.

    (a) In reviewing subcontracting plans submitted under the clause at 
FAR 52.219-9, Small Business Subcontracting Plan, the contracting 
officer shall--
    (1) Ensure that the contractor included anticipated awards to HBCU/
MIs in the small disadvantaged business goal; and
    (2) Consider whether subcontracts are contemplated that involve 
research or studies of the type normally performed by higher educational 
institutions.
    (b) The contracting officer may, when contracting by negotiation, 
use in solicitations and contracts a clause similar to the clause at FAR 
52.219-10, Incentive Subcontracting Program, when a subcontracting plan 
is required and inclusion of a monetary incentive is, in the judgment of 
the contracting officer, necessary to increase subcontracting 
opportunities for HBCU/MIs. The clause should include a separate goal 
for HBCU/MIs.

[[Page 185]]



Sec. 226.370-9  Solicitation provision and contract clause.

    (a) Use the clause at 252.226-7000, Notice of Historically Black 
College or University and Minority Institution Set-Aside, in 
solicitations and contracts set aside for HBCU/MIs.
    (b) Use the provision at FAR 52.226-2, Historically Black College or 
University and Minority Institution Representation, in solicitations set 
aside for HBCU/MIs.

Subpart 226.70 [Reserved]

        Subpart 226.71_Preference for Local and Small Businesses

    Source: 59 FR 12192, Mar. 16, 1994, unless otherwise noted.



Sec. 226.7100  Scope of subpart.

    This subpart implements section 2912 of the Fiscal Year 1994 Defense 
Authorization Act (Pub. L. 103-160) and section 817 of the Fiscal Year 
1995 Defense Authorization Act (Pub. L. 103-337).

[60 FR 5870, Jan. 31, 1995]



Sec. 226.7101  Definition.

    Vicinity, as used in this subpart, means the county or counties in 
which the military installation to be closed or realigned is located and 
all adjacent counties, unless otherwise defined by the agency head.

[60 FR 29499, June 5, 1995]



Sec. 226.7102  Policy.

    Businesses located in the vicinity of a military installation that 
is being closed or realigned under a base closure law, including 10 
U.S.C. 2687, and small and small disadvantaged businesses shall be 
provided maximum practicable opportunity to participate in acquisitions 
that support the closure or realignment, including acquisitions for 
environmental restoration and mitigation.



Sec. 226.7103  Procedure.

    In considering acquisitions for award through the section 8(a) 
program (subpart 219.8 and FAR subpart 19.8) or in making set-aside 
decisions under subpart 219.5 and FAR subpart 19.5 for acquisitions in 
support of a base closure or realignment, the contracting officer 
shall--
    (a) Determine whether there is a reasonable expectation that offers 
will be received from responsible business concerns located in the 
vicinity of the military installation that is being closed or realigned.
    (b) If offers can not be expected from business concerns in the 
vicinity, proceed with section 8(a) or set-aside consideration as 
otherwise indicated in part 219 and FAR part 19.
    (c) If offers can be expected from business concerns in the 
vicinity--
    (1) Consider section 8(a) only if at least one eligible 8(a) 
contractor is located in the vicinity.
    (2) Set aside the acquisition for small business only if at least 
one of the expected offers is from a small business located in the 
vicinity.

[60 FR 29499, June 5, 1995, as amended at 63 FR 41974, Aug. 6, 1998; 67 
FR 11438, Mar. 14, 2002]



Sec. 226.7104  Other considerations.

    When planning for contracts for services related to base closure 
activities at a military installation affected by a closure or 
realignment under a base closure law, contracting officers shall 
consider including, as a factor in source selection, the extent to which 
offerors specifically identify and commit, in their proposals, to a plan 
to hire residents of the vicinity of the military installation that is 
being closed or realigned.

[60 FR 61598, Nov. 30, 1995]

[[Page 186]]

              SUBCHAPTER E_GENERAL CONTRACTING REQUIREMENTS

                 PART 227_PATENTS, DATA, AND COPYRIGHTS

         Subpart 227.3_Patent Rights Under Government Contracts

Sec.

Sec. 227.303 Contract clauses.

Sec. 227.304 Procedures.

Sec. 227.304-1 General.

               Subpart 227.4_Rights in Data and Copyrights


Sec. 227.400 Scope of subpart.

    Subpart 227.6_Foreign License and Technical Assistance Agreements


Sec. 227.670 Scope.

Sec. 227.671 General.

Sec. 227.672 Policy.

Sec. 227.673 Foreign license and technical assistance agreements between 
          the Government and domestic concerns.

Sec. 227.674 Supply contracts between the Government and a foreign 
          government or concern.

Sec. 227.675 Foreign license and technical assistance agreements between 
          a domestic concern and a foreign government or concern.

Sec. 227.675-1 International Traffic in Arms Regulations.

Sec. 227.675-2 Review of agreements.

Sec. 227.676 Foreign patent interchange agreements.

      Subpart 227.70_Infringement Claims, Licenses, and Assignments


Sec. 227.7000 Scope.

Sec. 227.7001 Policy.

Sec. 227.7002 Statutes pertaining to administrative claims of 
          infringement.

Sec. 227.7003 Claims for copyright infringement.

Sec. 227.7004 Requirements for filing an administrative claim for patent 
          infringement.

Sec. 227.7005 Indirect notice of patent infringement claims.

Sec. 227.7006 Investigation and administrative disposition of claims.

Sec. 227.7007 Notification and disclosure to claimants.

Sec. 227.7008 Settlement of indemnified claims.

Sec. 227.7009 Patent releases, license agreements, and assignments.

Sec. 227.7009-1 Required clauses.

Sec. 227.7009-2 Clauses to be used when applicable.

Sec. 227.7009-3 Additional clauses--contracts except running royalty 
          contracts.

Sec. 227.7009-4 Additional clauses--contracts providing for payment of a 
          running royalty.

Sec. 227.7010 Assignments.

Sec. 227.7011 Procurement of rights in inventions, patents, and 
          copyrights.

Sec. 227.7012 Contract format.

Sec. 227.7013 Recordation.

                 Subpart 227.71_Rights in Technical Data


Sec. 227.7100 Scope of subpart.

Sec. 227.7101 Definitions.

Sec. 227.7102 Commercial items, components, or processes.

Sec. 227.7102-1 Policy.

Sec. 227.7102-2 Rights in technical data.

Sec. 227.7102-3 Contract clause.

Sec. 227.7103 Noncommercial items or processes.

Sec. 227.7103-1 Policy.

Sec. 227.7103-2 Acquisition of technical data.

Sec. 227.7103-3 Early identification of technical data to be furnished 
          to the Government with restrictions on use, reproduction or 
          disclosure.

Sec. 227.7103-4 License rights.

Sec. 227.7103-5 Government rights.

Sec. 227.7103-6 Contract clauses.

Sec. 227.7103-7 Use and non-disclosure agreement.

Sec. 227.7103-8 Deferred delivery and deferred ordering of technical 
          data.

Sec. 227.7103-9 Copyright.

Sec. 227.7103-10 Contractor identification and marking of technical data 
          to be furnished with restrictive markings.

Sec. 227.7103-11 Contractor procedures and records.

Sec. 227.7103-12 Government right to establish conformity of markings.

Sec. 227.7103-13 Government right to review, verify, challenge and 
          validate asserted restrictions.

Sec. 227.7103-14 Conformity, acceptance, and warranty of technical data.

Sec. 227.7103-15 Subcontractor rights in technical data.

Sec. 227.7103-16 Providing technical data to foreign governments, 
          foreign contractors, or international organizations.

Sec. 227.7103-17 Overseas contracts with foreign sources.

Sec. 227.7104 Contracts under the Small Business Innovation Research 
          (SBIR) Program.

Sec. 227.7105 Contracts for the acquisition of existing works.

Sec. 227.7105-1 General.

Sec. 227.7105-2 Acquisition of existing works without modification.

Sec. 227.7105-3 Acquisition of modified existing works.

Sec. 227.7106 Contracts for special works.

Sec. 227.7107 Contracts for architect-engineer services.

[[Page 187]]


Sec. 227.7107-1 Architectural designs and data clauses for architect-
          engineer or construction contracts.

Sec. 227.7107-2 Contracts for construction supplies and research and 
          development work.

Sec. 227.7107-3 Approval of restricted designs.

Sec. 227.7108 Contractor data repositories.

    Subpart 227.72_Rights in Computer Software and Computer Software 
                              Documentation


Sec. 227.7200 Scope of subpart.

Sec. 227.7201 Definitions.

Sec. 227.7202 Commercial computer software and commercial computer 
          software documentation.

Sec. 227.7202-1 Policy.

Sec. 227.7202-2 [Reserved]

Sec. 227.7202-3 Rights in commercial computer software or commercial 
          computer software documentation.

Sec. 227.7202-4 Contract clause.

Sec. 227.7203 Noncommercial computer software and noncommercial computer 
          software documentation.

Sec. 227.7203-1 Policy.

Sec. 227.7203-2 Acquisition of noncommercial computer software and 
          computer software documentation.

Sec. 227.7203-3 Early identification of computer software or computer 
          software documentation to be furnished to the Government with 
          restrictions on use, reproduction or disclosure.

Sec. 227.7203-4 License rights.

Sec. 227.7203-5 Government rights.

Sec. 227.7203-6 Contract clauses.

Sec. 227.7203-7 [Reserved]

Sec. 227.7203-8 Deferred delivery and deferred ordering of computer 
          software and computer software documentation.

Sec. 227.7203-9 Copyright.

Sec. 227.7203-10 Contractor identification and marking of computer 
          software or computer software documentation to be furnished 
          with restrictive markings.

Sec. 227.7203-11 Contractor procedures and records.

Sec. 227.7203-12 Government right to establish conformity of markings.

Sec. 227.7203-13 Government right to review, verify, challenge and 
          validate asserted restrictions.

Sec. 227.7203-14 Conformity, acceptance, and warranty of computer 
          software and computer software documentation.

Sec. 227.7203-15 Subcontractor rights in computer software or computer 
          software documentation.

Sec. 227.7203-16 Providing computer software or computer software 
          documentation to foreign governments, foreign contractors, or 
          international organizations.

Sec. 227.7203-17 Overseas contracts with foreign sources.

Sec. 227.7204 Contracts under the Small Business Innovative Research 
          Program.

Sec. 227.7205 Contracts for special works.

Sec. 227.7206 Contracts for architect-engineer services.

Sec. 227.7207 Contractor data repositories.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36389, July 31, 1991, unless otherwise noted.

         Subpart 227.3_Patent Rights Under Government Contracts



Sec. 227.303  Contract clauses.

    (1) Use the clause at 252.227-7039, Patents--Reporting of Subject 
Inventions, in solicitations and contracts containing the clause at FAR 
52.227-11, Patent Rights--Ownership by the Contractor.
    (2)(i) Use the clause at 252.227-7038, Patent Rights--Ownership by 
the Contractor (Large Business), instead of the clause at FAR 52.227-11, 
in solicitations and contracts for experimental, developmental, or 
research work if--
    (A) The contractor is other than a small business concern or 
nonprofit organization; and
    (B) No alternative patent rights clause is used in accordance with 
FAR 27.303(c) or (e).
    (ii) Use the clause with its Alternate I if--
    (A) The acquisition of patent rights for the benefit of a foreign 
government is required under a treaty or executive agreement;
    (B) The agency head determines at the time of award that it would be 
in the national interest to acquire the right to sublicense foreign 
governments or international organizations pursuant to any existing or 
future treaty or agreement; or
    (C) Other rights are necessary to effect a treaty or agreement, in 
which case Alternate I may be appropriately modified.
    (iii) Use the clause with its Alternate II in long-term contracts if 
necessary to effect treaty or agreements to be entered into.

[72 FR 69159, Dec. 7, 2007]

[[Page 188]]



Sec. 227.304  Procedures.



Sec. 227.304-1  General.

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

[56 FR 36389, July 31, 1991, as amended at 57 FR 53600, Nov. 12, 1992]

               Subpart 227.4_Rights in Data and Copyrights



Sec. 227.400  Scope of subpart.

    DoD activities shall use the guidance in subparts 227.71 and 227.72 
instead of the guidance in FAR subpart 27.4.

[60 FR 33471, June 28, 1995]

    Subpart 227.6_Foreign License and Technical Assistance Agreements



Sec. 227.670  Scope.

    This subpart prescribes policy with respect to foreign license and 
technical assistance agreements.



Sec. 227.671  General.

    In furtherance of the Military Assistance Program or for other 
national defense purposes, the Government may undertake to develop or 
encourage the development of foreign additional sources of supply. The 
development of such sources may be accomplished by an agreement, often 
called a foreign licensing agreement or technical assistance agreement, 
wherein a domestic concern, referred to in this subpart as a ``primary 
source,'' agrees to furnish to a foreign concern or government, herein 
referred to as a ``second source;'' foreign patent rights; technical 
assistance in the form of data, know-how, trained personnel of the 
primary source, instruction and guidance of the personnel of the second 
source, jigs, dies, fixtures, or other manufacturing aids, or such other 
assistance, information, rights, or licenses as are needed to enable the 
second source to produce particular supplies or perform particular 
services. Agreements calling for one or more of the foregoing may be 
entered into between the primary source and the Government, a foreign 
government, or a foreign concern. The consideration for providing such 
foreign license and technical assistance may be in the form of a lump 
sum payment, payments for each item manufactured by the second source, 
an agreement to exchange data and patent rights on improvements made to 
the article or service, capital stock transactions, or any combination 
of these. The primary source's bases for computing such consideration 
may include actual costs; charges for the use of patents, data, or know-
how reflecting the primary source's investment in developing and 
engineering and production techniques; and the primary source's 
``price'' for setting up a second source. Such agreements often refer to 
the compensation to be paid as a royalty or license fee whether or not 
patent rights are involved.



Sec. 227.672  Policy.

    It is Government policy not to pay in connection with its contracts, 
and not to allow to be paid in connection with contracts made with funds 
derived through the Military Assistance Program or otherwise through the 
United States Government, charges for use of patents in which it holds a 
royalty-free license or charges for data which it has a right to use and 
disclose to others, or which is in the public domain, or which the 
Government has acquired without restriction upon its use and disclosure 
to others. This policy shall be applied by the Departments in 
negotiating contract prices for foreign license technical assistance 
contracts (227.675) or supply contracts with second sources (227.674); 
and in commenting on such agreements when they are referred to the 
Department of Defense by the Department of State pursuant to section 414 
of the Mutual Security Act of 1954 as amended (22 U.S.C. 1934) and the 
International Traffic in Arms Regulations (see 227.675).



Sec. 227.673  Foreign license and technical assistance agreements 
          between the Government and domestic concerns.

    (a) Contracts between the Government and a primary source to provide

[[Page 189]]

technical assistance or patent rights to a second source for the 
manufacture of supplies or performance of services shall, to the extent 
practicable, specify the rights in patents and data and any other rights 
to be supplied to the second source. Each contract shall provide, in 
connection with any separate agreement between the primary source and 
the second source for patent rights or technical assistance relating to 
the articles or services involved in the contract, that--
    (1) The primary source and his subcontractors shall not make, on 
account of any purchases by the Government or by others with funds 
derived through the Military Assistance Program or otherwise through the 
Government, any charge to the second source for royalties or 
amortization for patents or inventions in which the Government holds a 
royalty-free license; or data which the Government has the right to 
possess, use, and disclose to others; or any technical assistance 
provided to the second source for which the Government has paid under a 
contract between the Government and the primary source; and
    (2) The separate agreement between the primary and second source 
shall include a statement referring to the contract between the 
Government and the primary source, and shall conform to the requirements 
of the International Traffic in Arms Regulations (see 227.675-1).
    (b) The following factors, among others, shall be considered in 
negotiating the price to be paid the primary source under contracts 
within (a) of this section:
    (1) The actual cost of providing data, personnel, manufacturing 
aids, samples, spare parts, and the like;
    (2) The extent to which the Government has contributed to the 
development of the supplies or services, and to the methods of 
manufacture or performance, through past contracts for research and 
development or for manufacture of the supplies or performance of the 
services; and
    (3) The Government's patent rights and rights in data relating to 
the supplies or services and to the methods of manufacture or of 
performance.



Sec. 227.674  Supply contracts between the Government and a foreign 
          government or concern.

    In negotiating contract prices with a second source, including the 
redetermination of contract prices, or in determining the allowability 
of costs under a cost-reimbursement contract with a second source, the 
contracting officer:
    (a) Shall obtain from the second source a detailed statement (see 
FAR 27.204-1(a)(2)) of royalties, license fees, and other compensation 
paid or to be paid to a primary source (or any of his subcontractors) 
for patent rights, rights in data, and other technical assistance 
provided to the second source, including identification and description 
of such patents, data, and technical assistance; and
    (b) Shall not accept or allow charges which in effect are--
    (1) For royalties or amortization for patents or inventions in which 
the Government holds a royalty-free license; or
    (2) For data which the Government has a right to possess, use, and 
disclose to others; or
    (3) For any technical assistance provided to the second source for 
which the Government has paid under a contract between the Government 
and a primary source.



Sec. 227.675  Foreign license and technical assistance agreements 
          
          between a domestic concern and a foreign government or 
          concern.



Sec. 227.675-1  International Traffic in Arms Regulations.

    Pursuant to section 414 of the Mutual Security Act of 1954, as 
amended (22 U.S.C. 1934), the Department of State controls the 
exportation of data relating to articles designated in the United States 
Munitions List as arms, ammunition, or munitions of war. (The Munitions 
List and pertinent procedures are set forth in the International Traffic 
in Arms Regulations, 22 CFR, et seq.) Before authorizing such 
exportation, the Department of State generally requests comments from 
the Department of Defense. On request of the Office of the Assistant 
Secretary of Defense (International Security Affairs), each Department 
shall submit comments

[[Page 190]]

thereon as the basis for a Department of Defense reply to the Department 
of State.



Sec. 227.675-2  Review of agreements.

    (a) In reviewing foreign license and technical assistance agreements 
between primary and second sources, the Department concerned shall, 
insofar as its interests are involved, indicate whether the agreement 
meets the requirements of Sec. Sec. 124.07-124.10 of the International 
Traffic in Arms Regulations or in what respects it is deficient. 
Paragraphs (b) through (g) of this subsection provide general guidance.
    (b) When it is reasonably anticipated that the Government will 
purchase from the second source the supplies or services involved in the 
agreement, or that Military Assistance Program funds will be provided 
for the procurement of the supplies or services, the following guidance 
applies.
    (1) If the agreement specifies a reduction in charges thereunder, 
with respect to purchases by or for the Government or by others with 
funds derived through the Military Assistance Program or otherwise 
through the Government, in recognition of the Government's rights in 
patents and data, the Department concerned shall evaluate the amount of 
the reduction to determine whether it is fair and reasonable in the 
circumstances, before indicating its approval.
    (2) If the agreement does not specify any reduction in charges or 
otherwise fails to give recognition to the Government's rights in the 
patents or data involved, approval shall be conditioned upon amendment 
of the agreement to reflect a reduction, evaluated by the Department 
concerned as acceptable to the Government, in any charge thereunder with 
respect to purchases made by or for the Government or by others with 
funds derived through the Military Assistance Program or otherwise 
through the Government, in accordance with Sec. 124.10 of the 
International Traffic in Arms Regulations.
    (3) If the agreement provides that no charge is to be made to the 
second source for data or patent rights to the extent of the 
Government's rights, the Department concerned shall evaluate the 
acceptability of the provision before indicating its approval.
    (4) If time or circumstances do not permit the evaluation called for 
in (b) (1), (2), or (3) of this subsection, the guidance in (c) of this 
subsection shall be followed.
    (c) When it is not reasonably anticipated that the Government will 
purchase from the second source the supplies or services involved in the 
agreement nor that Military Assistance Program funds will be provided 
for the purchase of the supplies or services, then the following 
guidance applies.
    (1) If the agreement provides for charges to the second source for 
data or patent rights, it may suffice to fulfill the requirements of 
Sec. 124.10 insofar as the Department of Defense is concerned if:
    (i) The agreement requires the second source to advise the primary 
source when he has knowledge of any purchase made or to be made from him 
by or for the Government or by others with funds derived through the 
Military Assistance Program or otherwise through the Government;
    (ii) The primary source separately agrees with the Government that 
upon such advice to him from the second source or from the Government or 
otherwise as to any such a purchase or prospective purchase, he will 
negotiate with the Department concerned an appropriate reduction in his 
charges to the second source in recognition of any Government rights in 
patents or data; and
    (iii) The agreement between the primary and second sources further 
provides that in the event of any such purchase and resulting reduction 
in charges, the second source shall pass on this reduction to the 
Government by giving the Government a corresponding reduction in the 
purchase price of the article or service.
    (2) If the agreement provides that no charge is to be made to the 
second source for data or patent rights to the extent to which the 
Government has rights, the Department concerned shall:
    (i) Evaluate the acceptability of the provision before indicating 
its approval; or

[[Page 191]]

    (ii) Explicitly condition its approval on the right to evaluate the 
acceptability of the provision at a later time.
    (d) When there is a technical assistance agreement between the 
primary source and the Government related to the agreement between the 
primary and second sources that is under review, the latter agreement 
shall reflect the arrangements contemplated with respect thereto by the 
Government's technical assistance agreement with the primary source.
    (e) Every agreement shall provide that any license rights 
transferred under the agreement are subject to existing rights of the 
Government.
    (f) In connection with every agreement referred to in (b) of this 
section, a request shall be made to the primary source--
    (1) To identify the patents, data, and other technical assistance to 
be provided to the second source by the primary source or any of his 
subcontractors,
    (2) To identify any such patents and data in which, to the knowledge 
of the primary source, the Government may have rights, and
    (3) To segregate the charges made to the second source for each such 
category or item of patents, data, and other technical assistance.

Reviewing personnel shall verify this information or, where the primary 
source does not furnish it, obtain such information from Governmental 
sources so far as practicable.
    (g) The Department concerned shall make it clear that its approval 
of any agreement does not necessarily recognize the propriety of the 
charges or the amounts thereof, or constitute approval of any of the 
business arrangements in the agreement, unless the Department expressly 
intends by its approval to commit itself to the fairness and 
reasonableness of a particular charge or charges. In any event, a 
disclaimer should be made to charges or business terms not affecting any 
purchase made by or for the Government or by others with funds derived 
through the Military Assistance Program or otherwise through the 
Government.



Sec. 227.676  Foreign patent interchange agreements.

    (a) Patent interchange agreements between the United States and 
foreign governments provide for the use of patent rights, compensation, 
free licenses, and the establishment of committees to review and make 
recommendations on these matters. The agreements also may exempt the 
United States from royalty and other payments. The contracting officer 
shall ensure that royalty payments are consistent with patent 
interchange agreements.
    (b) Assistance with patent rights and royalty payments in the United 
States European Command (USEUCOM) area of responsibility is available 
from HQ USEUCOM, ATTN: ECLA, Unit 30400, Box 1000, APO AE 09128; 
Telephone: DSN 430-8001/7263, Commercial 49-0711-680-8001/7263; Telefax: 
49-0711-680-5732.

[62 FR 34125, June 24, 1997, as amended at 63 FR 11534, Mar. 9, 1998]

      Subpart 227.70_Infringement Claims, Licenses, and Assignments



Sec. 227.7000  Scope.

    This subpart prescribes policy, procedures, and instructions for use 
of clauses with respect to processing licenses, assignments, and 
infringement claims.



Sec. 227.7001  Policy.

    Whenever a claim of infringement of privately owned rights in 
patented inventions or copyrighted works is asserted against any 
Department or Agency of the Department of Defense, all necessary steps 
shall be taken to investigate, and to settle administratively, deny, or 
otherwise dispose of such claim prior to suit against the United States. 
This subpart 227.70 does not apply to licenses or assignments acquired 
by the Department of Defense under the Patent Rights clauses.



Sec. 227.7002  Statutes pertaining to administrative claims of 
          infringement.

    Statutes pertaining to administrative claims of infringement in the 
Department of Defense include the following: the Foreign Assistance Act 
of

[[Page 192]]

1961, 22 U.S.C. 2356 (formerly the Mutual Security Acts of 1951 and 
1954); the Invention Secrecy Act, 35 U.S.C. 181-188; 10 U.S.C. 2386; 28 
U.S.C. 1498; and 35 U.S.C. 286.



Sec. 227.7003  Claims for copyright infringement.

    The procedures set forth herein will be followed, where applicable, 
in copyright infringement claims.



Sec. 227.7004  Requirements for filing an administrative claim for 
          patent infringement.

    (a) A patent infringement claim for compensation, asserted against 
the United States under any of the applicable statutes cited in 
227.7002, must be actually communicated to and received by a Department, 
agency, organization, office, or field establishment within the 
Department of Defense. Claims must be in writing and should include the 
following:
    (1) An allegation of infringement;
    (2) A request for compensation, either expressed or implied;
    (3) A citation of the patent or patents alleged to be infringed;
    (4) A sufficient designation of the alleged infringing item or 
process to permit identification, giving the military or commercial 
designation, if known, to the claimant;
    (5) A designation of at least one claim of each patent alleged to be 
infringed; or
    (6) As an alternative to (a) (4) and (5) of this section, a 
declaration that the claimant has made a bona fide attempt to determine 
the item or process which is alleged to infringe, but was unable to do 
so, giving reasons, and stating a reasonable basis for his belief that 
his patent or patents are being infringed.
    (b) In addition to the information listed in (a) of this section, 
the following material and information is generally necessary in the 
course of processing a claim of patent infringement. Claimants are 
encouraged to furnish this information at the time of filing a claim to 
permit the most expeditious processing and settlement of the claim.
    (1) A copy of the asserted patent(s) and identification of all 
claims of the patent alleged to be infringed.
    (2) Identification of all procurements known to claimant which 
involve the alleged infringing item or process, including the identity 
of the vendor or contractor and the Government procuring activity.
    (3) A detailed identification of the accused article or process, 
particularly where the article or process relates to a component or 
subcomponent of the item procured, an element by element comparison of 
the representative claims with the accused article or process. If 
available, this identification should include documentation and drawings 
to illustrate the accused article or process in suitable detail to 
enable verification of the infringement comparison.
    (4) Names and addresses of all past and present licenses under the 
patent(s), and copies of all license agreements and releases involving 
the patent(s).
    (5) A brief description of all litigation in which the patent(s) has 
been or is now involved, and the present status thereof.
    (6) A list of all persons to whom notices of infringement have been 
sent, including all departments and agencies of the Government, and a 
statement of the ultimate disposition of each.
    (7) A description of Government employment or military service, if 
any, by the inventor and/or patent owner.
    (8) A list of all Government contracts under which the inventor, 
patent owner, or anyone in privity with him performed work relating to 
the patented subject matter.
    (9) Evidence of title to the patent(s) alleged to be infringed or 
other right to make the claim.
    (10) A copy of the Patent Office file of each patent if available to 
claimant.
    (11) Pertinent prior art known to claimant, not contained in the 
Patent Office file, particularly publications and foreign art.

In addition in the foregoing, if claimant can provide a statement that 
the investigation may be limited to the specifically identified accused 
articles or processes, or to a specific procurement, it may materially 
expedite determination of the claim.
    (c) Any Department receiving an allegation of patent infringement 
which

[[Page 193]]

meets the requirements of this paragraph shall acknowledge the same and 
supply the other Departments which may have an interest therein with a 
copy of such communication and the acknowledgement thereof.
    (1) For the Department of the Army--Chief, Patents, Copyrights, and 
Trademarks Division, U.S. Army Legal Services Agency;
    (2) For the Department of the Navy--The Patent Counsel for Navy, 
Office of Naval Research;
    (3) For the Department of the Air Force--Chief, Patents Division, 
Office of The Judge Advocate General;
    (4) For the Defense Logistics Agency--The Office of Counsel; for the 
National Security Agency, the General Counsel;
    (5) For the Defense Information Systems Agency--the Counsel;
    (6) For the Defense Threat Reduction Agency--The General Counsel; 
and
    (7) For the National Geospatial-Intelligence Agency--The Counsel.
    (d) If a communication alleging patent infringement is received 
which does not meet the requirements set forth in paragraph (c) of this 
section, the sender shall be advised in writing--
    (1) That his claim for infringement has not been satisfactorily 
presented, and
    (2) Of the elements considered necessary to establish a claim.
    (e) A communication making a proffer of a license in which no 
infringement is alleged shall not be considered as a claim for 
infringement.

[56 FR 36389, July 31, 1991, as amended at 56 FR 67216, Dec. 30, 1991; 
61 FR 50454, Sept. 26, 1996; 62 FR 2613, Jan. 17, 1997; 64 FR 51076, 
Sept. 21, 1999; 74 FR 42780, Aug. 25, 2009]



Sec. 227.7005  Indirect notice of patent infringement claims.

    (a) A communication by a patent owner to a Department of Defense 
contractor alleging that the contractor has committed acts of 
infringement in performance of a Government contract shall not be 
considered a claim within the meaning of 227.7004 until it meets the 
requirements specified therein.
    (b) Any Department receiving an allegation of patent infringement 
which meets the requirements of 227.7004 shall acknowledge the same and 
supply the other Departments (see 227.7004(c)) which may have an 
interest therein with a copy of such communication and the 
acknowledgement thereof.
    (c) If a communication covering an infringement claim or notice 
which does not meet the requirements of 227.7004(a) is received from a 
contractor, the patent owner shall be advised in writing as covered by 
the instructions of 227.7004(d).



Sec. 227.7006  Investigation and administrative disposition of claims.

    An investigation and administrative determination (denial or 
settlement) of each claim shall be made in accordance with instructions 
and procedures established by each Department, subject to the following:
    (a) When the procurement responsibility for the alleged infringing 
item or process is assigned to a single Department or only one 
Department is the purchaser of the alleged infringing item or process, 
and the funds of that Department only are to be charged in the 
settlement of the claim, that Department shall have the sole 
responsibility for the investigation and administrative determination of 
the claim and for the execution of any agreement in settlement of the 
claim. Where, however, funds of another Department are to be charged, in 
whole or in part, the approval of such Department shall be obtained as 
required by 208.7002. Any agreement in settlement of the claim, approved 
pursuant to 208.7002 shall be executed by each of the Departments 
concerned.
    (b) When two or more Departments are the respective purchasers of 
alleged infringing items or processes and the funds of those Departments 
are to be charged in the settlement of the claim, the investigation and 
administrative determination shall be the responsibility of the 
Department having the predominant financial interest in the claim or of 
the Department or Departments as jointly agreed upon by the Departments 
concerned. The Department responsible for negotiation shall, throughout 
the negotiation, coordinate with the other Departments concerned and 
keep them advised of the status of the negotiation. Any agreement in the

[[Page 194]]

settlement of the claim shall be executed by each Department concerned.



Sec. 227.7007  Notification and disclosure to claimants.

    When a claim is denied, the Department responsible for the 
administrative determination of the claim shall so notify the claimant 
or his authorized representative and provide the claimant a reasonable 
rationale of the basis for denying the claim. Disclosure of information 
or the rationale referred to above shall be subject to applicable 
statutes, regulations, and directives pertaining to security, access to 
official records, and the rights of others.



Sec. 227.7008  Settlement of indemnified claims.

    Settlement of claims involving payment for past infringement shall 
not be made without the consent of, and equitable contribution by, each 
indemnifying contractor involved, unless such settlement is determined 
to be in the best interests of the Government and is coordinated with 
the Department of Justice with a view to preserving any rights of the 
Government against the contractors involved. If consent of and equitable 
contribution by the contractors are obtained, the settlement need not be 
coordinated with the Department of Justice.



Sec. 227.7009  Patent releases, license agreements, and assignments.

    This section contains clauses for use in patent release and 
settlement agreements, license agreements, and assignments, executed by 
the Government, under which the Government acquires rights. Minor 
modifications of language (e.g., pluralization of ``Secretary'' or 
``Contracting Officer'') in multi-departmental agreements may be made if 
necessary.



Sec. 227.7009-1  Required clauses.

    (a) Covenant Against Contingent Fees. Insert the clause at FAR 
52.203-5.
    (b) Gratuities. Insert the clause at FAR 52.203-3.
    (c) Assignment of Claims. Insert the clause at FAR 52.232-23.
    (d) Disputes. Pursuant to FAR 33.014, insert the clause at FAR 
52.233-1.
    (e) Non-Estoppel. Insert the clause at 252.227-7000.

[56 FR 36389, July 31, 1991, as amended at 61 FR 50454, Sept. 26, 1996]



Sec. 227.7009-2  Clauses to be used when applicable.

    (a) Release of past infringement. The clause at 252.227-7001, 
Release of Past Infringement, is an example which may be modified or 
omitted as appropriate for particular circumstances, but only upon the 
advice of cognizant patent or legal counsel. (See footnotes at end of 
clause.)
    (b) Readjustment of payments. The clause at 252.227-7002, 
Readjustment of Payments, shall be inserted in contracts providing for 
payment of a running royalty.
    (c) Termination. The clause at 252.227-7003, Termination, is an 
example for use in contracts providing for the payment of a running 
royalty. This clause may be modified or omitted as appropriate for 
particular circumstances, but only upon the advice of cognizant patent 
or legal counsel (see 227.7004(c)).



Sec. 227.7009-3  Additional clauses--contracts except running royalty 
          contracts.

    The following clauses are examples for use in patent release and 
settlement agreements, and license agreements not providing for payment 
by the Government of a running royalty.
    (a) License Grant. Insert the clause at 252.227-7004.
    (b) License Term. Insert one of the clauses at 252.227-7005 
Alternate I or Alternate II, as appropriate.



Sec. 227.7009-4  Additional clauses--contracts providing for payment of 
          a running royalty.

    The clauses set forth below are examples which may be used in patent 
release and settlement agreements, and license agreements, when it is 
desired to cover the subject matter thereof and the contract provides 
for payment of a running royalty.
    (a) License grant--running royalty. No Department shall be obligated 
to pay royalties unless the contract is signed on behalf of such 
Department. Accordingly, the License Grant clause at 252.227-7006 should 
be limited to the

[[Page 195]]

practice of the invention by or for the signatory Department or 
Departments.
    (b) License term--running royalty. The clause at 252.227-7007 is a 
sample form for expressing the license term.
    (c) Computation of royalties. The clause at 252.227-7008 providing 
for the computation of royalties, may be of varying scope depending upon 
the nature of the royalty bearing article, the volume of procurement, 
and the type of contract pursuant to which the procurement is to be 
accomplished.
    (d) Reporting and payment of royalties. (1) The contract should 
contain a provision specifying the office designated within the specific 
Department involved to make any necessary reports to the contractor of 
the extent of use of the licensed subject matter by the entire 
Department, and such office shall be charged with the responsibility of 
obtaining from all procuring offices of that Department the information 
necessary to make the required reports and corresponding vouchers 
necessary to make the required payments. The clause at 252.227-7009 is a 
sample for expressing reporting and payment of royalties requirements.
    (2) Where more than one Department or Government Agency is licensed 
and there is a ceiling on the royalties payable in any reporting period, 
the licensing Departments or Agencies shall coordinate with respect to 
the pro rata share of royalties to be paid by each.
    (e) License to other government agencies. When it is intended that a 
license on the same terms and conditions be available to other 
departments and agencies of the Government, the clause at 252.227-7010 
is an example which may be used.



Sec. 227.7010  Assignments.

    (a) The clause at 252.227-7011 is an example which may be used in 
contracts of assignment of patent rights to the Government.
    (b) To facilitate proof of contracts of assignments, the 
acknowledgement of the contractor should be executed before a notary 
public or other officer authorized to administer oaths (35 U.S.C. 261).



Sec. 227.7011  Procurement of rights in inventions, patents, and 
          copyrights.

    Even though no infringement has occurred or been alleged, it is the 
policy of the Department of Defense to procure rights under patents, 
patent applications, and copyrights whenever it is in the Government's 
interest to do so and the desired rights can be obtained at a fair 
price. The required and suggested clauses at 252.227-7004 and 252.227-
7010 shall be required and suggested clauses, respectively, for license 
agreements and assignments made under this paragraph. The instructions 
at 227.7009-3 and 227.7010 concerning the applicability and use of those 
clauses shall be followed insofar as they are pertinent.



Sec. 227.7012  Contract format.

    The format at 252.227-7012 appropriately modified where necessary, 
may be used for contracts of release, license, or assignment.



Sec. 227.7013  Recordation.

    Executive Order No. 9424 of 18 February 1944 requires all executive 
Departments and agencies of the Government to forward through 
appropriate channels to the Commissioner of Patents and Trademarks, for 
recording, all Government interests in patents or applications for 
patents.

                 Subpart 227.71_Rights in Technical Data

    Source: 60 FR 33471, June 28, 1995, unless otherwise noted.



Sec. 227.7100  Scope of subpart.

    This subpart--
    (a) Prescribes policies and procedures for the acquisition of 
technical data and the rights to use, modify, reproduce, release, 
perform, display, or disclose technical data. It implements requirements 
in the following laws and Executive Order:
    (1) 10 U.S.C. 2302(4).
    (2) 10 U.S.C. 2305 (subsection (d)(4)).
    (3) 10 U.S.C. 2320.
    (4) 10 U.S.C. 2321.
    (5) 10 U.S.C. 2325.
    (6) Pub. L. 103-355.

[[Page 196]]

    (7) Executive Order 12591 (Subsection 1(b)(6)).
    (b) Does not apply to computer software or technical data that is 
computer software documentation (see subpart 227.72).



Sec. 227.7101  Definitions.

    (a) As used in this subpart, unless otherwise specifically 
indicated, the terms ``offeror'' and ``contractor'' include an offeror's 
or contractor's subcontractors, suppliers, or potential subcontractors 
or suppliers at any tier.
    (b) Other terms used in this subpart are defined in the clause at 
252.227-7013, Rights in Technical Data--Noncommercial Items.

[56 FR 36389, July 31, 1991, as amended at 60 FR 61598, Nov. 30, 1995]



Sec. 227.7102  Commercial items, components, or processes.

    Section 2320(b)(1) of Title 10 U.S.C. establishes a presumption that 
commercial items are developed at private expense whether or not a 
contractor submits a justification in response to a challenge notice. 
Therefore, do not challenge a contractor's assertion that a commercial 
item, component, or process was developed at private expense unless the 
Government can demonstrate that it contributed to development of the 
item, component or process. Follow the procedures in 227.7103-13 and the 
clause at 252.227-7037, Validation of Restrictive Markings on Technical 
Data, when information provided by the Department of Defense 
demonstrates that an item, component, or process was not developed 
exclusively at private expense. However, when a challenge is warranted, 
a contractor's or subcontractor's failure to respond to the challenge 
notice cannot be the sole basis for issuing a final decision denying the 
validity of an asserted restriction.



Sec. 227.7102-1  Policy.

    (a) DoD shall acquire only the technical data customarily provided 
to the public with a commercial item or process, except technical data 
that--
    (1) Are form, fit, or function data;
    (2) Are required for repair or maintenance of commercial items or 
processes, or for the proper installation, operating, or handling of a 
commercial item, either as a stand alone unit or as a part of a military 
system, when such data are not customarily provided to commercial users 
or the data provided to commercial users is not sufficient for military 
purposes; or
    (3) Describe the modifications made at Government expense to a 
commercial item or process in order to meet the requirements of a 
Government solicitation.
    (b) To encourage offerors and contractors to offer or use commercial 
products to satisfy military requirements, offerors, and contractors 
shall not be required, except for the technical data described in 
paragraph (a) of this subsection, to--
    (1) Furnish technical information related to commercial items or 
processes that is not customarily provided to the public; or
    (2) Relinquish to, or otherwise provide, the Government rights to 
use, modify, reproduce, release, perform, display, or disclose technical 
data pertaining to commercial items or processes except for a transfer 
of rights mutually agreed upon.



Sec. 227.7102-2  Rights in technical data.

    (a) The clause at 252.227-7015, Technical Data--Commercial Items, 
provides the Government specific license rights in technical data 
pertaining to commercial items or processes. DoD may use, modify, 
reproduce, release, perform, display, or disclose data only within the 
Government. The data may not be used to manufacture additional 
quantities of the commercial items and, except for emergency repair or 
overhaul, may not be released or disclosed to, or used by, third parties 
without the contractor's written permission. Those restrictions do not 
apply to the technical data described in 227.7102-1(a).
    (b) If additional rights are needed, contracting activities must 
negotiate with the contractor to determine if there are acceptable terms 
for transferring such rights. The specific additional rights granted to 
the Government shall be enumerated in a license agreement made part of 
the contract.

[[Page 197]]



Sec. 227.7102-3  Contract clause.

    (a)(1) Except as provided in paragraph (b) of this subsection, use 
the clause at 252.227-7015, Technical Data--Commercial Items, in all 
solicitations and contracts when the contractor will be required to 
deliver technical data pertaining to commercial items, components, or 
processes. Do not require the contractor to include this clause in its 
subcontracts.
    (2) Use the clause at 252.227-7015 with its Alternate I in contracts 
for the development or delivery of a vessel design or any useful article 
embodying a vessel design.
    (b) Use the clause at 252.227-7013, Rights in Technical Data--
Noncommercial Items, in lieu of the clause at 252.227-7015 if the 
Government will pay any portion of the development costs. Do not require 
the contractor to include this clause in its subcontracts for commercial 
items or commercial components.
    (c) Use the clause at 252.227-7037, Validation of Restrictive 
Markings on Technical Data, in all solicitations and contracts for 
commercial items that include the clause at 252.227-7015 or the clause 
at 252.227-7013. Do not require the contractor to include this clause in 
its subcontracts for commercial items or commercial components.

[56 FR 36389, July 31, 1991, as amended at 60 FR 61598, Nov. 30, 1995; 
74 FR 61044, Nov. 23, 2009]



Sec. 227.7103  Noncommercial items or processes.



Sec. 227.7103-1  Policy.

    (a) DoD policy is to acquire only the technical data, and the rights 
in that data, necessary to satisfy agency needs.
    (b) Solicitations and contracts shall--
    (1) Specify the technical data to be delivered under a contract and 
delivery schedules for the data;
    (2) Establish or reference procedures for determining the 
acceptability of technical data;
    (3) Establish separate contract line items, to the extent 
practicable, for the technical data to be delivered under a contract and 
require offerors and contractors to price separately each deliverable 
data item; and
    (4) Require offerors to identify, to the extent practicable, 
technical data to be furnished with restrictions on the Government's 
rights and require contractors to identify technical data to be 
delivered with such restrictions prior to delivery.
    (c) Offerors shall not be required, either as a condition of being 
responsive to a solicitation or as a condition for award, to sell or 
otherwise relinquish to the Government any rights in technical data 
related to items, components or processes developed at private expense 
except for the data identified at 227.7103-5(a)(2) and (a)(4) through 
(9).
    (d) Offerors and contractors shall not be prohibited or discouraged 
from furnishing or offering to furnish items, components, or processes 
developed at private expense solely because the Government's rights to 
use, modify, release, reproduce, perform, display, or disclose technical 
data pertaining to those items may be restricted.
    (e) As provided in 10 U.S.C. 2305, solicitations for major systems 
development contracts shall not require offerors to submit proposals 
that would permit the Government to acquire competitively items 
identical to items developed at private expense unless a determination 
is made at a level above the contracting officer that--
    (1) The offeror will not be able to satisfy program schedule or 
delivery requirements; or
    (2) The offeror's proposal to meet mobilization requirements does 
not satisfy mobilization needs.
    (f) For acquisitions involving major weapon systems or subsystems of 
major weapon systems, the acquisition plan shall address acquisition 
strategies that provide for technical data and the associated license 
rights in accordance with 207.106(S-70).
    (g) The Government's rights in a vessel design, and in any useful 
article embodying a vessel design, must be consistent with the 
Government's rights in technical data pertaining to the design (10 
U.S.C. 7317; 17 U.S.C. 1301(a)(3)).

[60 FR 33471, June 28, 1995, as amended at 72 FR 51189, Sept. 6, 2007; 
74 FR 61044, Nov. 23, 2009]

[[Page 198]]



Sec. 227.7103-2  Acquisition of technical data.

    (a) Contracting officers shall work closely with data managers and 
requirements personnel to assure that data requirements included in 
solicitations are consistent with the policy expressed in 227.7103-1.
    (b)(1) Data managers or other requirements personnel are responsible 
for identifying the Government's minimum needs for technical data. Data 
needs must be established giving consideration to the contractor's 
economic interests in data pertaining to items, components, or processes 
that have been developed at private expense; the Government's costs to 
acquire, maintain, store, retrieve, and protect the data; reprocurement 
needs; repair, maintenance and overhaul philosophies; spare and repair 
part considerations; and whether procurement of the items, components, 
or processes can be accomplished on a form, fit, or function basis. When 
it is anticipated that the Government will obtain unlimited or 
government purpose rights in technical data that will be required for 
competitive spare or repair parts procurements, such data should be 
identified as deliverable data items. Reprocurement needs may not be a 
sufficient reason to acquire detailed manufacturing or process data when 
items or components can be acquired using performance specifications, 
form, fit and function data, or when there are a sufficient number of 
alternate sources which can reasonably be expected to provide such items 
on a performance specification or form, fit, or function basis.
    (2) When reviewing offers received in response to a solicitation or 
other request for data, data managers must balance the original 
assessment of the Government's data needs with data prices contained in 
the offer.
    (c) Contracting officers are responsible for ensuring that, wherever 
practicable, solicitations and contracts--
    (1) Identify the type and quantity of the technical data to be 
delivered under the contract and the format and media in which the data 
will be delivered;
    (2) Establish each deliverable data item as a separate contract line 
item (this requirement may be satisfied by listing each deliverable data 
item on an exhibit to the contract);
    (3) Identify the prices established for each deliverable data item 
under a fixed-price type contract;
    (4) Include delivery schedules and acceptance criteria for each 
deliverable data item; and
    (5) Specifically identify the place of delivery for each deliverable 
item of technical data.



Sec. 227.7103-3  Early identification of technical data to be furnished 
          
          to the Government with restrictions on use, reproduction or 
          disclosure.

    (a) 10 U.S.C. 2320 requires, to the maximum extent practicable, an 
identification prior to delivery of any technical data to be delivered 
to the Government with restrictions on use.
    (b) Use the provision at 252.227-7017, Identification and Assertion 
of Use, Release, or Disclosure Restrictions, in all solicitations that 
include the clause at 252.227-7013, Rights in Technical Data--
Noncommercial Items. The provision requires offerors to identify any 
technical data for which restrictions, other than copyright, on use, 
release, or disclosure are asserted and to attach the identification and 
assertions to the offer.
    (c) Subsequent to contract award, the clause at 252.277-7013 permits 
a contractor, under certain conditions, to make additional assertions of 
use, release, or disclosure restrictions. The prescription for the use 
of that clause and its alternate is at 227.7103-6 (a) and (b).



Sec. 227.7103-4  License rights.

    (a) Grant of license. The Government obtains rights in technical 
data, including a copyright license, under and irrevocable license 
granted or obtained for the Government by the contractor. The contractor 
or licensor retains all rights in the data not granted to the 
Government. For technical data that pertain to items, components, or 
processes, the scope of the license is generally determined by the 
source of funds used to develop the item, component, or process. When 
the technical

[[Page 199]]

data do not pertain to items, components, or processes, the scope of the 
license is determined by the source of funds used to create the data.
    (1) Techical data pertaining to items, components, or processes. 
Contractors or licensors may, with some exceptions (see 227.7103-5(a)(2) 
and (a)(4) through (9)), restrict the Government's rights to use, 
modify, release, reproduce, perform, display or disclose technical data 
pertaining to items, components, or processes developed exclusively at 
private expense (limited rights). They may not restrict the Government's 
rights in items, components, or processes developed exclusively at 
Government expense (unlimited rights) without the Government's approval. 
When an item, component, or process is developed with mixed funding, the 
Government may use, modify, release, reproduce, perform, display or 
disclose the data pertaining to such items, components, or processes 
within the Government without restriction but may release or disclose 
the data outside the Government only for government purposes (government 
purpose rights).
    (2) Technical data that do not pertain to items, components, or 
processes. Technical data may be created during the performance of a 
contract for a conceptual design or similar effort that does not require 
the development, manufacture, construction, or production of items, 
components or processes. The Government generally obtains unlimited 
rights in such data when the data were created exclusively with 
Government funds, government purpose rights when the data were created 
with mixed funding, and limited rights when the data were created 
exclusively at private expense.
    (b) Source of funds determination. The determination of the source 
of development funds for technical data pertaining to items, components, 
or processes should be made at any practical sub-item or subcomponent 
level or for any segregable portion of a process. Contractors may assert 
limited rights in a segregable sub-item, sub-component, or portion of a 
process which otherwise qualifies for limited rights under the clause at 
252.227-7013, Rights in Technical Data--Noncommercial Items.



Sec. 227.7103-5  Government rights.

    The standard license rights that a licensor grants to the Government 
are unlimited rights, government purpose rights, or limited rights. 
Those rights are defined in the clause at 252.227-7013, Rights in 
Technical Data--Noncommercial Items. In unusual situations, the 
standards rights may not satisfy the Government's needs or the 
Government may be willing to accept lesser rights in data in return for 
other consideration. In those cases, a special license may be 
negotiated. However, the licensor is not obligated to provide the 
Government greater rights and the contracting officer is not required to 
accept lesser rights than the rights provided in the standard grant of 
license. The situations under which a particular grant of license 
applies are enumerated in paragraphs (a) through (d) of this subsection.
    (a) Unlimited rights. The Government obtains unlimited rights in 
technical data that are--
    (1) Data pertaining to an item, component, or process which has been 
or will be developed exclusively with Government funds;
    (2) Studies, analyses, test data, or similar data produced in the 
performance of a contract when the study, analysis, test, or similar 
work was specified as an element of performance;
    (3) Created exclusively with Government funds in the performance of 
a contract that does not require the development, manufacture, 
construction, or production of items, components, or processes;
    (4) Form, fit, and function data;
    (5) Necessary for installation, operation, maintenance, or training 
purposes (other than detailed manufacturing or process data);
    (6) Corrections or changes to technical data furnished to the 
contractor by the Government;
    (7) Publicly available or have been released or disclosed by the 
contractor or subcontractor without restrictions on further use, release 
or disclosure other than a release or disclosure resulting from the 
sale, transfer, or other assignment of interest in the software to 
another party or the sale or transfer of some or all of a business 
entity or its assets to another party;

[[Page 200]]

    (8) Data in which the Government has obtained unlimited rights under 
another Government contract or as a result of negotiations; or
    (9) Data furnished to the Government, under a Government contract or 
subcontract thereunder, with--
    (i) Government purpose license rights or limited rights and the 
restrictive condition(s) has/have expired; or
    (ii) Government purpose rights and the contractor's exclusive right 
to use such data for commercial purposes has expired.
    (b) Government purpose rights. (1) The Government obtains government 
purpose rights in technical data--
    (i) That pertain to items, components, or processes developed with 
mixed funding except when the Government is entitled to unlimited rights 
as provided in paragraphs (a)(2) and (a)(4) through (9) of this 
subsection; or
    (ii) Created with mixed funding in the performance of a contract 
that does not require the development, manufacture, construction, or 
production of items, components, or processes.
    (2) The period during which government purpose rights are effective 
is negotiable. The clause at 252.227-7013 provides a nominal five-year 
period. Either party may request a different period. Changes to the 
government purpose rights period may be made at any time prior to 
delivery of the technical data without consideration from either party. 
Longer periods should be negotiated when a five-year period does not 
provide sufficient time to apply the data for commercial purposes or 
when necessary to recognize subcontractors' interests in the data.
    (3) The government purpose rights period commences upon execution of 
the contract, subcontract, letter contract (or similar contractual 
instrument), contract modification, or option exercise that required the 
development. Upon expiration of the Government rights period, the 
Government has unlimited rights in the data including the right to 
authorize others to use the data for commercial purposes.
    (4) During the government purpose rights period, the government may 
not use, or authorize other persons to use, technical data marked with 
government purpose rights legends for commercial purposes. The 
Government shall not release or disclose data in which it has government 
purpose rights to any person, or authorize others to do so, unless--
    (i) Prior to release or disclosure, the intended recipient is 
subject to the use and non-disclosure agreement at 227.7103-7; or
    (ii) The intended recipient is a Government contractor receiving 
access to the data for performance of a Government contract that 
contains the clause at 252.227-7025, Limitations on the Use or 
Disclosure of Government-Furnished Information Marked with Restrictive 
Legends.
    (5) When technical data marked with government purpose rights 
legends will be released or disclosed to a Government contractor 
performing a contract that does not include the clause at 252-227-7025, 
the contract may be modified, prior to release or disclosure, to include 
that clause in lieu of requiring the contractor to complete a use and 
non-disclosure agreement.
    (6) Contracting activities shall establish procedures to assure that 
technical data marked with government purpose rights legends are 
released or disclosed, including a release or disclosure through a 
Government solicitation, only to persons subject to the use and non-
disclosure restrictions. Public announcements in the Commerce Business 
Daily or other publications must provide notice of the use and non-
disclosure requirements. Class use and non-disclosure agreements (e.g., 
agreements covering all solicitations received by the XYZ company within 
a reasonable period) are authorized and may be obtained at any time 
prior to release or disclosure of the government purpose rights data. 
Documents transmitting government purpose rights data to persons under 
class agreements shall identify the technical data subject to government 
purpose rights and the class agreement under which such data are 
provided.
    (c) Limited rights. (1) The Government obtains limited rights in 
technical data--
    (i) That pertain to items, components, or processes developed 
exclusively at private expense except when

[[Page 201]]

the Government is entitled to unlimited rights as provided in paragraphs 
(a)(2) and (a)(4) through (9) of this subsection; or
    (ii) Created exclusively at private expense in the performance of a 
contract that does not require the development, manufacture, 
construction, or production of items, components, or processes.
    (2) Data in which the Government has limited rights may not be used, 
released, or disclosed outside the Government without the permission of 
the contractor asserting the restriction except for a use, release or 
disclosure that is--
    (i) Necessary for emergency repair and overhaul; or
    (ii) To a foreign government, other than detailed manufacturing or 
process data, when use, release, or disclosure is in the interest of the 
United States and is required for evaluation or informational purposes.
    (3) The person asserting limited rights must be notified of the 
Government's intent to release, disclose, or authorize others to use 
such data prior to release or disclosure of the data except notification 
of an intended release, disclosure, or use for emergency repair or 
overhaul which shall be made as soon as practicable.
    (4) When the person asserting limited rights permits the Government 
to release, disclose, or have others use the data subject to 
restrictions on further use, release, or disclosure, or for a release 
under paragraph (c)(2)(i) or (ii) of this subsection, the intended 
recipient must complete the use and non-disclosure agreement at 
227.7103-7 prior to release or disclosure of the limited rights data.
    (d) Specifically negotiated license rights. (1) Negotiate specific 
licenses when the parties agree to modify the standard license rights 
granted to the government or when the government wants to obtain rights 
in data in which it does not have rights. When negotiating to obtain, 
relinquish, or increase the Government's rights in technical data, 
consider the acquisition strategy for the item, component, or process, 
including logistics support and other factors which may have relevance 
for a particular procurement. The Government may accept lesser rights 
when it has unlimited or government purpose rights in data but may not 
accept less than limited rights in such data. The negotiated license 
rights must stipulate what rights the Government has to release or 
disclose the data to other persons or to authorize others to use the 
data. Identify all negotiated rights in a license agreement made part of 
the contract.
    (2) When the Government needs additional rights in data acquired 
with government purpose or limited rights, the contracting officer must 
negotiate with the contractor to determine whether there are acceptable 
terms for transferring such rights. Generally, such negotiations should 
be conducted only when there is a need to disclose the data outside the 
Government or if the additional rights are required for competitive 
reprocurement and the anticipated savings expected to be obtained 
through competition are estimated to exceed the acquisition cost of the 
additional rights. Prior to negotiating for additional rights in limited 
rights data, consider alternatives such as--
    (i) Using performance specifications and form, fit, and function 
data to acquire or develop functionally equivalent items, components, or 
processes;
    (ii) Obtaining a contractor's contractual commitment to qualify 
additional sources and maintain adequate competition among the sources; 
or
    (iii) Reverse engineering, or providing items from Government 
inventories to contractors who request the items to facilitate the 
development of equivalent items through reverse engineering.



Sec. 227.7103-6  Contract clauses.

    (a) Use the clause at 252.227-7013, Rights in Technical Data--
Noncommercial Items, in solicitations and contracts when the successful 
offeror(s) will be required to deliver technical data to the Government. 
Do not use the clause when the only deliverable items are computer 
software or computer software documentation (see 227.72), commercial 
items (see 227.7102-3), existing works (see 227.7105), special

[[Page 202]]

works (see 227.7106), or when contracting under the Small Business 
Innovation Research Program (see 227.7104). Except as provided in 
227.7107-2, do not use the clause in architect-engineer and construction 
contracts.
    (b)(1) Use the clause at 252.227-7013 with its Alternate I in 
research contracts when the contracting officer determines, in 
consultation with counsel, that public dissemination by the contractor 
would be--
    (i) In the interest of the government; and
    (ii) Facilitated by the Government relinquishing its right to 
publish the work for sale, or to have others publish the work for sale 
on behalf of the Government.
    (2) Use the clause at 252.227-7013 with its Alternate II in 
contracts for the development or delivery of a vessel design or any 
useful article embodying a vessel design.
    (c) Use the clause at 252.227-7025, Limitations on the Use or 
Disclosure of Government Furnished Information Marked with Restrictive 
Legends, in solicitations and contracts when it is anticipated that the 
Government will provide the contractor, for performance of its contract, 
technical data marked with another contractor's restrictive legend(s).
    (d) Use the provision at 252.227-7028, Technical Data or Computer 
Software Previously Delivered to the Government, in solicitations when 
the resulting contract will require the contractor to deliver technical 
data. The provision requires offerors to identify any technical data 
specified in the solicitations as deliverable data items that are the 
same or substantially the same as data items the offeror has delivered 
or is obligated to deliver, either as a contractor or subcontractor, 
under any other federal agency contract.
    (e) Use the following clauses in solicitations and contracts that 
include the clause at 252.227-7013:
    (1) 252.227-7016, Rights in Bid or Proposal Information;
    (2) 252.227-7030, Technical Data--Withholding of Payment; and
    (3) 252.227-7037, Validation of Restrictive Markings on Technical 
Data (paragraph (e) of the clause contains information that must be 
included in a challenge).

[60 FR 33471, June 28, 1995; 60 FR 41157, Aug. 11, 1995; 60 FR 61598, 
Nov. 30, 1995; 62 FR 2613, Jan. 17, 1997; 69 FR 31911, June 8, 2004; 74 
FR 61044, Nov. 23, 2009]



Sec. 227.7103-7  Use and non-disclosure agreement.

    (a) Except as provided in paragraph (b) of this subsection, 
technical data or computer software delivered to the Government with 
restrictions on use, modification, reproduction, release, performance, 
display, or disclosure may not be provided to third parties unless the 
intended recipient completes and signs the use and non-disclosure 
agreement at paragraph (c) of this subsection prior to release, or 
disclosure of the data.
    (1) The specific conditions under which an intended recipient will 
be authorized to use, modify, reproduce, release, perform, display, or 
disclose technical data subject to limited rights or computer software 
subject to restricted rights must be stipulated in an attachment to the 
use and non-disclosure agreement.
    (2) For an intended release, disclosure, or authorized use of 
technical data or computer software subject to special license rights, 
modify paragraph (1)(d) of the use and non-disclosure agreement to enter 
the conditions, consistent with the license requirements, governing the 
recipient's obligations regarding use, modification, reproduction, 
release, performance, display or disclosure of the data or software.
    (b) The requirement for use and non-disclosure agreements does not 
apply to Government contractors which require access to a third party's 
data or software for the performance of a Government contract that 
contains the clause at 252.227-7025, Limitations on the Use or 
Disclosure of Government-Furnished Information Marked with Restrictive 
Legends.
    (c) The prescribed use and non-disclosure agreement is:

                    Use and Non-Disclosure Agreement

    The undersigned, ---------------- (Insert Name) ----------------, an 
authorized representative of the ---------------- (Insert Company Name) 
----------------, (which is

[[Page 203]]

hereinafter referred to as the ``Recipient'') requests the Government to 
provide the Recipient with technical data or computer software 
(hereinafter referred to as ``Data'') in which the Government's use, 
modification, reproduction, release, performance, display or disclosure 
rights are restricted. Those Data are identified in an attachment to 
this Agreement. In consideration for receiving such Data, the Recipient 
agrees to use the Data strictly in accordance with this Agreement:
    (1) The Recipient shall--
    (a) Use, modify, reproduce, release, perform, display, or disclose 
Data marked with government purpose rights or SBIR data rights legends 
only for government purposes and shall not do so for any commercial 
purpose. The Recipient shall not release, perform, display, or disclose 
these Data, without the express written permission of the contractor 
whose name appears in the restrictive legend (the ``Contractor''), to 
any person other than its subcontractors or suppliers, or prospective 
subcontractors or suppliers, who require these Data to submit offers 
for, or perform, contracts with the Recipient. The Recipient shall 
require its subcontractors or suppliers, or prospective subcontractors 
or suppliers, to sign a use and non-disclosure agreement prior to 
disclosing or releasing these Data to such persons. Such agreement must 
be consistent with the terms of this agreement.
    (b) Use, modify, reproduce, release, perform, display, or disclose 
technical data marked with limited rights legends only as specified in 
the attachment to this Agreement. Release, performance, display, or 
disclosure to other persons is not authorized unless specified in the 
attachment to this Agreement or expressly permitted in writing by the 
Contractor. The Recipient shall promptly notify the Contractor of the 
execution of this Agreement and identify the Contractor's Data that has 
been or will be provided to the Recipient, the date and place the Data 
were or will be received, and the name and address of the Government 
office that has provided or will provide the Data.
    (c) Use computer software marked with restricted rights legends only 
in performance of Contract Number ---------------- (insert contract 
number(s)) ----------------. The recipient shall not, for example, 
enhance, decompile, disassemble, or reverse engineer the software; time 
share, or use a computer program with more than one computer at a time. 
The recipient may not release, perform, display, or disclose such 
software to others unless expressly permitted in writing by the licensor 
whose name appears in the restrictive legend. The Recipient shall 
promptly notify the software licensor of the execution of this Agreement 
and identify the software that has been or will be provided to the 
Recipient, the date and place the software were or will be received, and 
the name and address of the Government office that has provided or will 
provide the software.
    (d) Use, modify, reproduce, release, perform, display, or disclose 
Data marked with special license rights legends (To be completed by the 
contracting officer. See 227.7103-7(a)(2). Omit if none of the Data 
requested is marked with special license rights legends).
    (2) The Recipient agrees to adopt or establish operating procedures 
and physical security measures designed to protect these Data from 
inadvertent release or disclosure to unauthorized third parties.
    (3) The Recipient agrees to accept these Data ``as is'' without any 
Government representation as to suitability for intended use or warranty 
whatsoever. This disclaimer does not affect any obligation the 
Government may have regarding Data specified in a contract for the 
performance of that contract.
    (4) The Recipient may enter into any agreement directly with the 
Contractor with respect to the use, modification, reproduction, release, 
performance, display, or disclosure of these Data.
    (5) The Recipient agrees to indemnify and hold harmless the 
Government, its agents, and employees from every claim or liability, 
including attorneys fees, court costs, and expenses arising out of, or 
in any way related to, the misuse or unauthorized modification, 
reproduction, release, performance, display, or disclosure of Data 
received from the Government with restrictive legends by the Recipient 
or any person to whom the Recipient has released or disclosed the Data.
    (6) The Recipient is executing this Agreement for the benefit of the 
Contractor. The Contractor is a third party beneficiary of this 
Agreement who, in addition to any other rights it may have, is intended 
to have the rights of direct action against the Recipient or any other 
person to whom the Recipient has released or disclosed the Data, to seek 
damages from any breach of this Agreement or to otherwise enforce this 
Agreement.
    (7) The Recipient agrees to destroy these Data, and all copies of 
the Data in its possession, no later than 30 days after the date shown 
in paragraph (8) of this Agreement, to have all persons to whom it 
released the Data do so by that date, and to notify the Contractor that 
the Data have been destroyed.
    (8) This Agreement shall be effective for the period commencing with 
the Recipient's execution of this Agreement and ending upon -------- 
(Insert Date) --------. The obligations imposed by this Agreement shall 
survive the expiration or termination of the Agreement.
Recipient's Business Name_______________________________________________
By______________________________________________________________________

[[Page 204]]

Authorized Representative

________________________________________________________________________
Date

Representative's Typed Name_____________________________________________
and Title_______________________________________________________________

                (End of use and non-disclosure agreement)



Sec. 227.7103-8  Deferred delivery and deferred ordering of technical 
          data.

    (a) Deferred delivery. Use the clause at 252.227-7026, Deferred 
Delivery of Technical Data or Computer Software, when it is in the 
Government's interests to defer the delivery of technical data. The 
clause permits the contracting officer to require the delivery of 
technical data identified as ``deferred delivery'' data at any time 
until two years after acceptance by the Government of all items (other 
than technical data or computer software) under the contract or contract 
termination, whichever is later. The obligation of subcontractors or 
suppliers to deliver such technical data expires two years after the 
date the prime contractor accepts the last item from the subcontractor 
or supplier for use in the performance of the contract. The contract 
must specify which technical data is subject to deferred delivery. The 
contracting officer shall notify the contractor sufficiently in advance 
of the desired delivery date for such data to permit timely delivery.
    (b) Deferred ordering. Use the clause at 252.227-7027, Deferred 
Ordering of Technical Data or Computer Software, when a firm requirement 
for a particular data item(s) has not been established prior to contract 
award but there is a potential need for the data. Under this clause, the 
contracting officer may order any data that has been generated in the 
performance of the contract or any subcontract thereunder at any time 
until three years after acceptance of all items (other than technical 
data or computer software) under the contract or contract termination, 
whichever is later. The obligation of subcontractors to deliver such 
data expires three years after the date the contractor accepts the last 
item under the subcontract. When the data are ordered, the delivery 
dates shall be negotiated and the contractor compensated only for 
converting the data into the prescribed form, reproduction costs, and 
delivery costs.



Sec. 227.7103-9  Copyright.

    (a) Copyright license. (1) The clause at 252.227-7013, Rights in 
Technical Data--Noncommercial Items, requires a contractor to grant or 
obtain for the Government license rights which permit the Government to 
reproduce data, distribute copies of the data, publicly perform or 
display the data or, through the right to modify data, prepare 
derivative works. The extent to which the Government, and others acting 
on its behalf, may exercise these rights varies for each of the standard 
data rights licenses obtained under the clause. When non-standard 
license rights in technical data will be negotiated, negotiate the 
extent of the copyright license concurrent with negotiations for the 
data rights license. Do not negotiate a copyright license that provides 
less rights than the standard limited rights license in technical data.
    (2) The clause at 252.227-7013 does not permit a contractor to 
incorporate a third party's copyrighted data into a deliverable data 
item unless the contractor has obtained an appropriate license for the 
Government and, when applicable, others acting on the Government's 
behalf, or has obtained the contracting officer's written approval to do 
so. Grant approval to use third party copyrighted data in which the 
Government will not receive a copyright license only when the 
Government's requirements cannot be satisfied without the third party 
material or when the use of the third party material will result in cost 
savings to the Government which outweigh the lack of a copyright 
license.
    (b) Copyright considerations--acquisition of existing and special 
works. See 227.7105 or 227.7106 for copyright considerations when 
acquiring existing or special works.



Sec. 227.7103-10  Contractor identification and marking of technical 
          data to be furnished with restrictive markings.

    (a) Identification requirements. (1) The solicitation provision at 
252.227-7017,

[[Page 205]]

Identification and Assertion of Use, Release, or Disclosure 
Restrictions, requires offerors to identify to the contracting officer, 
prior to contract award, any technical data that the offeror asserts 
should be provided to the Government with restrictions on use, 
modification, reproduction, release or disclosure. This requirement does 
not apply to restrictions based solely on copyright. The notification 
and identification must be submitted as an attachment to the offer. If 
an offeror fails to submit the attachment or fails to complete the 
attachment in accordance with the requirements of the solicitation 
provision, such failure shall constitute a minor informality. Provide 
offerors an opportunity to remedy a minor informality in accordance with 
the procedures at FAR 14.405 or 15.607. An offeror's failure to correct 
the informality within the time prescribed by the contracting officer 
shall render the offer ineligible for award.
    (2) The procedures for correcting minor informalities shall not be 
used to obtain information regarding asserted restrictions or an 
offeror's suggested asserted rights category. Questions regarding the 
justification for an asserted restriction or asserted rights category 
must be pursued in accordance with the procedures at 227.7103-13.
    (3) The restrictions asserted by a successful offeror shall be 
attached to its contract unless, in accordance with the procedures at 
227.7103-13, the parties have agreed that an asserted restriction is not 
justified. The contract attachment shall provide the same information 
regarding identification of the technical data, the asserted rights 
category, the basis for the assertion, and the name of the person 
asserting the restrictions as required by paragraph (d) of the 
solicitation provision at 252.227-7017. Subsequent to contract award, 
the clause at 252.227-7013, Rights in Technical Data--Noncommercial 
Items, permits the contractor to make additional assertions under 
certain conditions. The additional assertions must be made in accordance 
with the procedures and in the format prescribed by that clause.
    (4) Neither the pre- or post-award assertions made by the 
contractor, nor the fact that certain assertions are identified in the 
attachment to the contract, determine the respective rights of the 
parties. As provided at 227.7103-13, the Government has the right to 
review, verify, challenge and validate restrictive markings.
    (5) Information provided by offerors in response to the solicitation 
provision may be used in the source selection process to evaluate the 
impact on evaluation factors that may be created by restrictions on the 
Government's ability to use or disclose technical data. However, 
offerors shall not be prohibited from offering products for which the 
offeror is entitled to provide the Government limited rights in the 
technical data pertaining to such products and offerors shall not be 
required, either as a condition of being responsive to a solicitation or 
as a condition for award, to sell or otherwise relinquish any greater 
rights in technical data when the offeror is entitled to provide the 
technical data with limited rights.
    (b) Contractor marking requirements. The clause at 252.227-7013, 
Rights in Technical Data--Noncommercial Items--
    (1) Requires a contractor that desires to restrict the Government's 
rights in technical data to place restrictive markings on the data, 
provides instructions for the placement of the restrictive markings, and 
authorizes the use of certain restrictive markings; and
    (2) Requires a contractor to deliver, furnish, or otherwise provide 
to the Government any technical data in which the Government has 
previously obtained rights with the Government's pre-existing rights in 
that data unless the parties have agreed otherwise or restrictions on 
the Government's rights to use, modify, reproduce, release, perform, 
display, or disclose the data have expired. When restrictions are still 
applicable, the contractor is permitted to mark the data with the 
appropriate restrictive legend for which the data qualified.
    (c) Unmarked technical data. (1) Technical data delivered or 
otherwise provided under a contract without restrictive markings shall 
be presumed to have been delivered with unlimited rights and may be 
released or disclosed without restriction. To the extent

[[Page 206]]

practicable, if a contractor has requested permission (see paragraph 
(c)(2) of this subsection) to correct an inadvertent omission of 
markings, do not release or disclose the technical data pending 
evaluation of the request.
    (2) A contractor may request permission to have appropriate legends 
placed on unmarked technical data at its expense. The request must be 
received by the contracting officer within six months following the 
furnishing or delivery of such data, or any extension of that time 
approved by the contracting officer. The person making the request must:
    (i) Identify the technical data that should have been marked;
    (ii) Demonstrate that the omission of the marking was inadvertent, 
the proposed marking is justified and conforms with the requirements for 
the marking of technical data contained in the clause at 252.227-7013; 
and
    (iii) Acknowledge, in writing, that the Government has no liability 
with respect to any disclosure, reproduction, or use of the technical 
data made prior to the addition of the marking or resulting from the 
omission of the marking.
    (3) Contracting officers should grant permission to mark only if the 
technical data were not distributed outside the Government or were 
distributed outside the Government with restrictions on further use or 
disclosure.



Sec. 227.7103-11  Contractor procedures and records.

    (a) The clause at 252.227-7013, Rights in Technical Data--
Noncommercial Items, requires a contractor, and its subcontractors or 
suppliers that will deliver technical data with other than unlimited 
rights, to establish and follow written procedures to assure that 
restrictive markings are used only when authorized and to maintain 
records to justify the validity of asserted restrictions on delivered 
data.
    (b) The clause at 252.227-7037, Validation of Restrictive Markings 
on Technical Data requires contractors and their subcontractors at any 
tier to maintain records sufficient to justify the validity of 
restrictive markings on technical data delivered or to be delivered 
under a Government contract.



Sec. 227.7103-12  Government right to establish conformity of markings.

    (a) Nonconforming markings. (1) Authorized markings are identified 
in the clause at 252.227-7013, Rights in Technical Data--Noncommercial 
Items. All other markings are nonconforming markings. An authorized 
marking that is not in the form, or differs in substance, from the 
marking requirements in the clause at 252.227-7013 is also a 
nonconforming marking.
    (2) The correction of nonconforming markings on technical data is 
not subject to 252.227-7037, Validation of Restrictive Markings on 
Technical Data. To the extent practicable, the contracting officer 
should return technical data bearing nonconforming markings to the 
person who has placed the nonconforming markings on such data to provide 
that person an opportunity to correct or strike the nonconforming 
marking at that person's expense. If that person fails to correct the 
nonconformity and return the corrected data within 60 days following the 
person's receipt of the data, the contracting officer may correct or 
strike the nonconformity at that person's expense. When it is 
impracticable to return technical data for correction, contracting 
officers may unilaterally correct any nonconforming markings at 
Government expense. Prior to correction, the data may be used in 
accordance with the proper restrictive marking.
    (b) Unjustified markings. (1) An unjustified marking is an 
authorized marking that does not depict accurately restrictions 
applicable to the Government's use, modification, reproduction, release, 
performance, display, or disclosure of the marked technical data. For 
example, a limited rights legend placed on technical data pertaining to 
items, components, or processes that were developed under a Government 
contract either exclusively at Government expense or with mixed funding 
(situations under which the Government obtains unlimited or government 
purpose rights) is an unjustified marking.
    (2) Contracting officers have the right to review and challenge the 
validity of unjustified markings. However, at any time during 
performance of a

[[Page 207]]

contract and notwithstanding existence of a challenge, the contracting 
officer and the person who has asserted a restrictive marking may agree 
that the restrictive marking is not justified. Upon such agreement, the 
contracting officer may, at his or her election, either--
    (i) Strike or correct the unjustified marking at that person's 
expense; or
    (ii) Return the technical data to the person asserting the 
restriction for correction at that person's expense. If the data are 
returned and that person fails to correct or strike the unjustified 
restriction and return the corrected data to the contracting officer 
within 60 days following receipt of the data, the unjustified marking 
shall be corrected or stricken at that person's expense.



Sec. 227.7103-13  Government right to review, verify, challenge and 
          validate asserted restrictions.

    (a) General. An offeror's assertion(s) of restrictions on the 
Government's rights to use, modify, reproduce, release, or disclose 
technical data do not, by themselves, determine the extent of the 
Government's rights in the technical data. Under 10 U.S.C. 2321, the 
Government has the right to challenge asserted restrictions when there 
are reasonable grounds to question the validity of the assertion and 
continued adherence to the assertion would make it impractical to later 
procure competitively the item to which the data pertain.
    (b) Pre-award considerations. The challenge procedures required by 
10 U.S.C. 2321 could significantly delay awards under competitive 
procurements. Therefore, avoid challenging asserted restrictions prior 
to a competitive contract award unless resolution of the assertion is 
essential for successful completion of the procurement.
    (c) Challenge and validation. Contracting officers must have 
reasonable grounds to challenge the current validity of an asserted 
restriction. Before issuing a challenge to an asserted restriction, 
carefully consider all available information pertaining to the 
assertion. All challenges must be made in accordance with the provisions 
of the clause at 252.227-7037, Validation of Restrictive Markings on 
Technical Data.
    (1) Challenge period. Asserted restrictions should be reviewed 
before acceptance of technical data deliverable under the contract. 
Assertions must be challenged within three years after final payment 
under the contract or three years after delivery of the data, whichever 
is later. However, restrictive markings may be challenged at any time if 
the technical data--
    (i) Are publicly available without restrictions;
    (ii) Have been provided to the United States without restriction; or
    (iii) Have been otherwise made available without restriction other 
than a release or disclosure resulting from the sale, transfer, or other 
assignment of interest in the technical data to another party or the 
sale or transfer of some or all of a business entity or its assets to 
another party.
    (2) Pre-challenge requests for information. (i) After consideration 
of the situation described in paragraph (c)(3) of this subsection, 
contracting officers may request the person asserting a restriction to 
furnish a written explanation of the facts and supporting documentation 
for the assertion in sufficient detail to enable the contracting officer 
to ascertain the basis of the restrictive markings. Additional 
supporting documentation may be requested when the explanation provided 
by the person making the assertion does not, in the contracting 
officer's opinion, establish the validity of the assertion.
    (ii) If the person asserting the restriction fails to respond to the 
contracting officer's request for information or additional supporting 
documentation, or if the information submitted or any other available 
information pertaining to the validity of a restrictive marking does not 
justify the asserted restriction, a challenge should be considered.
    (3)Transacting matters directly with subcontracts. The clause at 
252.227-7037 obtains the contractor's agreement that the Government may 
transact matters under the clause directly with a subcontractor, at any 
tier, without creating or implying privity of contract. Contracting 
officers should permit a subcontractor or supplier to

[[Page 208]]

transact challenge and validation matters directly with the Government 
when--
    (i) A subcontractor's or supplier's business interests in its 
technical data would be compromised if the data were disclosed to a 
higher tier contractor;
    (ii) There is reason to believe that the contractor will not respond 
in a timely manner to a challenge and an untimely response would 
jeopardize a subcontractor's or suppliers right to assert restrictions; 
or
    (iii) Requested to do so by a subcontractor or supplier.
    (4) Challenge notice. Do not issue a challenge notice unless there 
are reasonable grounds to question the validity of an assertion. 
Assertions may be challenged whether or not supporting documentation was 
requested from the person asserting the restriction. Challenge notices 
must be in writing and issued to the contractor or, after consideration 
of the situations described in paragraph (c)(3) of this subsection, the 
person asserting the restriction. The challenge notice must include the 
information in paragraph (e) of the clause at 252.227-7037.
    (5) Extension of response time. The contracting officer, at his or 
her discretion, may extend the time for response contained in a 
challenge notice, as appropriate, if the contractor submits a timely 
written request showing the need for additional time to prepare a 
response.
    (6) Contracting officer's final decision. Contracting officers must 
issue a final decision for each challenged assertion, whether or not the 
assertion has been justified.
    (i) A contracting officer's final decision that an assertion is not 
justified must be issued a soon as practicable following the failure of 
the person asserting the restriction to respond to the contracting 
officer's challenge within 60 days, or any extension to that time 
granted by the contracting officer.
    (ii) A contracting officer who, following a challenge and response 
by the person asserting the restriction, determines that an asserted 
restriction is justified, shall issue a final decision sustaining the 
validity of the asserted restriction. If the asserted restriction was 
made subsequent to submission of the contractor's offer, add the 
asserted restriction to the contract attachment.
    (iii) A contracting officer who determine that the validity of an 
asserted restriction has not been justified shall issue a contracting 
officer's final decision within the time frames prescribed in 252.227-
7037. As provided in paragraph (g) of that clause, the Government is 
obligated to continue to respect the asserted restrictions through final 
disposition of any appeal unless the agency head notifies the person 
asserting the restriction that urgent or compelling circumstances do not 
permit the Government to continue to respect the asserted restriction.
    (7) Multiple challenges to an asserted restriction. When more than 
one contracting officer challenges an asserted restriction, the 
contracting officer who made the earliest challenge is responsible for 
coordinating the Government challenges. That contracting officer shall 
consult with all other contracting officers making challenges, verify 
that all challenges apply to the same asserted restriction and, after 
consulting with the contractor, subcontractor, or supplier asserting the 
restriction, issue a schedule that provides that person a reasonable 
opportunity to respond to each challenge.
    (8) Validation. Only a contracting officer's final decision, or 
actions of an agency board of contract appeals or a court of competent 
jurisdiction, that sustain the validity of an asserted restriction 
constitute validation of the asserted restriction.



Sec. 227.7103-14  Conformity, acceptance, and warranty of technical 
          data.

    (a) Statutory requirements. 10 U.S.C. 2320--
    (1) Provides for the establishment of remedies applicable to 
technical data found to be incomplete, inadequate, or not to satisfy the 
requirements of the contract concerning such data; and
    (2) Authorizes agency heads to withhold payments (or exercise such 
other remedies an agency head considers appropriate) during any period 
if the contractor does not meet the requirements of the contract 
pertaining to the delivery of technical data.

[[Page 209]]

    (b) Conformity and acceptance. (1) Solicitations and contracts 
requiring the delivery of technical data shall specify the requirements 
the data must satisfy to be acceptable. Contracting officers, or their 
authorized representatives, are responsible for determining whether 
technical data tendered for acceptance conform to the contractual 
requirements.
    (2) The clause at 252.227-7030, Technical Data--Withholding of 
Payment, provides for withholding up to 10 percent of the contract price 
pending correction or replacement of the nonconforming technical data or 
negotiation of an equitable reduction in contract price. The amount 
subject to withholding may be expressed as a fixed dollar amount or as a 
percentage of the contract price. In either case, the amount shall be 
determined giving consideration to the relative value and importance of 
the data. For example--
    (i) When the sole purpose of a contract is to produce the data, the 
relative value of that data may be considerably higher than the value of 
data produced under a contract where the production of the data is a 
secondary objective; or
    (ii) When the Government will maintain or repair items, repair and 
maintenance data may have a considerably higher relative value than data 
that merely describe the item or provide performance characteristics.
    (3) Do not accept technical data that do not conform to the 
contractual requirements in all respects. Except for nonconforming 
restrictive markings (see paragraph (b)(4) of this subsection), 
correction or replacement of nonconforming data or an equitable 
reduction in contract price when correction or replacement of the 
nonconforming data is not practicable or is not in the Government's 
interests, shall be accomplished in accordance with--
    (i) The provisions of a contract clause providing for inspection and 
acceptance of deliverables and remedies for nonconforming deliverables; 
or
    (ii) The procedures at FAR 46.407(c) through (g), if the contract 
does not contain an inspection clause providing remedies for 
nonconforming deliverables.
    (4) Follow the procedures at 227.7103-12(a)(2) if nonconforming 
markings are the sole reason technical data fail to conform to 
contractual requirements. The clause at 252.227-7030 may be used to 
withhold an amount for payment, consistent with the terms of the clause, 
pending correction of the nonconforming markings.
    (c) Warranty. (1) The intended use of the technical data and the 
cost, if any, to obtain the warranty should be considered before 
deciding to obtain a data warranty (see FAR 46.703). The fact that a 
particular item, component, or process is or is not warranted is not a 
consideration in determining whether or not to obtain a warranty for the 
technical data that pertain to the item, component, or process. For 
example, a data warranty should be considered if the Government intends 
to repair or maintain an item and defective repair or maintenance data 
would impair the Government's effective use of the item or result in 
increased costs to the Government.
    (2) As prescribed in 246.710, use the clause at 252.246-7001, 
Warranty of Data, and its alternates, or a substantially similar clause 
when the Government needs a specific warranty of technical data.

[60 FR 33471, June 28, 1995, as amended at 69 FR 31912, June 8, 2004]



Sec. 227.7103-15  Subcontractor rights in technical data.

    (a) 10 U.S.C. 2320 provides subcontractors at all tiers the same 
protection for their rights in data as is provided to prime contractors. 
The clauses at 252.227-7013, Rights in Technical Data--Noncommercial 
Items, and 252.227-7037, Validation of Restrictive Markings on Technical 
Data, implement the statutory requirements.
    (b) 10 U.S.C. 2321 permits a subcontractor to transact directly with 
the Government matters relating to the validation of its asserted 
restrictions on the Government's rights to use or disclose technical 
data. The clause at 252.227-7037 obtains a contractor's agreement that 
the direct transaction of validation or challenge matters with 
subcontractors at any tier does not establish or imply privity of 
contract.

[[Page 210]]

When a subcontractor or supplier exercise its right to transact 
validation matters directly with the Government, contracting officers 
shall deal directly with such persons, as provided at 227.7103-13(c)(3).
    (c) Require prime contractors whose contracts include the following 
clauses to include those clauses, without modification except for 
appropriate identification of the parties, in contracts with 
subcontractors or suppliers, at all tiers, who will be furnishing 
technical data for non-commercial items in response to a Government 
requirement:
    (1) 252.227-7013, Rights in Technical Data--Noncommercial Items;
    (2) 252.227-7025, Limitations on the Use or Disclosure of 
Government-Furnished Information Marked with Restrictive Legends;
    (3) 252.227-7028, Technical Data or Computer Software Previously 
Delivered to the Government; and
    (4) 252.227-7037, Validation of Restrictive Markings on Technical 
Data.
    (d) Do not require contractors to have their subcontractors or 
suppliers at any tier relinquish rights in technical data to the 
contractor, a higher tier subcontractor, or to the Government, as a 
condition for award of any contract, subcontract, purchase order, or 
similar instrument except for the rights obtained by the Government 
under the Rights in Technical Data--Noncommercial Items clause contained 
in the contractor's contract with the Government.

[56 FR 36389, July 31, 1991, as amended at 60 FR 61598, Nov. 30, 1995]



Sec. 227.7103-16  Providing technical data to foreign governments, 
          foreign contractors, or international organizations.

    Technical data may be released or disclosed to foreign governments, 
foreign contractors, or international organizations only if release or 
disclosure is otherwise permitted both by Federal export controls and 
other national security laws or regulations. Subject to such laws and 
regulations, the Department of Defense--
    (a) May release or disclose technical data in which it has obtained 
unlimited rights to such foreign entities or authorize the use of such 
data by those entities; and
    (b) Shall not release or disclose technical data for which 
restrictions on use, release, or disclosure have been asserted to 
foreign entities, or authorize the use of technical data by those 
entities, unless the intended recipient is subject to the same 
provisions as included in the use and non-disclosure agreement at 
227.7103-7 and the requirements of the clause at 252.227-7103, Rights in 
Technical Data--Noncommercial Items, governing use, modification, 
reproduction, release, performance, display, or disclosure of such data 
have been satisfied.



Sec. 227.7103-17  Overseas contracts with foreign sources.

    (a) The clause at 252.227-7032, Rights in Technical Data and 
Computer Software (Foreign), may be used in contracts with foreign 
contractors to be performed overseas, except Canadian purchases (see 
paragraph (c) of this subsection), in lieu of the clause at 252.227-
7013, Rights in Technical Data--Noncommercial Items, when the Government 
requires the unrestricted right to use, modify, reproduce, perform, 
display, release or disclose all technical data to be delivered under 
the contract. Do not use the clause in contracts for existing or special 
works.
    (b) When the Government does not require unlimited rights, the 
clause at 252.227-7032 may be modified to accommodate the needs of a 
specific overseas procurement situation. The Government should obtain 
rights in the technical data that are not less than the rights the 
Government would have obtained under the data rights clause(s) 
prescribed in this part for a comparable procurement performed within 
the United States or its outlying areas.
    (c) Contracts for Canadian purchases shall include the appropriate 
data rights clause prescribed in this part for a comparable procurement 
performed within the United States or its outlying areas.

[56 FR 36389, July 31, 1991, as amended at 70 FR 35545, June 21, 2005]

[[Page 211]]



Sec. 227.7104  Contracts under the Small Business Innovation Research 
          (SBIR) Program.

    (a) Use the clause at 252.227-7018, Rights in Noncommercial 
Technical Data and Computer Software--Small Business Innovation Research 
(SBIR) Program, when technical data or computer software will be 
generated during performance of contracts under the SBIR program.
    (b) Under the clause at 252.227-7018, the Government obtains a 
royalty-free license to use technical data marked with an SBIR data 
rights legend only for government purposes during the period commencing 
with contract award and ending five years after completion of the 
project under which the data were generated. Upon expiration of the 
five-year restrictive license, the Government has unlimited rights in 
the SBIR data. During the license period, the Government may not release 
or disclose SBIR data to any person other than its support services 
contractors except--
    (1) For evaluational purposes;
    (2) As expressly permitted by the contractor; or
    (3) A use, release, or disclosure that is necessary for emergency 
repair or overhaul of items operated by the Government.
    (c) Do not make any release or disclosure permitted by paragraph (b) 
of this section unless, prior to release or disclosure, the intended 
recipient is subject to the use and nondisclosure agreement at 227.7103-
7.
    (d) Use the clause at 252.227-7018 with its Alternate I in research 
contracts when the contracting officer determines, in consultation with 
counsel, that public dissemination by the contractor would be--
    (1) In the interest of the Government; and
    (2) Facilitated by the Government relinquishing its right to publish 
the work for sale, or to have others publish the work for sale on behalf 
of the Government.
    (e) Use the following provision and clauses in SBIR solicitations 
and contracts that include the clause at 252.227-7018:
    (1) 252.227-7016, Rights in Bid or Proposal Information;
    (2) 252.227-7017, Identification and Assertion of Use, Release, or 
Disclosure Restrictions;
    (3) 252.227-7019, Validation of Asserted Restrictions--Computer 
Software;
    (4) 252.227-7030, Technical Data--Withholding of Payment; and
    (5) 252.227-7037, Validation of Restrictive Markings on Technical 
Data (paragraph (e) of the clause contains information that must be 
included in a challenge).
    (f) Use the following clauses and provision in SBIR solicitations 
and contracts in accordance with the guidance at 227.7103-6 (c) and (d):
    (1) 252.227-7025, Limitations on the Use or Disclosure of 
Government-Furnished Information Marked with Restrictive Legends; and
    (2) 252.227-7028, Technical Data or Computer Software Previously 
Delivered to the Government.

[56 FR 36389, July 31, 1991, as amended at 60 FR 61598, Nov. 30, 1995; 
62 FR 2614, Jan. 17, 1997; 69 FR 31912, June 8, 2004]



Sec. 227.7105  Contracts for the acquisition of existing works.



Sec. 227.7105-1  General.

    (a) Existing works include motion pictures, television recordings, 
video recordings, and other audiovisual works in any medium; sound 
recordings in any medium; musical, dramatic, and literary works; 
pantomimes and choreographic works; pictorial, graphic, and sculptural 
works; and works of a similar nature. Usually, these or similar works 
were not first created, developed, generated, originated, prepared, or 
produced under a Government contract. Therefore, the Government must 
obtain a license in the work if it intends to reproduce the work, 
distribute copies of the work, prepare derivative works, or perform or 
display the work publicly. When the Government is not responsible for 
the content of an existing work, it should require the copyright owner 
to indemnify the Government for liabilities that may arise out of the 
content, performance, use, or disclosure of such data.
    (b) Follow the procedures at 227.7106 for works which will be first 
created,

[[Page 212]]

developed, generated, originated, prepared, or produced under a 
Government contract and the Government needs to control distribution of 
the work or has a specific need to obtain indemnity for liabilities that 
may arise out of the creation, content, performance, use, or disclosure 
of the work or from libelous or other unlawful material contained in the 
work. Follow the procedures at 227.7103 when the Government does not 
need to control distribution of such works or obtain such indemnities.



Sec. 227.7105-2  Acquisition of existing works without modification.

    (a) Use the clause at 252.227-7021, Rights in Data--Existing Works, 
in lieu of the clause at 252.227-7013, Rights in Technical Data--
Noncommercial Items, in solicitations and contracts exclusively for 
existing works when--
    (1) The existing works will be acquired without modification; and
    (2) The Government requires the right to reproduce, prepare 
derivative works, or publicly perform or display the existing works; or
    (3) The Government has a specific need to obtain indemnity for 
liabilities that may arise out of the content, performance, use, or 
disclosure of such data.
    (b) The clause at 252.227-7021 provides the Government, and others 
acting on its behalf, a paid-up, non-exclusive, irrevocable, world-wide 
license to reproduce, prepare derivative works and publicly perform or 
display the works called for by a contract and to authorize others to do 
so for government purposes.
    (c) A contract clause is not required to acquire existing works such 
as books, magazines and periodicals, in any storage or retrieval medium, 
when the Government will not reproduce the books, magazines or 
periodicals, or prepare derivative works.



Sec. 227.7105-3  Acquisition of modified existing works.

    Use the clause at 252.227-7020, Rights in Special Works, in 
solicitations and contracts for modified existing works in lieu of the 
clause at 252.227-7021, Rights in Data--Existing Works.



Sec. 227.7106  Contracts for special works.

    (a) Use the clause at 252.227-7020, Rights in Special Works, in 
solicitations and contracts where the Government has a specific need to 
control the distribution of works first produced, created, or generated 
in the performance of a contract and required to be delivered under that 
contract, including controlling distribution by obtaining an assignment 
of copyright, or a specific need to obtain indemnity for liabilities 
that may arise out of the creation, delivery, use, modification, 
reproduction, release, performance, display, or disclosure of such 
works. Use the clause--
    (1) In lieu of the clause at 252.227-7013, Rights in Technical 
Data--Noncommercial Items, when the Government must own or control 
copyright in all works first produced, created, or generated and 
required to be delivered under a contract; or
    (2) In addition to the clause at 252.227-7013 when the Government 
must own or control copyright in a portion of a work first produced, 
created, or generated and required to be delivered under a contract. The 
specific portion in which the Government must own or control copyright 
must be identified in a special contract requirement.
    (b) Although the Government obtains an assignment of copyright and 
unlimited rights in a special work under the clause at 252.227-7020, the 
contractor retains use and disclosure rights in that work. If the 
Government needs to restrict a contractor's rights to use or disclose a 
special work, it must also negotiate a special license which 
specifically restricts the contractor's use or disclosure rights.
    (c) The clause at 252.227-7020 does not permit a contractor to 
incorporate into a special work any works copyrighted by others unless 
the contractor obtains the contracting officer's permission to do so and 
obtains for the Government a non-exclusive, paid up, world-wide license 
to make and distribute copies of that work, to prepare derivative works, 
to perform or display publicly any portion of the work, and to permit 
others to do so for government purposes.

[[Page 213]]

Grant permission only when the Government's requirements cannot be 
satisfied unless the third party work is included in the deliverable 
work.
    (d) Examples of works which may be procured under the Rights in 
Special Works clause include, but are not limited, to audiovisual works, 
computer data bases, computer software documentation, scripts, 
soundtracks, musical compositions, and adaptations; histories of 
departments, agencies, services or units thereof; surveys of Government 
establishments; instructional works or guidance to Government officers 
and employees on the discharge of their official duties; reports, books, 
studies, surveys or similar documents; collections of data containing 
information pertaining to individuals that, if disclosed, would violate 
the right of privacy or publicity of the individuals to whom the 
information relates; or investigative reports.



Sec. 227.7107  Contracts for architect-engineer services.

    This section sets forth policies and procedures, pertaining to data, 
copyrights, and restricted designs unique to the acquisition of 
construction and architect-engineer services.



Sec. 227.7107-1  Architectural designs and data clauses for architect-
          engineer or construction contracts.

    (a) Except as provided in paragraph (b) of this subsection and in 
227.7107-2, use the clause at 252.227-7022, Government Rights 
(Unlimited), in solicitations and contracts for architect-engineer 
services and for construction involving architect-engineer services.
    (b) When the purpose of a contract for architect-engineer services, 
or for construction involving architect-engineer services, is to obtain 
a unique architectural design of a building, a monument, or construction 
of similar nature, which for artistic, aesthetic or other special 
reasons the Government does not want duplicated, the Government may 
acquire exclusive control of the data pertaining to the design by 
including the clause at 252.227-7023, Drawings and Other Data to Become 
Property of Government, in solicitations and contracts.
    (c) The Government shall obtain unlimited rights in shop drawings 
for construction. In solicitations and contracts calling for delivery of 
shop drawings, include the clause at 252.227-7033, Rights in Shop 
Drawings.



Sec. 227.7107-2  Contracts for construction supplies and research and 
          development work.

    Use the provisions and clauses required by 227-7103-6 and 227.7203-6 
when the acquisition is limited to--
    (a) Construction supplies or materials;
    (b) Experimental, developmental, or research work, or test and 
evaluation studies of structures, equipment, processes, or materials for 
use in construction; or
    (c) Both.



Sec. 227.7107-3  Approval of restricted designs.

    The clause at 252.227-7024, Notice and Approval of Restricted 
Designs, may be included in architect-engineer contracts to permit the 
Government to make informed decisions concerning noncompetitive aspects 
of the design.



Sec. 227.7108  Contractor data repositories.

    (a) Contractor data repositories may be established when permitted 
by agency procedures. The contractual instrument establishing the data 
repository must require, as a minimum, the data repository management 
contractor to--
    (1) Establish and maintain adequate procedures for protecting 
technical data delivered to or stored at the repository from 
unauthorized release or disclosure;
    (2) Establish and maintain adequate procedures for controlling the 
release or disclosure of technical data from the repository to third 
parties consistent with the Government's rights in such data;
    (3) When required by the contracting officer, deliver data to the 
Government on paper or in other specified media;
    (4) Be responsible for maintaining the currency of data delivered 
directly by Government contractors or subcontractors to the repository;

[[Page 214]]

    (5) Obtain use and non-disclosure agreements (see 227.7103-7) from 
all persons to whom government purpose rights data is released or 
disclosed; and
    (6) Indemnify the Government from any liability to data owners or 
licensors resulting from, or as a consequence of, a release or 
disclosure of technical data made by the data repository contractor or 
its officers, employees, agents, or representatives.
    (b) If the contractor is or will be the data repository manager, the 
contractor's data management and distribution responsibilities must be 
identified in the contract or the contract must reference the agreement 
between the Government and the contractor that establishes those 
responsibilities.
    (c) If the contractor is not and will not be the data repository 
manager, do not require a contractor or subcontractor to deliver 
technical data marked with limited rights legends to a data repository 
managed by another contractor unless the contractor or subcontractor who 
has asserted limited rights agrees to release the data to the repository 
or has authorized, in writing, the Government to do so.
    (d) Repository procedures may provide for the acceptance, delivery, 
and subsequent distribution of technical data in storage media other 
than paper, including direct electronic exchange of data between two 
computers. The procedures must provide for the identification of any 
portions of the data provided with restrictive legends, when 
appropriate. The acceptance criteria must be consistent with the 
authorized delivery format.

    Subpart 227.72_Rights in Computer Software and Computer Software 
                              Documentation

    Source: 60 FR 33482, June 28, 1995, unless otherwise noted.



Sec. 227.7200  Scope of subpart.

    This subpart--
    (a) Prescribes policies and procedures for the acquisition of 
computer software and computer software documentation, and the rights to 
use, modify, reproduce, release, perform, display, or disclose such 
software or documentation. It implements requirements in the following 
laws and Executive Order:
    (1) 10 U.S.C. 2302(4).
    (2) 10 U.S.C. 2305 (subsection (d)(4)).
    (3) 10 U.S.C. 2320.
    (4) 10 U.S.C. 2321.
    (5) 10 U.S.C. 2325.
    (6) Executive Order 12591 (subsection 1(b)(6)).
    (b) Does not apply to computer software or computer software 
documentation acquired under GSA schedule contracts.



Sec. 227.7201  Definitions.

    (a) As used in this subpart, unless otherwise specifically 
indicated, the terms ``offeror'' and ``contractor'' include an offeror's 
or contractor's subcontractors, suppliers, or potential subcontractors 
or suppliers at any tier.
    (b) Other terms used in this subpart are defined in the clause at 
252.227-7014, Rights in Noncommercial Computer Software and 
Noncommercial Computer Software Documentation.



Sec. 227.7202  Commercial computer software and commercial computer 
          software documentation.



Sec. 227.7202-1  Policy.

    (a) Commercial computer software or commercial computer software 
documentation shall be acquired under the licenses customarily provided 
to the public unless such licenses are inconsistent with Federal 
procurement law or do not otherwise satisfy user needs.
    (b) Commercial computer software and commercial computer software 
documentation shall be obtained competitively, to the maximum extent 
practicable, using firm-fixed-price contracts or firm-fixed-priced 
orders under available pricing schedules.
    (c) Offerors and contractors shall not be required to--
    (1) Furnish technical information related to commercial computer 
software or commercial computer software documentation that is not 
customarily provided to the public except for information documenting 
the specific modifications made at Government expense to such software 
or documentation to meet the requirements of a Government solicitation; 
or
    (2) Relinquish to, or otherwise provide, the Government rights to 
use,

[[Page 215]]

modify, reproduce, release, perform, display, or disclose commercial 
computer software or commercial computer software documentation except 
for a transfer of rights mutually agreed upon.



Sec. 227.7202-2  [Reserved]



Sec. 227.7202-3  Rights in commercial computer software or commercial 
          computer software documentation.

    (a) The Government shall have only the rights specified in the 
license under which the commercial computer software or commercial 
computer software documentation was obtained.
    (b) If the Government has a need for rights not conveyed under the 
license customarily provided to the public, the Government must 
negotiate with the contractor to determine if there are acceptable terms 
for transferring such rights. The specific rights granted to the 
Government shall be enumerated in the contract license agreement or an 
addendum thereto.



Sec. 227.7202-4  Contract clause.

    A specific contract clause governing the Government's rights in 
commercial computer software or commercial computer software 
documentation is not prescribed. As required by 227.7202-3, the 
Government's rights to use, modify, reproduce, release, perform, 
display, or disclose computer software or computer software 
documentation shall be identified in a license agreement.



Sec. 227.7203  Noncommercial computer software and noncommercial 
          computer software documentation.



Sec. 227.7203-1  Policy.

    (a) DoD policy is to acquire only the computer software and computer 
software documentation, and the rights in such software or 
documentation, necessary to satisfy agency needs.
    (b) Solicitations and contracts shall--
    (1) Specify the computer software or computer software documentation 
to be delivered under a contract and the delivery schedules for the 
software or documentation;
    (2) Establish or reference procedures for determining the 
acceptability of computer software or computer software documentation;
    (3) Establish separate contract line items, to the extent 
practicable, for the computer software or computer software 
documentation to be delivered under a contract and require offerors and 
contractors to price separately each deliverable data item; and
    (4) Require offerors to identify, to the extent practicable, 
computer software or computer software documentation to be furnished 
with restrictions on the Government's rights and require contractors to 
identify computer software or computer software documentation to be 
delivered with such restrictions prior to delivery.
    (c) Offerors shall not be required, either as a condition of being 
responsive to a solicitation or as a condition for award, to sell or 
otherwise relinquish to the Government any rights in computer software 
developed exclusively at private expense except for the software 
identified at 227.7203-5(a) (3) through (6).
    (d) Offerors and contractors shall not be prohibited or discouraged 
from furnishing or offering to furnish computer software developed 
exclusively at private expense solely because the Government's rights to 
use, modify, release, reproduce, perform, display, or disclose the 
software may be restricted.
    (e) For acquisitions involving major weapon systems or subsystems of 
major weapon systems, the acquisition plan shall address acquisition 
strategies that provide for computer software and computer software 
documentation, and the associated license rights, in accordance with 
207.106(S-70).

[60 FR 33471, June 28, 1995 as amended at 72 FR 51189, Sept. 6, 2007]



Sec. 227.7203-2  Acquisition of noncommercial computer software and 
          computer software documentation.

    (a) Contracting officers shall work closely with data managers and 
requirements personnel to assure that computer software and computer 
software documentation requirements included in solicitations are 
consistent with the policy expressed in 227.7203-1.
    (b)(1) Data managers or other requirements personnel are responsible

[[Page 216]]

for identifying the Government's minimum needs. In addition to desired 
software performance, compatibility, or other technical considerations, 
needs determinations should consider such factors as multiple site or 
shared use requirements, whether the Government's software maintenance 
philosophy will require the right to modify or have third parties modify 
the software, and any special computer software documentation 
requirements.
    (2) When reviewing offers received in response to a solicitation or 
other request for computer software or computer software documentation, 
data managers must balance the original assessment of the Government's 
needs with prices offered.
    (c) Contracting officers are responsible for ensuring that, wherever 
practicable, solicitations and contracts--
    (1) Identify the types of computer software and the quantity of 
computer programs and computer software documentation to be delivered, 
any requirements for multiple users at one site or multiple site 
licenses, and the format and media in which the software or 
documentation will be delivered;
    (2) Establish each type of computer software or computer software 
documentation to be delivered as a separate contract line item (this 
requirement may be satisfied by an exhibit to the contract);
    (3) Identify the prices established for each separately priced 
deliverable item of computer software or computer software documentation 
under a fixed-price type contract;
    (4) Include delivery schedules and acceptance criteria for each 
deliverable item; and
    (5) Specifically identify the place of delivery for each deliverable 
item.



Sec. 227.7203-3  Early identification of computer software or computer 
          
          software documentation to be furnished to the Government with 
          restrictions on use, reproduction or disclosure.

    (a) Use the provision at 252.227-7017, Identification and Assertion 
of Use, Release, or Disclosure Restrictions, in all solicitation that 
include the clause at 252.227-7014, Rights in Noncommercial Computer 
Software and Noncommercial Computer Software Documentation. The 
provision requires offerors to identify any computer software or 
computer software documentation for which restrictions, other than 
copyright, on use, modification, reproduction, release, performance, 
display, or disclosure are asserted and to attach the identification and 
assertion to the offer.
    (b) Subsequent to contract award, the clause at 252.227-7014 permits 
a contractor, under certain conditions, to make additional assertions of 
restrictions. The prescriptions for the use of that clause and its 
alternates are at 227.7203-6(a).



Sec. 227.7203-4  License rights.

    (a) Grant of license. The Government obtains rights in computer 
software or computer software documentation, including a copyright 
license, under an irrevocable license granted or obtained by the 
contractor which developed the software or documentation or the licensor 
of the software or documentation if the development contractor is not 
the licensor. The contractor or licensor retains all rights in the 
software or documentation not granted to the Government. The scope of a 
computer software license is generally determined by the source of funds 
used to develop the software. Contractors or licensors may, with some 
exceptions, restrict the Government's rights to use, modify, reproduce, 
release, perform, display, or disclose computer software developed 
exclusively or partially at private expense (see 227.7203-5 (b) and 
(c)). They may not, without the Government's agreement (see 227.7203-
5(d)), restrict the Government's rights in computer software developed 
exclusively with Government funds or in computer software documentation 
required to be delivered under a contract.
    (b) Source of funds determination. The determination of the source 
of funds used to develop computer software should be made at the lowest 
practicable segregable portion of the software or documentation (e.g., a 
software sub-routine that performs a specific function). Contractors may 
assert restricted rights in a segregable portion of computer software 
which otherwise qualifies for restricted rights under the

[[Page 217]]

clause at 252.227-7014, Rights in Noncommercial Computer Software and 
Noncommercial Computer Software Documentation.



Sec. 227.7203-5  Government rights.

    The standard license rights in computer software that a licensor 
grants to the Government are unlimited rights, government purpose 
rights, or restricted rights. The standard license in computer software 
documentation conveys unlimited rights. Those rights are defined in the 
clause at 252.227-7014, Rights in Noncommercial Computer Software and 
Noncommercial Computer Software Documentation. In unusual situations, 
the standard rights may not satisfy the Government's needs or the 
Government may be willing to accept lesser rights in return for other 
consideration. In those cases, a special license may be negotiated. 
However, the licensor is not obligated to provide the Government greater 
rights and the contracting officer is not required to accept lesser 
rights than the rights provided in the standard grant of license. The 
situations under which a particular grant of license applies are 
enumerated in paragraphs (a) through (d) of this subsection.
    (a) Unlimited rights. The Government obtains an unlimited rights 
license in--
    (1) Computer software developed exclusively with Government funds;
    (2) Computer software documentation required to be delivered under a 
Government contract;
    (3) Corrections or changes to computer software or computer software 
documentation furnished to the contractor by the Government;
    (4) Computer software or computer software documentation that is 
otherwise publicly available or has been released or disclosed by the 
contractor or subcontractor without restrictions on further use, release 
or disclosure other than a release or disclosure resulting from the 
sale, transfer, or other assignment of interest in the software to 
another party or the sale or transfer of some or all of a business 
entity or it assets to another party;
    (5) Computer software or computer software documentation obtained 
with unlimited rights under another Government contract or as a result 
of negotiations; or
    (6) Computer software or computer software documentation furnished 
to the Government, under a Government contract or subcontract with--
    (i) Restricted rights in computer software, limited rights in 
technical data, or government purpose license rights and the restrictive 
conditions have expired; or
    (ii) Government purpose rights and the contractor's exclusive right 
to use such software or documentation for commercial purposes has 
expired.
    (b) Government purpose rights. (1) Except as provided in paragraph 
(a) of this subsection, the Government obtains government purpose rights 
in computer software developed with mixed funding.
    (2) The period during which government purpose rights are effective 
is negotiable. The clause at 252.227-7014 provides a nominal five-year 
period. Either party may request a different period. Changes to the 
government purpose rights period may be made at any time prior to 
delivery of the software without consideration from either party. Longer 
periods should be negotiated when a five-year period does not provide 
sufficient time to commercialize the software or, for software developed 
by subcontractors, when necessary to recognize the subcontractors' 
interests in the software.
    (3) The government purpose rights period commences upon execution of 
the contract, subcontract, letter contract (or similar contractual 
instrument), contract modification, or option exercise that required 
development of the computer software. Upon expiration of the government 
purpose rights period, the Government has unlimited rights in the 
software including the right to authorize others to use data for 
commercial purposes.
    (4) During the government purpose rights period, the Government may 
not use, or authorize other persons to use, computer software marked 
with government purpose rights legends for commercial purposes. The 
Government

[[Page 218]]

shall not release or disclose, or authorize others to release or 
disclose, computer software in which it has government purpose rights to 
any person unless--
    (i) Prior to release or disclosure, the intended recipient is 
subject to the use and non-disclosure agreement at 227.7103-7; or
    (ii) The intended recipient is a Government contractor receiving 
access to the software for performance of a Government contract that 
contains the clause at 252.227-7025, Limitations on the Use or 
Disclosure of Government-Furnished Information Marked with Restrictive 
Legends.
    (5) When computer software marked with government purpose rights 
legends will be released or disclosed to a Government contractor 
performing a contract that does not include the clause at 252.227-7025, 
the contract may be modified, prior to release or disclosure, to include 
such clause in lieu of requiring the contractor to complete a use and 
non-disclosure agreement.
    (6) Contracting activities shall establish procedures to assure that 
computer software or computer software documentation marked with 
government purpose rights legends are released or disclosed, including a 
release or disclosure through a Government solicitation, only to persons 
subject to the use and non-disclosure restrictions. Public announcements 
in the Commerce Business Daily or other publications must provide notice 
of the use and non-disclosure requirements. Class use and non-disclosure 
agreements (e.g., agreements covering all solicitations received by the 
XYZ company within a reasonable period) are authorized and may be 
obtained at any time prior to release or disclosure of the government 
purpose rights software or documentation. Documents transmitting 
government purpose rights software or documentation to persons under 
class agreements shall identify the specific software or documentation 
subject to government purpose rights and the class agreement under which 
such software or documentation are provided.
    (c) Restricted rights. (1) The Government obtains restricted rights 
in noncommercial computer software required to be delivered or otherwise 
provided to the Government under a contract that were developed 
exclusively at private expense.
    (2) Contractors are not required to provide the Government 
additional rights in computer software delivered or otherwise provided 
to the Government with restricted rights. When the Government has a need 
for additional rights, the Government must negotiate with the contractor 
to determine if there are acceptable terms for transferring such rights. 
List or describe all software in which the contractor has granted the 
Government additional rights in a license agreement made part of the 
contract (see paragraph (d) of this subsection). The license shall 
enumerate the specific additional rights granted to the Government.
    (d) Specifically negotiated license rights. Negotiate specific 
licenses when the parties agree to modify the standard license rights 
granted to the Government or when the Government wants to obtain rights 
in computer software in which it does not have rights. When negotiating 
to obtain, relinquish, or increase the Government's rights in computer 
software, consider the planned software maintenance philosophy, 
anticipated time or user sharing requirements, and other factors which 
may have relevance for a particular procurement. If negotiating to 
relinquish rights in computer software documentation, consider the 
administrative burden associated with protecting documentation subject 
to restrictions from unauthorized release or disclosure. The negotiated 
license rights must stipulate the rights granted the Government to use, 
modify, reproduce, release, perform, display, or disclose the software 
or documentation and the extent to which the Government may authorize 
others to do so. Identify all negotiated rights in a license agreement 
made part of the contract.
    (e) Rights in derivative computer software or computer software 
documentation. The clause at 252.227-7014 protects the Government's 
rights in computer software, computer software documentation, or 
portions thereof that the

[[Page 219]]

contractor subsequently uses to prepare derivative software or 
subsequently embeds or includes in other software or documentation. The 
Government retains the rights it obtained under the development contract 
in the unmodified portions of the derivative software or documentation.



Sec. 227.7203-6  Contract clauses.

    (a)(1) Use the clause at 252.227-7014, Rights in Noncommercial 
Computer Software and Noncommercial Computer Software Documentation, in 
solicitations and contracts when the successful offeror(s) will be 
required to deliver computer software or computer software 
documentation. Do not use the clause when the only deliverable items are 
technical data (other than computer software documentation), commercial 
computer software or commercial computer software documentation, 
commercial items (see 227.7102-3), special works (see 227.7205), or 
contracts under the Small Business Innovative Research Program (see 
227.7104), Except as provided in 227.7107-2, do not use the clause in 
architect-engineer and construction contracts.
    (2) Use the clause at 252.227-7014 with its Alternate I in research 
contracts when the contracting officer determines, in consultation with 
counsel, that public dissemination by the contractor would be--
    (i) In the interest of the Government; and
    (ii) Facilitated by the Government relinquishing its right to 
publish the work for sale, or to have others publish the work for sale 
on behalf of the Government.
    (b) Use the clause at 252.227-7016, Rights in Bid or Proposal 
Information, in solicitations and contracts that include the clause at 
252.227-7014.
    (c) Use the clause at 252.227-7019, Validation of Asserted 
Restrictions--Computer Software, in solicitations and contracts that 
include the clause at 252.227-7014. The clause provides procedures for 
the validation of asserted restrictions on the Government's rights to 
use, release, or disclose computer software.
    (d) Use the provision at 252.227-7025, Limitations on the Use or 
Disclosure of Government-Furnished Information Marked with Restrictive 
Legends, in solicitations and contracts when it is anticipated that the 
Government will provide the contractor, for performance of its contract, 
computer software or computer software documentation marked with another 
contractor's restrictive legend(s).
    (e) Use the provision at 252.227-7028, Technical Data or Computer 
Software Previously Delivered to the Government, in solicitations when 
the resulting contract will require the contractor to deliver computer 
software or computer software documentation. The provision requires 
offerors to identify any software or documentation specified in the 
solicitation as deliverable items that are the same or substantially the 
same as software or documentation which the offeror has delivered or is 
obligated to deliver, either as a contractor or subcontractor, under any 
other federal agency contract.
    (f) Use the clause at 252.227-7037, Validation of Restrictive 
Markings on Technical Data, in solicitations and contracts that include 
the clause at 252.227-7014 when the contractor will be required to 
deliver noncommercial computer software documentation (technical data). 
The clause implements statutory requirements under 10 U.S.C. 2321. 
Paragraph (e) of the clause contains information that must be included 
in a formal challenge.



Sec. 227.7203-7  [Reserved]



Sec. 227.7203-8  Deferred delivery and deferred ordering of computer 
          software and computer software documentation.

    (a) Deferred delivery. Use the clause at 252.227-7026, Deferred 
Delivery of Technical Data or Computer Software, when it is in the 
Government's interests to defer the delivery of computer software or 
computer software documentation. The clause permits the contracting 
officer to require the delivery of data identified as ``deferred 
delivery'' data or computer software at any time until two years after 
acceptance by the Government of all items (other than technical data or 
computer software) under the contract or contract termination, whichever 
is later. The obligation of subcontractors or suppliers to deliver such 
data expires two years after the

[[Page 220]]

date the prime contractor accepts the last item from the subcontractor 
or supplier for use in the performance of the contract. The contract 
must specify the computer software or computer software documentation 
that is subject to deferred delivery. The contracting officer shall 
notify the contractor sufficiently in advance of the desired delivery 
date for such software or documentation to permit timely delivery.
    (b) Deferred ordering. Use the clause at 252.227-7027, Deferred 
Ordering of Technical Data or Computer Software, when a firm requirement 
for software or documentation has not been established prior to contract 
award but there is a potential need for computer software or computer 
software documentation. Under this clause the contracting officer may 
order any computer software or computer software documentation generated 
in the performance of the contract or any subcontract thereunder at any 
time until three years after acceptance of all items (other than 
technical data or computer software) under the contract or contract 
termination, whichever is later. The obligation of subcontractors to 
deliver such technical data or computer software expires three years 
after the date the contractor accepts the last item under the 
subcontract. When the software or documentation are ordered, the 
delivery dates shall be negotiated and the contractor compensated only 
for converting the software or documentation into the prescribed form, 
reproduction costs, and delivery costs.



Sec. 227.7203-9  Copyright.

    (a) Copyright license. (1) The clause at 252.227-7014, Rights in 
Noncommercial Computer Software and Noncommercial Computer Software 
Documentation, requires a contractor to grant, or obtain for the 
Government license rights which permit the Government to reproduce the 
software or documentation, distribute copies, perform or display the 
software or documentation and, through the right to modify data, prepare 
derivative works. The extent to which the Government, and others acting 
on its behalf, may exercise these rights varies for each of the standard 
data rights licenses obtained under the clause. When non-standard 
license rights in computer software or computer software documentation 
will be negotiated, negotiate the extent of the copyright license 
concurrent with negotiations for the data rights license. Do not 
negotiate copyright licenses for computer software that provide less 
rights than the standard restricted rights in computer software license. 
For computer software documentation, do not negotiate a copyright 
license that provides less rights than the standard limited rights in 
technical data license.
    (2) The clause at 252.227-7013, Rights in Technical Data--
Noncommercial Items, does not permit a contractor to incorporate a third 
party's copyrighted software into a deliverable software item unless the 
contractor has obtained an appropriate license for the Government and, 
when applicable, others acting on the Government's behalf, or has 
obtained the contracting officer's written approval to do so. Grant 
approval to use third party copyrighted software in which the Government 
will not receive a copyright license only when the Government's 
requirements cannot be satisfied without the third party material or 
when the use of the third party material will result in cost savings to 
the Government which outweigh the lack of a copyright license.
    (b) Copyright considerations--special works. See 227.7205 for 
copyright considerations when acquiring special works.



Sec. 227.7203-10  Contractor identification and marking of computer 
          
          software or computer software documentation to be furnished 
          with restrictive markings.

    (a) Identification requirements. (1) The solicitation provision at 
252.227-7017, Identification and Assertion of Use, Release, or 
Disclosure Restrictions, requires offerors to identify, prior to 
contract award, any computer software or computer software documentation 
that an offeror asserts should be provided to the Government with 
restrictions on use, modification, reproduction, release, or disclosure. 
This requirement does not apply to restrictions based solely on 
copyright. The notification and identification must be submitted as an 
attachment to the offer. If an offeror fails to submit the attachment or

[[Page 221]]

fails to complete the attachment in accordance with the requirements of 
the solicitation provision, such failure shall constitute a minor 
informality. Provide offerors an opportunity to remedy a minor 
informality in accordance with the procedures at FAR 14.405 or 
15.306(a). An offeror's failure to correct an informality within the 
time prescribed by the contracting officer shall render the offer 
ineligible for award.
    (2) The procedures for correcting minor informalities shall not be 
used to obtain information regarding asserted restrictions or an 
offeror's suggested asserted rights category. Questions regarding the 
justification for an asserted restriction or asserted rights category 
must be pursued in accordance with the procedures at 227.7203-13.
    (3) The restrictions asserted by a successful offeror shall be 
attached to its contract unless, in accordance with the procedures at 
227.7203-13, the parties have agreed that an asserted restriction is not 
justified. The contract attachment shall provide the same information 
regarding identification of the computer software or computer software 
documentation, the asserted rights category, the basis for the 
assertion, and the name of the person asserting the restrictions as 
required by paragraph (d) of the solicitation provision at 252.227-7017. 
Subsequent to contract award, the clause at 252.227-7014, Rights in 
Noncommercial Computer Software and Noncommercial Computer Software 
Documentation, permits a contractor to make additional assertions under 
certain conditions. The additional assertions must be made in accordance 
with the procedures and in the format prescribed by that clause.
    (4) Neither the pre- or post-award assertions made by the contractor 
nor the fact that certain assertions are identified in the attachment to 
the contract, determine the respective rights of the parties. As 
provided at 227.7203-13, the Government has the right to review, verify, 
challenge and validate restrictive markings.
    (5) Information provided by offerors in response to the solicitation 
provision at 252.227-7017 may be used in the source selection process to 
evaluate the impact on evaluation factors that may be created by 
restrictions on the Government's ability to use or disclose computer 
software or computer software documentation.
    (b) Contractor marking requirements. The clause at 252.227-7014, 
Rights in Noncommercial Computer Software and Noncommercial Computer 
Software Documentation--
    (1) Requires a contractor who desires to restrict the Government's 
rights in computer software or computer software documentation to place 
restrictive markings on the software or documentation, provides 
instructions for the placement of the restrictive markings, and 
authorizes the use of certain restrictive markings. When it is 
anticipated that the software will or may be used in combat or 
situations which simulate combat conditions, do not permit contractors 
to insert instructions into computer programs that interfere with or 
delay operation of the software to display a restrictive rights legend 
or other license notice; and
    (2) Requires a contractor to deliver, furnish, or otherwise provide 
to the Government any computer software or computer software 
documentation in which the Government has previously obtained rights 
with the Government's pre-existing rights in that software or 
documentation unless the parties have agreed otherwise or restrictions 
on the Government's rights to use, modify, produce, release, or disclose 
the software or documentation have expired. When restrictions are still 
applicable, the contractor is permitted to mark the software or 
documentation with the appropriate restrictive legend.
    (c) Unmarked computer software or computer software documentation. 
(1) Computer software or computer software documentation delivered or 
otherwise provided under a contract without restrictive markings shall 
be presumed to have been delivered with unlimited rights and may be 
released or disclosed without restriction. To the extent practicable, if 
a contractor has requested permission (see paragraph (c)(2) of this 
subsection) to correct an inadvertent omission of markings, do not 
release or disclose the software or documentation pending evaluation of 
the request.

[[Page 222]]

    (2) A contractor may request permission to have appropriate legends 
placed on unmarked computer software or computer software documentation 
at its expense. The request must be received by the contracting officer 
within six months following the furnishing or delivery of such software 
or documentation, or any extension of that time approved by the 
contracting officer. The person making the request must--
    (i) Identify the software or documentation that should have been 
marked;
    (ii) Demonstrate that the omission of the marking was inadvertent, 
the proposed marking is justified and conforms with the requirements for 
the marking of computer software or computer software documentation 
contained in the clause at 252.227-7014; and
    (iii) Acknowledge, in writing, that the Government has no liability 
with respect to any disclosure, reproduction, or use of the software or 
documentation made prior to the addition of the marking or resulting 
from the omission of the marking.
    (3) Contracting officers should grant permission to mark only if the 
software or documentation were not distributed outside the Government or 
were distributed outside the Government with restrictions on further use 
or disclosure.

[60 FR 33482, June 28, 1995, as amended at 63 FR 55052, Oct. 14, 1998]



Sec. 227.7203-11  Contractor procedures and records.

    (a) The clause at 252.227-7014, Rights in Noncommercial Computer 
Software and Noncommercial Computer Software Documentation, requires a 
contractor, and its subcontractors or suppliers that will deliver 
computer software or computer software documentation with other than 
unlimited rights, to establish and follow written procedures to assure 
that restrictive markings are used only when authorized and to maintain 
records to justify the validity of restrictive markings.
    (b) The clause at 252.227-7019, Validation of Asserted 
Restrictions--Computer Software, requires contractors and their 
subcontractors or suppliers at any tier to maintain records sufficient 
to justify the validity of markings that assert restrictions on the use, 
modification, reproduction, release, performance, display, or disclosure 
of computer software.



Sec. 227.7203-12  Government right to establish conformity of markings.

    (a) Nonconforming markings. (1) Authorized markings are identified 
in the clause at 252.227-7014, Rights in Noncommercial Computer Software 
and Noncommercial Computer Software Documentation. All other markings 
are nonconforming markings. An authorized marking that is not in the 
form, or differs in substance, from the marking requirements in the 
clause at 252.227-7014 is also a nonconforming marking.
    (2) The correction of nonconforming markings on computer software is 
not subject to 252.227-7019, Validation of Asserted Restrictions--
Computer Software, and the correction of nonconforming markings on 
computer software documentation (technical data) is not subject to 
252.227-7037, Validation of Restrictive Markings on Technical Data. To 
the extent practicable, the contracting officer should return computer 
software or computer software documentation bearing nonconforming 
markings to the person who has placed the nonconforming markings on the 
software or documentation to provide that person an opportunity to 
correct or strike the nonconforming markings at that person's expense. 
If that person fails to correct the nonconformity and return the 
corrected software or documentation within 60 days following the 
person's receipt of the software or documentation, the contracting 
officer may correct or strike the nonconformity at the person's expense. 
When it is impracticable to return computer software or computer 
software documentation for correction, contracting officers may 
unilaterally correct any nonconforming markings at Government expense. 
Prior to correction, the software or documentation may be used in 
accordance with the proper restrictive marking.
    (b) Unjustified markings. (1) An unjustified marking is an 
authorized marking that does not depict accurately restrictions 
applicable to the

[[Page 223]]

Government's use, modification, reproduction, release, or disclosure of 
the marked computer software or computer software documentation. For 
example, a restricted rights legend placed on computer software 
developed under a Government contract either exclusively at Government 
expense or with mixed funding (situations under which the Government 
obtains unlimited or government purpose rights) is an unjustified 
marking.
    (2) Contracting officers have the right to review and challenge the 
validity of unjustified markings. However, at any time during 
performance of a contract and notwithstanding existence of a challenge, 
the contracting officer and the person who has asserted a restrictive 
marking may agree that the restrictive marking is not justified. Upon 
such agreement, the contracting officer may, at his or her election, 
either--
    (i) Strike or correct the unjustified marking at that person's 
expense; or
    (ii) Return the computer software or computer software documentation 
to the person asserting the restriction for correction at that person's 
expense. If the software or documentation are returned and that person 
fails to correct or strike the unjustified restriction and return the 
corrected software or documentation to the contracting officer within 60 
days following receipt of the software or documentation, the unjustified 
marking shall be corrected or stricken at that person's expense.



Sec. 227.7203-13  Government right to review, verify, challenge and 
          validate asserted restrictions.

    (a) General. An offeror's or contractor's assertion(s) of 
restrictions on the Government's rights to use, modify, reproduce, 
release, or disclose computer software or computer software 
documentation do not, by themselves, determine the extent of the 
Government's rights in such software or documentation. The Government 
may require an offeror or contractor to submit sufficient information to 
permit an evaluation of a particular asserted restriction and may 
challenge asserted restrictions when there are reasonable grounds to 
believe that an assertion is not valid.
    (b) Requests for information. Contracting officers should have a 
reason to suspect that an asserted restriction might not be correct 
prior to requesting information. When requesting information, provide 
the offeror or contractor the reason(s) for suspecting that an asserted 
restriction might not be correct. A need for additional license rights 
is not, by itself, a sufficient basis for requesting information 
concerning an asserted restriction. Follow the procedures at 227.7203-
5(d) when additional license rights are needed but there is no basis to 
suspect that an asserted restriction might not be valid.
    (c) Transacting matters directly with subcontractors. The clause at 
252.227-7019, Validation of Asserted Restrictions--Computer Software, 
obtains the contractor's agreement that the Government may transact 
matters under the clause directly with a subcontractor or supplier, at 
any tier, without creating or implying privity of contract. Contracting 
officers should permit a subcontractor or supplier to transact challenge 
and validation matters directly with the Government when--
    (1) A subcontractor's or supplier's business interests in its 
technical data would be compromised if the data were disclosed to a 
higher tier contractor.
    (2) There is reason to believe that the contractor will not respond 
in a timely manner to a challenge and an untimely response would 
jeopardize a subcontractor's or supplier's right to assert restrictions; 
or
    (3) Requested to do so by a subcontractor or supplier.
    (d) Challenging asserted restrictions--(1) Pre-award considerations. 
The challenge procedures in the clause at 252.227-7019 could 
significantly delay competitive procurements. Therefore, avoid 
challenging asserted restrictions prior to a competitive contract award 
unless resolution of the assertion is essential for successful 
completion of the procurement.
    (2) Computer software documentation. Computer software documentation 
is technical data. Challenges to asserted restrictions on the 
Government's rights to use, modify, reproduce, release, perform, 
display, or disclose

[[Page 224]]

computer software documentation must be made in accordance with the 
clause at 252.227-7037, Validation of Restrictive Markings on Technical 
Data, and the guidance at 227.7103-13. The procedures in the clause at 
252.227-7037 implement requirements contained in 10 U.S.C. 2321. 
Resolution of questions regarding the validity of asserted restrictions 
using the process described at 227.7103-12(b)(2) is strongly encouraged.
    (3) Computer software. (i) Asserted restrictions should be reviewed 
before acceptance of the computer software deliverable under a contract. 
The Government's right to challenge an assertion expires three years 
after final payment under the contract or three years after delivery of 
the software, whichever is later. Those limitations on the Government's 
challenge rights do not apply to software that is publicly available, 
has been furnished to the Government without restrictions, or has been 
otherwise made available without restrictions.
    (ii) Contracting officers must have reasonable grounds to challenge 
the current validity of an asserted restriction. Before challenging an 
asserted restriction, carefully consider all available information 
pertaining to the asserted restrictions. Resolution of questions 
regarding the validity of asserted restrictions using the process 
described at 227.7203-12(b)(2) is strongly encouraged. After 
consideration of the situations described in paragraph (c) of this 
subsection, contracting officers may request the person asserting a 
restriction to furnish a written explanation of the facts and supporting 
documentation for the assertion in sufficient detail to enable the 
contracting officer to determine the validity of the assertion. 
Additional supporting documentation may be requested when the 
explanation provided by that person does not, in the contracting 
officer's opinion, establish the validity of the assertion.
    (iii) Assertions may be challenged whether or not supporting 
documentation was requested. Challenges must be in writing and issued to 
the person asserting the restriction.
    (4) Extension of response time. The contracting officer, at his or 
her discretion, may extend the time for response contained in a 
challenge, as appropriate, if the contractor submits a timely written 
request showing the need for additional time to prepare a response.
    (e) Validating or denying asserted restrictions. (1) Contracting 
officers must promptly issue a final decision denying or sustaining the 
validity of each challenged assertion unless the parties have agreed on 
the disposition of the assertion. When a final decision denying the 
validity of an asserted restriction is made following a timely response 
to a challenge, the Government is obligated to continue to respect the 
asserted restrictions through final disposition of any appeal unless the 
agency head notifies the person asserting the restriction that urgent or 
compelling circumstances do not permit the Government to continue to 
respect the asserted restriction. See 252.227-7019(g) for restrictions 
applicable following a determination of urgent and compelling 
circumstances.
    (2) Only a contracting officer's final decision, or actions of an 
agency Board of Contract Appeals or a court of competent jurisdiction, 
that sustain the validity of an asserted restriction constitute 
validation of the restriction.
    (f) Multiple challenges to an asserted restriction. When more than 
one contracting officer challenges an asserted restriction, the 
contracting officer who made the earliest challenge is responsible for 
coordinating the Government challenges. That contracting officer shall 
consult with all other contracting officers making challenges, verify 
that all challenges apply to the same asserted restriction and, after 
consulting with the contractor, subcontractor, or supplier asserting the 
restriction, issue a schedule that provides that person a reasonable 
opportunity to respond to each challenge.



Sec. 227.7203-14  Conformity, acceptance, and warranty of computer 
          software and computer software documentation.

    (a) Computer software documentation. Computer software documentation 
is technical data. See 227.7103-14 for appropriate guidance and 
statutory requirements.

[[Page 225]]

    (b) Computer software--(1) Conformity and acceptance. Solicitations 
and contracts requiring the delivery of computer software shall specify 
the requirements the software must satisfy to be acceptable. Contracting 
officers, or their authorized representatives, are responsible for 
determining whether computer software tendered for acceptance conforms 
to the contractual requirements. Except for nonconforming restrictive 
markings (follow the procedures at 227.7203-12(a) if nonconforming 
markings are the sole reason computer software tendered for acceptance 
fails to conform to contractual requirements), do not accept software 
that does not conform in all respects to applicable contractual 
requirements. Correction or replacement of nonconforming software, or an 
equitable reduction in contract price when correction or replacement of 
the nonconforming data is not practicable or is not in the Government's 
interests, shall be accomplished in accordance with--
    (i) The provisions of a contract clause providing for inspection and 
acceptance of deliverables and remedies for nonconforming deliverables; 
or
    (ii) The procedures at FAR 46.407(c) through (g), if the contract 
does not contain an inspection clause providing remedies for 
nonconforming deliverables.
    (2) Warranties--(i) Weapon systems. Computer software that is a 
component of a weapon system or major subsystem should be warranted as 
part of the weapon system warranty. Follow the procedures at 246.770.
    (ii) Non-weapon systems. Approval of the chief of the contracting 
office must be obtained to use a computer software warranty other than a 
weapon system warranty. Consider the factors at FAR 46.703 in deciding 
whether to obtain a computer software warranty. When approval for a 
warranty has been obtained, the clause at 252.246-7001, Warranty of 
Data, and its alternates, may be appropriately modified for use with 
computer software or a procurement specific clause may be developed.



Sec. 227.7203-15  Subcontractor rights in computer software or computer 
          software documentation.

    (a) Subcontractors and suppliers at all tiers should be provided the 
same protection for their rights in computer software or computer 
software documentation as are provided to prime contractors.
    (b) The clauses at 252.227-7019, Validation of Asserted 
Restrictions--Computer Software, and 252.227-7037, Validation of 
Restrictive Markings on Technical Data, obtain a contractor's agreement 
that the Government's transaction of validation or challenge matters 
directly with subcontractors at any tier does not establish or imply 
privity of contract. When a subcontractor or supplier exercises its 
right to transact validation matters directly with the Government, 
contracting officers shall deal directly with such persons, as provided 
at 227.7203-13(c) for computer software and 227.7103-13(c)(3) for 
computer software documentation (technical data).
    (c) Require prime contractors whose contracts include the following 
clauses to include those clauses, without modification except for 
appropriate identification of the parties, in contracts with 
subcontractors or suppliers who will be furnishing computer software in 
response to a Government requirement (see 227.7103-15(c) for clauses 
required when subcontractors or suppliers will be furnishing computer 
software documentation (technical data)):
    (1) 252.227.7014, Rights in Noncommercial Computer Software and 
Noncommercial Computer Software Documentation;
    (2) 252.227.7019, Validation of Asserted Restrictions--Computer 
Software;
    (3) 252.227.7025, Limitations on the Use or Disclosure of Government 
Furnished Information Marked with Restrictive Legends; and
    (4) 252.227.7028, Technical Data or Computer Software Previously 
Delivered to the Government.
    (d) Do not require contractors to have their subcontractors or 
suppliers at any tier relinquish rights in technical data to the 
contractor, a higher tier subcontractor, or to the Government, as a 
condition for award of any contract, subcontract, purchase order,

[[Page 226]]

or similar instrument except for the rights obtained by the Government 
under the provisions of the Rights in Noncommercial Computer Software 
and Noncommercial Computer Software Documentation clause contained in 
the contractor's contract with the Government.



Sec. 227.7203-16  Providing computer software or computer software 
          
          documentation to foreign governments, foreign contractors, or 
          international organizations.

    Computer software or computer software documentation may be released 
or disclosed to foreign governments, foreign contractors, or 
international organizations only if release or disclosure is otherwise 
permitted both by Federal export controls and other national security 
laws or regulations. Subject to such laws and regulations, the 
Department of Defense--
    (a) May release or disclose computer software or computer software 
documentation in which it has obtained unlimited rights to such foreign 
entities or authorize the use of such data by those entities; and
    (b) Shall not release or disclose computer software or computer 
software documentation for which restrictions on use, release, or 
disclosure have been asserted to such foreign entities or authorize the 
use of such data by those entities, unless the intended recipient is 
subject to the same provisions as included in the use and non-disclosure 
agreement at 227.7103-7 and the requirements of the clause at 252.227-
7014, Rights in Noncommercial Computer Software and Noncommercial 
Computer Software Documentation, governing use, modification, 
reproduction, release, performance, display, or disclosure of such data 
have been satisfied.



Sec. 227.7203-17  Overseas contracts with foreign sources.

    (a) The clause at 252.227-7032, Rights in Technical Data and 
Computer Software (Foreign), may be used in contracts with foreign 
contractors to be performed overseas, except Canadian purchases (see 
paragraph (c) of this subsection) in lieu of the clause at 252.227-7014, 
Rights in Noncommercial Computer Software and Noncommercial Computer 
Software Documentation, when the Government requires the unrestricted 
right to use, modify, reproduce, release, perform, display, or disclose 
all computer software or computer software documentation to be delivered 
under the contract. Do not use the clause in contracts for special 
works.
    (b) When the Government does not require unlimited rights, the 
clause at 252.227-7032 may be modified to accommodate the needs of a 
specific overseas procurement situation. The Government should obtain 
rights to the computer software or computer software documentation that 
are not less than the rights the Government would have obtained under 
the software rights clause(s) prescribed in this part for a comparable 
procurement performed within the United States or its outlying areas.
    (c) Contracts for Canadian purchases shall include the appropriate 
software rights clause prescribed in this part for a comparable 
procurement performed within the United States or its outlying areas.

[56 FR 36389, July 31, 1991, as amended at 70 FR 35545, June 21, 2005]



Sec. 227.7204  Contracts under the Small Business Innovative Research 
          Program.

    When contracting under the Small Business Innovative Research 
Program, follow the procedures at 227-7104.



Sec. 227.7205  Contracts for special works.

    (a) Use the clause at 252.227-7020, Rights in Special Works, in 
solicitations and contracts where the Government has a specific need to 
control the distribution of computer software or computer software 
documentation first produced, created, or generated in the performance 
of a contract and required to be delivered under that contract, 
including controlling distribution by obtaining an assignment of 
copyright, or a specific need to obtain indemnity for liabilities that 
may arise out of the creation, delivery, use, modification, 
reproduction, release, performance, display, or disclosure of such 
software or documentation. Use the clause--

[[Page 227]]

    (1) In lieu of the clause at 252.227-7014, Rights in Noncommercial 
Computer Software and Noncommercial Computer Software Documentation, 
when the Government must own or control copyright in all computer 
software or computer software documentation first produced, created, or 
generated and required to be delivered under a contract; or
    (2) In addition to the clause at 252.227-7014 when the Government 
must own or control copyright in some of the computer software or 
computer software documentation first produced, created, or generated 
and required to be delivered under a contract. The specific software or 
documentation in which the Government must own or control copyright must 
be identified in a special contract requirement.
    (b) Although the Government obtains an assignment of copyright and 
unlimited rights in the computer software or computer software 
documentation delivered as a special work under the clause at 252.227-
7020, the contractor retains use and disclosure rights in that software 
or documentation. If the Government needs to restrict a contractor's 
rights to use or disclose a special work, it must also negotiate a 
special license which specifically restricts the contractor's use or 
disclosure rights.
    (c) The clause at 252.227-7020 does not permit a contractor to 
incorporate into a special work any work copyrighted by others unless 
the contractor obtains the contracting officer's permission to do so and 
obtains for the Government a non-exclusive, paid up, world-wide license 
to make and distribute copies of that work, to prepare derivative works, 
to perform or display any portion of that work, and to permit others to 
do so for government purposes. Grant permission only when the 
Government's requirements cannot be satisfied unless the third party 
work is included in the deliverable work.
    (d) Examples of other works which may be procured under the clause 
at 252.227-7020 include, but are not limited to, audiovisual works, 
scripts, soundtracks, musical compositions, and adaptations; histories 
of departments, agencies, services or units thereof; surveys of 
Government establishments; instructional works or guidance to Government 
officers and employees on the discharge of their official duties; 
reports, books, studies, surveys or similar documents; collections of 
data containing information pertaining to individuals that, if 
disclosed, would violate the right of privacy or publicity of the 
individuals to whom the information relates; or investigative reports.



Sec. 227.7206  Contracts for architect-engineer services.

    Follow 227.7107 when contracting for architect-engineer services.



Sec. 227.7207  Contractor data repositories.

    Follow 227.7108 when it is in the Government's interests to have a 
data repository include computer software or to have a separate computer 
software repository. Contractual instruments establishing the repository 
requirements must appropriately reflect the repository manager's 
software responsibilities.

                      PART 228_BONDS AND INSURANCE

                           Subpart 228.1_Bonds

Sec.

Sec. 228.102 Performance and payment bonds for construction contracts.

Sec. 228.102-1 General.

Sec. 228.102-70 Defense Environmental Restoration Program construction 
          contract.

Sec. 228.105 Other types of bonds.

Sec. 228.106 Administration.

Sec. 228.106-7 Withholding contract payments.

Sec. 228.170 Solicitation provision.

                         Subpart 228.3_Insurance


Sec. 228.304 Risk-pooling arrangements.

Sec. 228.305 Overseas workers' compensation and war-hazard insurance.

Sec. 228.307 Insurance under cost-reimbursement contracts.

Sec. 228.307-1 Group insurance plans.

Sec. 228.311 Solicitation provision and contract clause on liability 
          insurance under cost-reimbursement contracts.

Sec. 228.311-1 Contract clause.

Sec. 228.370 Additional clauses.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36404, July 31, 1991, unless otherwise noted.

[[Page 228]]

                           Subpart 228.1_Bonds



Sec. 228.102  Performance and payment bonds for construction contracts.



Sec. 228.102-1  General.

    The requirement for performance and payment bonds is waived for 
cost-reimbursement contracts. However, for cost-type contracts with 
fixed-price construction subcontracts over $30,000, require the prime 
contractor to obtain from each of its construction subcontractors 
performance and payment protections in favor of the prime contractor as 
follows:
    (1) For fixed-price construction subcontracts over $30,000, but not 
exceeding $150,000, payment protection sufficient to pay labor and 
material costs, using any of the alternatives listed at FAR 28.102-
1(b)(1).
    (2) For fixed-price construction subcontracts over $100,000--
    (i) A payment bond sufficient to pay labor and material costs; and
    (ii) A performance bond in an equal amount if available at no 
additional cost.

[68 FR 36945, June 20, 2003, as amended at 71 FR 75892, Dec. 19, 2006; 
75 FR 45074, Aug. 2, 2010]



Sec. 228.102-70  Defense Environmental Restoration Program construction 
          contracts.

    For Defense Environmental Restoration Program construction contracts 
entered into pursuant to 10 U.S.C. 2701--
    (a) Any rights of action under the performance bond shall only 
accrue to, and be for the exclusive use of, the obligee named in the 
bond;
    (b) In the event of default, the surety's liability on the 
performance bond is limited to the cost of completion of the contract 
work, less the balance of unexpended funds. Under no circumstances shall 
the liability exceed the penal sum of the bond;
    (c) The surety shall not be liable for indemnification or 
compensation of the obligee for loss or liability arising from personal 
injury or property damage, even if the injury or damage was caused by a 
breach of the bonded contract; and
    (d) Once it has taken action to meet its obligations under the bond, 
the surety is entitled to any indemnification and identical standard of 
liability to which the contractor was entitled under the contract or 
applicable laws and regulations.

[68 FR 36945, June 20, 2003]



Sec. 228.105  Other types of bonds.

    Fidelity and forgery bonds generally are not required but are 
authorized for use when--
    (1) Necessary for the protection of the Government or the 
contractor; or
    (2) The investigative and claims services of a surety company are 
desired.

[70 FR 8538, Feb. 22, 2005]



Sec. 228.106  Administration.



Sec. 228.106-7  Withholding contract payments.

    (a) Withholding may be appropriate in other than construction 
contracts (see FAR 32.112-1(b)).

[57 FR 42707, Sept. 16, 1992, as amended at 70 FR 8538, Feb. 22, 2005]



Sec. 228.170  Solicitation provision.

    When a requirement for a performance bond or other security is 
included in a solicitation for dismantling, demolition, or removal of 
improvements (see FAR 37.300), use the provision at 252.228-7004, Bonds 
or Other Security. Set a period of time (normally ten days) for return 
of executed bonds.

                         Subpart 228.3_Insurance



Sec. 228.304  Risk-pooling arrangements.

    DoD has established the National Defense Projects Rating Plan, also 
known as the Special Casualty Insurance Rating Plan, as a risk-pooling 
arrangement to minimize the cost to the Government of purchasing the 
liability insurance listed in FAR 28.307-2. Use the plan in accordance 
with the procedures at PGI 228.304 when it provides the necessary 
coverage more advantageously than commercially available coverage.

[69 FR 65091, Nov. 10, 2004]

[[Page 229]]



Sec. 228.305  Overseas workers' compensation and war-hazard insurance.

    (d) When submitting requests for waiver, follow the procedures at 
PGI 228.305(d).

[69 FR 65091, Nov. 10, 2004]



Sec. 228.307  Insurance under cost-reimbursement contracts.



Sec. 228.307-1  Group insurance plans.

    The Defense Department Group Term Insurance Plan is available for 
contractor use under cost-reimbursement type contracts when approved as 
provided in department or agency regulations. A contractor is eligible 
if--
    (a) The number of covered employees is 500 or more; and
    (b) The contractor has all cost-reimbursement contracts; or
    (c) At least 90 percent of the payroll for contractor operations to 
be covered by the Plan is under cost-reimbursement contracts.



Sec. 228.311  Solicitation provision and contract clause on liability 
          insurance under cost-reimbursement contracts.



Sec. 228.311-1  Contract clause.

    Use the clause at FAR 52.228-7, Insurance--Liability to Third 
Persons, in solicitations and contracts, other than those for 
construction and those for architect-engineer services, when a cost-
reimbursement contract is contemplated, unless the head of the 
contracting activity waives the requirement for use of the clause.

[56 FR 36404, July 31, 1991. Redesignated at 61 FR 50454, Sept. 26, 
1996]



Sec. 228.370  Additional clauses.

    (a) Use the clause at 252.228-7000, Reimbursement for War-Hazard 
Losses, when--
    (1) The clause at FAR 52.228-4, Worker's Compensation and War-Hazard 
Insurance Overseas, is used; and
    (2) The head of the contracting activity decides not to allow the 
contractor to buy insurance for war-hazard losses.
    (b)(1) Use the clause at 252.228-7001, Ground and Flight Risk, in 
all solicitations and contracts for the acquisition, development, 
production, modification, maintenance, repair, flight, or overhaul of 
aircraft, except those solicitations and contracts--
    (i) That are strictly for activities incidental to the normal 
operations of the aircraft (e.g., refueling operations, minor non-
structural actions not requiring towing such as replacing aircraft tires 
due to wear and tear);
    (ii) That are awarded under FAR Part 12 procedures and are for the 
development, production, modification, maintenance, repair, flight, or 
overhaul of aircraft; or otherwise involving the furnishing of aircraft;
    (iii) For which a non-DoD customer (including a foreign military 
sales customer) has not agreed to assume the risk for loss or 
destruction of, or damages to, the aircraft; or
    (iv) For commercial derivative aircraft that are to be maintained to 
Federal Aviation Administration (FAA) airworthiness when the work will 
be performed at a licensed FAA repair station.
    (2) The clause at 252.228-7001 may be modified only as follows:
    (i) Include a modified definition of ``aircraft'' if the contract 
covers other than conventional types of winged aircraft, i.e., 
helicopters, vertical take-off or landing aircraft, lighter-than-air 
airships, unmanned aerial vehicles, or other nonconventional aircraft. 
The modified definition should describe a stage of manufacture 
comparable to the standard definition.
    (ii) Modify ``in the open'' to include ``hush houses,'' test hangars 
and comparable structures, and other designated areas.
    (iii) Expressly define the ``contractor's premises'' where the 
aircraft will be located during and for contract performance. These 
locations may include contract premises which are owned or leased by the 
contractor or subcontractor, or premises where the contractor or 
subcontractor is a permittee or licensee or has a right to use, 
including Government airfields.
    (iv) Revise paragraph (e)(3) of the clause to provide Government 
assumption of risk for transportation by conveyance on streets or 
highways when transportation is--
    (A) Limited to the vicinity of contractor premises; and

[[Page 230]]

    (B) Incidental to work performed under the contract.
    (3) Follow the procedures at PGI 228.370(b) when using the clause at 
252.228-7001.
    (c) The clause at 252.228-7003, Capture and Detention, may be used 
when contractor employees are subject to capture and detention and may 
not be covered by the War Hazards Compensation Act (42 U.S.C. 1701 et 
seq.).
    (d) The clause at 252.228-7005, Accident Reporting and Investigation 
Involving Aircraft, Missiles, and Space Launch Vehicles, may be used in 
solicitations and contracts which involve the manufacture, modification, 
overhaul, or repair of these items.
    (e) Use the clause at 252.228-7006, Compliance with Spanish Laws and 
Insurance, in solicitations and contracts for services or construction 
to be performed in Spain, unless the contractor is a Spanish concern.

[56 FR 36404, July 31, 1991, as amended at 57 FR 42631, Sept. 15, 1992; 
62 FR 34125, June 24, 1997; 63 FR 69006, Dec. 15, 1998; 75 FR 32644, 
June 8, 2010]

                             PART 229_TAXES

                          Subpart 229.1_General

Sec.

Sec. 229.101 Resolving tax problems.

Sec. 229.170 Reporting of foreign taxation on U.S. assistance programs.

Sec. 229.170-1 Definition.

Sec. 229.170-2 Policy.

Sec. 229.170-3 Reports.

Sec. 229.170-4 Contract clause.

                     Subpart 229.4_Contract Clauses


Sec. 229.402 Foreign contracts.

Sec. 229.402-1 Foreign fixed-price contracts.

Sec. 229.402-70 Additional clauses.

Subpart 229.70--Special Procedures for Overseas Contracts

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36405, July 31, 1991, unless otherwise noted.

                          Subpart 229.1_General



Sec. 229.101  Resolving tax problems.

    (a) Within DoD, the agency-designated legal counsels are the defense 
agency General Counsels, the General Counsels of the Navy and Air Force, 
and for the Army, the Chief, Contract Law Division, Office of the Judge 
Advocate General. For additional information on the designated legal 
counsels, see PGI 229.101(a).
    (b) For information on fuel excise taxes, see PGI 229.101(b).
    (c) For guidance on directing a contractor to litigate the 
applicability of a particular tax, see PGI 229.101(c).
    (d) For information on tax relief agreements between the United 
States and European foreign governments, see PGI 229.101(d).

[70 FR 8538, Feb. 22, 2005, as amended at 71 FR 14100, Mar. 21, 2006]



Sec. 229.170  Reporting of foreign taxation on U.S. assistance programs.



Sec. 229.170-1  Definition.

    Commodities, as used in this section, means any materials, articles, 
supplies, goods, or equipment.

[70 FR 57192, Sept. 30, 2005]



Sec. 229.170-2  Policy.

    (a) By law, bilateral agreements with foreign governments must 
include a provision that commodities acquired under contracts funded by 
U.S. assistance programs shall be exempt from taxation by the foreign 
government. If taxes or customs duties nevertheless are imposed, the 
foreign government must reimburse the amount of such taxes to the U.S. 
Government (Section 579 of Division E of the Consolidated Appropriations 
Act, 2003 (Pub. L. 108-7), as amended by Section 506 of Division D of 
the Consolidated Appropriations Act, 2004 (Pub. L. 108-199), and similar 
sections in subsequent acts).
    (b) This foreign tax exemption--
    (1) Applies to a contract or subcontract for commodities when--
    (i) The funds are appropriated by the annual foreign operations 
appropriations act; and
    (ii) The value of the contract or subcontract is $500 or more;
    (2) Does not apply to the acquisition of services;
    (3) Generally is implemented through letters of offer and 
acceptance, other country-to-country agreements, or Federal interagency 
agreements; and

[[Page 231]]

    (4) Requires reporting of noncompliance for effective 
implementation.

[70 FR 57192, Sept. 30, 2005]



Sec. 229.170-3  Reports.

    The contracting officer shall submit a report to the designated 
Security Assistance Office when a foreign government or entity imposes 
tax or customs duties on commodities acquired under contracts or 
subcontracts meeting the criteria of 229.170-2(b)(1). Follow the 
procedures at PGI 229.170-3 for submission of reports.

[70 FR 57192, Sept. 30, 2005]



Sec. 229.170-4  Contract clause.

    Use the clause at 252.229-7011, Reporting of Foreign Taxes--U.S. 
Assistance Programs, in solicitations and contracts funded with U.S. 
assistance appropriations provided in the annual foreign operations 
appropriations act.

[70 FR 57192, Sept. 30, 2005]

                     Subpart 229.4_Contract Clauses

    Source: 62 FR 34125, June 24, 1997, unless otherwise noted.



Sec. 229.402  Foreign contracts.



Sec. 229.402-1  Foreign fixed-price contracts.

    Use the clause at 252.229-7000, Invoices Exclusive of Taxes or 
Duties, in solicitations and contracts when a fixed-price contract will 
be awarded to a foreign concern.



Sec. 229.402-70  Additional clauses.

    (a) Use the clause at 252.229-7001, Tax Relief, in solicitations and 
contracts when a contract will be awarded to a foreign concern in a 
foreign country. When contract performance will be in Germany, use the 
clause with its Alternate I.
    (b) Use the clause at 252.229-7002, Customs Exemptions (Germany), in 
solicitations and contracts requiring the import of U.S. manufactured 
products into Germany.
    (c) Use the clause at 252.229-7003, Tax Exemptions (Italy), in 
solicitations and contracts when contract performance will be in Italy.
    (d) Use the clause at 252.229-7004, Status of Contractor as a Direct 
Contractor (Spain), in solicitations and contracts requiring the import 
into Spain of supplies for construction, development, maintenance, or 
operation of Spanish-American installations and facilities.
    (e) Use the clause at 252.229-7005, Tax Exemptions (Spain), in 
solicitations and contracts when contract performance will be in Spain.
    (f) Use the clause at 252.229-7006, Value Added Tax Exclusion 
(United Kingdom), in solicitations and contracts when contract 
performance will be in the United Kingdom.
    (g) Use the clause at 252.229-7007, Verification of United States 
Receipt of Goods, in solicitations and contracts when contract 
performance will be in the United Kingdom.
    (h) Use the clause at 252.229-7008, Relief from Import Duty (United 
Kingdom), in solicitations issued and contracts awarded in the United 
Kingdom.
    (i) Use the clause at 252.229-7009, Relief from Customs Duty and 
Value Added Tax on Fuel (Passenger Vehicles) (United Kingdom), in 
solicitations issued and contracts awarded in the United Kingdom for 
fuels (gasoline or diesel) and lubricants used in passenger vehicles 
(excluding taxis).
    (j) Use the clause at 252.229-7010, Relief from Customs Duty on Fuel 
(United Kingdom), in solicitations issued and contracts awarded in the 
United Kingdom that require the use of fuels (gasoline or diesel) and 
lubricants in taxis or vehicles other than passenger vehicles.

        Subpart 229.70_Special Procedures for Overseas Contracts

    Source: 70 FR 6375, Feb. 7, 2005, unless otherwise noted.
    Note: To obtain tax relief for overseas contracts, follow the 
procedures at PGI 229.70.

            PART 230_COST ACCOUNTING STANDARDS ADMINISTRATION

                 Subpart 230.2_CAS Program Requirements

Sec.

Sec. 230.201-5 Waiver.


[[Page 232]]


    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36406, July 31, 1991, unless otherwise noted.

                 Subpart 230.2_CAS Program Requirements



Sec. 230.201-5  Waiver.

    (a)(1)(A) The military departments and the Director, Defense 
Procurement and Acquisition Policy, Office of the Under Secretary of 
Defense (Acquisition, Technology, and Logistics)--
    (1) May grant CAS waivers that meet the conditions in FAR 30.201-
5(b)(1); and
    (2) May grant CAS waivers that meet the conditions in FAR 30.201-
5(b)(2), provided the cognizant Federal agency official granting the 
waiver determines that--
    (i) The property or services cannot reasonably be obtained under the 
contract, subcontract, or modification, as applicable, without granting 
the waiver;
    (ii) The price can be determined to be fair and reasonable without 
the application of the Cost Accounting Standards; and
    (iii) There are demonstrated benefits to granting the waiver.
    (B) Follow the procedures at PGI 230.201-5(a)(1) for submitting 
waiver requests to the Director, Defense Procurement and Acquisition 
Policy.
    (2) The military departments shall not delegate CAS waiver authority 
below the individual responsible for issuing contracting policy for the 
department.
    (e) By November 30th of each year, the military departments shall 
provide a report to the Director, Defense Procurement and Acquisition 
Policy, ATTN: DPAP/CPF, of all waivers granted under FAR 30.201-5(a), 
during the previous fiscal year, for any contract, subcontract, or 
modification expected to have a value of $15,000,000 or more. See PGI 
230.201-5(e) for format and guidance for the report. The Director, 
Defense Procurement and Acquisition Policy, will submit a consolidated 
report to the CAS Board and the congressional defense committees.

[71 FR 69495, Dec. 1, 2006]

            PART 231_CONTRACT COST PRINCIPLES AND PROCEDURES

                       Subpart 231.1_Applicability

Sec.

Sec. 231.100 Scope of subpart.

Sec. 231.100-70 Contract clause.

          Subpart 231.2_Contracts With Commercial Organizations


Sec. 231.205 Selected costs.

Sec. 231.205-1 Public relations and advertising costs.

Sec. 231.205-6 Compensation for personal services.

Sec. 231.205-18 Independent research and development and bid and 
          proposal costs.

Sec. 231.205-19 Insurance and indemnification.

Sec. 231.205-22 Legislative lobbying costs.

Sec. 231.205-70 External restructuring costs.

          Subpart 231.3_Contracts With Educational Institutions


Sec. 231.303 Requirements.

  Subpart 231.6_Contracts With State, Local, and Federally Recognized 
                        Indian Tribal Governments


Sec. 231.603 Requirements.

          Subpart 231.7_Contracts With Nonprofit Organizations


Sec. 231.703 Requirements.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36408, July 31, 1991, unless otherwise noted.

                       Subpart 231.1_Applicability



Sec. 231.100  Scope of subpart.



Sec. 231.100-70  Contract clause.

    Use the clause at 252.231-7000, Supplemental Cost Principles, in all 
solicitations and contracts which are subject to the principles and 
procedures described in FAR subpart 31.1, 31.2, 31.6, or 31.7.

[59 FR 27672, May 27, 1994]

[[Page 233]]

          Subpart 231.2_Contracts With Commercial Organizations



Sec. 231.205  Selected costs.



Sec. 231.205-1  Public relations and advertising costs.

    (e) See 225.7303-2(e) for allowability provisions affecting foreign 
military sales contracts.
    (f) Unallowable public relations and advertising costs also include 
monies paid to the Government associated with the leasing of Government 
equipment, including lease payments and reimbursement for support 
services, except for foreign military sales contracts as provided for at 
225.7303-2.

[74 FR 68382, Dec. 24, 2009]



Sec. 231.205-6  Compensation for personal services.

    (f)(1) In accordance with Section 8122 of Pub. L. 104-61, and 
similar sections in subsequent Defense appropriations acts, costs for 
bonuses or other payments in excess of the normal salary paid by the 
contractor to an employee, that are part of restructuring costs 
associated with a business combination, are unallowable under DoD 
contracts funded by fiscal year 1996 or subsequent appropriations. This 
limitation does not apply to severance payments or early retirement 
incentive payments. (See 231.205-70(b) for the definitions of ``business 
combination'' and ``restructuring costs.'')

[57 FR 53600, Nov. 12, 1992, as amended at 58 FR 28469, May 13, 1993; 60 
FR 2331, Jan. 9, 1995; 60 FR 61598, Nov. 30, 1995; 61 FR 7077, Feb. 26, 
1996; 61 FR 36306, July 10, 1996; 61 FR 50454, Sept. 26, 1996; 61 FR 
58490, Nov. 15, 1996; 61 FR 65479, Dec. 13, 1996; 62 FR 63036, Nov. 26, 
1997; 63 FR 14641, Mar. 26, 1998]



Sec. 231.205-18  Independent research and development and bid and 
          proposal costs.

    (a) Definitions. As used in this subsection--
    (i) Covered contract means a DoD prime contract for an amount 
exceeding the simplified acquisition threshold, except for a fixed-price 
contract without cost incentives. The term also includes a subcontract 
for an amount exceeding the simplified acquisition threshold, except for 
a fixed-price subcontract without cost incentives under such a prime 
contract.
    (ii) Covered segment means a product division of the contractor that 
allocated more than $1,100,000 in independent research and development 
and bid and proposal (IR&D/B&P) costs to covered contracts during the 
preceding fiscal year. In the case of a contractor that has no product 
divisions, the term means that contractor as a whole. A product division 
of the contractor that allocated less than $1,100,000 in IR&D/B&P costs 
to covered contracts during the preceding fiscal year is not subject to 
the limitations in paragraph (c) of this subsection.
    (iii) Major contractor means any contractor whose covered segments 
allocated a total of more than $11,000,000 in IR&D/B&P costs to covered 
contracts during the preceding fiscal year. For purposes of calculating 
the dollar threshold amounts to determine whether a contractor meets the 
definition of ``major contractor,'' do not include contractor segments 
allocating less than $1,100,000 of IR&D/B&P costs to covered contracts 
during the preceding fiscal year.
    (c) Allowability. (i) Departments/agencies shall not supplement this 
regulation in any way that limits IR&D/B&P cost allowability.
    (ii) See 225.7303-2(c) for allowability provisions affecting foreign 
military sale contracts.
    (iii) For major contractors, the following limitations apply:
    (A) The amount of IR&D/B&P costs allowable under DoD contracts shall 
not exceed the lesser of--
    (1) Such contracts' allocable share of total incurred IR&D/B&O 
costs; or
    (2) The amount of incurred IR&D/B&P costs for projects having 
potential interest to DoD.
    (B) Allowable IR&D/B&P costs are limited to those for projects that 
are of potential interest to DoD, including activities intended to 
accomplish any of the following:
    (1) Enable superior performance of future U.S. weapon systems and 
components.
    (2) Reduce acquisition costs and life-cycle costs of military 
systems.

[[Page 234]]

    (3) Strengthen the defense industrial and technology base of the 
United States.
    (4) Enhance the industrial competitiveness of the United States.
    (5) Promote the development of technologies identified as critical 
under 10 U.S.C. 2522.
    (6) Increase the development and promotion of efficient and 
effective applications of dual-use technologies.
    (7) Provide efficient and effective technologies for achieving such 
environmental benefits as: Improved environmental data gathering, 
environmental cleanup and restoration, pollution reduction in 
manufacturing, environmental conservation, and environmentally safe 
management of facilities.
    (iv) For major contractors, the cognizant administrative contracting 
officer (ACO) or corporate ACO shall--
    (A) Determine whether IR&D/B&P projects are of potential interest to 
DoD; and
    (B) Provide the results of the determination to the contractor.
    (v) The cognizant contract administration office shall furnish 
contractors with guidance on financial information needed to support 
IR&D/B&P costs and on technical information needed from major 
contractors to support the potential interest to DoD determination (also 
see 242.771-3).

[64 FR 8729, Feb. 23, 1999]



Sec. 231.205-19  Insurance and indemnification.

    (e) In addition to the cost limitations in FAR 31.205-19(e), self-
insurance and purchased insurance costs are subject to the requirements 
of the clauses at 252.217-7012, Liability and Insurance, and 252.228-
7001, Ground and Flight Risk.

[75 FR 32645, June 8, 2010]



Sec. 231.205-22  Legislative lobbying costs.

    (a) Costs associated with preparing any material, report, list, or 
analysis on the actual or projected economic or employment impact in a 
particular State or congressional district of an acquisition program for 
which all research, development, testing, and evaluation has not been 
completed also are unallowable (10 U.S.C. 2249).

[69 FR 63332, Nov. 1, 2004]



Sec. 231.205-70  External restructuring costs.

    (a) Scope. This subsection--
    (1) Prescribes policies and procedures for allowing contractor 
external restructuring costs when savings would result for DoD; and
    (2) Implements 10 U.S.C. 2325.
    (b) Definitions. As used in this subsection:
    (1) Business combination means a transaction whereby assets or 
operations of two or more companies not previously under common 
ownership or control are combined, whether by merger, acquisition, or 
sale/purchase of assets.
    (2) External restructuring activities means restructuring activities 
occurring after a business combination that affect the operations of 
companies not previously under common ownership or control. They do not 
include restructuring activities occurring after a business combination 
that affect the operations of only one of the companies not previously 
under common ownership or control, or, when there has been no business 
combination, restructuring activities undertaken within one company. 
External restructuring activities are a direct outgrowth of a business 
combination. They normally will be initiated within 3 years of the 
business combination.
    (3) Restructuring activities means nonroutine, nonrecurring, or 
extraordinary activities to combine facilities, operations, or 
workforce, in order to eliminate redundant capabilities, improve future 
operations, and reduce overall costs. Restructuring activities do not 
include routine or ongoing repositionings and redeployments of a 
contractor's productive facilities or workforce (e.g., normal plant 
rearrangement or employee relocation), nor do they include other routine 
or ordinary activities charged as indirect costs that would otherwise 
have been incurred (e.g., planning and analysis, contract administration 
and oversight, or recurring financial and administrative support).

[[Page 235]]

    (4) Restructuring costs means the costs, including both direct and 
indirect, of restructuring activities. Restructuring costs that may be 
allowed include, but are not limited to, severance pay for employees, 
early retirement incentive payments for employees, employee retraining 
costs, relocation expense for retained employees, and relocation and 
rearrangement of plant and equipment. For purposes of this definition, 
if restructuring costs associated with external restructuring activities 
allocated to DoD contracts are less than $2.5 million, the costs shall 
not be subject to the audit, review, and determination requirements of 
paragraph (c)(4) of this subsection; instead, the normal rules for 
determining cost allowability in accordance with FAR part 31 shall 
apply.
    (5) Restructuring savings means cost reductions, including both 
direct and indirect cost reductions, that result from restructuring 
activities. Reassignments of cost to future periods are not 
restructuring savings.
    (c) Limitations on cost allowability. Restructuring costs associated 
with external restructuring activities shall not be allowed unless--
    (1) Such costs are allowable in accordance with FAR part 31 and 
DFARS part 231;
    (2) An audit of projected restructuring costs and restructuring 
savings is performed;
    (3) The cognizant administrative contracting officer (ACO) reviews 
the audit report and the projected costs and projected savings, and 
negotiates an advance agreement in accordance with paragraph (d) of this 
subsection; and
    (4)(i) The official designated in paragraph (c)(4)(ii) of this 
subsection determines in writing that the audited projected savings, on 
a present value basis, for DoD resulting from the restructuring will 
exceed either--
    (A) The costs allowed by a factor of at least two to one; or
    (B) The costs allowed, and the business combination will result in 
the preservation of a critical capability that might otherwise be lost 
to DoD.
    (ii)(A) If the amount of restructuring costs is expected to exceed 
$25 million over a 5-year period, the designated official is the Under 
Secretary of Defense (Acquisition, Technology, and Logistics) or the 
Principal Deputy. This authority may not be delegated below the level of 
an Assistant Secretary of Defense.
    (B) For all other cases, the designated official is the Director of 
the Defense Contract Management Agency. The Director may not delegate 
this authority.
    (d) Procedures and ACO responsibilities. As soon as it is known that 
the contractor will incur restructuring costs for external restructuring 
activities, the cognizant ACO shall follow the procedures at PGI 
231.205-70(d).
    (e) Information needed to obtain a determination. (1) The novation 
agreement (if one is required).
    (2) The contractor's restructuring proposal.
    (3) The proposed advance agreement.
    (4) The audit report.
    (5) Any other pertinent information.
    (6) The cognizant ACO's recommendation for a determination. This 
recommendation must clearly indicate one of the following, consistent 
with paragraph (c)(4)(i) of this subsection:
    (i) The audited projected savings for DoD will exceed the costs 
allowed by a factor of at least two to one on a present value basis.
    (ii) The business combination will result in the preservation of a 
critical capability that might otherwise be lost to DoD, and the audited 
projected savings for DoD will exceed the costs allowed on a present 
value basis.
    (f) Contracting officer responsibilities. (1) The contracting 
officer, in consultation with the cognizant ACO, should consider 
including a repricing clause in noncompetitive fixed-price contracts 
that are negotiated during the period between--
    (i) The time a business combination is announced; and
    (ii) The time the contractor's forward pricing rates are adjusted to 
reflect the impact of restructuring.
    (2) The decision to use a repricing clause will depend upon the 
particular circumstances involved, including--
    (i) When the restructuring will take place;
    (ii) When restructuring savings will begin to be realized;

[[Page 236]]

    (iii) The contract performance period;
    (iv) Whether the contracting parties are able to make a reasonable 
estimate of the impact of restructuring on the contract; and
    (v) The size of the potential dollar impact of restructuring on the 
contract.
    (3) If the contracting officer decides to use a repricing clause, 
the clause must provide for a downward-only price adjustment to ensure 
that DoD receives its appropriate share of restructuring net savings.

[63 FR 7309, Feb. 13, 1998; 63 FR 12862, Mar. 16, 1998, as amended at 64 
FR 18828, Apr. 16, 1999; 65 FR 39705, June 27, 2000; 68 FR 7440, Feb. 
14, 2003; 69 FR 63332, Nov. 1, 2004; 70 FR 43075, July 26, 2005]

          Subpart 231.3_Contracts With Educational Institutions



Sec. 231.303  Requirements.

    (1) Pursuant to section 841 of the National Defense Authorization 
Act for Fiscal Year 1994 (Pub. L. 103-160), no limitation may be placed 
on the reimbursement of otherwise allowable indirect costs incurred by 
an institution of higher education under a DoD contract awarded on or 
after November 30, 1993, unless that same limitation is applied 
uniformly to all other organizations performing similar work under DoD 
contracts. The 26 percent limitation imposed on administrative indirect 
costs by OMB Circular No. A-21 shall not be applied to DoD contracts 
awarded on or after November 30, 1993, to institutions of higher 
education because the same limitation is not applied to other 
organizations performing similar work.
    (2) The cognizant administrative contracting officer may waive the 
prohibition in 231.303(1) if the governing body of the institution of 
higher education requests the waiver to simplify the institution's 
overall management of DoD cost reimbursements under DoD contracts.
    (3) Under 10 U.S.C. 2249, the costs cited in 231.205-22(a) are 
unallowable.

[59 FR 26144, May 19, 1994, as amended at 60 FR 2331, Jan. 9, 1995; 61 
FR 36306, July 10, 1996; 62 FR 47155, Sept. 8, 1997; 63 FR 14641, Mar. 
26, 1998]

  Subpart 231.6_Contracts With State, Local, and Federally Recognized 
                        Indian Tribal Governments



Sec. 231.603  Requirements.

    Under 10 U.S.C. 2249, the costs cited in 231.205-22(a) are 
unallowable.

[61 FR 36306, July 10, 1996, as amended at 62 FR 47155, Sept. 8, 1997; 
63 FR 14641, Mar. 26, 1998]

          Subpart 231.7_Contracts With Nonprofit Organizations



Sec. 231.703  Requirements.

    Under 10 U.S.C. 2249, the costs cited in 231.205-22(a) are 
unallowable.

[61 FR 36306, July 10, 1996, as amended at 62 FR 47155, Sept. 8, 1997; 
63 FR 14641, Mar. 26, 1998]

                       PART 232_CONTRACT FINANCING

Sec.

Sec. 232.001 Definitions.

Sec. 232.006 Reduction or suspension of contract payments upon finding 
          of fraud.

Sec. 232.006-5 Reporting.

Sec. 232.007 Contract financing payments.

Sec. 232.070 Responsibilities.

Sec. 232.071 [Reserved]

Sec. 232.072 Financial responsibility of contractors.

Sec. 232.072-1 Required financial reviews.

Sec. 232.072-2 Appropriate information.

Sec. 232.072-3 Cash flow forecasts.

          Subpart 232.1_Non-Commercial Item Purchase Financing


Sec. 232.102 Description of contract financing methods.

Sec. 232.102-70 Provisional delivery payments.

            Subpart 232.2_Commercial Item Purchase Financing


Sec. 232.202-4 Security for Government financing.

Sec. 232.206 Solicitation provisions and contract clauses.

          Subpart 232.3_Loan Guarantees for Defense Production


Sec. 232.302 Authority.

         Subpart 232.4_Advance Payments for Non-Commercial Items


Sec. 232.404 Exclusions.

[[Page 237]]


Sec. 232.409 Contracting officer action.

Sec. 232.409-1 Recommendation for approval.

Sec. 232.410 Findings, determination, and authorization.

Sec. 232.412 Contract clause.

Sec. 232.412-70 Additional clauses.

Sec. 232.470 Advance payment pool.

             Subpart 232.5_Progress Payments Based on Costs


Sec. 232.501 General.

Sec. 232.501-1 Customary progress payment rates.

Sec. 232.501-2 Unusual progress payments.

Sec. 232.501-3 Contract price.

Sec. 232.502 Preaward matters.

Sec. 232.502-1 Use of customary progress payments.

Sec. 232.502-4 Contract clauses.

Sec. 232.502-4-70 Additional clauses.

Sec. 232.503 Postaward matters.

Sec. 232.503-6 Suspension or reduction of payments.

Sec. 232.503-15 Application of Government title terms.

                      Subpart 232.6_Contract Debts


Sec. 232.605 Responsibilities and cooperation among Government 
          officials.

Sec. 232.606 Debt determination and collection.

Sec. 232.610 Demand for payment of contract debt.

Sec. 232.616 Compromise actions.

Sec. 232.617 Contract clause.

Sec. 232.670 Transfer of responsibility for debt collection.

Sec. 232.671 Bankruptcy reporting.

                     Subpart 232.7_Contract Funding


Sec. 232.702 Policy.

Sec. 232.703 Contract funding requirements.

Sec. 232.703-1 General.

Sec. 232.703-3 Contracts crossing fiscal years.

Sec. 232.703-70 Military construction appropriations act restriction.

Sec. 232.704 Limitation of cost or funds.

Sec. 232.704-70 Incrementally funded fixed-price contracts.

Sec. 232.705 Contract clauses.

Sec. 232.705-70 Clause for limitation of Government's obligation.

                   Subpart 232.8_Assignment of Claims


Sec. 232.803 Policies.

Sec. 232.805 Procedure.

Sec. 232.806 Contract clause.

                      Subpart 232.9_Prompt Payment


Sec. 232.901 Applicability.

Sec. 232.903 Responsibilities.

Sec. 232.904 Determining payment due dates.

Sec. 232.906 Making payments.

Sec. 232.908 Contract clauses.

                Subpart 232.10_Performance-Based Payments


Sec. 232.1001 Policy.

Sec. 232.1004 Procedure.

                Subpart 232.11_Electronic Funds Transfer


Sec. 232.1110 Solicitation provision and contract clauses.

Subpart 232.70_Electronic Submission and Processing of Payment Requests 
                          and Receiving Reports


Sec. 232.7000 Scope of subpart.

Sec. 232.7001 Definitions.

Sec. 232.7002 Policy.

Sec. 232.7003 Procedures.

Sec. 232.7004 Contract clause.

               Subpart 232.71_Levies on Contract Payments


Sec. 232.7100 Scope of subpart.

Sec. 232.7101 Policy and procedures.

Sec. 232.7102 Contract clause.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36409, July 31, 1991, unless otherwise noted.



Sec. 232.001  Definitions.

    Incremental funding means the partial funding of a contract or an 
exercised option, with additional funds anticipated to be provided at a 
later time.

[71 FR 18673, Apr. 12, 2006]



Sec. 232.006  Reduction or suspension of contract payments upon finding 
          of fraud.



Sec. 232.006-5  Reporting.

    Departments and agencies in accordance with department/agency 
procedures, shall prepare and submit to the Under Secretary of Defense 
(Acquisition, Technology, and Logistics), through the Director of 
Defense Procurement and Acquisition Policy, annual reports (Report 
Control Symbol DD-AT&L(A) 1891) containing the information required by 
FAR 32.006-5.

[63 FR 11535, Mar. 9, 1998, as amended at 65 FR 39705, June 27, 2000; 68 
FR 7440, Feb. 14, 2003]

[[Page 238]]



Sec. 232.007  Contract financing payments.

    (a) DoD policy is to make contract financing payments as quickly as 
possible. Generally, the contracting officer shall insert the standard 
due dates of 7 days for progress payments, and 14 days for performance-
based payments and interim payments on cost-type contracts, in the 
appropriate paragraphs of the respective payment clauses. For interim 
payments on cost-reimbursement contracts for services, see 
232.906(a)(i).
    (b) The contracting officer should coordinate contract financing 
payment terms with offices that will be involved in the payment process 
to ensure that specified terms can be met. Where justified, the 
contracting officer may insert a due date greater than, but not less 
than, the standard. In determining payment terms, consider--
    (i) Geographical separation;
    (ii) Workload;
    (iii) Contractor ability to submit a proper request; and
    (iv) Other factors that could affect timing of payment.

[70 FR 75412, Dec. 20, 2005]



Sec. 232.070  Responsibilities.

    (a) The Director of Defense Procurement and Acquisition Policy, 
Office of the Under Secretary of Defense (Acquisition, Technology, and 
Logistics) (OUSD(AT&L)DPAP) is responsible for ensuring uniform 
administration of DoD contract financing, including DoD contract 
financing policies and important related procedures. Agency discretion 
under FAR part 32 is at the DoD level and is not delegated to the 
departments and agencies. Proposals by the departments and agencies, to 
exercise agency discretion, shall be submitted to OUSD(AT&L)DPAP.
    (b) Departments and agencies are responsible for their day-to-day 
contract financing operations. Refer specific cases involving financing 
policy or important procedural issues to OUSD(AT&L)DPAP for 
consideration through the department/agency Contract Finance Committee 
members (also see Subpart 201.4 for deviation request and approval 
procedures).
    (c) See PGI 232.070(c) for information on department/agency contract 
financing offices.

[63 FR 11535, Mar. 9, 1998, as amended at 65 FR 39705, June 27, 2000; 68 
FR 7440, Feb. 14, 2003; 70 FR 75412, Dec. 20, 2005; 72 FR 20765, Apr. 
26, 2007]



Sec. 232.071  [Reserved]



Sec. 232.072  Financial responsibility of contractors.

    Use the policies and procedures in this section in determining the 
financial capability of current or prospective contractors.

[63 FR 11535, Mar. 9, 1998]



Sec. 232.072-1  Required financial reviews.

    The contracting officer shall perform a financial review when the 
contracting officer does not otherwise have sufficient information to 
make a positive determination of financial responsibility. In addition, 
the contracting officer shall consider performing a financial review--
    (a) Prior to award of a contract, when--
    (1) The contractor is on a list requiring preaward clearance or 
other special clearance before award;
    (2) The contractor is listed on the Consolidated List of Contractors 
Indebted to the Government (Hold-Up List), or is otherwise known to be 
indebted to the Government;
    (3) The contractor may receive Government assets such as contract 
financing payments or Government property;
    (4) The contractor is experiencing performance difficulties on other 
work; or
    (5) The contractor is a new company or a new supplier of the item.
    (b) At periodic intervals after award of a contract, when--
    (1) Any of the conditions in paragraphs (a)(2) through (a)(5) of 
this subsection are applicable; or
    (2) There is any other reason to question the contractor's ability 
to finance performance and completion of the contract.

[63 FR 11535, Mar. 9, 1998]

[[Page 239]]



Sec. 232.072-2  Appropriate information.

    (a) The contracting officer shall obtain the type and depth of 
financial and other information that is required to establish a 
contractor's financial capability or disclose a contractor's financial 
condition. While the contracting officer should not request information 
that is not necessary for protection for the Government's interests, the 
contracting officer must insist upon obtaining the information that is 
necessary. The unwillingness or inability of a contractor to present 
reasonably requested information in a timely manner, especially 
information that a prudent business person would be expected to have and 
to use in the professional management of a business, may be a material 
fact in the determination of the contractor's responsibility and 
prospects for contract completion.
    (b) The contracting officer shall obtain the following information 
to the extent required to protect the Government's interest. In 
addition, if the contracting officer concludes that information not 
listed in paragraphs (b)(1) through (b)(10) of this subsection is 
required to comply with 232.072-1, that information should be requested. 
The information must be for the person(s) who are legally liable for 
contract performance. If the contractor is not a corporation, the 
contracting officer shall obtain the required information for each 
individual/joint venturer/partner:
    (1) Balance sheet and income statement--
    (i) For the current fiscal year (interim);
    (ii) For the most recent fiscal year and, preferably, for the 2 
preceding fiscal years. These should be certified by an independent 
public accountant or by an appropriate officer of the firm; and
    (iii) Forecasted for each fiscal year for the remainder of the 
period of contract performance.
    (2) Summary history of the contractor and its principal managers, 
disclosing any previous insolvencies--corporate or personal, and 
describing its products or services.
    (3) Statement of all affiliations disclosing--
    (i) Material financial interests of the contractor;
    (ii) Material financial interests in the contractor;
    (iii) Material affiliations of owners, officers, directors, major 
stockholders; and
    (iv) The major stockholders if the contractor is not a widely-
traded, publicly-held corporation.
    (4) Statement of all forms of compensation to each officer, manager, 
partner, joint venturer, or proprietor, as appropriate--
    (i) Planned for the current year;
    (ii) Paid during the past 2 years; and
    (iii) Deferred to future periods.
    (5) Business base and forecast that--
    (i) Shows, by significant markets, existing contracts and 
outstanding offers, including those under negotiation; and
    (ii) Is reconcilable to indirect cost rate projections.
    (6) Cash forecast for the duration of the contract (see 232.072-3).
    (7) Financing arrangement information that discloses--
    (i) Availability of cash to finance contract performance;
    (ii) Contractor's exposure to financial crisis from creditor's 
demands;
    (iii) Degree to which credit security provisions could conflict with 
Government title terms under contract financing;
    (iv) Clearly stated confirmations of credit with no unacceptable 
qualifications;
    (v) Unambiguous written agreement by a creditor if credit 
arrangements include deferred trade payments or creditor subordinations/
repayment suspensions.
    (8) Statement of all state, local, and Federal tax accounts, 
including special mandatory contributions, e.g., environmental 
superfund.
    (9) Description and explanation of the financial effect of issues 
such as--
    (i) Leases, deferred purchase arrangements, or patent or royalty 
arrangements;
    (ii) Insurance, when relevant to the contract;
    (iii) Contemplated capital expenditures, changes in equity, or 
contractor debt load;
    (iv) Pending claims either by or against the contractor;

[[Page 240]]

    (v) Contingent liabilities such as guarantees, litigation, 
environmental, or product liabilities;
    (vi) Validity of accounts receivable and actual value of inventory, 
as assets; and
    (vii) Status and aging of accounts payable.
    (10) Significant ratios such as--
    (i) Inventory to annual sales;
    (ii) Inventory to current assets;
    (iii) Liquid assets to current assets;
    (iv) Liquid assets to current liabilities;
    (v) Current assets to current liabilities; and
    (vi) Net worth to net debt.

[63 FR 11535, Mar. 9, 1998]



Sec. 232.072-3  Cash flow forecasts.

    (a) A contractor must be able to sustain a sufficient cash flow to 
perform the contract. When there is doubt regarding the sufficiency of a 
contractor's cash flow, the contracting officer should require the 
contractor to submit a cash flow forecast covering the duration of the 
contract.
    (b) A contractor's inability of refusal to prepare and provide cash 
flow forecasts or to reconcile actual cash flow with previous forecasts 
is a strong indicator of serious managerial deficiencies or potential 
contract cost or performance problems.
    (c) Single or one-time cash flow forecasts are of limited 
forecasting power. As such, they should be limited to preaward survey 
situations. Reliability of cash flow forecasts can be established only 
by comparing a series of previous actual cash flows with the 
corresponding forecasts and examining the causes of any differences.
    (d) Cash flow forecasts must--
    (1) Show the origin and use of all material amounts of cash within 
the entire business unit responsible for contract performance, period by 
period, for the length of the contract (or until the risk of a cash 
crisis ends); and
    (2) Provide an audit trail to the data and assumptions used to 
prepare it.
    (e) Cash flow forecasts can be no more reliable than the assumptions 
on which they are based. Most important of these assumptions are--
    (1) Estimated amounts and timing of purchases and payments for 
materials, parts, components, subassemblies, and services;
    (2) Estimated amounts and timing of payments of purchase or 
production of capital assets, test facilities, and tooling;
    (3) Amounts and timing of fixed cash charges such as debt 
installments, interest, rentals, taxes, and indirect costs;
    (4) Estimated amounts and timing of payments for projected labor, 
both direct and indirect;
    (5) Reasonableness of projected manufacturing and production 
schedules;
    (6) Estimated amounts and timing of billings to customers (including 
progress payments), and customer payments;
    (7) Estimated amounts and timing of cash receipts from lenders or 
other credit sources, and liquidation of loans; and
    (8) Estimated amount and timing of cash receipt from other sources.
    (f) The contracting officer should review the assumptions underlying 
the cash flow forecasts. In determining whether the assumptions are 
reasonable and realistic, the contracting officer should consult with--
    (1) The contractor;
    (2) Government personnel in the areas of finance, engineering, 
production, cost, and price analysis; or
    (3) Prospective supply, subcontract, and loan or credit sources.

[63 FR 11536, Mar. 9, 1998]

          Subpart 232.1_Non-Commercial Item Purchase Financing

    Source: 63 FR 11536, Mar. 9, 1998, unless otherwise noted.



Sec. 232.102  Description of contract financing methods.

    (e)(2) Progress payments based on percentage or stage of completion 
are authorized only for contracts for construction (as defined in FAR 
36.102), shipbuilding, and ship conversion, alteration, or repair. 
However, percentage or state of completion methods of measuring 
contractor performance may be used for performance-based payments in 
accordance with FAR Subpart 32.10.

[[Page 241]]



Sec. 232.102-70  Provisional delivery payments.

    (a) The contracting officer may establish provisional delivery 
payments to pay contractors for the costs of supplies and services 
delivered to and accepted by the Government under the following contract 
actions if undefinitized:
    (1) Letter contracts contemplating a fixed-price contract.
    (2) Orders under basic ordering agreements.
    (3) Spares provisioning documents annexed to contracts.
    (4) Unpriced equitable adjustments on fixed-price contracts.
    (5) Orders under indefinite-delivery contracts.
    (b) Provisional delivery payments shall be--
    (1) Used sparingly;
    (2) Priced conservatively; and
    (3) Reduced by liquidating previous progress payments in accordance 
with the Progress Payments clause.
    (c) Provisional delivery payments shall not--
    (1) Include profit;
    (2) Exceed funds obligated for the undefinitized contract action; or
    (3) Influence the definitized contract price.

            Subpart 232.2_Commercial Item Purchase Financing

    Source: 63 FR 11537, Mar. 9, 1998, unless otherwise noted.



Sec. 232.202-4  Security for Government financing.

    (a)(2) When determining whether an offeror's financial condition is 
adequate security, see 232.072-2 and 232.072-3 for guidance. It should 
be noted that an offeror's financial condition may be sufficient to make 
the contractor responsible for award purposes, but may not be adequate 
security for commercial contract financing.



Sec. 232.206  Solicitation provisions and contract clauses.

    (f) Prompt payment for commercial purchase payments. The contracting 
officer shall incorporate the following standard prompt payment terms 
for commercial item contract financing:
    (i) Commercial advance payments: The contractor entitlement date 
specified in the contract, or 30 days after receipt by the designated 
billing office of a proper request for payment, whichever is later.
    (ii) Commercial interim payments: The contractor entitlement date 
specified in the contract, or 14 days after receipt by the designated 
billing office of a proper request for payment, whichever is later. The 
prompt payment standards for commercial delivery payments shall be the 
same as specified in FAR Subpart 32.9 for invoice payments for the item 
delivered.
    (g) Installment payment financing for commercial items. Installment 
payment financing shall not be used for DoD contracts, unless market 
research has established that this form of contract financing is both 
appropriate and customary in the commercial marketplace. When 
installment payment financing is used, the contracting officer shall use 
the ceiling percentage of contract price that is customary in the 
particular marketplace (not to exceed the maximum rate established in 
FAR 52.232-30).

[63 FR 11537, Mar. 9, 1998, as amended at 70 FR 75413, Dec. 20, 2005]

          Subpart 232.3_Loan Guarantees for Defense Production



Sec. 232.302  Authority.

    (a) The use of guaranteed loans as a contract financing mechanism 
requires the availability of certain congressional authority. The DoD 
has not requested such authority in recent years, and none is now 
available.

[[Page 242]]

         Subpart 232.4_Advance Payments for Non-Commercial Items



Sec. 232.404  Exclusions.

    (a)(9) The requirements of FAR subpart 32.4 do not apply to 
advertisements in high school and college publications for military 
recruitment efforts under 10 U.S.C. 503 when the contract cost does not 
exceed the micro-purchase threshold.

[56 FR 36409, July 31, 1991, as amended at 70 FR 75413, Dec. 20, 2005; 
71 FR 75892, Dec. 19, 2006; 75 FR 45074, Aug. 2, 2010]



Sec. 232.409  Contracting officer action.



Sec. 232.409-1  Recommendation for approval.

    Follow the procedures at PGI 232.409-1 for preparation of the 
documents required by FAR 32.409-1(e) and (f).

[70 FR 75413, Dec. 20, 2005]



Sec. 232.410  Findings, determination, and authorization.

    If an advance payment procedure is used without a special bank 
account, follow the procedures at PGI 232.410.

[70 FR 75413, Dec. 20, 2005]



Sec. 232.412  Contract clause.



Sec. 232.412-70  Additional clauses.

    (a) Use the clause at 252.232-7000, Advance Payment Pool, in any 
contract that will be subject to the terms of an advance payment pool 
agreement with a nonprofit organization or educational institution. 
Normally, use the clause in all cost reimbursement type contracts with 
the organization or institution.
    (b) Use the clause at 252.232-7001, Disposition of Payments, in 
contracts when payments under the contract are to be made by a 
disbursing office not designated in the advance payment pool agreement.
    (c) Use the clause at 252.232-7005, Reimbursement of Subcontractor 
Advance Payments-DoD Pilot Mentor-Protege Program, when advance payments 
will be provided by the contractor to a subcontractor pursuant to an 
approved mentor-protege agreement (See subpart 219.71).

[56 FR 36409, July 31, 1991, as amended at 56 FR 67217, Dec. 30, 1991]



Sec. 232.470  Advance payment pool.

    (a) An advance payment pool agreement--
    (1) Is a means of financing the performance of more than one 
contract held by a single contractor;
    (2) Is especially convenient for the financing of cost-type 
contracts with nonprofit educational or research institutions for 
experimental or research and development work when several contracts 
require financing by advance payments. When appropriate, pooled advance 
payments may also be used to finance other types of contracts held by a 
single contractor; and
    (3) May be established--
    (i) Without regard to the number of appropriations involved;
    (ii) To finance contracts for one or more department(s) or 
contracting activity(ies); or
    (iii) In addition to any other advance payment pool agreement at a 
single contractor location when it is more convenient or otherwise 
preferable to have more than one agreement.

             Subpart 232.5_Progress Payments Based on Costs



Sec. 232.501  General.



Sec. 232.501-1  Customary progress payment rates.

    (a) The customary progress payment rates for DoD contracts, 
including contracts that contain foreign military sales (FMS) 
requirements, are 80 percent for large business concerns, 90 percent for 
small business concerns, and 95 percent for small disadvantaged business 
concerns.

[66 FR 49865, Oct. 1, 2001]



Sec. 232.501-2  Unusual progress payments.

    Follow the procedures at PGI 232.501-2 for approval of unusual 
progress payments.

[70 FR 75413, Dec. 20, 2005]

[[Page 243]]



Sec. 232.501-3  Contract price.

    (b) The contracting officer may approve progress payments when the 
contract price exceeds the funds obligated under the contract, provided 
the contract limits the Government's liability to the lesser of--
    (i) The applicable rate (i.e., the lower of the progress payment 
rate, the liquidation rate, or the loss-ratio adjusted rate); or
    (ii) 100 percent of the funds obligated.

[56 FR 36409, July 31, 1991, as amended at 65 FR 39722, June 27, 2000; 
70 FR 75413, Dec. 20, 2005]



Sec. 232.502  Preaward matters.



Sec. 232.502-1  Use of customary progress payments.

    (b)(1) If the contractor is a small disadvantaged business, progress 
payments may be provided when the contract will involve $65,000 or more.

[56 FR 36409, July 31, 1991, as amended at 71 FR 75893, Dec. 19, 2006; 
75 FR 45074, Aug. 2, 2010]



Sec. 232.502-4-70  Additional clauses.

    (a) Use the clause at 252.232-7002, Progress Payments for Foreign 
Military Sales Acquisitions, in solicitations and contracts that--
    (i) Contain FMS requirements; and
    (ii) Provide for progress payments.
    (b) Use the clause at 252.232-7004, DoD Progress Payment Rates, 
instead of Alternate I of the clause at FAR 52.232-16, if the contractor 
is a small business or small disadvantaged business concern.

[56 FR 36409, July 31, 1991, as amended at 56 FR 67217, Dec. 30, 1991; 
64 FR 8731, Feb. 23, 1999; 65 FR 39722, June 27, 2000; 66 FR 49865, Oct. 
1, 2001]



Sec. 232.503  Postaward matters.



Sec. 232.503-6  Suspension or reduction of payments.

    (b) Contractor noncompliance. See also 242.7503.
    (g) Loss contracts. Use the following loss ratio adjustment 
procedures for making adjustments required by FAR 32.503-6(f) and (g)--
    (i) Except as provided in paragraph (g)(ii) of this subsection, the 
contracting officer must prepare a supplementary analysis of the 
contractor's request for progress payments and calculate the loss ratio 
adjustment using the procedures in FAR 32.503-6(g).
    (ii) The contracting officer may request the contractor to prepare 
the supplementary analysis as an attachment to the progress payment 
request when the contracting officer determines that the contractor's 
methods of estimating the ``Costs to Complete'' are reliable, accurate, 
and not susceptible to improper influences.
    (iii) To maintain an audit trail and permit verification of 
calculations, do not make the loss ratio adjustments by altering or 
replacing data on the contractor's original request for progress payment 
(SF 1443, Contractor's Request for Progress Payment, or computer 
generated equivalent).

[56 FR 36409, July 31, 1991, as amended at 60 FR 29499, June 5, 1995; 65 
FR 39722, June 27, 2000]



Sec. 232.503-15  Application of Government title terms.

    (d) An administrative contracting officer (ACO) determination that 
the contractor's material management and accounting system conforms to 
the standard at 252.242-7004(e)(7) constitutes the contracting officer 
approval requirement of FAR 32.503-15(d). Prior to granting blanket 
approval of cost transfers between contracts, the ACO should determine 
that--
    (i) The contractor retains records of the transfer activity that 
took place in the prior month;
    (ii) The contractor prepares, at least monthly, a summary of the 
transfer activity that took place in the prior month; and
    (iii) The summary report includes as a minimum, the total number and 
dollar value of transfers.

[56 FR 36409, July 31, 1991, as amended at 57 FR 42632, Sept. 15, 1992; 
70 FR 75413, Dec. 20, 2005]

                      Subpart 232.6_Contract Debts



Sec. 232.605  Responsibilities and cooperation among Government 
          officials.

    (b) Disbursing officers are those officials designated to make 
payments

[[Page 244]]

under a contract or to receive payments of amounts due under a contract. 
The disbursing officer is responsible for determining the amount and 
collecting contract debts whenever overpayments or erroneous payments 
have been made. The disbursing officer also has primary responsibility 
when the amounts due and dates for payment are contained in the 
contract, and a copy of the contract has been furnished to the 
disbursing officer with notice to collect as amounts become due.

[56 FR 36409, July 31, 1991, as amended at 70 FR 75413, Dec. 20, 2005]



Sec. 232.606  Debt determination and collection.

    When transferring a case to the contract financing office, follow 
the procedures at PGI 232.606.

[70 FR 75413, Dec. 20, 2005]



Sec. 232.610  Demand for payment of contract debt.

    When issuing a demand for payment of a contract debt, follow the 
procedures at PGI 232.610.

[70 FR 75413, Dec. 20, 2005]



Sec. 232.616  Compromise actions.

    Only the department/agency contract financing offices (see 
232.070(c)) are authorized to compromise debts covered by this subpart.

[56 FR 36409, July 31, 1991, as amended at 70 FR 75413, Dec. 20, 2005]



Sec. 232.617  Contract clause.

    (a) The Director of Defense Procurement and Acquisition Policy, 
Office of the Under Secretary of Defense (Acquisition, Technology, and 
Logistics), may exempt the contracts in FAR 32.617(a)(2) through (5) and 
other contracts, in exceptional circumstances, from the administrative 
interest charges required by this subpart.
    (7) Other exceptions are--
    (A) Contracts for instructions of military or ROTC personnel at 
civilian schools, colleges, and universities;
    (B) Basic agreements with telephone companies for communications 
services and facilities, and purchases under such agreements; and
    (C) Transportation contracts with common carriers for common carrier 
services.

[70 FR 75413, Dec. 20, 2005]



Sec. 232.670  Transfer of responsibility for debt collection.

    Follow the procedures at PGI 232.670 for transferring responsibility 
for debt collection.

[70 FR 75413, Dec. 20, 2005]



Sec. 232.671  Bankruptcy reporting.

    Follow the procedures at PGI 232.671 for bankruptcy reporting.

[70 FR 75413, Dec. 20, 2005]

                     Subpart 232.7_Contract Funding

    Source: 58 FR 46092, Sept. 1, 1993, unless otherwise noted.



Sec. 232.702  Policy.

    Fixed-price contracts shall be fully funded except as permitted by 
232.703-1.



Sec. 232.703  Contract funding requirements.



Sec. 232.703-1  General.

    (1) A fixed-price contract may be incrementally funded only if--
    (i) The contract (excluding any options) or any exercised option--
    (A) Is for severable services;
    (B) Does not exceed one year in length; and
    (C) Is incrementally funded using funds available (unexpired) as of 
the date the funds are obligated; or
    (ii) The contract uses funds available from multiple (two or more) 
fiscal years and--
    (A) The contract is funded with research and development 
appropriations; or
    (B) Congress has otherwise authorized incremental funding.
    (2) An incrementally funded fixed-price contract shall be fully 
funded as soon as funds are available.

[71 FR 18673, Apr. 12, 2006]



Sec. 232.703-3  Contracts crossing fiscal years.

    (b) The contracting officer may enter into a contract, exercise an 
option, or

[[Page 245]]

place an order under a contract for severable services for a period that 
begins in one fiscal year and ends in the next fiscal year if the period 
of the contract awarded, option exercised, or order placed does not 
exceed 1 year (10 U.S.C. 2410a).

[64 FR 28110, May 25, 1999]



Sec. 232.703-70  Military construction appropriations act restriction.

    Annual military construction appropriations acts restrict the use of 
funds appropriated by the acts for payments under cost-plus-fixed-fee 
contracts (see 216.306(c)).

[61 FR 7744, Feb. 29, 1996]



Sec. 232.704  Limitation of cost or funds.



Sec. 232.704-70  Incrementally funded fixed-price contracts.

    (a) Upon receipt of the contractor's notice under paragraph (c) of 
the clause at 252.232-7007, Limitation of Government's Obligation, the 
contracting officer shall promptly provide written notice to the 
contractor that the Government is--
    (1) Allotting additional funds for continued performance and 
increasing the Government's limitation of obligation in a specified 
amount;
    (2) Terminating the contract; or
    (3) Considering whether to allot additional funds; and
    (i) The contractor is entitled by the contract terms to stop work 
when the Government's limitation of obligation is reached; and
    (ii) Any costs expended beyond the Government's limitation of 
obligation are at the contractor's risk.
    (b) Upon learning that the contract will receive no further funds, 
the contracting officer shall promptly give the contractor written 
notice of the Government's decision and terminate for the convenience of 
the Government.
    (c) The contracting officer shall ensure that, in accordance with 
paragraph (b) of the clause at 252.232-7007, Limitation of Government's 
Obligation, sufficient funds are allotted to the contract to cover the 
total amount payable to the contractor in the event of termination for 
the convenience of the Government.



Sec. 232.705  Contract clauses.



Sec. 232.705-70  Clause for limitation of Government's obligation.

    Use the clause at 252.232-7007, Limitation of Government's 
Obligation, in solicitations and resultant incrementally funded fixed-
price contracts. The contracting officer may revise the contractor's 
notification period, in paragraph (c) of the clause, from ``ninety'' to 
``thirty'' or ``sixty'' days, as appropriate.

                   Subpart 232.8_Assignment of Claims



Sec. 232.803  Policies.

    (b) Only contracts for personal services may prohibit the assignment 
of claims.
    (d) Pursuant to Section 3737(e) of the Revised Statutes (41 U.S.C. 
15), and in accordance with Presidential delegation dated October 3, 
1995, Secretary of Defense delegation dated February 5, 1996, and Under 
Secretary of Defense (Acquisition, Technology, and Logistics) delegation 
dated February 23, 1996, the Director of Defense Procurement determined 
on May 10, 1996, that a need exists for DoD to agree not to reduce or 
set off any money due or to become due under the contract when the 
proceeds under the contract have been assigned in accordance with the 
Assignment of Claims provision of the contract. This determination was 
published in the Federal Register on June 11, 1996, as required by law. 
Nevertheless, if departments/agencies decide it is in the Government's 
interests, or if the contracting officer makes a determination in 
accordance with FAR 32.803(d) concerning a significantly indebted 
offeror, they may exclude the no-setoff commitment.

[56 FR 36409, July 31, 1991, as amended at 61 FR 50454, Sept. 26, 1996; 
65 FR 39706, June 27, 2000]



Sec. 232.805  Procedure.

    (b) The assignee shall forward--
    (i) To the administrative contracting officer (ACO), a true copy of 
the instrument of assignment and an original

[[Page 246]]

and three copies of the notice of assignment. The ACO shall acknowledge 
receipt by signing and dating all copies of the notice of assignment and 
shall--
    (A) File the true copy of the instrument of assignment and the 
original of the notice in the contract file;
    (B) Forward two copies of the notice to the disbursing officer of 
the payment office cited in the contract;
    (C) Return a copy of the notice to the assignee; and
    (D) Advise the contracting officer of the assignment.
    (ii) To the surety or sureties, if any, a true copy of the 
instrument of assignment and an original and three copies of the notice 
of assignment. The surety shall return three acknowledged copies of the 
notice to the assignee, who shall forward two copies to the disbursing 
officer designated in the contract.
    (iii) To the disbursing officer of the payment office cited in the 
contract, a true copy of the instrument of assignment and an original 
and one copy of the notice of assignment. The disbursing officer shall 
acknowledge and return to the assignee the copy of the notice and shall 
file the true copy of the instrument and original notice.



Sec. 232.806  Contract clause.

    (a)(1) Use the clause at 252.232-7008, Assignment of Claims 
(Overseas), instead of the clause at FAR 52.232-23, Assignment of 
Claims, in solicitations and contracts when contract performance will be 
in a foreign country.
    (2) Use Alternate I with the clause at FAR 52.232-23, Assignment of 
Claims, unless otherwise authorized under 232.803(d).

[62 FR 34126, June 24, 1997]

                      Subpart 232.9_Prompt Payment



Sec. 232.901  Applicability.

    (1) FAR subpart 32.9, Prompt Payment, does not apply when--
    (i) There is--
    (A) An emergency, as defined in the Disaster Relief Act of 1974;
    (B) A contingency operation (see FAR 2.101(b)); or
    (C) The release or threatened release of hazardous substances (as 
defined in 4 U.S.C. 9606, Section 106); and
    (ii) The head of the contracting activity has made a determination, 
after consultation with the cognizant comptroller, that conditions exist 
that limit normal business operations; and
    (iii) Payments will be made in the operational area or made 
contingent upon receiving supporting documentation (i.e., contract, 
invoice, and receiving report) from the operational area.
    (2) Criteria limiting normal business operations during emergencies 
and contingency operations that restrict the use of FAR 32.9 may include 
such conditions as--
    (i) Support infrastructure, hardware, communications capabilities, 
and bandwidth are not consistently available such that normal business 
operations can be carried out;
    (ii) Support resources, facilities, and banking needs are not 
consistently available for use as necessary in carrying out normal 
business operations;
    (iii) Military mission priorities override the availability of 
appropriately skilled personnel in support of back-office operations;
    (iv) Mobility impairments and security concerns restrict free 
movement of personnel and documents necessary for timely processing;
    (v) Foreign vendors are not familiar with or do not understand DoD 
contract requirements (i.e., proper invoice, receiving documentation, 
and contracting terms); or
    (vi) Documents received in support of payment requests and shipments 
require language translations that cannot be performed and documented 
within normal business processing times.
    (3) Subsequent Determinations. The head of the contracting activity 
shall make subsequent determinations, after consultation with the 
cognizant comptroller, as the operational area evolves into either a 
more stable or less stable environment.
    (i) If the head of the contracting activity determines that the 
operational area has evolved into a more stable environment, the 
contracting officer shall notify, by issuance of a contract

[[Page 247]]

modification, each contractor performing in the operational area under 
review. The modification deactivates clause 252.232-7011 and activates 
the applicable FAR Prompt Payment clause in the contract.
    (ii) If after deactivation of clause 252.232-7011, the head of the 
contracting activity subsequently determines that the operational area 
has evolved into a less stable environment, the head of the contracting 
activity will make a determination that conditions exist that limit 
normal business operations. The contracting officer will then reactivate 
clause 252.232-7011 by issuance of a contract modification.

[75 FR 40713, July 13, 2010]



Sec. 232.903  Responsibilities.

    DoD policy is to assist small disadvantaged business concerns by 
paying them as quickly as possible after invoices are received and 
before normal payment due dates established in the contract (see 
232.906(a)).

[70 FR 75413, Dec. 20, 2005]



Sec. 232.904  Determining payment due dates.

    (d) In most cases, Government acceptance or approval can occur 
within the 7-day constructive acceptance period specified in the FAR 
Prompt Payment clauses. Government payment of construction progress 
payments can, in most cases, be made within the 14-day period allowed by 
the Prompt Payment for Construction Contracts clause. While the 
contracting officer may specify a longer period because the period 
specified in the contract is not reasonable or practical, such change 
should be coordinated with the Government offices responsible for 
acceptance or approval and for payment. Reasons for specifying a longer 
period include but are not limited to: the nature of the work or 
supplies or services, inspection or testing requirements, shipping and 
acceptance terms, and resources available at the acceptance activity. A 
constructive acceptance period of less than the cited 7 or 14 days is 
not authorized.

[70 FR 75413, Dec. 20, 2005]



Sec. 232.906  Making payments.

    (a)(i) Generally, the contracting officer shall insert the standard 
due date of 14 days for interim payments on cost-reimbursement contracts 
for services in the clause at FAR 52.232-25, Prompt Payment, when using 
the clause with its Alternate I.
    (ii) The restrictions of FAR 32.906 prohibiting early payment do not 
apply to invoice payments made to small disadvantaged business concerns. 
However, contractors shall not be entitled to interest penalties if the 
Government fails to make early payment.

[70 FR 75413, Dec. 20, 2005]



Sec. 232.908  Contract clauses.

    Use the clause at 252.232-7011, Payments in Support of Emergencies 
and Contingency Operations, in solicitations and contracts in addition 
to the approved clause prescribed in FAR 32.908 in acquisitions that 
meet the applicability criteria at 232.901(1).

[75 FR 40714, July 13, 2010]

                Subpart 232.10_Performance-Based Payments

    Source: 63 FR 11537, Mar. 9, 1998, unless otherwise noted.



Sec. 232.1001  Policy.

    (d) The contracting officer shall use the following standard prompt 
payment terms for performance-based payments: The contractor entitlement 
date, if any, specified in the contract, or 14 days after receipt by the 
designated billing office of a proper request for payment, whichever is 
later.



Sec. 232.1004  Procedure.

    (c) Instructions for multiple appropriations. If the contract 
contains foreign military sales requirements, the contracting officer 
shall provide instructions for distribution of the contract financing 
payments to each country's account.

                Subpart 232.11_Electronic Funds Transfer

    Source: 65 FR 46626, July 31, 2000, unless otherwise noted.

[[Page 248]]



Sec. 232.1110  Solicitation provision and contract clauses.

    Use the clause at 252.232-7009, Mandatory Payment by Governmentwide 
Commercial Purchase Card, in solicitations, contracts, and agreements 
when--
    (1) Placement of orders or calls valued at or below the 
micropurchase threshold is anticipated; and
    (2) Payment by Governmentwide commercial purchase card is required 
for orders or calls valued at or below the micropurchase threshold under 
the contract or agreement.

Subpart 232.70_Electronic Submission and Processing of Payment Requests 
                          and Receiving Reports

    Source: 68 FR 8455, Feb. 21, 2003, unless otherwise noted.



Sec. 232.7000  Scope of subpart.

    This subpart prescribes policies and procedures for submitting and 
processing payment requests in electronic form to comply with 10 U.S.C. 
2227.



Sec. 232.7001  Definitions.

    Electronic form and payment request, as used in this subpart, are 
defined in the clause at 252.232-7003, Electronic Submission of Payment 
Requests.



Sec. 232.7002  Policy.

    (a) Contractors shall submit payment requests and receiving reports 
in electronic form, except for--
    (1) Purchases paid for with a Governmentwide commercial purchase 
card;
    (2) Awards made to foreign vendors for work performed outside the 
United States;
    (3) Classified contracts or purchases when electronic submission and 
processing of payment requests could compromise the safeguarding of 
classified information or national security;
    (4) Contracts awarded by deployed contracting officers in the course 
of military operations, including, but not limited to, contingency 
operations as defined in 10 U.S.C. 101(a)(13) or humanitarian or 
peacekeeping operations as defined in 10 U.S.C. 2302(8), or contracts 
awarded by contracting officers in the conduct of emergency operations, 
such as responses to natural disasters or national or civil emergencies;
    (5) Purchases to support unusual or compelling needs of the type 
described in FAR 6.302-2;
    (6) Cases in which DoD is unable to receive payment requests or 
provide acceptance in electronic form; or
    (7) Cases in which the contracting officer administering the 
contract for payment has determined, in writing, that electronic 
submission would be unduly burdensome to the contractor.
    (b) DoD officials receiving payment requests in electronic form 
shall process the payment requests in electronic form. Any supporting 
documentation necessary for payment, such as receiving reports, 
contracts, contract modifications, and required certifications, also 
shall be processed in electronic form. Scanned documents are acceptable 
for processing supporting documentation other than receiving reports and 
other forms of acceptance.
    (c) When payment requests and receiving reports will not be 
submitted in electronic form--
    (1) Payment requests and receiving reports shall be submitted by 
facsimile or conventional mail. The contracting officer shall consult 
with the payment office and the contract administration office regarding 
the method of payment request to be used; and
    (2) Section G of the contract shall specify the method of payment 
request.

[72 FR 14241, Mar. 27, 2007, as amended at 73 FR 11358, Mar. 3, 2008]



Sec. 232.7003  Procedures.

    (a) The accepted electronic form for submission of payment requests 
and receiving reports is Wide Area WorkFlow (see Web site--https://
wawf.eb.mil/).
    (b) If the payment office and the contract administration office 
concur, the contracting officer may authorize a contractor to submit a 
payment request and receiving report using an electronic form other than 
Wide Area WorkFlow. However, with this authorization, the contractor and 
the contracting officer shall agree to a plan, which shall include a 
timeline, specifying when the contractor will transfer to Wide Area 
WorkFlow.

[[Page 249]]

    (c) For payment of commercial transportation services provided under 
a Government rate tender or a contract for transportation services, the 
use of a DoD-approved electronic third party payment system or other 
exempted vendor payment/invoicing system (e.g., PowerTrack, 
Transportation Financial Management System, and Cargo and Billing 
System) is permitted.

[73 FR 11358, Mar. 3, 2008]



Sec. 232.7004  Contract clause.

    Except as provided in 232.7002(a), use the clause at 252.232-7003, 
Electronic Submission of Payment Requests and Receiving Reports, in 
solicitations and contracts.

[73 FR 11358, Mar. 3, 2008]

               Subpart 232.71_Levies on Contract Payments

    Source: 70 FR 52032, Sept. 1, 2005, unless otherwise noted.



Sec. 232.7100  Scope of subpart.

    This subpart prescribes policies and procedures concerning the 
effect of levies pursuant to 26 U.S.C. 6331(h) on contract payments. The 
Internal Revenue Service (IRS) is authorized to levy up to 100 percent 
of all payments made under a DoD contract, up to the amount of the tax 
debt.



Sec. 232.7101  Policy and procedures.

    (a) The contracting officer shall require the contractor to--
    (1) Promptly notify the contracting officer when a levy may result 
in an inability to perform the contract; and
    (2) Advise the contracting officer whether the inability to perform 
may adversely affect national security.
    (b) The contracting officer shall promptly notify the Director, 
Defense Procurement and Acquisition Policy (DPAP), when the contractor's 
inability to perform will adversely affect national security or will 
result in significant additional costs to the Government. Follow the 
procedures at PGI 232.7101(b) for reviewing the contractor's rationale 
and submitting the required notification.
    (c) The Director, DPAP, will promptly evaluate the contractor's 
rationale and will notify the IRS, the contracting officer, and the 
payment office, as appropriate, in accordance with the procedures at PGI 
232.7101(c).
    (d) The contracting officer shall then notify the contractor in 
accordance with paragraph (c) of the clause at 252.232-7010 and in 
accordance with the procedures at PGI 232.7101(d).

[71 FR 69492, Dec. 1, 2006]



Sec. 232.7102  Contract clause.

    Use the clause at 252.232-7010, Levies on Contract Payments, in all 
solicitations and contracts other than those for micro-purchases.

[71 FR 69492, Dec. 1, 2006]

                PART 233_PROTESTS, DISPUTES, AND APPEALS

                   Subpart 233.2_Disputes and Appeals

Sec.

Sec. 233.204-70 Limitations on payment.

Sec. 233.210 Contracting officer's authority.

Sec. 233.215 Contract clause.

Sec. 233.215-70 Additional contract clause.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36416, July 31, 1991, unless otherwise noted.

                   Subpart 233.2_Disputes and Appeals



Sec. 233.204-70  Limitations on payment.

    See 10 U.S.C. 2410(b) for limitations on Congressionally directed 
payment of a claim under the Contract Disputes Act of 1978, a request 
for equitable adjustment to contract terms, or a request for relied 
under Pub. L. 85-804.

[63 FR 11537, Mar. 9, 1998]



Sec. 233.210  Contracting officer's authority.

    See PGI 233.210 for guidance on reviewing a contractor's claim.

[72 FR 6485, Feb. 12, 2007]



Sec. 233.215  Contract clause.

    Use Alternate I of the clause at FAR 52.233-1, Disputes, when--
    (1) The acquisition is for--
    (i) Aircraft
    (ii) Spacecraft and launch vehicles

[[Page 250]]

    (iii) Naval vessels
    (iv) Missile systems
    (v) Tracked combat vehicles
    (vi) Related electronic systems;
    (2) The contracting officer determines that continued performance 
is--
    (i) Vital to the national security, or
    (ii) Vital to the public health and welfare; or
    (3) The head of the contracting activity determines that continued 
performance is necessary pending resolution of any claim that might 
arise under or be related to the contract.

[56 FR 36416, July 31, 1991. Redesignated at 62 FR 34126, June 24, 1997]



Sec. 233.215-70  Additional contract clause.

    Use the clause at 252.233-7001, Choice of Law (Overseas), in 
solicitations and contracts when contract performance will be outside 
the United States and its outlying areas, unless otherwise provided for 
in a government-to-government agreement.

[70 FR 35545, June 21, 2005]

[[Page 251]]

             SUBCHAPTER F_SPECIAL CATEGORIES OF CONTRACTING

                    PART 234_MAJOR SYSTEM ACQUISITION

Sec.

Sec. 234.003 Responsibilities.

Sec. 234.004 Acquisition strategy.

Sec. 234.005-1 Competition.

              Subpart 234.2_Earned Value Management System


Sec. 234.201 Policy.

Sec. 234.203 Solicitation provisions and contract clause.

 Subpart 234.70_Acquisition of Major Weapon Systems as Commercial Items


Sec. 234.7000 Scope of subpart.

Sec. 234.7001 Definition.

Sec. 234.7002 Policy.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.



Sec. 234.003  Responsibilities.

    DoDD 5000.1, The Defense Acquisition System, and DoDI 5000.2, 
Operation of the Defense Acquisition System, contain the DoD 
implementation of OMB Circular A-109 and OMB Circular A-11.

[70 FR 14575, Mar. 23, 2005]



Sec. 234.004  Acquisition strategy.

    (1) See 209.570 for policy applicable to acquisition strategies that 
consider the use of lead system integrators.
    (2) In accordance with Section 818 of the National Defense 
Authorization Act for Fiscal Year 2007 (Pub. L. 109-364), for major 
defense acquisition programs as defined in 10 U.S.C. 2430--
    (i) The Milestone Decision Authority shall select, with the advice 
of the contracting officer, the contract type for a development program 
at the time of Milestone B approval or, in the case of a space program, 
Key Decision Point B approval;
    (ii) The basis for the contract type selection shall be documented 
in the acquisition strategy. The documentation--
    (A) Shall include an explanation of the level of program risk; and
    (B) If program risk is determined to be high, shall outline the 
steps taken to reduce program risk and the reasons for proceeding with 
Milestone B approval despite the high level of program risk; and
    (iii) If a cost-type contract is selected, the contract file shall 
include the Milestone Decision Authority's written determination that--
    (A) The program is so complex and technically challenging that it 
would not be practicable to reduce program risk to a level that would 
permit the use of a fixed-price type contract; and
    (B) The complexity and technical challenge of the program is not the 
result of a failure to meet the requirements of 10 U.S.C. 2366a.

[73 FR 4118, Jan. 24, 2008]



Sec. 234.005-1  Competition.

    (1) A contract that is initially awarded from the competitive 
selection of a proposal resulting from a general solicitation may 
contain a contract line item or contract option for the provision of 
advanced component development or prototype of technology developed 
under the contract or the delivery of initial or additional prototype 
items if the item or a prototype thereof is created as the result of 
work performed under the contract only when it adheres to the following 
limitations:
    (i) The contract line item or contract option shall be limited to 
the minimal amount of initial or additional prototype items that will 
allow for timely competitive solicitation and award of a follow-on 
development or production contract for those items.
    (ii) The term of the contract line item or contract option shall be 
for not more than 12 months.
    (iii) The dollar value of the work to be performed pursuant to the 
contract line item or contract option shall not exceed the lesser of--
    (A) The amount that is three times the dollar value of the work 
previously performed under the contract; or
    (B) $20 million.
    (2) A contract line item or contract option may not be exercised 
under this authority after September 30, 2014.

[75 FR 32639, June 8, 2010]

[[Page 252]]

              Subpart 234.2_Earned Value Management System

    Source: 73 FR 21848, Apr. 23, 2008, unless otherwise noted.



Sec. Sec. 234.201  Policy.

    (1) DoD applies the earned value management system requirement as 
follows:
    (i) For cost or incentive contracts and subcontracts valued at 
$20,000,000 or more, the earned value management system shall comply 
with the guidelines in the American National Standards Institute/
Electronic Industries Alliance Standard 748, Earned Value Management 
Systems (ANSI/EIA-748).
    (ii) For cost or incentive contracts and subcontracts valued at 
$50,000,000 or more, the contractor shall have an earned value 
management system that has been determined by the cognizant Federal 
agency to be in compliance with the guidelines in ANSI/EIA-748.
    (iii) For cost or incentive contracts and subcontracts valued at 
less than $20,000,000--
    (A) The application of earned value management is optional and is a 
risk-based decision;
    (B) A decision to apply earned value management shall be documented 
in the contract file; and
    (C) Follow the procedures at PGI 234.201(1)(iii) for conducting a 
cost-benefit analysis.
    (iv) For firm-fixed-price contracts and subcontracts of any dollar 
value--
    (A) The application of earned value management is discouraged; and
    (B) Follow the procedures at PGI 234.201(1)(iv) for obtaining a 
waiver before applying earned value management.
    (2) When an offeror proposes a plan for compliance with the earned 
value management system guidelines in ANSI/EIA-748, follow the review 
procedures at PGI 234.201(2).
    (3) The Defense Contract Management Agency is responsible for 
determining earned value management system compliance when DoD is the 
cognizant Federal agency.
    (4) See PGI 234.201(4) for additional guidance on earned value 
management.



Sec. 234.203  Solicitation provisions and contract clause.

    For cost or incentive contracts valued at $20,000,000 or more, and 
for other contracts for which EVMS will be applied in accordance with 
234.201(1)(iii) and (iv)--
    (1) Use the provision at 252.234-7001, Notice of Earned Value 
Management System, instead of the provisions at FAR 52.234-2, Notice of 
Earned Value Management System--Pre-Award IBR, and FAR 52.234-3, Notice 
of Earned Value Management System--Post-Award IBR, in the solicitation; 
and
    (2) Use the clause at 252.234-7002, Earned Value Management System, 
instead of the clause at FAR 52.234-4, Earned Value Management System, 
in the solicitation and contract.

 Subpart 234.70_Acquisition of Major Weapon Systems as Commercial Items

    Source: 71 FR 58538, Oct. 4, 2006, unless otherwise noted.



Sec. 234.7000  Scope of subpart.

    This subpart--
    (a) Implements 10 U.S.C. 2379; and
    (b) Requires a determination by the Secretary of Defense and a 
notification to Congress before acquiring a major weapon system as a 
commercial item.



Sec. 234.7001  Definition.

    Major weapon system, as used in this subpart, means a weapon system 
acquired pursuant to a major defense acquisition program, as defined in 
10 U.S.C. 2430 to be a program that--
    (1) Is not a highly sensitive classified program, as determined by 
the Secretary of Defense; and
    (2)(i) Is designated by the Secretary of Defense as a major defense 
acquisition program; or
    (ii) Is estimated by the Secretary of Defense to require an eventual 
total expenditure for research, development, test, and evaluation of 
more than $300,000,000 (based on fiscal year 1990 constant dollars) or 
an eventual total expenditures for procurement of more than 
$1,800,000,000 (based on fiscal year 1990 constant dollars).

[[Page 253]]



Sec. 234.7002  Policy.

    (a) Major weapon systems. (1) A DoD major weapon system may be 
treated as a commercial item, or acquired under procedures established 
for the acquisition of commercial items, only if--
    (i) The Secretary of Defense determines that--
    (A) The major weapon system is a commercial item as defined in FAR 
2.101; and
    (B) Such treatment is necessary to meet national security 
objectives;
    (ii) The offeror has submitted sufficient information to evaluate, 
through price analysis, the reasonableness of the price for such a 
system; and
    (iii) The congressional defense committees are notified at least 30 
days before such treatment or acquisition occurs. Follow the procedures 
at PGI 234.7002.
    (2) The authority of the Secretary of Defense to make a 
determination under paragraph (a)(1) of this section may not be 
delegated below the level of the Deputy Secretary of Defense.
    (b) Subsystems. A subsystem of a major weapon system (other than a 
commercially available off-the-shelf item) may be treated as a 
commercial item and acquired under procedures established for the 
acquisition of commercial items only if--
    (1) The subsystem is intended for a major weapon system that is 
being acquired, or has been acquired, under procedures established for 
the acquisition of commercial items in accordance with paragraph (a) of 
this section; or
    (2) The contracting officer determines in writing that--
    (i) The subsystem is a commercial item; and
    (ii) The offeror has submitted sufficient information to evaluate, 
through price analysis, the reasonableness of the price for the 
subsystem.
    (c) Components and spare parts. (1) A component or spare part for a 
major weapon system (other than a commercially available off-the-shelf 
item) may be treated as a commercial item only if--
    (i) The component or spare part is intended for--
    (A) A major weapon system that is being acquired, or has been 
acquired, under procedures established for the acquisition of commercial 
items in accordance with paragraph (a) of this section; or
    (B) A subsystem of a major weapon system that is being acquired, or 
has been acquired, under procedures established for the acquisition of 
commercial items in accordance with paragraph (b) of this section; or
    (ii) The contracting officer determines in writing that--
    (A) The component or spare part is a commercial item; and
    (B) The offeror has submitted sufficient information to evaluate, 
through price analysis, the reasonableness of the price for the 
component or spare part.
    (2) This paragraph (c) shall apply only to components and spare 
parts that are acquired by DoD through a prime contract or a 
modification to a prime contract, or through a subcontract under a prime 
contract or modification to a prime contract on which the prime 
contractor adds no, or negligible, value.
    (d) Relevant information. To the extent necessary to make a 
determination under paragraph (a)(1)(ii), (b)(2), or (c)(1)(ii) of this 
section, the contracting officer may request the offeror to submit--
    (1) Prices paid for the same or similar commercial items under 
comparable terms and conditions by both Government and commercial 
customers; and
    (2) Other relevant information regarding the basis for price or 
cost, including information on labor costs, material costs, and overhead 
rates, if the contracting officer determines that the information 
described in paragraph (d)(1) of this section is not sufficient to 
determine price reasonableness.

[74 FR 34264, July 15, 2009]

              PART 235_RESEARCH AND DEVELOPMENT CONTRACTING

Sec.

Sec. 235.001 Definitions.

Sec. 235.006 Contracting methods and contract type.

Sec. 235.006-70 Manufacturing Technology Program.

Sec. 235.008 Evaluation for award.

Sec. 235.010 Scientific and technical reports.

[[Page 254]]


Sec. 235.015-70 Special use allowances for research facilities acquired 
          by educational institutions.

Sec. 235.016 Broad agency announcement.

Sec. 235.017 Federally Funded Research and Development Centers.

Sec. 235.017-1 Sponsoring agreements.

Sec. 235.070 Indemnification against unusually hazardous risks.

Sec. 235.070-1 Indemnification under research and development contracts.

Sec. 235.070-2 Indemnification under contracts involving both research 
          and development and other work.

Sec. 235.070-3 Contract clauses.

Sec. 235.071 Export-controlled items.

Sec. 235.072 Additional contract clauses.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36416, July 31, 1991, unless otherwise noted.



Sec. 235.001  Definitions.

    ``Research and development'' means those efforts described by the 
Research, Development, Test, and Evaluation (RDT&E) budget activity 
definitions found in the DoD Financial Management Regulation (DoD 
7000.14-R), Volume 2B, Chapter 5.

[65 FR 32040, May 22, 2000]



Sec. 235.006  Contracting methods and contract type.

    (b)(i) For major defense acquisition programs as defined in 10 
U.S.C. 2430--
    (A) Follow the procedures at 234.004; and
    (B) Notify the Under Secretary of Defense (Acquisition, Technology, 
and Logistics) (USD(AT&L)) of an intent not to exercise a fixed-price 
production option on a development contract for a major weapon system 
reasonably in advance of the expiration of the option exercise period.
    (ii) For other than major defense acquisition programs--
    (A) Do not award a fixed-price type contract for a development 
program effort unless--
    (1) The level of program risk permits realistic pricing;
    (2) The use of a fixed-price type contract permits an equitable and 
sensible allocation of program risk between the Government and the 
contractor; and
    (3) A written determination that the criteria of paragraphs 
(b)(ii)(A)(1) and (2) of this section have been met is executed--
    (i) By the USD(AT&L) if the contract is over $25 million and is for: 
research and development for a non-major system; the development of a 
major system (as defined in FAR 2.101); or the development of a 
subsystem of a major system; or
    (ii) By the contracting officer for any development not covered by 
paragraph (b)(ii)(A)(3)(i) of this section.
    (B) Obtain USD(AT&L) approval of the Government's prenegotiation 
position before negotiations begin, and obtain USD(AT&L) approval of the 
negotiated agreement with the contractor before the agreement is 
executed, for any action that is--
    (1) An increase of more than $250 million in the price or ceiling 
price of a fixed-price type development contract, or a fixed-price type 
contract for the lead ship of a class;
    (2) A reduction in the amount of work under a fixed-price type 
development contract or a fixed-price type contract for the lead ship of 
a class, when the value of the work deleted is $100 million or more; or
    (3)) A repricing of fixed-price type production options to a 
development contract, or a contract for the lead ship of a class, that 
increases the price or ceiling price by more than $250 million for 
equivalent quantities.

[73 FR 4118, Jan. 24, 2008]



Sec. 235.006-70  Manufacturing Technology Program.

    In accordance with 10 U.S.C. 2521(d), for acquisitions under the 
Manufacturing Technology Program--
    (a) Award all contracts using competitive procedures; and
    (b) Include in all solicitations an evaluation factor that addresses 
the extent to which offerors propose to share in the cost of the project 
(see FAR 15.304).

[65 FR 2058, Jan. 13, 2000, as amended at 69 FR 65092, Nov. 10, 2004]



Sec. 235.008  Evaluation for award.

    See 209.570 for limitations on the award of contracts to contractors 
acting as lead system integrators.

[73 FR 1825, Jan. 10, 2008]

[[Page 255]]



Sec. 235.010  Scientific and technical reports.

    (b) For DoD, the Defense Technical Information Center is responsible 
for collecting all scientific and technical reports. For access to these 
reports, follow the procedures at PGI 235.010(b).

[69 FR 65092, Nov. 10, 2004]



Sec. 235.015-70  Special use allowances for research facilities acquired 
          by educational institutions.

    (a) Definitions. As used in this subsection--
    (1) Research facility means--
    (i) Real property, other than land; and
    (ii) Includes structures, alterations, and improvements, acquired 
for the purpose of conducting scientific research under contracts with 
departments and agencies of the DoD.
    (2) Special use allowance means a negotiated direct or indirect 
allowance--
    (i) For construction or acquisition of buildings, structures, and 
real property, other than land; and
    (ii) Where the allowance is computed at an annual rate exceeding the 
rate which normally would be allowed under FAR subpart 31.3.
    (b) Policy. (1) Educational institutions are to furnish the 
facilities necessary to perform Defense contracts. FAR 31.3 governs how 
much the Government will reimburse the institution for the research 
programs. However, in extraordinary situations, the Government may give 
special use allowances to an educational institution when the 
institution is unable to provide the capital for new laboratories or 
expanded facilities needed for Defense contracts.
    (2) Decisions to provide a special use allowance must be made on a 
case-by-case basis, using the criteria in paragraph (c) of this 
subsection.
    (c) Authorization for special use allowance. The head of a 
contracting activity may approve special use allowances only when all of 
the following conditions are met--
    (1) The research facility is essential to the performance of DoD 
contracts;
    (2) Existing facilities, either Government or nongovernment, cannot 
meet program requirements practically or effectively;
    (3) The proposed agreement for special use allowances is a sound 
business arrangement;
    (4) The Government's furnishing of Government-owned facilities is 
undesirable or impractical; and
    (5) The proposed use of the research facility is to conduct 
essential Government research which requires the new or expanded 
facilities.
    (d) Application of the special use allowance. (1) In negotiating a 
special use allowance--
    (i) Compare the needs of DoD and of the institution for the research 
facility to determine the amount of the special use allowance;
    (ii) Consider rental costs for similar space in the area where the 
research facility is or will be located to establish the annual special 
use allowance;
    (iii) Do not include or allow--
    (A) The costs of land; or
    (B) Interest charges on capital;
    (iv) Do not include maintenance, utilities, or other operational 
costs;
    (v) The period of allowance generally will be--
    (A) At least ten years; or
    (B) A shorter period if the total amount to be allowed is less than 
the construction or acquisition cost for the research facility;
    (vi) Generally, provide for allocation of the special use allowance 
equitably among the Government contracts using the research facility;
    (vii) Special use allowances apply only in the years in which the 
Government has contracts in effect with the institution. However, if in 
any given year there is a reduced level of Government research effort 
which results in the special use allowance being excessive compared to 
the Government research funding, a separate special use allowance may be 
negotiated for that year;
    (viii) Special use allowances may be adjusted for the period before 
construction is complete if the facility is partially occupied and used 
for Government research during that period.
    (2) A special use allowance may be based on either total or partial 
cost of construction or acquisition of the research facility.

[[Page 256]]

    (i) When based on total cost neither the normal use allowance nor 
depreciation will apply--
    (A) During the special use allowance period; and
    (B) After the educational institution has recovered the total 
construction or acquisition cost from the Government or other users.
    (ii) When based on partial cost, normal use allowance and 
depreciation--
    (A) Apply to the balance of costs during the special use allowance 
period to the extent negotiated in the special use allowance agreement; 
and
    (B) Do not apply after the special use allowance period, except for 
normal use allowance applied to the balance.
    (3) During the special use allowance period, the research facility--
    (i) Shall be available for Government research use on a priority 
basis over nongovernment use; and
    (ii) Cannot be put to any significant use other than that which 
justified the special use allowance, unless the head of the contracting 
activity, who approved the special use allowance, consents.
    (4) The Government will pay only an allocable share of the special 
use allowance when the institution makes any substantial use of the 
research facility for parties other than the Government during the 
period when the special use allowance is in effect.
    (5) In no event shall the institution be paid more than the 
acquisition costs.

[56 FR 36416, July 31, 1991, as amended at 60 FR 29500, June 5, 1995]



Sec. 235.016  Broad agency announcement.

    To help achieve the goals of Section 1207 of Public Law 99-661 (see 
part 226), contracting officers shall--
    (1) Whenever practicable, reserve discrete or severable areas of 
research interest contained in broad agency announcements for exclusive 
competition among historically black colleges and universities and 
minority institutions;
    (2) Indicate such reservation--
    (i) In the broad agency announcement; and
    (ii) In the announcement synopsis (see 205.207(d)).

[56 FR 36416, July 31, 1991, as amended at 69 FR 63328, Nov. 1, 2004]



Sec. 235.017  Federally Funded Research and Development Centers.

    (a) Policy. (2) No DoD fiscal year 1992 or later funds may be 
obligated or expended to finance activities of a DoD Federally Funded 
Research and Development Center (FFRDC) if a member of its board of 
directors or trustees simultaneously serves on the board of directors or 
trustees of a profit-making company under contract to DoD, unless the 
FFRDC has a DoD-approved conflict of interest policy for its members 
(section 8107 of Pub. L. 102-172 and similar sections in subsequent 
Defense appropriations acts).

[58 FR 28471, May 13, 1993]



Sec. 235.017-1  Sponsoring agreements.

    (c)(4) DoD-sponsoring FFRDCs that function primarily as research 
laboratories (C3I Laboratory operated by the Institute for Defense 
Analysis, Lincoln Laboratory operated by Massachusetts Institute of 
Technology, and Software Engineering Institute operated by Carnegie 
Mellon) may respond to solicitations and announcements for programs 
which promote research, development, demonstration, or transfer of 
technology (Section 217, Public Law 103-337).

[60 FR 61598, Nov. 30, 1995, as amended at 69 FR 65092, Nov. 10, 2004]



Sec. 235.070  Indemnification against unusually hazardous risks.



Sec. 235.070-1  Indemnification under research and development 
          contracts.

    (a) Under 10 U.S.C. 2354, and if authorized by the Secretary 
concerned, contracts for research and/or development may provide for 
indemnification of the contractor or subcontractors for--
    (1) Claims by third persons (including employees) for death, bodily 
injury, or loss of or damage to property; and
    (2) Loss of or damage to the contractor's property to the extent 
that the liability, loss, or damage--
    (i) Results from a risk that the contract defines as ``unusually 
hazardous;''
    (ii) Arises from the direct performance of the contract; and

[[Page 257]]

    (iii) Is not compensated by insurance or other means.
    (b) Clearly define the specific unusually hazardous risks to be 
indemnified. Submit this definition for approval with the request for 
authorization to grant indemnification. Include the approved definition 
in the contract.

[56 FR 36416, July 31, 1991, as amended at 64 FR 51076, Sept. 21, 1999]



Sec. 235.070-2  Indemnification under contracts involving both research 
          and development and other work.

    These contracts may provide for indemnification under the authority 
of both 10 U.S.C. 2354 and Public Law 85-804. Public Law 85-804 will 
apply only to work to which 10 U.S.C. 2354 does not apply. Actions under 
Public Law 85-804 must also comply with FAR subpart 50.4.



Sec. 235.070-3  Contract clauses.

    When the contractor is to be indemnified in accordance with 235.070-
1, use either--
    (a) The clause at 252.235-7000, Indemnification Under 10 U.S.C. 
2354--Fixed Price; or
    (b) The clause at 252.235-7001, Indemnification Under 10 U.S.C. 
2354--Cost-Reimbursement, as appropriate.



Sec. 235.071  Export-controlled items.

    For requirements regarding access to export-controlled items, see 
Subpart 204.73.

[73 FR 42278, July 21, 2008]



Sec. 235.072  Additional contract clauses.

    (a) Use the clause at 252.235-7002, Animal Welfare, or one 
substantially the same, in solicitations and contracts awarded in the 
United States or its outlying areas involving research on live 
vertebrate animals.
    (b) Use the clause at 252.235-7003, Frequency Authorization, in 
solicitations and contracts for developing, producing, constructing, 
testing, or operating a device requiring a frequency authorization.
    (c) Use the clause at 252.235-7010, Acknowledgement of Support and 
Disclaimer, in solicitations and contracts for research and development.
    (d) Use the clause at 252.235-7011, Final Scientific or Technical 
Report, in solicitations and contracts for research and development.
    (e) Use the clause at 252.235-7004, Protection of Human Subjects, in 
solicitations and contracts that include or may include research 
involving human subjects in accordance with 32 CFR Part 219, DoD 
Directive 3216.02, and 10 U.S.C. 980, including research that meets 
exemption criteria under 32 CFR 219.101(b). The clause--
    (1) Applies to solicitations and contracts awarded by any DoD 
component, regardless of mission or funding Program Element Code; and
    (2) Does not apply to use of cadaver materials alone, which are not 
directly regulated by 32 CFR Part 219 or DoD Directive 3216.02, and 
which are governed by other DoD policies and applicable State and local 
laws.

[56 FR 36416, July 31, 1991, as amended at 60 FR 29500, June 5, 1995; 70 
FR 35545, June 21, 2005. Redesignated at 73 FR 42278, July 21, 2008; 74 
FR 37645, 37648, July 29, 2009]

         PART 236_CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

                          Subpart 236.1_General

Sec.

Sec. 236.102 Definitions.

      Subpart 236.2_Special Aspects of Contracting for Construction


Sec. 236.201 Evaluation of contractor performance.

Sec. 236.203 Government estimate of construction costs.

Sec. 236.204 Disclosure of the magnitude of construction projects.

Sec. 236.206 Liquidated damages.

Sec. 236.213 Special procedures for sealed bidding in construction 
          contracting.

Sec. 236.270 Expediting construction contracts.

Sec. 236.271 Cost-plus-fixed-fee contracts.

Sec. 236.272 Prequalification of sources.

Sec. 236.273 Construction in foreign countries.

Sec. 236.274 Restriction on acquisition of steel for use in military 
          construction projects.

Sec. 236.275 Construction of industrial resources.

                     Subpart 236.5_Contract Clauses


Sec. 236.570 Additional provisions and clauses.

                Subpart 236.6_Architect-Engineer Services


Sec. 236.601 Policy.

[[Page 258]]


Sec. 236.602 Selection of firms for architect-engineer contracts.

Sec. 236.602-1 Selection criteria.

Sec. 236.602-70 Restriction on award of overseas architect-engineer 
          contracts to foreign firms.

Sec. 236.604 Performance evaluation.

Sec. 236.606 Negotiations.

Sec. 236.606-70 Statutory fee limitation.

Sec. 236.609 Contract clauses.

Sec. 236.609-70 Additional provision and clause.

     Subpart 236.7_Standard and Optional Forms for Contracting for 
Construction, Architect-Engineer Services, and Dismantling, Demolition, 
                       or Removal of Improvements


Sec. 236.701 Standard and optional forms for use in contracting for 
          construction or dismantling, demolition, or removal of 
          improvements.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36421, July 31, 1991, unless otherwise noted.

                          Subpart 236.1_General



Sec. 236.102  Definitions.

    (1) A-E means architect-engineer.
    (2) Construction activity means an activity at any organizational 
level of the DoD that--
    (i) Is responsible for the architectural, engineering, and other 
related technical aspects of the planning, design, and construction of 
facilities; and
    (ii) Receives its technical guidance from the Army Office of the 
Chief of Engineers, Naval Facilities Engineering Command, or Air Force 
Directorate of Civil Engineering.
    (3) Marshallese firm is defined in the provision at 252.236-7012, 
Military Construction on Kwajalein Atoll--Evaluation Preference.
    (4) United States firm is defined in the provisions at 252.236-7010, 
Overseas Military Construction-Preference for United States Firms, and 
252.236-7011, Overseas Architect-Engineer Services-Restriction to United 
States firms.

[56 FR 36421, July 31, 1991, as amended at 62 FR 2857, Jan. 17, 1997; 63 
FR 11538, Mar. 9, 1998; 71 FR 9272, Feb. 23, 2006]

      Subpart 236.2_Special Aspects of Contracting for Construction



Sec. 236.201  Evaluation of contractor performance.

    (a) Preparation of performance evaluation reports. Use DD Form 2626, 
Performance Evaluation (Construction), instead of SF 1420.
    (c) Follow the procedures at PGI 236.201(c) for distribution and use 
of performance reports.

[56 FR 36421, July 31, 1991, as amended at 61 FR 7749, Feb. 29, 1996; 66 
FR 49861, Oct. 1, 2001; 71 FR 9272, Feb. 23, 2006]



Sec. 236.203   Government estimate of construction costs.

    Follow the procedures at PGI 236.203 for handling the Government 
estimate of construction costs.

[71 FR 9273, Feb. 23, 2006]



Sec. 236.204  Disclosure of the magnitude of construction projects.

    Additional price ranges are--
    (i) Between $10,000,000 and $25,000,000;
    (ii) Between $25,000,000 and $100,000,000;
    (iii) Between $100,000,000 and $250,000,000;
    (iv) Between $250,000,000 and $500,000,000; and
    (v) Over $500,000,000.

[61 FR 7749, Feb. 29, 1996]



Sec. 236.206  Liquidated damages.

    See 211.503 for instructions on use of liquidated damages.

[56 FR 36421, July 31, 1991, as amended at 66 FR 49861, Oct. 1, 2001]



Sec. 236.213  Special procedures for sealed bidding in construction 
          contracting.

    If it appears that sufficient funds may not be available for all the 
desired construction features, consider using a bid schedule with 
additive or deductive items in accordance with PGI 236.213.

[71 FR 9273, Feb. 23, 2006]



Sec. 236.270  Expediting construction contracts.

    (a) 10 U.S.C. 2858 requires agency head approval to expedite the 
completion date of a contract funded by a

[[Page 259]]

Military Construction Appropriations Act, if additional costs are 
involved. This approval authority may not be redelegated. The approval 
authority must--
    (1) Certify that the additional expenditures are necessary to 
protect the National interest; and
    (2) Establish a reasonable completion date for the project.
    (b) The contracting officer may approve an expedited completion date 
if no additional costs are involved.



Sec. 236.271  Cost-plus-fixed-fee contracts.

    Annual military construction appropriations acts restrict the use of 
cost-plus-fixed-fee contracts (see 216.306(c)).

[61 FR 7749, Feb. 29, 1996]



Sec. 236.272  Prequalification of sources.

    (a) Prequalification procedures may be used when necessary to ensure 
timely and efficient performance of critical construction projects. 
Prequalification--
    (1) Results in a list of sources determined to be qualified to 
perform a specific construction contract; and
    (2) Limits offerors to those with proven competence to perform in 
the required manner.
    (b) The head of the contracting activity must--
    (1) Authorize the use of prequalification by determining, in 
writing, that a construction project is of an urgency or complexity that 
requires prequalification; and
    (2) Approve the prequalification procedures.
    (c) For small businesses, the prequalification procedures must 
require the qualifying authority to--
    (1) Request a preliminary recommendation from the appropriate Small 
Business Administration regional office, if the qualifying authority 
believes a small business is not responsible;
    (2) Permit the small business to submit a bid or proposal if the 
preliminary recommendation is that the small business is responsible; 
and
    (3) Follow the procedures in FAR 19.6, if the small business is in 
line for award and is found nonresponsible.



Sec. 236.273  Construction in foreign countries.

    (a) In accordance with Section 112 of Pub. L. 105-45 and similar 
sections in subsequent military construction appropriations acts, 
military construction contracts funded with military construction 
appropriations, that are estimated to exceed $1,000,000 and are to be 
performed in the United States outlying area in the Pacific and on 
Kwajalein Atoll, or in countries bordering the Arabian Gulf, shall be 
awarded only to United States firms, unless--
    (1) The lowest responsive and responsible offer of a United States 
firm exceeds the lowest responsive and responsible offer of a foreign 
firm by more than 20 percent; or
    (2) The contract is for military construction on Kwajalein Atoll and 
the lowest responsive and responsible offer is submitted by a 
Marshallese firm.
    (b) See PGI 236.273(b) for guidance on technical working agreements 
with foreign governments.

[56 FR 36421, July 31, 1991, as amended at 62 FR 2856, Jan. 17, 1997; 62 
FR 34127, June 24, 1997; 63 FR 11538, Mar. 9, 1998; 66 FR 49861, Oct. 1, 
2001; 70 FR 35545, June 21, 2005. Redesignated and amended at 71 FR 
9273, Feb. 23, 2006]



Sec. 236.274  Restriction on acquisition of steel for use in military 
          construction projects.

    In accordance with section 108 of the Military Construction and 
Veterans Affairs Appropriations Act, 2009 (Pub. L. 110-329, Division E), 
do not acquire, or allow a contractor to acquire, steel for any 
construction project or activity for which American steel producers, 
fabricators, or manufacturers have been denied the opportunity to 
compete for such acquisition of steel.

[74 FR 2418, Jan. 15, 2009]



Sec. 236.275  Construction of industrial resources.

    See Subpart 237.75 for policy relating to facilities projects.

[74 FR 37646, July 29, 2009]

[[Page 260]]

                     Subpart 236.5_Contract Clauses



Sec. 236.570  Additional provisions and clauses.

    (a) Use the following clauses in all fixed-price construction 
solicitations and contracts--
    (1) 252.236-7000, Modification Proposals-Price Breakdown; and
    (2) 252.236-7001, Contract Drawings and Specifications.
    (b) Use the following provisions and clauses in fixed-price 
construction contracts and solicitations as applicable--
    (1) 252.236-7002, Obstruction of Navigable Waterways, when the 
contract will involve work near or on navigable waterways.
    (2) When the head of the contracting activity has approved use of a 
separate bid item for mobilization and preparatory work, use either--
    (i) 252.236-7003, Payment for Mobilization and Preparatory Work. Use 
this clause for major construction contracts that require--
    (A) Major or special items of plant and equipment; or
    (B) Large stockpiles of material which are in excess of the type, 
kind, and quantity which would be normal for a contractor qualified to 
undertake the work; or
    (ii) 252.236-7004, Payment for Mobilization and Demobilization. Use 
this clause for contracts involving major mobilization expense, or plant 
equipment and material (other than the situations covered in paragraph 
(b)(2)(i) of this section) made necessary by the location or nature of 
the work.
    (A) Generally, allocate 60 percent of the lump sum price in 
paragraph (a) of the clause to the cost of mobilization.
    (B) Vary this percentage to reflect the circumstances of the 
particular contract, but in no event should mobilization exceed 80 
percent of the payment item.
    (3) 252.236-7005, Airfield Safety Precautions, when construction 
will be performed on or near airfields.
    (4) 252.236-7006, Cost Limitation, if the solicitation's bid 
schedule contains one or more items subject to statutory cost 
limitations, and if a waiver has not been granted (FAR 36.205).
    (5) 252.236-7007, Additive or Deductive Items, if the procedures in 
236.213 are being used.
    (6) 252.236-7008, Contract Prices--Bidding Schedule, if the contract 
will contain only unit prices for some items.
    (c) Use the following provisions in solicitations for military 
construction contracts that are funded with military construction 
appropriations and are estimated to exceed $1,000,000:
    (1) 252.236-7010, Overseas Military Construction--Preference for 
United States Firms, when contract performance will be in a United 
States outlying area in the Pacific or in a country bordering the 
Arabian Gulf.
    (2) 252.236-7012, Military Construction on Kwajalein Atoll--
Evaluation Preference, when contract performance will be on Kwajalein 
Atoll.
    (d) Use the clause at 252.236-7013, Requirement for Competition 
Opportunity for American Steel Producers, Fabricators, and 
Manufacturers, in solicitations and contracts that--
    (1) Use funds appropriated by Title I of the Military Construction 
and Veterans Affairs Appropriations Act, 2009 (Pub. L. 110-329, Division 
E); and
    (2) May require the acquisition of steel as a construction material.
    (e) Also see 246.710(4) for an additional clause applicable to 
construction contracts to be performed in Germany.

[56 FR 36421, July 31, 1991, as amended at 57 FR 42632, Sept. 15, 1992; 
62 FR 2856, Jan. 17, 1997; 62 FR 34127, June 24, 1997; 63 FR 11538, Mar. 
9, 1998; 65 FR 63804, Oct. 25, 2000; 68 FR 7440, Feb. 14, 2003; 70 FR 
35545, June 21, 2005; 73 FR 46817, Aug. 12, 2008; 74 FR 2418, Jan. 15, 
2009]

                Subpart 236.6_Architect-Engineer Services



Sec. Sec. 236.601  Policy

    (1) Written notification to the congressional defense committees is 
required if the total estimated contract price for architect-engineer 
services or construction design, in connection with military 
construction, military

[[Page 261]]

family housing, or restoration or replacement of damaged or destroyed 
facilities, exceeds $1,000,000. In accordance with 10 U.S.C. 480, 
unclassified notifications must be provided by electronic medium.
    (i) For military construction or military family housing (10 U.S.C. 
2807(b)), the notification--
    (A) Must include the scope of the project and the estimated contract 
price; and
    (B)(1) If provided by electronic medium, must be provided at least 
14 days before the initial obligation of funds; or
    (2) If provided by other than electronic medium, must be received by 
the congressional defense committees at least 21 days before the initial 
obligation of funds.
    (ii) For restoration or replacement of damaged or destroyed 
facilities (10 U.S.C. 2854(b)), the notification--
    (A) Must include the justification for the project, the estimated 
contract price, and the source of the funds for the project; and
    (B)(1) If provided by electronic medium, must be provided at least 7 
days before the initial obligation of funds; or
    (2) If provided by other than electronic medium, must be received by 
the congressional defense committees at least 21 days before the initial 
obligation of funds.
    (2) During the applicable notice period, synopsis of the proposed 
contract action and administrative actions leading to the award may be 
started.

[71 FR 58541, Oct. 4, 2006]



Sec. 236.602  Selection of firms for architect-engineer contracts.



Sec. 236.602-1  Selection criteria.

    (a) Establish the evaluation criteria before making the public 
announcement required by FAR 5.205(d) and include the criteria and their 
relative order of importance in the announcement. Follow the procedures 
at PGI 236.602-1(a).

[69 FR 75000, Dec. 15, 2004, as amended at 71 FR 53044, Sept. 8, 2006]



Sec. 236.602-70  Restriction on award of overseas architect-engineer 
          contracts to foreign firms.

    In accordance with Section 111 of Public Law 104-32 and similar 
sections in subsequent military construction appropriations acts, A-E 
contracts funded by military construction appropriations that are 
estimated to exceed $500,000 and are to be performed in Japan, in any 
North Atlantic Treaty Organization member country, or in countries 
bordering the Arabian Gulf, shall be awarded only to United States firms 
or to joint ventures of United States and host nation firms.

[62 FR 2858, Jan. 17, 1997]



Sec. 236.604  Performance evaluation.

    (a) Preparation of performance reports. Use DD Form 2631, 
Performance Evaluation (Architect-Engineer), instead of SF 1421.
    (2) Prepare a separate performance evaluation after actual 
construction of the project. Ordinarily, the evaluating official should 
be the person most familiar with the A-E's performance.
    (c) Distribution and use of performance reports.
    (i) Forward each performance report to the central data base 
identified in 236.201(c) after completing the review. The procedures in 
236.201 also apply to A-E contracts.
    (ii) File and use the DD Form 2631, Performance Evaluation 
(Architect-Engineer), in a manner similar to the SF 330, Architect-
Engineer Qualifications, Part II.

[56 FR 36421, July 31, 1991, as amended at 61 FR 7749, Feb. 29, 1996; 64 
FR 51076, Sept. 21, 1999; 69 FR 75000, Dec. 15, 2004]



Sec. 236.606  Negotiations.



Sec. 236.606-70  Statutory fee limitation.

    (a) 10 U.S.C. 4540, 7212, and 9540 limit the contract price (or fee) 
for A-E services for the preparation of designs, plans, drawings, and 
specifications to six percent of the project's estimated construction 
cost.
    (b) The six percent limit also applies to contract modifications, 
including modifications involving--
    (1) Work not initially included in the contract. Apply the six 
percent limit to

[[Page 262]]

the revised total estimated construction cost.
    (2) Redesign. Apply the six percent limit as follows--
    (i) Add the estimated construction cost of the redesign features to 
the original estimated construction cost;
    (ii) Add the contract cost for the original design to the contract 
cost for redesign; and
    (iii) Divide the total contract design cost by the total estimated 
construction cost. The resulting percentage may not exceed the six 
percent statutory limitation.
    (c) The six percent limit applies only to that portion of the 
contract (or modification) price attributable to the preparation of 
designs, plans, drawings, and specifications. If a contract or 
modification also includes other services, the part of the price 
attributable to the other services is not subject to the six percent 
limit.



Sec. 236.609  Contract clauses.



Sec. 236.609-70  Additional provision and clause.

    (a)(1) Use the clause at 252.236-7009, Option for Supervision and 
Inspection Services, in solicitations and contracts for A-E services 
when--
    (i) The contract will be fixed price; and
    (ii) Supervision and inspection services by the A-E may be required 
during construction.
    (2) Include the scope of such services in appendix A of the 
contract.
    (b) Use the provision at 252.236-7011, Overseas Architect-Engineer 
Services--Restriction to United States Firms, in solicitations for A-E 
contracts that are--
    (1) Funded with military construction appropriations;
    (2) Estimated to exceed $500,000; and
    (3) To be performed in Japan, in any North Atlantic Treaty 
Organization member country, or in countries bordering the Arabian Gulf.

[56 FR 36421, July 31, 1991, as amended at 62 FR 2858, Jan. 17, 1997; 63 
FR 11539, Mar. 9, 1998]

     Subpart 236.7_Standard and Optional Forms for Contracting for 
Construction, Architect-Engineer Services, and Dismantling, Demolition, 
                       or Removal of Improvements



Sec. 236.701  Standard and optional forms for use in contracting for 
          
          construction or dismantling, demolition, or removal of 
          improvements.

    (c) Do not use Optional Form 347, Order for Supplies or Services 
(see 213.307).

[56 FR 36421, July 31, 1991, as amended at 65 FR 63804, Oct. 25, 2000]

                      PART 237_SERVICE CONTRACTING

                 Subpart 237.1_Service Contracts_General

Sec.

Sec. 237.101 Definitions.

Sec. 237.102 Policy.

Sec. 237.102-70 Prohibition on contracting for firefighting or security-
          guard functions.

Sec. 237.102-71 Limitation on service contracts for military flight 
          simulators.

Sec. 237.102-72 Contracts for management services.

Sec. 237.104 Personal services contracts.

Sec. 237.106 Funding and term of service contracts.

Sec. 237.109 Services of quasi-military armed forces.

Sec. 237.170 Approval of contracts and task orders for services.

Sec. 237.170-1 Scope.

Sec. 237.170-2 Approval requirements.

Sec. 237.171 Training for contractor personnel interacting with 
          detainees.

Sec. 237.171-1 Scope.

Sec. 237.171-2 Definition.

Sec. 237.171-3 Policy.

Sec. 237.171-4 Contract clause.

Sec. 237.172 Service Contracts Surveillance.

             Subpart 237.2_Advisory and Assistance Services


Sec. 237.270 Acquisition of audit services.

         Subpart 237.5_Management Oversight of Service Contracts


Sec. 237.503 Agency-head responsibilities.

                    Subpart 237.70_Mortuary Services


Sec. 237.7000 Scope.

Sec. 237.7001 Method of acquisition.

Sec. 237.7002 Area of performance and distribution of contracts.

[[Page 263]]


Sec. 237.7003 Solicitation provisions and contract clauses.

            Subpart 237.71_Laundry and Dry Cleaning Services


Sec. 237.7100 Scope.

Sec. 237.7101 Solicitation provisions and contract clauses.

              Subpart 237.72_Educational Service Agreements


Sec. 237.7200 Scope.

Sec. 237.7201 Educational service agreement.

Sec. 237.7202 Limitations.

Sec. 237.7203 Duration.

Sec. 237.7204 Format and clauses for educational service agreements.

    Subpart 237.73_Services of Students at Research and Development 
                              Laboratories


Sec. 237.7300 Scope.

Sec. 237.7301 Definitions.

Sec. 237.7302 General.

Sec. 237.7303 Contract clauses.

          Subpart 237.74_Services at Installations Being Closed


Sec. 237.7400 Scope.

Sec. 237.7401 Policy.

Sec. 237.7402 Contract clause.

    Subpart 237.75_Acquisition and Management of Industrial Resources


Sec. 237.7501 Definition.

Sec. 237.7502 Policy.

      SUBPART 237.76_CONTINUATION OF ESSENTIAL CONTRACTOR SERVICES


Sec. 237.7600 Scope.

Sec. 237.7601 Definitions.

Sec. 237.7602 Policy.

Sec. 237.7603 Contract clause.

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

    Source: 56 FR 36424, July 31, 1991, unless otherwise noted.

                 Subpart 237.1_Service Contracts_General



Sec. 237.101  Definitions.

    Increased performance of security-guard functions, as used in this 
subpart, means--
    (1) In the case of an installation or facility where no security-
guard functions were performed as of September 10, 2001, the entire 
scope or extent of the performance of security-guard functions at the 
installation or facility after such date; and
    (2) In the case of an installation or facility where security-guard 
functions were performed within a lesser scope of requirements or to a 
lesser extent as of September 10, 2001, than after such date, the 
increment of the performance of security-guard functions at the 
installation or facility that exceeds such lesser scope of requirements 
or extent of performance.

[68 FR 7443, Feb. 14, 2003]



Sec. 237.102  Policy.

    (c) In addition to the prohibition on award of contracts for the 
performance of inherently governmental functions, contracting officers 
shall not award contracts for functions that are exempt from private 
sector performance. See 207.503(e) for the associated documentation 
requirement.
    (e) Program officials shall obtain assistance from contracting 
officials through the Peer Review process at 201.170.

[73 FR 1826, Jan. 10, 2008, as amended at 74 FR 37626, July 29, 2009]



Sec. 237.102-70  Prohibition on contracting for firefighting or 
          security-guard functions.

    (a) Under 10 U.S.C. 2465, the DoD is prohibited for entering into 
contracts for the performance of firefighting or security-guard 
functions at any military installation or facility unless--
    (1) The contract is to be carried out at a location outside the 
United States and its outlying areas at which members of the armed 
forces would have to be used for the performance of firefighting or 
security-guard functions at the expense of unit readiness;
    (2) The contract will be carried out on a Government-owned but 
privately operated installation;
    (3) The contract (or renewal of a contract) is for the performance 
of a function under contract on September 24, 1983; or
    (4) The contract--
    (i) Is for the performance of firefighting functions;
    (ii) Is for a period of 1 year or less; and

[[Page 264]]

    (iii) Covers only the performance of firefighting functions that, in 
the absence of the contract, would have to be performed by members of 
the armed forces who are not readily available to perform such functions 
by reason of a deployment.
    (b) Under Section 2907 of Public Law 103-160, this prohibition does 
not apply to services at installations being closed (see subpart 
237.74).
    (c) Under Section 1010 of Public Law 107-56, this prohibition does 
not apply to any contract that'
    (1) Is entered into during the period of time that United States 
armed forces are engaged in Operation Enduring Freedom or during the 
period 180 days thereafter;
    (2) Is for the performance of security functions at any military 
installation or facility in the United States;
    (3) Is awarded to a proximately located local or State government, 
or a combination of such governments, whether or not any such government 
is obligated to provide such services to the general public without 
compensation; and
    (4) Prescribes standards for the training and other qualifications 
of local government law enforcement personnel who perform security 
functions under the contract in accordance with criteria established by 
the Secretary of the department concerned.
    (d)(1) Under Section 332 of Public Law 107-314, as amended by 
Section 333 of Public Law 109-364 and Section 343 of Public Law 110-181, 
this prohibition does not apply to any contract that is entered into for 
any increased performance of security-guard functions at a military 
installation or facility undertaken in response to the terrorist attacks 
on the United States on September 11, 2001, if--
    (i) Without the contract, members of the Armed Forces are or would 
be used to perform the increased security-guard functions;
    (ii) The agency has determined that--
    (A) Recruiting and training standards for the personnel who are to 
perform the security-guard functions are comparable to the recruiting 
and training standards for DoD personnel who perform the same security-
guard functions;
    (B) Contractor personnel performing such functions will be 
effectively supervised, reviewed, and evaluated; and
    (C) Performance of such functions will not result in a reduction in 
the security of the installation or facility;
    (iii) Contract performance will not extend beyond September 30, 
2012; and
    (iv) The total number of personnel employed to perform security-
guard functions under all contracts entered into pursuant to this 
authority does not exceed the following limitations:
    (A) For fiscal year 2007, the total number of such personnel 
employed under such contracts on October 1, 2006.
    (B) For fiscal year 2008, the number equal to 90 percent of the 
total number of such personnel employed under such contracts on October 
1, 2006.
    (C) For fiscal year 2009, the number equal to 80 percent of the 
total number of such personnel employed under such contracts on October 
1, 2006.
    (D) For fiscal year 2010, the number equal to 70 percent of the 
total number of such personnel employed under such contracts on October 
1, 2006.
    (E) For fiscal year 2011, the number equal to 60 percent of the 
total number of such personnel employed under such contracts on October 
1, 2006.
    (F) For fiscal year 2012, the number equal to 50 percent of the 
total number of such personnel employed under such contracts on October 
1, 2006.

[60 FR 61599, Nov. 30, 1995, as amended at 67 FR 11439, Mar. 14, 2002; 
68 FR 7443, Feb. 14, 2003; 69 FR 35533, June 25, 2004; 70 FR 14577, Mar. 
23, 2005; 70 FR 35545, June 21, 2005; 71 FR 34834, June 16, 2006; 72 FR 
51192, Sept. 6, 2007; 73 FR 53157, Sept. 15, 2008]



Sec. 237.102-71  Limitation on service contracts for military flight 
          simulators.

    (a) Definitions. As used in this subsection--
    (1) Military flight simulator means any system to simulate the form, 
fit, and function of a military aircraft that has no commonly available 
commercial variant.
    (2) Service contract means any contract entered into by DoD, the 
principal purpose of which is to furnish services in the United States 
through the use of service employees as defined in 41 U.S.C. 357(b).

[[Page 265]]

    (b) Under Section 832 of Public Law 109-364, as amended by Section 
883(b) of Public Law 110-181, DoD is prohibited from entering into a 
service contract to acquire a military flight simulator. However, the 
Secretary of Defense may waive this prohibition with respect to a 
contract, if the Secretary--
    (1) Determines that a waiver is in the national interest; and
    (2) Provides an economic analysis to the congressional defense 
committees at least 30 days before the waiver takes effect. This 
economic analysis shall include, at a minimum--
    (i) A clear explanation of the need for the contract; and
    (ii) An examination of at least two alternatives for fulfilling the 
requirements that the contract is meant to fulfill, including the 
following with respect to each alternative:
    (A) A rationale for including the alternative.
    (B) A cost estimate of the alternative and an analysis of the 
quality of each cost estimate.
    (C) A discussion of the benefits to be realized from the 
alternative.
    (D) A best value determination of each alternative and a detailed 
explanation of the life-cycle cost calculations used in the 
determination.
    (c) When reviewing requirements or participating in acquisition 
planning that would result in a military department or defense agency 
acquiring a military flight simulator, the contracting officer shall 
notify the program officials of the prohibition in paragraph (b) of this 
subsection. If the program officials decide to request a waiver from the 
Secretary of Defense under paragraph (b) of this subsection, the 
contracting officer shall follow the procedures at PGI 237.102-71.

[72 FR 51193, Sept. 6, 2007, as amended at 73 FR 53156, Sept. 15, 2008]



Sec. 237.102-72  Contracts for management services.

    In accordance with Section 802 of the National Defense Authorization 
Act for Fiscal Year 2008 (Pub. L. 110-181), DoD may award a contract for 
the acquisition of services the primary purpose of which is to perform 
acquisition support functions with respect to the development or 
production of a major system, only if--
    (a) The contract prohibits the contractor from performing inherently 
governmental functions;
    (b) The DoD organization responsible for the development or 
production of the major system ensures that Federal employees are 
responsible for determining--
    (1) Courses of action to be taken in the best interest of the 
Government; and
    (2) Best technical performance for the warfighter; and
    (c) The contract requires that the prime contractor for the contract 
may not advise or recommend the award of a contract or subcontract for 
the development or production of the major system to an entity owned in 
whole or in part by the prime contractor.

[74 FR 34269, July 15, 2009]



Sec. 237.104  Personal services contracts.

    (b)(i) Authorization to acquire the personal services of experts and 
consultants is included in 10 U.S.C. 129b. Personal service contracts 
for expert and consultant services must also be authorized by a 
determination and findings (D&F) in accordance with department/agency 
regulations.
    (A) Generally, the D&F should authorize one contract at a time; 
however, an authorizing official may issue a blanket D&F for classes of 
contracts.
    (B) Prepare each D&F in accordance with FAR 1.7 and include a 
determination that--
    (1) The duties are of a temporary or intermittent nature;
    (2) Acquisition of the services is advantageous to the national 
defense;
    (3) DoD personnel with necessary skills are not available;
    (4) Excepted appointment cannot be obtained;
    (5) A nonpersonal services contract is not practicable;
    (6) Statutory authority, 5 U.S.C. 3109 and other legislation, apply; 
and
    (7) Any other determination required by statues has been made.
    (ii) Personal services contracts for health care are authorized by 
10 U.S.C. 1091.
    (A) This authority may be used to acquire--

[[Page 266]]

    (1) Direct health care services provided in medical treatment 
facilities;
    (2) Health care services at locations outside of medical treatment 
facilities (such as the provision of medical screening examinations at 
military entrance processing stations); and
    (3) Services of clinical counselors, family advocacy program staff, 
and victim's services representatives to members of the Armed Forces and 
covered beneficiaries who require such services, provided in medical 
treatment facilities or elsewhere. Persons with whom a personal services 
contract may be entered into under this authority include clinical 
social workers, psychologists, psychiatrists, and other comparable 
professionals who have advanced degrees in counseling or related 
academic disciplines and who meet all requirements for State licensure 
and board certification requirements, if any, within their fields of 
specialization.
    (B) Sources for personal services contracts with individuals under 
the authority of 10 U.S.C. 1091 shall be selected through the procedures 
in this section. These procedures do not apply to contracts awarded to 
business entities other than individuals. Selections made using the 
procedures in this section are exempt by statute from FAR part 6 
competition requirements (see 206.001(b)).
    (C) Approval requirements for--
    (1) Direct health care personal services contracts (see paragraphs 
(b)(ii)(A)(1) and (2) of this section) and a pay cap are in DoDI 6025.5, 
Personal Services Contracts for Health Care Providers.
    (i) A request to enter into a personal services contract for direct 
health care services must be approved by the commander of the medical/
dental treatment facility where the services will be performed.
    (ii) A request to enter into a personal services contract for a 
location outside of a medical treatment facility must be approved by the 
chief of the medical facility who is responsible for the area in which 
the services will be performed.
    (2) Services of clinical counselors, family advocacy program staff, 
and victim's services representatives (see paragraph (b)(ii)(A)(3) of 
this section), shall be in accordance with agency procedures.
    (D) The contracting officer must ensure that the requiring activity 
provides a copy of the approval with the purchase request.
    (E) The contracting officer must provide adequate advance notice of 
contracting opportunities to individuals residing in the area of the 
facility. The notice must include the qualification criteria against 
which individuals responding will be evaluated. The contracting officer 
shall solicit applicants through at least one local publication which 
serves the area of the facility. Acquisitions under this section for 
personal service contracts are exempt from the posting and synopsis 
requirements of FAR part 5.
    (F) The contracting officer shall provide the qualifications of 
individuals responding to the notice to the commander of the facility 
for evaluation and ranking in accordance with agency procedures. 
Individuals must be considered solely on the basis of the professional 
qualifications established for the particular personal services being 
acquired and the Government's estimate of reasonable rates, fees, or 
other costs. The commander of the facility shall provide the contracting 
officer with rationale for the ranking of individuals, consistent with 
the required qualifications.
    (G) Upon receipt from the facility of the ranked listing of 
applicants, the contracting officer shall either--
    (1) Enter into negotiations with the highest ranked applicant. If a 
mutually satisfactory contract cannot be negotiated, the contracting 
officer shall terminate negotiations with the highest ranked applicant 
and enter into negotiations with the next highest.
    (2) Enter into negotiations with all qualified applicants and select 
on the basis of qualifications and rates, fees, or other costs.
    (H) In the event only one individual responds to an advertised 
requirement, the contracting officer is authorized to negotiate the 
contract award. In this case, the individual must still meet the minimum 
qualifications of the requirement and the contracting officer must be 
able to make a determination that the price is fair and reasonable.

[[Page 267]]

    (I) If a fair and reasonable price cannot be obtained from a 
qualified individual, the requirement should be canceled and acquired 
using procedures other than those set forth in this section.
    (iii) (A) In accordance with 10 U.S.C. 129b(d), an agency may enter 
into a personal services contract if--
    (1) The personal services--
    (i) Are to be provided by individuals outside the United States, 
regardless of their nationality;
    (ii) Directly support the mission of a defense intelligence 
component or counter-intelligence organization of DoD; or
    (iii) Directly support the mission of the special operations command 
of DoD; and
    (2) The head of the contracting activity provides written approval 
for the proposed contract. The approval shall include a determination 
that addresses the following:
    (i) The services to be procured are urgent or unique;
    (ii) It would not be practical to obtain such services by other 
means; and
    (iii) For acquisition of services in accordance with paragraph 
(b)(iii)(A)(1)(i) of this section, the services to be acquired are 
necessary and appropriate for supporting DoD activities and programs 
outside the United States.
    (B) The contracting officer shall ensure that the applicable 
requirements of paragraph (b)(iii)(A)(2) of this section have been 
satisfied and shall include the approval documentation in the contract 
file.
    (iv) The requirements of 5 U.S.C. 3109, Employment of Experts and 
Consultants; Temporary or Intermittent, do not apply to contracts 
entered into in accordance with paragraph (b)(iii) of this section.
    (f)(i) Payment to each expert or consultant for personal services 
under 5 U.S.C. 3109 shall not exceed the highest rate fixed by the 
Classification Act Schedules for grade GS-15 (see 5 CFR 304.105(a)).
    (ii) The contract may provide for the same per diem and travel 
expenses authorized for a Government employee, including actual 
transportation and per diem in lieu of subsistence for travel between 
home or place of business and official duty station.
    (iii) Coordinate with the civilian personnel office on benefits, 
taxes, personnel ceilings, and maintenance of records.

[56 FR 36424, July 31, 1991, as amended at 60 FR 2888, Jan. 12, 1995; 60 
FR 61599, Nov. 30, 1995; 63 FR 11539, Mar. 9, 1998; 67 FR 61516, Oct. 1, 
2002; 69 FR 55992, Sept. 17, 2004]



Sec. 237.106  Funding and term of service contracts.

    (1) Personal service contracts for expert or consultant services 
shall not exceed 1 year. The nature of the duties must be--
    (i) Temporary (not more than 1 year); or
    (ii) Intermittent (not cumulatively more than 130 days in 1 year).
    (2) The contracting officer may enter into a contract, exercise an 
option, or place an order under a contract for severable services for a 
period that begins in one fiscal year and ends in the next fiscal year 
if the period of the contract awarded, option exercised, or order placed 
does not exceed 1 year (10 U.S.C. 2410a).

[64 FR 28110, May 25, 1999]



Sec. 237.109  Services of quasi-military armed forces.

    See 237.102-70b for prohibition on contracting for firefighting or 
security-guard functions.

[60 FR 61599, Nov. 30, 1995]



Sec. 237.170  Approval of contracts and task orders for services.



Sec. 237.170-1  Scope.

    This section--
    (a) Implements 10 U.S.C. 2330; and
    (b) Applies to services acquired for DoD, regardless of whether the 
services are acquired through--
    (1) A DoD contract or task order; or
    (2) A contract or task order awarded by an agency other than DoD.

[68 FR 56564, Oct. 1, 2003]



Sec. 237.170-2  Approval requirements.

    (a) Acquisition of services through a contract or task order that is 
not performance based. (1) For acquisitions at or below $85.5 million, 
obtain the approval

[[Page 268]]

of the official designated by the department or agency.
    (2) For acquisitions exceeding $85.5 million, obtain the approval of 
the senior procurement executive.
    (b) Acquisition of services through use of a contract or task order 
issued by a non-DoD agency. Comply with the review, approval, and 
reporting requirements established in accordance with Subpart 217.78 
when acquiring services through use of a contract or task order issued 
by a non-DoD agency.

[70 FR 29643, May 24, 2005, as amended at 71 FR 14104, Mar. 21, 2006; 71 
FR 75893, Dec. 19, 2006; 75 FR 45074, Aug. 2, 2010]



Sec. 237.171  Training for contractor personnel interacting with 
          detainees.



Sec. 237.171-1  Scope.

    This section prescribes policies to prevent the abuse of detainees, 
as required by Section 1092 of the National Defense Authorization Act 
for Fiscal Year 2005 (Pub. L. 108-375).

[70 FR 52033, Sept. 1, 2005]



Sec. 237.171-2  Definition.

    Combatant commander, detainee, and personnel interacting with 
detainees, as used in this section, are defined in the clause at 
252.237-7019, Training for Contractor Personnel Interacting with 
Detainees.

[71 FR 53048, Sept. 8, 2006]



Sec. 237.171-3  Policy.

    (a) Each DoD contract in which contractor personnel, in the course 
of their duties, interact with detainees shall include a requirement 
that such contractor personnel--
    (1) Receive Government-provided training regarding the international 
obligations and laws of the United States applicable to the detention of 
personnel, including the Geneva Conventions; and
    (2) Provide a copy of the training receipt document to the 
contractor.
    (b) The combatant commander responsible for the area where the 
detention or interrogation facility is located will arrange for the 
training and a training receipt document to be provided to contractor 
personnel. For information on combatant commander geographic areas of 
responsibility and point of contact information for each command, see 
PGI 237.171-3(b).

[71 FR 53048, Sept. 8, 2006]



Sec. 237.171-4  Contract clause.

    Use the clause at 252.237-7019, Training for Contractor Personnel 
Interacting with Detainees, in solicitations and contracts for the 
acquisition of services if--
    (a) The clause at 252.225-7040, Contractor Personnel Supporting a 
Force Deployed Outside the United States, is included in the 
solicitation or contract; or
    (b) The services will be performed at a facility holding detainees, 
and contractor personnel in the course of their duties may be expected 
to interact with the detainees.

[70 FR 52033, Sept. 1, 2005]



Sec. 237.172  Service Contracts Surveillance.

    Ensure that quality assurance surveillance plans are prepared in 
conjunction with the preparation of the statement of work or statement 
of objectives for solicitations and contracts for services. These plans 
should be tailored to address the performance risks inherent in the 
specific contract type and the work effort addressed by the contract. 
(See FAR Subpart 46.4.) Retain quality assurance surveillance plans in 
the official contract file. See https://sam.dau.mil, Step Four--
Requirements Definition, for examples of quality assurance surveillance 
plans.

[75 FR 22706, Apr. 30, 2010]

             Subpart 237.2_Advisory and Assistance Services



Sec. 237.270  Acquisition of audit services.

    (a) General policy. (1) Do not contract for audit services unless--
    (i) The cognizant DoD audit organization determines that expertise 
required to perform the audit is not available within the DoD audit 
organization; or
    (ii) Temporary audit assistance is required to meet audit reporting 
requirements mandated by law or DoD regulation.

[[Page 269]]

    (2) See PGI 237.270 for a list of DoD publications that govern the 
conduct of audits.
    (b) Contract period. Except in unusual circumstances, award 
contracts for recurring audit services for a 1-year period with at least 
2 option years.
    (c) Approvals. Do not issue a solicitation for audit services unless 
the requiring activity provides evidence that the cognizant DoD audit 
organization has approved the statement of work. The requiring agency 
shall obtain the same evidence of approval for subsequent material 
changes to the statement of work.
    (d) Solicitation provisions and contract clauses. (1) Use the 
provision at 252.237-7000, Notice of Special Standards of 
Responsibility, in solicitations for audit services.
    (2) Use the clause at 252.237-7001, Compliance with Audit Standards, 
in solicitations and contracts for audit services.

[70 FR 57193, Sept. 30, 2005]

         Subpart 237.5_Management Oversight of Service Contracts

    Source: 75 FR 54525, Sept. 8, 2010, unless otherwise noted.



Sec. 237.503  Agency-head responsibilities.

    (c) The agency head or designee shall employ procedures to ensure 
that requirements for service contracts are vetted and approved as a 
safeguard to prevent contracts from being awarded or administered in a 
manner that constitutes an unauthorized personal services contract. 
Contracting officers shall follow the procedures at PGI 237.503, include 
substantially similar certifications in conjunction with service 
contract requirements, and place the certification in the contract file. 
The program manager or other official responsible for the requirement, 
at a level specified by the agency, should execute the certification.

                    Subpart 237.70_Mortuary Services

    Source: 71 FR 3416, Jan. 23, 2006, unless otherwise noted.



Sec. 237.7000  Scope.

    This subpart--
    (a) Applies to contracts for mortuary services (the care of remains) 
for military personnel within the United States; and
    (b) May be used as guidance in areas outside the United States for 
mortuary services for deceased military and civilian personnel.



Sec. 237.7001  Method of acquisition.

    (a) Requirements type contract. By agreement among the military 
activities, one activity in each geographical area will contract for the 
estimated requirements for the care of remains for all military 
activities in the area. Use a requirements type contract (see FAR 
16.503) when the estimated annual requirements for the activities in the 
area are ten or more.
    (b) Purchase order. Where no contract exists, use DD Form 1155, 
Order for Supplies or Services, to obtain mortuary services.



Sec. 237.7002  Area of performance and distribution of contracts.

    Follow the procedures at PGI 237.7002 for--
    (a) Defining the geographical area to be covered by the contract; 
and
    (b) Distributing copies of the contract.



Sec. 237.7003  Solicitation provisions and contract clauses.

    (a) Use the provision at 252.237-7002, Award to Single Offeror, in 
all sealed bid solicitations for mortuary services. Use the basic 
provision with its Alternate I in all negotiated solicitations for 
mortuary services.
    (b) Use the following clauses in all mortuary service solicitations 
and contracts, except do not use the clauses at 252.237-7004, Area of 
Performance, in solicitations or contracts that include port of entry 
requirements:
    (1) 252.237-7003, Requirements, (insert activities authorized to 
place orders in paragraph (e) of the clause).
    (2) 252.237-7004, Area of Performance.
    (3) 252.237-7005, Performance and Delivery.
    (4) 252.237-7006, Subcontracting.
    (5) 252.237-7007, Termination for Default.

[[Page 270]]

    (6) 252.237-7008, Group Interment.
    (7) 252.237-7009, Permits.
    (8) 252.237-7011, Preparation History.
    (c) Use the clause at FAR 52.245-1, Government Property, with its 
Alternate I, in solicitations and contracts that include port of entry 
requirements.

[71 FR 3416, Jan. 23, 2006, as amended at 74 FR 37646, July 29, 2009]

            Subpart 237.71_Laundry and Dry Cleaning Services



Sec. 237.7100  Scope.

    This subpart--
    (a) Applies to contracts for laundry and dry cleaning services 
within the United States; and
    (b) May be used as guidance in areas outside the United States.

[71 FR 3416, Jan. 23, 2006]



Sec. 237.7101  Solicitation provisions and contract clauses.

    (a) Use the provision at 252.237-7012, Instruction to Offerors 
(Count-of-Articles), in solicitations for laundry and dry cleaning 
services to be provided on a count-of-articles basis.
    (b) Use the provision at 252.237-7013, Instruction to Offerors (Bulk 
Weight), in solicitations for laundry services to be provided on a bulk 
weight basis.
    (c) Use the clause at 252.237-7014, Loss or Damage (Count-of-
Articles), in solicitations and contracts for laundry and dry cleaning 
services to be provided on a count-of-articles basis.
    (d) Use the clause at 252.237-7015, Loss or Damage (Weight of 
Articles), in solicitations and contracts for laundry and dry cleaning 
services to be provided on a bulk weight basis.
    (1) Insert a reasonable per pound price in paragraph (b) of the 
clause, based on the average per pound value. When the contract requires 
laundry services on a bag type basis, insert reasonable per pound prices 
by bag type.
    (2) Insert an appropriate percentage in paragraph (e) of the clause, 
not to exceed eight percent.
    (e) Use the clause at 252.237-7016, Delivery Tickets, in all 
solicitations and contracts for laundry and dry cleaning services.
    (1) Use the clause with its Alternate I when services are for bag 
type laundry to be provided on a bulk weight basis.
    (2) Use the clause with its Alternate II when services are unsorted 
laundry to be provided on a bulk weight basis.
    (f) Use the clause at 252.237-7017, Individual Laundry, in 
solicitations and contracts for laundry and dry cleaning services to be 
provided to individual personnel.
    (1) Insert the number of pieces of outer garments in paragraphs (d) 
(1) and (2) of the clause.
    (2) The number of pieces and composition of a bundle in paragraphs 
(d) (1) and (2) of the clause may be modified to meet local conditions.
    (g) Use the clause at 252.237-7018, Special Definitions of 
Government Property, in all solicitations and contracts for laundry and 
dry cleaning services.

[56 FR 36424, July 31, 1991, as amended at 62 FR 34127, June 24, 1997. 
Redesignated at 71 FR 3416, Jan. 23, 2006]

              Subpart 237.72_Educational Service Agreements



Sec. 237.7200  Scope.

    (a) This subpart prescribes acquisition procedures for educational 
services from schools, colleges, universities, or other educational 
institutions. This subpart does not include tuition assistance 
agreements, i.e., payment by the Government of partial tuition under the 
off-duty educational program.
    (b) As used in the subpart--
    (1) ``Facilities'' do not include the institution's dining rooms or 
dormitories; and
    (2) ``Fees'' does not include charges for meals or lodging.



Sec. 237.7201  Educational service agreement.

    (a) An educational service agreement is not a contract, but is an 
ordering agreement under which the Government may order educational 
services.
    (b) Educational service agreements provide for ordering educational 
services when--
    (1) The Government pays normal tuition and fees for educational 
services

[[Page 271]]

provided to a student by the institution under its normal schedule of 
tuition and fees applicable to all students generally; and
    (2) Enrollment is at the institution under the institution's normal 
rules and in courses and curricula which the institution offers to all 
students meeting admission requirements.



Sec. 237.7202  Limitations.

    (a) Make no agreement under this subpart which will result in 
payment of Government funds for tuition or other expenses for training 
in any legal profession, except in connection with the detailing of 
commissioned officers to law schools under 10 U.S.C. 2004.
    (b) Educational service agreements are not used to provide special 
courses or special fees for Government students.



Sec. 237.7203  Duration.

    (a) Educational service agreements are for an indefinite duration 
and remain in effect until terminated.
    (b) The issuing activity must establish procedures to review each 
educational service agreement at least once each year. Review dates 
should consider the institution's academic calendar and occur at least 
30 days before the beginning of a term. The purpose of the review is to 
incorporate changes to reflect requirements of any statute, Executive 
Order, FAR, or DFARS.
    (c) If the contracting officer and the institution do not agree on 
required changes, terminate the agreement.



Sec. 237.7204  Format and clauses for educational service agreements.

    Educational service agreements under this subpart shall be in the 
following format. Add to the schedule any other provisions necessary to 
describe the requirements, if they are consistent with the following 
provisions and the policy of acquiring educational services in the form 
of standard course offerings at the prevailing rates of the institution.

                      Educational Service Agreement

                       Agreement No. ------------

    1. This agreement entered into on the -------- day of ---------- --
------, is between the Government, represented by the Contracting 
Officer, and the Contractor, (name of institution), an educational 
institution located in -------- (city), -------- (state).
    2. This agreement is for educational services to be provided by the 
Contractor to Government personnel at the Contractor's institution. The 
Contractor shall provide instruction with standard offerings of courses 
available to the public.
    3. The Government shall pay for services under the Contractor's 
normal schedule of tuition and fees applicable to the public and in 
effect at the time the services are performed.
    4. The Government will review this agreement annually before the 
anniversary of its effective date for the purpose of incorporating 
changes required by statutes, executive orders, the Federal Acquisition 
Regulation, or the Defense Federal Acquisition Regulation Supplement. 
Changes required to be made by modification to this agreement or by 
issuance of a superseding agreement. If mutual agreement on the changes 
cannot be reached, the Government will terminate this agreement.
    5. The parties may amend this agreement only by mutual consent.
    6. This agreement shall start on the date in paragraph 1 and shall 
continue until terminated.
    7. The estimated annual cost of this agreement is $----------. This 
estimate is for administrative purposes only and does not impose any 
obligation on the Government to request any services or make any 
payment.
    8. Advance payments are authorized by 10 U.S.C. 2396(a)(3).
    9. Submit invoices to: ------------ (name and address of activity).

                           Schedule Provisions

    1. Ordering procedures and services to be provided. (a) The 
Contractor shall promptly deliver to the Contracting Officer one copy of 
each catalog applicable to this agreement, and one copy of any 
subsequent revision.
    (b) The Government will request educational services under this 
agreement by a (insert type of request, such as, delivery order, 
official Government order, or other written communication). The (insert 
type of request, such as, delivery order, official Government order, or 
other written communication) will contain the number of this agreement 
and will designate as students at the Contractor's institution one or 
more Government-selected persons who have already been accepted for 
admission under the Contractor's usual admission standards.
    (c) All students under this agreement shall register in the same 
manner, be subject to the same academic regulations, and have the same 
privileges, including the use of all facilities and equipment as any 
other students enrolled in the institution.

[[Page 272]]

    (d) Upon enrolling each student under this agreement, the Contractor 
shall, where the resident or nonresident status involves a difference in 
tuition or fees--
    (i) Determine the resident or nonresident status of the student;
    (ii) Notify the student and the Contracting Officer of the 
determination. If there is an appeal of the determination;
    (iii) If there is an appeal of the determination, process the appeal 
under the Contractor's standard procedures;
    (iv) Notify the student and Contracting Officer of the result; and
    (v) Make the determination a part of the student's permanent record.
    (e) The Contractor shall not furnish any instruction or other 
services to any student under this agreement before the effective date 
of a request for services in the form specified in paragraph (b) of this 
schedule.
    2. Change in curriculum. The Contracting Officer may vary the 
curriculum for any student enrolled under this agreement but shall not 
require or make any change in any course without the Contractor's 
consent.
    3. Payment. (a) The Government shall pay the Contractor the normal 
tuition and fees which the Contractor charges any students pursuing the 
same or similar curricula, except for any tuition and fees which this 
agreement excludes. The Contractor may change any tuition and fees, 
provided--
    (1) The Contractor publishes the revisions in a catalog or otherwise 
publicly announces the revisions;
    (2) Applies the revisions uniformly to all students studying the 
same or similar curricula;
    (3) Provides the Contracting Officer notice of changes before their 
effective date.
    (b) The Contractor shall not establish any tuition or fees which 
apply solely to students under this agreement.
    (c) If the Contractor regularly charges higher tuition and fees for 
nonresident students, the Contractor may charge the Government the 
normal nonresident tuition and fees for students under this agreement 
who are nonresidents. The Government shall not claim resident tuition 
and fees for any student solely on the basis of the student residing in 
the State as a consequence of enrollment under this agreement.
    (d) The Contractor shall charge the Government only the tuition and 
fees which relate directly to enrollment as a student. Tuition and fees 
may include--
    (i) Penalty fees for late registration or change of course caused by 
the Government;
    (ii) Mandatory health fees and health insurance charges; and
    (iii) Any flat rate charge applicable to all students registered for 
research that appears in the Contractor's publicly announced fee 
schedule.
    (e) The Contractor shall not charge the Government for--
    (i) Permit charges, such as vehicle registration or parking fees, 
unless specifically authorized in the request for service; and
    (ii) Any equipment, refundable deposit