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desirable to cover the subject matter contained in such clauses.

(23) Alterations as set forth in § 7.105-1 of this title will be used in accordance with instructions contained in subparagraph (18) of § 1006.102 (b).

(24) Contractual contents as set forth in subparagraph (19) of § 1006.102 (b).

(25) Approval as set forth in § 7.105-2 of this title will be used in accordance with instructions contained in subparagraph (20) of § 1006.102 (b). SUBPART E-TIME AND MATERIALS CONTRACTS § 1006.501 Scope of subpart. This subpart sets forth authorized clauses for use in time and materials contracts. The use of this form of contract should be limited to those situations and governed by the conditions set forth in § 3.407 of this title and § 1003.403 (a).

§ 1006.502 Contract clauses. (a) All time and materials contracts will include the following clauses in the following sequence:

(1)

Definitions as set forth in § 7.103-1 of this title.

(2) Changes as set forth below:

Changes. The Contracting Officer may, at any time, by a written order, issue additional instructions, require changed, modified or additional work and services or direct the omission of work and services covered by this contract. If such changes require a change in the time of performance of the work called for hereunder, the contract shall be modified in writing accordingly. The hourly rate set forth in the Schedule shall not be adjusted by reason of any order issued under this clause.

(3) Inspection as set forth below:

Inspection. (a) All material and workmanship shall be subject to inspection and test by representatives of the Government. For this purpose, the Contractor shall allow, at all times, inspectors and other Government personnel free access to the plant and operations and shall furnish such facilities, supplies and services as may be required for the work. The Contractor shall inform the inspector when services and supplies are ready for inspection. The Government representative shall have the right to (i) require the replacement of parts which are not in accordance with applicable specifications, and (ii) require the correction of defects; any of such replacement or correction which is required by virtue of the Contractor's inferior workmanship or unsatisfactory inspection system, shall be accomplished at the sole cost and expense of the Contractor.

(b) The Contractor shall provide and maintain a complete inspection system acceptable to the Government covering the inspection of the services and supplies furnished under this contract. Records of all inspection work by the Contractor shall be kept complete and available to the Government during the performance of the contract.

(c) The inspection and test by the Government of any particular item of work does not relieve the Contractor from any responsibility regarding any failures to meet contract requirements which may be subsequently discovered prior to final acceptance.

(d) The Contractor covenants and agrees to employ only qualified and competent employees in the performance of this contract, and that employees used will, on the average, be as efficient as the average for the departments of its plant concerned with performance of this contract.

(4) Payments as set forth below:

Payments (a) Time rate. (1) Upon certification to and approval by the Contracting Officer of properly substantiated vouchers indicating the number of direct labor hours performed, the Government will pay the Contractor amounts computed by applying the appropriate Time Rate set forth in the Schedule to such hours, which rates shall include wages, overhead, general and administrative expense (except as otherwise provided), and profit. Fractional parts of an hour shall be payable on a pro rata basis. The Contractor will substantiate vouchers by individual daily job time cards, preferably signed by the workers performing the services, and in all cases by evidence of actual payment. Payments will normally be made at Contractor's payroll intervals, but may be varied if conditions so warrant.

(2) Notwithstanding the provisions of subparagraph (1) hereof, the Contracting Officer shall withhold payment of amounts due under this paragraph (a) equivalent to any average payment hereunder, at such time as may be deemed appropriate by the Contracting Officer. Such amount shall become payable upon completion of performance of this contract, which shall be upon delivery of all work called for hereunder and submission of a written statement by the Contractor releasing the Government from any further claims whatsoever (except such final payment).

(3) As used in this paragraph (a), direct labor shall be as defined in the Schedule.

(b) Materials (including subcontracts). (1) The Contractor shall be paid upon submission of properly certified allowable costs of direct materials utilized in performance of this contract, subject to the limitation of funds allotted.

(2) Allowable costs of direct materials shall be determined by the Contracting Officer in accordance with Part 2, Section XV of the Armed Services Procurement Regulation, it being understood however that:

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A. For purposes of payment, the cost of subcontracts which are authorized pursuant to clause 22 hereof, shall be reimbursable costs hereunder.

B. The cost-plus-a-percentage-of-cost system of contracting shall not be used by the contractor in procuring articles, materials, supplies, or services required for the performance of this contact.

C. The Contractor shall, to the extent of its ability, procure materials at the most advantageous prices available, with due regard to securing prompt delivery of satisfactory materials, take all cash and trade discounts, rebates, allowances, credits, salvage, commissions and bonifications, and when unable to take advantage of such benefits it shall promptly notify the Contracting Officer to that effect and the reason therefor. Credit shall be given to the Government in accordance with Contractor's standard accounting policy for all cash and trade discounts, rebates, allowances, credits, salvage, the value of resulting scrap, where the amount of such scrap is appreciable, commissions and bonifications which have accrued to the benefit of the Contractor or would have so accrued except for the fault or neglect of the Contractor. Such benefits lost through no fault or neglect on the part of the Contractor or lost through fault of the Government, shall not be deducted from gross costs.

D. The Contractor shall support all material charges by paid invoices or store room requisitions.

E. Unless provisions of the Schedule hereof otherwise specify, the hourly rate or rates set forth in the Schedule shall not be varied by virtue of the Contractor having performed work on an overtime basis. Whenever practicable, the Contractor shall inform the Contracting Officer in advance of proposed overtime work.

(c) Records and certifications. The Contractor will maintain detailed, complete and accurate accounting records on a job-order basis, which records will be preserved for a period of at least six (6) years after completion of this contract. The Contractor shall support all vouchers with a certificate that the amount billed is correct and just.

(d) Funds allotted. As of the date of execution of this contract, there has been allotted for it the total sum set forth in the Schedule. This sum may be increased from time to time by the Government solely at its discretion. Notwithstanding any other provisions of this contract, the Contractor shall not be obligated to perform any services, pursuant hereto, the aggregate price of which when added to the aggregate price of all services theretofore furnished pursuant hereto, would exceed said sum. If, at any time, the Contractor considers it likely that the aggregate amount, set forth in the Schedule, may shortly be exceeded, the Contractor will so notify the Contracting Officer and the parties may thereupon enter into negotiations for such amendment to or modification of this contract as may be appropriate. Any

thing in this contract to the contrary notwithstanding, the Government shall not be obligated to pay to the Contractor any amount in excess of the sum allotted for this contract.

NOTE: Provisions of the reference "Part 2, Section XV of the Armed Services Procurement Regulation" in a foregoing clause are contained in Subpart B, Part 15 of this title.

(5) Assignment of claims as set forth in § 7.103-8 of this title.

(6) Excusable delays as set forth below:

Excusable delays. The Contractor shall not be liable for any delay in the performance of this contract which results without fault or negligence on the part of the Contractor and which is due to causes beyond its control including, without being limited to, acts of God or of the public enemy, any preference, priority or allocation order issued by the Government or any other act of the Government, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes and unusually severe weather; and, unless the Contracting Officer shall determine that the materials or supplies to be furnished under a subcontract are procurable in the open market, any delay of a subcontractor which results without fault or negligence on the part of the Contractor, and which is due to causes beyond the control of the Contractor, including without being limited to the types or causes above enumerated; provided, that the Contractor shall notify the Contracting Officer in writing of such delay and the cause thereof, within ten days from the beginning thereof or within such further period as the Contracting Officer shall, prior to the date of final settlement of this contract, grant for the giving of such notice. The Contracting Officer shall then ascertain the facts and the extent of the delay and shall make an equitable adjustment in the prescribed time of performance when in his opinion the facts justify such action. If the Contractor objects to any adjustment made by the Contracting Officer under this clause, the dispute shall be determined as provided in clause 7 hereof.

(7) Disputes as set forth in §7.103-11 of this title.

(8) Notice and assistance as set forth in § 9.102 of this title.

(9) Buy American Act as set forth in § 7.103-14 of this title.

(10) Convict labor as set forth in § 12.203 of this title.

(11) Eight-Hour Law as set forth in § 12.303 of this title.

(12) Walsh-Healey Public Contracts Act as set forth in § 12.604 of this title.

(13) Nondiscrimination in employment as set forth in § 12.803 of this title.

(14) Officials not to benefit as set forth in § 7.103-19 of this title.

(15) Covenant against contingent fees as set forth in § 7.103-20 of this title.

(16) Termination as set forth below: Termination. (a) The performance of work under the contract may be terminated by the Government in accordance with this clause in whole, or from time to time in part, (1) whenever the Contractor shall default in performance of this contract in accordance with its terms (including in the term "default" any such failure by the Contractor to make progress in the prosecution of the work hereunder as endangers such performance), and shall fail to cure such default within a period of ten days (or such long period as the Contracting Officer may allow) after receipt from the Contracting Officer of a notice specifying the default, or (2) whenever for any reason the Contracting Officer shall determine that such termination is in the best interests of the Government. Any such termination shall be effected by delivery to the Contractor of a Notice of Termination specifying whether termination is for the default of the Contractor or for the convenience of the Government, the extent to which performance of work under the contract is terminated, and the date upon which such termination becomes effective. If, after the Notice of Termination of the contract for default under (1) above, it is determined that the Contractor's failure to perform or to make progress in performance is due to causes beyond the control and without the fault or negligence of the Contractor pursuant to the provisions of the clause of this contract entitled "Excusable Delays", the Notice of Termination shall be deemed to have been issued under (2) above, and the rights and obligations of the parties hereto shall in such event be governed accordingly.

(b) After receipt of a Notice of Termination and except as otherwise directed by the Contracting Officer, the Contractor shall (1) stop work under the contract on the date and to the extent specified in the Notice of Termination; (2) place no further orders or subcontracts for materials, services, or facilities except as may be necessary for completion of such portion of the work under the contract as is not terminated; (3) terminate all orders and subcontracts to the extent that they relate to the performance of work terminated by the Notice of Termination; (4) assign to the Government, in the manner and to the extent directed by the Contracting Officer, all of the right, title and interest of the Contractor under the orders or subcontracts so terminated; (5) with the approval or ratification of the Contracting Officer, which approval or ratification shall be final and conclusive for all the purposes of this clause, settle all outstanding liabilities and all claims arising out of such termination of orders and subcontracts, the cost of which

would be reimbursable, in whole or in part, in accordance with the provisions of this contract; (6) transfer title (to the extent that title has not already been transferred) and, in the manner, to the extent and at the times directed by the Contracting Offcer, deliver to the Government (1) the fabricated or unfabricated parts, work in process, completed work, supplies, and other material produced as a part of, or acquired in respect of the performance of, the work terminated by the Notice of Termination, (ii) the completed or partially completed plans, drawings, information and other property which, if the contract had been completed, would be required to be furnished to the Government, and (iii) the jigs, dies, fixtures, and other special tools and tooling acquired or manufactured for the performance of this contract for the cost of which the Contractor has been or will be reimbursed under this contract; (7) use his best efforts to sell in the manner, at the times, to the extent, and at the price or prices directed or authorized by the Contracting Officer, any property of the types referred to in provision (6) of this paragraph; provided, however, that the Contractor (1) shall not be required to extend credit to any purchases, and (ii) may acquire any such property under the conditions prescribed by and at a price or prices approved by the Contracting Officer; and provided further that the proceeds of any such transfer or disposition shall be applied in reduction of any payments to be made by the Government to the Contractor under this contract or shall otherwise be credited to the price or cost of work covered by this contract or paid in such manner as the Contracting Officer may direct; (8) complete performance of such part of the work as shall not have been terminated by the Notice of Termination; and (9) take such action as may be necessary, or as the Contracting Officer may direct, for the protection and preservation of the property related to this contract which is in the possession of the Contractor and in which the Government has or may acquire an interest. The Contractor shall proceed immediately with the performance of the above obligations, notwithstanding any delay in determining or adjusting any amount reimbursable under the provisions of this clause. At any time after expiration of the plant clearance period, as defined in Section VIII, Armed Services Procurement Regulation, as it may be amended from time to time, the Contractor may submit to the Contracting Officer a list, certified as to quantity and quality, of any or all items of termination inventory not previously disposed of, exclusive of items the disposition of which has been directed or authorized by the Contracting Officer, and may request the Government to remove such items or enter into a storage agreement covering them. Not later than fifteen (15) days thereafter, the Government will accept title to such items and remove them or enter into a storage agreement covering the same; provided that

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the list submitted shall be subject to verification by the Contracting Officer upon removal of the items, or if the items are stored, within forty-five (45) days from the date of submission of the list, and any necessary adjustment to correct the list as submitted shall be made prior to final settlement.

(c) After receipt of a Notice of Termination, the Contractor shall submit to the Contracting Officer its termination claim, in the form and with the certification prescribed by the Contracting Officer. Such claim shall be submitted promptly but in no event later than two years from the effective date of termination, unless one or more extensions in writing are granted by the Contracting Officer upon request of the Contractor made in writing within such twoyear period or authorized extension thereof. However, if the Contracting Officer determines that the facts justify such action, he may receive and act upon any such termination claim at any time after such two-year period or any extension thereof. Upon failure of the Contractor to submit its termination claim within the time allowed, the Contracting Officer may determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall thereupon pay to the Contractor the amount so determined.

(d) Subject to the provisions of paragraph (c), the Contractor and the Contracting Officer may agree upon the whole or any part of the amount or amounts to be paid to the Contractor by reason of the total or partial termination of work pursuant to this clause, which amount or amounts may include a reasonable allowance for profit, on work done. The contract shall be amended accordingly, and the Contractor shall be paid the agreed amount.

(e) In the event of the failure of the Contractor and the Contracting Officer to agree in whole or in part, as provided in paragraph (d) above, as to the amount or amounts to be paid to the Contractor in connection with the termination of work pursuant to this clause, the contracting officer shall determine on the basis of information available to him the amount, if any, due the Contractor by reason of the termination and shall pay to the Contractor the amount determined as follows:

(1) If the termination of the contract is for the convenience of the Government:

(1) There shall be included for direct labor hours (as defined in the Schedule of the contract) expended prior and up to the effective date of the termination, an amount computed by applying the hourly rate or rates set forth in the Schedule, less any hourly rate payments theretofore made to the Contractor.

(ii) There shall be included therein all costs of material reimbursable in accordance with the contract, not previously paid to the Contractor for the performance of this contract prior to the effective date of the Notice of Termination.

(iii) There shall be included therein the reasonable costs of settlement, including accounting, legal, clerical and other expenses reasonably necessary for the preparation of settlement claims and supporting data with respect to the terminated portion of the contract and for the termination and settlement of subcontracts thereunder together with reasonable storage, transportation and other costs incurred in connection with the protection or disposition of termination inventory: Provided, however, That if the termination is for default of the Contractor there shall not be included any amounts for the preparation of the Contractor's settlement proposal.

(2) If the termination of the contract is for the default of the Contractor:

(i) There shall be included for all direct labor hours (as defined in the Schedule of the contract) expended prior and up to the effective date of termination, an amount computed by applying the hourly rate or rates set forth in the Schedule less the profit factor contained therein as indicated in the Schedule and less any hourly rate payments theretofore made.

(ii) There shall be included therein such costs as are set forth in subparagraphs (1), (ii), and (iii) of this paragraph (e) and not prohibited by the provisions thereof.

(3) If the amount determined under subparagraphs (1) and (2) above is less than the total payments theretofore made to the Contractor, the Contractor shall repay the excess amount to the Government.

(f) The Contractor shall have the right of appeal, under the clause of this contract entitled "Disputes", from any determination made by the Contracting Officer under paragraphs (c) or (e) above, except that if the Contractor has failed to submit its claim within the time provided in paragraph (c) above, and has failed to request extension of such time, he shall have no such right of appeal. In any case where the Contracting Officer has made a determination of the amount due under paragraph (c) or (e) above, the Government shall pay to the Contractor the following: (1) If there is no right of appeal hereunder or if no timely appeal has been taken, the amount so determined by the Contracting Officer, or (ii) if an appeal has been taken, the amount finally determined on such appeal.

(g) In arriving at the amount due to the Contractor under this clause there shall be deducted (1) all unliquidated advance or other unliquidated payments theretofore made to the Contractor, (2) any claim which the Government may have against the Contractor in connection with this contract, and (3) the agreed price for, or the proceeds of sale of any materials, supplies or other things acquired by the Contractor or sold pursuant to the provisions of this clause and not otherwise recovered or credited to the Government.

(h) In the event of a partial termination, the portion of the contract relating to hourly

rates which are payable with respect to the work under the continued portion of the contract shall be equitably adjusted by agreement between the Contractor and the Government, and such adjustment shall be evidenced by an amendment to the contract.

(1) The Government may from time to time, under such terms and conditions as it may prescribe, make partial payments and payments on account against costs incurred by the Contractor in connection with the terminated portion of the contract whenever in the opinion of the Contracting Officer the aggregate of such payments shall be within the amount to which the Contractor will be entitled hereunder. If the total of such payments is in excess of the amount finally determined to be due under this clause, such excess shall be payable by the Contractor to the Government upon demand, together with interest computed at the rate of 6 percent per annum, for the period from the date such excess payment is received by the Contractor to the date on which such excess is repaid to the Government: Provided, however, No interest shall be charged with respect to any such excess payment attributable to a reduction in the Contractor's claim by reason of retention or other disposition of termination inventory until ten days after the date of such retention or disposition.

(1) Unless otherwise provided for in this contract, or by applicable statute, the Contractor from the effective date of termination and for a period of six years after final settlement under this contract shall preserve and make available to the Government at all reasonable times at the office of the Contractor, but without direct charge to the Government, all its books, records, documents, and other evidence bearing on the cost and expenses of the Contractor under this contract and relating to the work terminated hereunder, or, to the extent approved by the Contracting Officer, photographs, microphotographs, or other authentic repro

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of such property is not delivered to the Contractor by such time or times, the Contracting Officer, upon written request of the Contractor, shall equitably adjust the time of performance of this contract. In no event shall the Government be liable to the Contractor for damages or loss of profit by reason of any delay in or failure to deliver any or all of the items set forth in the Schedule or specifications. By notice in writing the Contracting Officer may increase or decrease the amount of Government Property to be so furnished, in which event, upon the request of either of the parties hereto, an equitable adjustment may be made in contract terms. Except as otherwise may be specified in the Schedule, all property listed to be Government-furnished shall be delivered to the Contractor f. o. b. cars or carriers equipment at the plant or plants of the Contractor, or the point or points nearest thereto that rail carrier service is available. (b) Title to all property furnished by the Government shall remain in the Government. Title to all property purchased by the Contractor, for the cost of which the Contractor is entitled to be reimbursed as a direct item of cost under this contract, shall pass to and vest in the Government upon delivery of such property by the vendor. Title to other property, the cost of which is reimbursable to the Contractor under this contract, shall pass to and vest in the Government upon (i) issuance for use of such property in the performance of this contract, or (ii) commencement of processing or use of such property in the performance of this contract, or (iii) reimbursement of the cost thereof by the Government, whichever first occurs. All the items to be furnished by the Government, as set forth in the Schedule or specifications, together with all property acquired by the Contractor title to which vests in the Government under this paragraph, are subject to the provisions of this clause and are hereinafter collectively referred to as "Government Property."

(c) Title to the Government Property shall not be affected by the incorporation or attachment thereof to any property not owned by the Government, nor shall such Government Property, or any part thereof, be or become a fixture or lose its identity as personalty by reason of affixation to any realty. The Contractor shall maintain adequate property control records of the Government Property and shall identify the Government Property as such in accordance with the provisions of the "Manual for Control of Government Property in Possession of Contractors" dated March 1951, which is incorporated herein by reference.

(d) The Government Property provided or furnished pursuant to the terms of this contract shall, unless otherwise provided herein, be used only for the performance of this contract.

(e) The Contractor shall maintain and administer in accordance with sound industrial practice, a program for the mainte

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