give appropriate consideration to the following:

(1) Whether the decision to enter into the proposed subcontract is consistent with the contractor's approved "makeor-buy" program, if any (see § 3.902);

(2) Whether the proposed subcontract will require the use of Government-furnished facilities;

(3) The responsibility of the proposed subcontractor (§ 1.906 of this chapter); (4) Basis for selecting proposed subcontractor, including the degree of competition obtained;

(5) Cost or price analysis or price comparisons accomplished, with particular attention to whether cost or pricing data are accurate, complete, and current (see §§ 1.303 and 3.807-3);

(6) Extent of subcontract supervision; (7) Types of contracts used (Subpart D of this part);

(8) Estimated total extent of subcontracting, including procurement of parts and materials; and

(9) The extent to which the prime contractor obtains assurance of the adequacy of the subcontractor's purchasing system.

(b) In reviewing subcontracts, careful and thorough evaluation is particularly necessary when:

(1) The prime contractor's purchasing system or performance thereunder is considered inadequate;

(2) Subcontracts are for items for which there is no competition or for which the proposed prices appear unreasonable (see § 3.807-10(b));

(3) Close working arrangements or business or ownership affiliations exist between the prime and the subcontractor which may preclude the free use of competition or result in higher subcontract prices than would otherwise be obtained;

(4) A subcontract is being proposed at a price less favorable than that which has been given by the subcontractor to the Government, all other factors such as manufacturing period and quantity being comparable; or

(5) A subcontract is to be placed on a cost-reimbursement, time and material, labor-hour, fixed-price incentive, fixed-price redeterminable basis.

or

Where subcontracts have been placed on a cost-reimbursement, time and materials, or labor-hour basis, contracting officers should be skeptical of approving

the repetitive or unduly protracted use of such types of subcontracts and should follow the principles of § 3.803(b). § 3.903-5

Disputes and arbitration provisions in subcontracts.

(a) Although consent by a contracting officer to a subcontract in and of itself does not constitute agreement with the terms and conditions of the subcontract, a contracting officer should not consent to provisions in subcontracts purporting to give the subcontractor a direct right to obtain a decision of the contracting officer or a direct right of appeal to the Armed Services Board of Contract Appeals. The Government is entitled to the management services of the prime contractor in adjusting disputes between the prime contractor and his subcontractors. Contracting officers should act only in disputes arising under the prime contract, and then only with and through the prime contractor, even if a subcontractor is affected by the dispute between the Government and the prime contractor. Contracting officers should not participate in disputes between a prime contractor and his subcontractors.

(b) A contracting officer should not however, refuse consent to a subcontract particularly under a cost-reimbursement type contract, merely because it contains a clause that allows the subcontractor, if he is affected by a dispute arising under the prime contract, an indirect appeal to the Armed Services Board of Contract Appeals (1) by asserting the prime contractor's right to take such an appeal, or (2) by having the prime contractor prosecute such an appeal on behalf of the subcontractor. Such a clause should not attempt to obligate the contracting officer or the Board to decide questions that do not arise between the Government and the prime contractor, or that are not cognizable under the "Disputes" clause of the prime contract, and should not attempt to obligate the contracting officer to notify or deal directly with the subcontractor. Such a clause may appropriately provide that the prime contractor and subcontractor will be equally bound by the contracting officer's or Board's decision on a dispute.

(c) The prime contractor and his subcontractor may agree to arbitration to settle disputes. The results of such arbitration and the cost resulting therefrom, however, are no more binding on the

Distribution of contracts.

Solicitation provision.
Schedule formats.

4.903-1 Schedule format for other than port of entry requirements contracts. 4.903-2 Schedule format for port of entry requirements contracts.

AUTHORITY: The provisions of this Part 4 issued under R.S. 161, sec. 2202, 70A Stat. 120; 5 U.S.C. 22, 10 U.S.C. 2202. Interpret or apply secs. 2301-2314, 70A Stat. 127-133; 10 U.S.C. 2301-2314.

Subart A-[Reserved)

Subpart B-Procurement of Research and Development

§ 4.200 Scope of subpart.

Procurement procedures of special application to research and development contracts are set forth in this subpart, and in certain instances other portions of this subchapter having particular significance to research and development contracts are cross-referenced herein. This subpart however, does not purport to contain or cross-reference all provisions of this subchapter applying to research and development contracts. Other provisions of this subchapter are also applicable to research and development contracts and shall be adhered to where applicable.

[27 F.R. 6124, June 29, 1962] § 4.201 Definitions.

(a) The following definitions of the term "research and development" are those set forth by the Department of Defense for the reporting of research, development, and engineering program information, and are primarily designed for program control. To enable procurement personnel to understand the meaning of these words as used by research and development personnel, the definitions are set forth here for information

purposes. As the term "research and development" is used in this subchapter, it ordinarily encompasses only the first four of the categories set forth below. The definitions set forth in subparagraphs (5) and (6) of this paragraph are not likely to coincide with the meaning of "research and development" as that term is used for procurement purposes. For example, “military construction of a general nature unrelated to specific programs", as included in subparagraph (6) of this paragraph would not be within "research and development" for procurement purposes in the case of construction of recreation facilities at an installation used exclusively for research and development. The facts of a particular case, however, may be such that subparagraphs (5) and (6) of this paragraph would include a procurement which satisfies the procurement meaning of the term research and development.

(1) Research. Includes all effort directed toward increased knowledge of natural phenomena and environment and efforts directed toward the solution of problems in the physical, behavioral and social sciences that have no clear direct military application. It would, thus, by definition, include all basic research and, in addition, that applied research directed toward the expansion of knowledge in various scientific areas. It does not include efforts directed to prove the feasibility of solutions of problems of immediate military importance or time-oriented investigations and developments.

(2) Exploratory development. InIcludes all effort directed toward the solution of specific military problems, short of major development projects. This type of effort may vary from fairly fundamental applied research to quite sophisticated bread-board hardware, study, programming and planning efforts. It would thus include studies, investigations and minor development effort. The dominant characteristic of this category of effort is that it be pointed toward specific military problem areas with a view toward developing and evaluating the feasibility and practicability of proposed solutions and determining their parameters.

(3) Advanced development. Includes all effort directed toward projects which have moved into the development of hardware for experimental or operational test. It is characterized by line

item projects and program control is exercised on a project basis. A further descriptive characteristic lies in the design of such items being directed toward hardware for test or experimentation as opposed to items designed and engineered for eventual service use.

In

(4) Engineering development. cludes all effort directed toward those development programs being engineered for Service use but which have not yet been approved for procurement or operation. This area is characterized by major line item projects and program control will be exercised by review of individual projects.

(5) Operational system development. Includes all effort directed toward development, engineering and test of systems, support programs, vehicles and weapons that have been approved for production and Service deployment. This area is included for convenience in considering all RDT&E projects. All items in this area are major line item projects which appear as RDT&E Costs of Weapons Systems Elements in other programs. Program control will thus be exercised by review of the individual research and development effort in each Weapon System Element.

In

(6) Management and support. cludes all effort directed toward support of installations or operations required for general research and development use. Included would be military construction of a general nature unrelated to specific programs, maintenance support of laboratories, operation and maintenance of test ranges, and maintenance of test aircraft and ships. Costs of laboratory personnel, either in-house or contract-operated, would be assigned to appropriate projects or as a line item in the Research, Exploratory Development, or Advanced Development Program areas, as appropriate. Military construction costs directly related to a major development program will be included in the appropriate element.

(b) "Educational or other nonprofit organization" means any corporation, foundation, trust, or institution operated for scientific, educational, or medical purposes, not organized for profit, no part of the net earnings of which inures to the profit of any private shareholder or individual.

(c) Unsolicited proposal is a research or development proposal which is made to the Government by a prospective contractor without prior formal or informal

§ 4.203

Publicizing procurement actions and expanding sources.

The Departments shall continually search for and develop information on sources (including small business concerns) competent to perform research and development. Advance publicity, including use of the Commerce Business Daily (see § 1.1003-4 of this chapter) to the fullest extent practicable, shall be given for this purpose. The search should include (a) a review of relevant data or brochures furnished by sources seeking research and development work and (b) a cooperative effort by technical personnel, small business specialists, and contracting officers to obtain information and recommendations with respect to potential sources and to consider the desirability of seeking other sources by publication of proposed procurements, in addition to the synopsis requirement. [28 FR. 12561, Nov. 23, 1963

the use of negotiation is the general rule For research and development contracts, Chis does not diminish the obligation to obtain competition to the maximum practicable extent. (See Subparts A and B, Part 3 of this chapter.)

[27 F.R. 6124, June 29, 1962]

§4.205

Selection of research and development contractors.

[27 F.R. 6124, June 29, 1962]

4.205-1 Selection of sources.

(a) General. Through its research and development programs, the Department of Defense must seek the most advanced scientific knowledge attainable and the best possible equipment, weapons, and weapon systems that can be devised and produced. This means two things. First, it means seeking the best scientific and technological sources consistent with the demands of the proposed procurement for the best mix of cost, performances and schedules. Second, it means unremitting efforts to increase the number of qualified sources, and to encourage participation by small business concerns, as well as others, in Defense research and development. See also §1.903 of this chapter.

(b) Small business sources. (1) Contracting officers, technical personnel, and small business specialists shall cooperatively seek and develop information on the technical competence of small business concerns for research and development contracts. Small business specialists shall regularly bring to the attention of contracting officers and technical personnel descriptive data, brochures, and other information as to small business concerns that are apparently competent to perform research or development work in fields in which the purchasing activity is interested.

(2) In order to cooperate with the Small Business Administration in carrying out its responsibility of assisting small business concerns to obtain contracts for research and development, contracting officers, technical personnel and small business specialists shall, upon request, provide to authorized SBA representatives information necessary to understand the Government's needs concerning research and development programs under consideration for specific future procurement actions. Normally, this information shall be provided to SBA representatives assigned to a purchasing activity, as early as practicable,

and shall cover the Government's requirements for each proposed research and development procurement exceeding $10,000. To the maximum extent feasible, SBA shall be afforded a minimum of 15 working days to provide pertinent information concerning qualified potential small business sources developed through its investigation of the capabilities of specific firms in the particular field of research and development covered by such procurements. Full evaluation shall be given to any such information in selecting qualified sources. Exception to the policy of providing SBA a minimum 15 working day interval to recommend additional qualified small research and development sources for a proposed procurement will be permitted only in those cases where the head of the purchasing activity or his designated representative advises the SBA representative that such action would result in unjustifiable delay.

(c) Recommendations by technical personnel. Recommendations as to which potential sources are technically qualified shall be made by cognizant technical personnel after review of the information obtained as a result of advance publicity (see § 4.203) and as appropriate, on the basis of discussion with potential sources (either singly or in a group), correspondence, or suitable surveys.

(d) Research and development pools. See § 1.302-3 of this chapter.

(e) Unsolicited proposals. Unsolicited proposals may be the product of original thinking and generally are the property of the organization or individual who presents them. They are offered in the hope that the Government will contract with the offeror for further research on, or development of, the ideas they contain. Such proposals received by purchasing activities shall be handled in a manner which will encourage prospective contractors to disclose to the Government ideas which they have originated, conceived, or developed. Extreme care must be exercised by the Government not to disclose to third parties any proprietary information contained in unsolicited proposals. The offeror is not necessarily entitled to preferential treatment in the award of any contract because of his submission of an unsolicited proposal. See § 4.205-2(d) (2). [27 F.R. 6124, June 29, 1962, as amended at 28 F.R. 12561, Nov. 23, 1963; 30 F.R. 1733, Feb. 9, 1965]