providing benefits for retirement, separation, life insurance, hospitalization, medical-surgical and unemployment (whether or not such plans are covered by insurance);

(iii) Travel (except foreign travel, which requires specific approval by the Contracting Officer on a case-by-case basis); incidental subsistence and other allowances of contractor employees, in connection with performance of work under this contract (including new employees reporting for work and transfer of employees, the transfer of their household goods and effects, and the travel and subsistence of their dependents);

(iv) Employee relations, welfare, morale, etc., programs, including incentive or suggestion awards, employee counseling services, health or first-aid clinics, and house or employee publications;

(v) Personnel training (except special education and training courses and research assignments calling for attendance at educational institutions which require specific approval by the Contracting Officer on a caseby-case basis) including apprenticeship training programs designed to improve efficiency and productivity of contract operations, to develop needed skills, and to develop scientific and technical personnel in specialized fields required in the contract work; and (vi) Recruitment of personnel (including help-wanted advertisement) including services of employment agencies at rates not in excess of standard commercial rates, employment office, travel of prospective employees at the request of the contractor for employment interviews.

Appendix A may be modified from time to time, in writing, without execution of an amendment to this contract for the purposes of effecting any changes in or additions to appendix A as may be agreed upon by the parties.

NOTE: In appropriate circumstances, the lead sentence in subparagraph (8) may be changed to read as follows: "Personnel costs and related expenses incurred in accordance with established policies, programs, and schedules, and any changes thereto during the contract term, applicable to the contractor's private operations and consistently followed throughout his organization, as approved by the Contracting Officer, such as:"

Also, delete last paragraph of text which refers to modifying appendix A.

(9) Rentals and leases of land, buildings, and equipment owned by third parties where such items are used in the performance of the contract, except that such rentals and leases when directly chargeable to the contract shall be subject to approval by the Contracting Officer.

(10) Repairs, maintenance, inspection, replacement, and disposal of Governmentowned property to the extent directed or approved by the Contracting Officer.

(11) Repairs, maintenance, and inspection of contractor-owned property used in connection with the performance of this con

tract, including reasonable standby facilities, which are due to ordinary wear and tear from use and the action of the elements, provided such maintenance and repairs keep the property in efficient operating condition and do not add to its permanent value or appreciably prolong its intended useful life; and major repairs (including replacement) to such property, except that such major repairs when directly chargeable to the contract shall be subject to approval by the Contracting Officer.

(12) Reproduction and art work, including such models and mockups as may be approved by the Contracting Officer.

(13) Structures and facilities of a temporary nature as approved by the Contracting Officer.

(14) Membership in trade, business, and professional organizations, except that such memberships when directly chargeable to the contract shall be subject to approval by the Contracting Officer.

(15) Subcontracts, purchase orders, and procurements from contractor-controlled sources, subject to aprovals required by other provisions of this contract.

(16) Subscriptions to trade, business, technical, and professional periodicals, except that such subscriptions when directly chargeable to the contract shall be subject to approval by the Contracting Officer.

(17) Taxes, fees, and charges levied by public agencies which the contractor is required by law to pay, except those which are expressly made unallowable under other provisions of this contract.

(18) Utility services, including electricity, gas, water, steam, and sewerage.

(19) The costs of preparing proposals to the extent approved by the Contracting Offcer, but not to exceed 1 percent of the direct material and direct labor costs of the contract work.

NOTE: This paragraph should be deleted for on-site architect-engineer contracts.

(e) Examples of items of unallowable costs. The following examples of items of costs are unallowable under this contract to the extent indicated:

(1) Advertising, except (1) help-wanted advertising, and (11) other advertising (such as costs of participation in exhibits) approved by the Contractng Officer as clearly in furtherance of work performed under the contract.

(2) Bad debts (including expenses of collection) and provisions for bad debts not arising out of the performance of this contract.

(3) Bonuses and similar compensation under any other name, which (1) are not pursuant to an agreement between the contractor and employee prior to the rendering of the services or an established plan consistently followed by the contractor, (11) are in excess of those costs which are allowable by the Internal Revenue Code and regulations thereunder, or (iii) provide total compensation to an employee in excess of rea

(4) Commissions, bonuses, and fees (under whatever name) in connection with obtaining or negotiating for a Government contract or a modification thereto, except when paid to bona fide employees or bona fide established selling organizations maintained by the contractor for the purpose of obtaining Government business.

(5) Contingency reserves, provisions for (except provisions for reserves under a selfinsurance program to the extent that the type, coverage, rates, and premiums would be allowable if commercial insurance were purchased to cover the same risk, as approved by the Contracting Officer).

(6) Contributions and donations.

(7) Depreciation in excess of that calculated by application of methods approved for use by the Internal Revenue Services under the Internal Revenue Code of 1954, as amended, including the straight-line, declining balance (using a rate not exceeding twice the rate which would have been used had the depreciation been computed under the straight-line method) or sum-of-the-years digits method, on the basis of expected useful life, to the cost of acquisition of the related fixed assets less estimated salvage or residual value at the end of the expected useful life. Amortization or depreciation of unrealized appreciation of values of assets or of assets fully amortized or depreciated on the contractor's books of account 18

unallowable.

(8) Dividend provisions or payments and, in the case of sole proprietors and partners, distributions of profits.

(9) Entertainment costs, except the costs of such recreational activities for on-site employees as may be approved by the Contracting Officer or provided for elsewhere in this contract.

(10) Fines and penalties, including assessed interest, resulting from violations of, or failure of the contractor to comply with, Federal, State, or local laws, or regulations, except when incurred in accordance with written approval of the Contracting Officer or as a result of compliance with the provisions of this contract.

(11) Government-furnished property, except to the extent that cash payment therefor is required pursuant to procedures of the Commission applicable to transfers of such property to the contractor from others.

(12) Insurance (including any provision of a self-insurance reserve) on any person where the contractor under the insurance policy is the beneficiary directly or indirectly, and insurance against loss of or damage to Government property as defined in Clause

(13) Interest, however represented (except interest incurred in compliance with the clause entitled "State and local taxes"), bond discounts and expenses, and costs of financing and refinancing operations.

(14) Legal, accounting, and consulting services and related costs incurred in connection with the preparation of prospectuses, preparation and issuance of stock rights, organization or reorganization, prosecution or defense of antitrust suits, prosecution of claims against the United States, contesting actions or proposed actions of the United States, and prosecution or defense of patent infringement litigation.

(15) Losses (including litigation expenses, counsel fees, and settlements) on, or arising from the sale, exchange, or abandonment of capital assets, including investments; losses on other contracts, including the contractor's contributed portion under cost-sharing contracts; losses in connection with price reduction to and discount purchases by employees and others from any source; and losses where such losses or expenses:

(1) Are compensated for by insurance or otherwise, or which would have been compensated by insurance required by law or by written direction of the Contracting Officer but which the contractor failed to procure or maintain through its own fault or negligence, or which could have been covered by permissible insurance in keeping with ordinary business practice but which the contractor failed to secure or maintain;

(11) Result from willful misconduct or lack of good faith on the part of any of the contractor's directors, corporate officers, or a supervising representative of the contractor, as defined in Clause of this contract;

(iii) Represent liabilities to third persons for which the contractor has expressly accepted responsibility under other terms of this contract.

(16) Precontract costs, except as expressly made allowable under other provisions in this contract.

(17) Reconversion, alteration, restoration, or rehabilitation of the contractor's facilities, except as expressly provided elsewhere in this contract.

(18) Research and development costs, unless specifically provided for elsewhere in this contract.

(19) Selling costs, except to the extent they are determined to be reasonable and to be allocable to the contract. Allocability of selling costs to the contract will be determined in the light of reasonable benefit to the agency program arising from such activities as technical, consulting, demonstration, and other services performed for such purposes as applying or adapting the contractor's product for agency use.

(20) Storage of records pertaining to this contract after completion of operations under this contract irrespective of contractual or statutory requirement of the preservation of records.

(21) Taxes, fees, and charges in connection with financing, refinancing, or refunding operations, including the listing of securities on exchanges; taxes which are paid contrary to the clause entitled "State and local taxes"; Federal taxes on net income and excess

profits; and special assessments on land which represent capital improvement.

(22) Salary or other compensation (and expenses related there to) of any individual employed under this contract as a consultant or in another comparable employment capacity who is an employee of another organization and concurrently performing work on a full-time annual basis for that organization under a cost-type contract with the Commission, except to the extent that cash payment therefor is required pursuant to the provisions of this contract or procedures of the Commission applicable to the borrowing of such an individual from another costtype contractor.

(23) First-class air travel in excess of the cost of less than first-class air accommodations, except when less than first-class accommodations are not reasonably available to meet necessary mission requirements, such as, where less than first-class accommodations would:

(1) Require circuitous routing,

(11) Require travel during unreasonable hours,

(111) Greatly increase the duration of the flight,

(iv) Result in additional costs which would offset the transportation savings,

(v) Offer accommodations which are not reasonably adequate for the medical needs of the traveler.

NOTE: The following additional examples of items of unallowable costs are to be used in on-site architect-engineer contracts:

(24) Costs of preparing proposals.

(25) Central and branch office expenses of the contractor, except as specifically set forth in the contract.

(26) Travel expenses of officers, partners, proprietors, executives, administrative heads, and other employees of the contractor's central office or branch office organization concerned with the general management, supervision, and conduct of the contractor's business as a whole, except to the extent that particular travel is in connection with the contract and approved by the Contracting Officer.

[34 F.R. 15142, Sept. 27, 1969, as amended at 35 F.R. 18116, Nov. 26, 1970]

All drawings, sketches, designs, design data, specifications, notebooks, technical and scientific data, and all photographs, negatives, reports, findings, recommendations, data and memoranda of every description relating thereto, as well as all copies of the foregoing relating to the work or any part thereof, shall be subject to inspection by the Commission at all reasonable times (for which inspection the proper facilities shall be afforded the Commission by the contractor and its subcontractors), shall be the property of the Government and may be used by the Government for any purpose whatsoever without any claim on the part of the contrac

tor and its subcontractors and vendors for additional compensation and shall, subject to the right of the contractor to retain a copy of said material for its own use, be delivered to the Government, or otherwise disposed of by the contractor either as the Contracting Officer may from time to time direct during the progress of the work or in any event as the Contracting Officer shall direct upon completion or termination of this contract. The contractor's right of retention and use shall be subject to the security, patent, and use of information provisions, if any, of this contract.

§ 9-7.5006-14 Obligation of funds, estimates of cost (other than operating contracts).

(a) Obligation of funds. The amount presently obligated by the Government with respect to the contract is dollars ($------). Such amount may be increased unilaterally by the Commission by written notice to the contractor and may be increased or decreased by written agreement of the parties (whether or not by formal modification of this contract). Payments by the Government under this contract on account of allowable costs shall not in the aggregate exceed the amount obligated with respect to this contract, less the contractor's fixed fee.

(b) Notices-Contractor excused pending increase when obligation is reached. Whenever the contractor has reason to believe that the total cost of the work under this contract (exclusive of the contractor's fixed fee) will be greater or substantially less than the presently estimated cost of the work, the contractor shall promptly notify the Contracting Officer in writing. [In contracts which are fully obligated, substitute the words "amount obligated with respect to this contract less the contractor's fixed fee" for the words "presently estimated cost of the work."] The contractor shall also notify the Contracting Officer in writing when the aggregate of expenditures plus outstanding commitments and liabilities allowable under this contract, including the contractor's fixed fee, is equal to ninety percent (90%) (or such other percentage as the Contracting Officer may from time to time establish by notice to the contractor) of the amount then obligated with respect to this contract. When such expenditures and outstanding commitments and liabilities, including the contractor's fixed fee, equal one hundred percent (100%) of such amount, the contractor shall immediately notify the Contracting Officer and shall make no further commitments or expenditures (except to meet existing commitments and liabilities) and shall be excused from further performance of the work unless and until the Contracting Officer thereafter shall increase the amount obligated with respect to this contract.

(c) Government's right to terminate not affected. The giving of any notice by either party under this article shall not be construed to waive or impair any right of the

Government to terminate the contract under the provisions of the article entitled "Termination."

(d) Estimates of cost. The presently estimated cost of the work under this contract is dollars ($------) exclusive of the contractor's fixed fee.

NOTE A: The following sentence may be substituted for the second sentence of paragraph (b) above: "The contractor shall also notify the Contracting Officer in writing when the aggregate of expenditures plus outstanding commitments and liabilities allowable under this contract, including the contractor's fixed fee, leaves available funds sufficient to continue contract performance for only days (or such other period

as the Contracting Officer may from time to time establish by notice to the contractor)."

NOTE B: In contracts where revenues and receipts are anticipated and such revenues and receipts are to be available and used for payment of allowable costs, paragraphs (a) and (b) above should be changed with the approval of counsel to provide for such revenues and receipts in a manner similar to paragraphs (a) and (c), respectively, of § 9-7.5006-15.

NOTE C: In certain types of contractual situations (e.g., multiperiod of multiphase contracts), it may be necessary to identify a controlling feature (e.g., period or phase) with its related estimated cost; in such event, changes may be made in paragraph (d) above to appropriately identify the controlling feature.

(8------). Such amount may be increased unilaterally by the Commission by written notice to the Contractor and may be increased or decreased by written agreement of the parties (whether or not by formal modification of this contract). Estimated revenues and receipts from others for work and services to be performed under this contract are not included in the amount obligated with respect to this contract. Such revenues and receipts, to the extent actually received by the Contractor, shall be available and used for the payment of allowable costs as provided in the article entitled "Payments and advances." Nothing in this paragraph (a) is to be construed as authorizing the Contractor to exceed limitations stated in financial plans established by the Commission and furnished to the Contractor from time to time under this contract.

(b) Limitation on payment by the Government. Except as otherwise provided in this contract and except for costs which may be incurred by the Contractor pursuant to the article entitled "Termination" or costs of claims allowable under the contract accruing after completion or termination and not re

leased by the Contractor at the time of financial settlement of the contract in accordance with the article entitled "Payments and advances," payment by the Government under this contract on account of allowable costs shall not in the aggregate exceed the amount obligated with respect to this contract, less the Contractor's fixed fee. Unless expressly negated in this contract, payment on account of those costs excepted in the preceding sentence which are in excess of the amount obligated with respect to this contract shall be subject to the availability of (1) revenues and receipts deposited to the Government's account as provided in the article entitled "Payments and advances," and (2) other funds which the Commission may legally use for such purpose: Provided, The Commission will use its best efforts to obtain the appropriation of funds for this purpose if not otherwise available.

(c) Notices Contractor excused from further performance. The Contractor shall notify the Commission in writing whenever the unexpended balance of funds (including revenues and receipts) available under paragraph (a) above, plus the Contractor's best estimate of revenues and receipts to be received during the day period herein

after specified, is in the Contractor's best judgment sufficient to continue contract operations at the programed rate for only

days and to cover the Contractor's unpaid fixed fee, and outstanding commitments and liabilities on account of costs allowable under the contract at the end of such period. Whenever the unexpended balance of funds (including revenues and receipts) available under paragraph (a) above, less the amount of the Contractor's fixed fee then earned but not paid, is in the Contractor's best judgment either sufficient only to liquidate outstanding commitments and liabilities on account of costs allowable under this contract or is equal to zero, the Contractor shall immediately notify the Commission and shall make no further commitments or expenditures (except to liquidate existing commitments and liabilities), and, unless the parties otherwise agree, the Contractor shall be excused from further performance (except such performance as may become necessary in connection with termination by the Government) and the performance of all work hereunder will be deemed to have been terminated for the convenience of the Government in accordance with the provisions of the article entitled "Termination.”

(d) Financial plans; cost and commitment limitations. In addition to the limitations provided for elsewhere in this contract, the Commission may, through Financial Plans or other directives issued to the Contractor, establish controls on the costs to be incurred and commitments to be made in the performance of the contract work. Such plans and instructions may be amended or supplemented from time to time by the Commission. The Contractor hereby agrees to comply with the specific limitations (cell

ings) on costs and commitments set forth in such plans and directives, to use its best efforts to comply with the other requirements of such plans and directives, and to promptly notify the Commission in writing whenever it has reason to believe the authorized financial levels of costs and commitments will be exceeded or substantially underrun.

NOTE: This paragraph (d) may be omitted in contracts which expressly or othewise provide a contractual basis for equivalent controls in a separate article.

(e) Government's right to terminate not affected. The giving of any notice under this article shall not be construed to waive or impair any right of the Government to terminate the contract under the provisions of the article entitled "Termination."

§ 9-7.5006-16 Background patent rights and background technical data. See 89-9.5008.

9-9.5011.

§ 9-7.5006-23

Patents-reporting

of

Payments and advances (cost-type contracts where funds are advanced by AEC).

(a) Installments of fixed fee. Ninety percent (90%) of the fixed fee shall become due and payable in periodic installments in amounts based on the proportion of the work then completed, as determined by the Contracting Officer, and the balance upon completion and acceptance of all work under this contract.

NOTE A: For operating contracts use: "The fixed fee provided for in Clause shall

be paid in equal monthly installments as it

accrues."

NOTE B: Where a separate fixed fee is provided for a separate item of work, this subparagraph should be modified to permit payment of the entire fixed fee upon completion of that item.

(b) Payments on Account of Allowable Costs. The Contracting Officer and the contractor shall agree as to the extent to which

payment for allowable costs or payments for other items specifically approved in writing by the Contracting Officer shall be made from advances of Government funds.

(c) Special Bank Account-Use. All advances of Government funds shall be withdrawn pursuant to a letter of credit in favor of the contractor or, in the option of the Government, shall be made by check payable to the contractor, and shall be deposited only in the Special Bank Account referred to in the Agreement for Special Bank Account, which is attached hereto and incorporated into this contract as an appendix. The contractor shall likewise deposit in the Special Bank Account any other revenues received by the contractor in connection with the work under this contract. No part of the funds in the Special Bank Account shall be (1) mingled with any funds of the contractor or (2) used for a purpose other than that of making payments for costs allowable under this contract or payments for other items specifically approved in writing by the Contracting Officer. If the Contracting Officer shall at any time determine that the balance on such bank account exceeds the contractor's current needs, the contractor shall promptly make such disposition of the excess as the Contracting Officer may direct.

NOTE: For Special Bank Account Agreement, see § 9-7.5006-24.

(d) Title to funds advanced. Title to the unexpended balance of any funds advanced and of any bank account established pursuant to this clause shall remain in the Government and be superior to any claim or lien of the bank of deposit or others. It is understood that an advance to the contractor hereunder is not a loan to the contractor, and will not require the payment of interest by the contractor, and that the contractor acquires no right, title or interest in or to such advance other than the right to make expenditures therefrom as provided in this clause.

(e) Review and approval of costs incurred. The contractor shall prepare and submit annually as of June 30 a voucher, for the total of net expenditures accrued (1.e., net costs incurred) for the period covered by the voucher, and the Commission, after audit and appropriate adjustment, will approve such voucher. This approval by the Commission will constitute an acknowledgment by the Commission that the net costs incurred are allowable under the contract and that they have been recorded in the accounts maintained by the contractor in accordance with the Commission accounting policies, but will not relieve the contractor of responsibility for the Commission's assets in its care, for appropriate subsequent adjustments, or for errors later becoming known to the Commission.