(1) "Domestic petroleum product" means any product refined in the United States from crude petroleum of wholly domestic origin;

(ii) "Complying petroleum product" means any product refined in the United States in whole or in part from crude petroleum of foreign origin, all of which has been, or will be imported by a firm which, during the period of contract performance and for the three months preceding the month in which the bid or offer which resulted in this contract is submitted, has imported crude petroleum" in compliance with the Voluntary Oil Import Program, or which is certifiled by the Administrator, Voluntary Oil Import Program, as being in compliance under that Program.

(iii) "United States" means the United States and any place subject to the jurisdiction thereof.

(b) Contractor agrees that there will be delivered under this contract only refined petroleum products of one of the types set forth above, except:

(1) When the petroleum products are for use outside the United States;

(ii) When the Government determines that neither domestic petroleum product nor complying petroleum product is produced or refined in the United States in sufficient and reasonably available quantities and of a satisfactory quality;

(iii) When the Secretary determines it would be inconsistent with the public interest to apply the preference to domestic petroleum product or complying petroleum product; or

(iv) When the Secretary determines the cost to the Government of domestic petroleum product or complying petroleum product to be unreasonable.

(c) If the supplies to be delivered hereunder are refined in the United States in whole or in part from imported crude, the Contractor agrees that during the contract period he will comply in all respects with the Voluntary Oil Import Program.

§ 595.1503-2 Evaluation of bids and proposals. (a) In evaluating bids or offers, no price differential will be applied between bids or offers of domestic petroleum product and those offering complying petroleum product.

(b) Otherwise acceptable bids or offers of foreign refined petroleum products will be accepted if such bid or offer is the lowest available bid or offer and (1) no bid or offer of domestic petroleum product or complying petroleum product is available for consideration, or (2) the lowest available bid or offer of a domestic petroleum product or complying product is 6 percent or more in excess of the sum of such bid or offer of foreign refined petroleum product, all costs of delivery to the place specified in the solici

tation and the import tax or duty (whether or not an import tax or dutyfree entry certificate may be issued).

(c) Bids or offers of non-complying petroleum product shall not be accepted.

(d) In determining whether a product is a complying petroleum product, a certificate issued by the Administrator, Voluntary Oil Import Program, shall be accepted as conclusive evidence of such compliance. In the absence of such a certificate, a certification or representation of compliance made by the supplier may be considered presumptive evidence of compliance.

596.203 596.203-5

596.203-50

Required clauses.

Inspection of supplies and correction of defects.

Allowable cost; incentive fee and payment.

596.203-51 Cost-plus- a- percentage- of- cost subcontracting.2

AUTHORITY NOTE: The citation of authority for Part 596 is changed to read:

AUTHORITY: §§ 596.00 to 596.203-50 issued under sec. 3012, 70A Stat. 157; 10 U. S. C. 3012. Interpret or apply secs. 2301-2314, 70A Stat. 127-133; 10 U. S. C. 2301-2314.

§ 596.050 Applicability. This part is applicable not only to contract clauses but to approved contract forms prescribed in Part 16 of this title ånd Part 605 of this subchapter. Contract forms and clauses prescribed by Chapter I, of this title or this subchapter must be used in accordance therewith unless the Deputy Chief of Staff for Logistics grants a deviation (§ 1.109 of this title and § 590.109 of this subchapter). Other forms and clauses previously approved and currently in use in the respective Procuring Activities may continue to be used in accordance with instruction of such Activities, provided such forms and clauses are not inconsistent with Chapter I of this title or this subchapter. Contract forms and clauses prescribed or approved by Chapter 1 of this title or this subchapter may not be modified except as a variation in the prescribed or approved form or clause expressly permitted by Chapter I of this title or this subchapter, or by the addition of provisions supplementary to and consistent with a prescribed or approved form or clause. In those cases where applicability of a particular contract form or clause may be in doubt, Contracting Officers will request interpretations of the Chief, Contracts Branch, Deputy Chief of Staff for Logistics, Department of the Army, through the Head of the Procuring Activity involved.

[20 F. R. 4017, June 9, 1955]

1 Added subsequent to revision. 'Revoked.

§ 596.051 Change orders and supplemental agreements. Change orders and supplemental agreements are types of contract modifications. A change order is the proper medium for effecting changes under the Changes Clause in § 7.103-2 of this title. If the contract authorizes such changes to be made (including, under certain circumstances, an equitable adjustment in price), change orders may be issued without the consent of the Contractor. A supplemental agreement is the proper medium for effecting all other changes to a contract (i. e., changes not covered by the Changes Clause or other clause of the contract) and which accordingly cannot be made without the consent of the Contractor. A supplemental agreement is in effect a new contract with the same Contractor and is added as a supplement to an existing contract. Regardless of the form of contract employed, the distinction as to whether a supplemental agreement or a change order is required rests upon whether the Contractor is bound by existing contract to perform the proposed change or whether such change cannot be required of him without his consent and acceptance. In connection with change orders and supplemental agreements, it is a requirement that contracts can be modified only in the interests of the Government.

[21 F. R. 4287, June 19, 1958]

SUBPART A-CLAUSES FOR FIXED-PRICE
SUPPLY CONTRACTS [REVISED]

SOURCE: §§ 596.103 to 596.150-6 appear at 22 F. R. 1815, Mar. 20, 1957, except as otherwise noted.

Prior Amendments

1955: 20 F. R. 1133, Feb. 24; 20 F. R. 3506, May 19.

1956: 21 F. R. 6374, Aug. 24; 21 F. R. 7246, Sept. 22.

NOTE: In the revision of Subpart A, § 596.102 and §§ 596.151 through 596.152-3 were superseded.

§ 596.103 Required clauses. Except as provided in § 7.102 of this title, all of the clauses specified in §§ 7.103-1 through 7.103-23 of this title will be inserted in all fixed-price supply contracts, subject to the instructions contained in § 7.103 of this title and §§ 596.103 and 596.050 of this subchapter. The additional contract clauses contained in this section, but not contained in Subchapter A, Chapter I of this title, also will be inserted in all fixed-price supply contracts as specified in this subchapter.

In ac

§ 596.103-2 Changes and disposition of inventory resulting from changes(a) Changes. (1) The "Changes" clause in § 7.103-2 of this title will be inserted in all fixed-price supply contracts. cordance with the instructions of each Procuring Activity, the period of "30 days", within which any claim for adjustment must be asserted, may be varied. In special cases the "Changes" clause may be made applicable to changes in provisions other than those relating to drawings, designs, specifications, method of shipment or packing, and place of delivery, so long as such extended applicability of the "Changes" clause would not be inconsistent with the provisions of the clause in § 7.103-2 of this title.

(2) Additional quantities of supplies which were not initially contemplated in the contract will not be ordered under the "Changes" clause since such a practice might be used to defeat the requirements for competitive procurement.

(3) Accelerated deliveries will be provided for by a supplemental agreement modifying the contract rather than through the use of the "Changes" clause. Such supplemental agreement, however, should not be used to provide additional compensation to the Contractor for accelerated deliveries to meet the delivery schedules prescribed in the contract.

(4) The following "Changes" clause is authorized for use in negotiated contracts, in lieu of the "Changes" clause set forth in § 7.103-2 of this title, in those exceptional cases when the Head of a Procuring Activity believes its inclusion in the contract is considered necessary to retain maximum flexibility in making contract changes. It will not be used in contracts resulting from formal advertising or in contracts for the continuation of existing production lines in circumvention of the requirement for competition in new procurement. This alternate "Changes" clause provides, within specified limits, increases or decreases in the quantity and delivery rate of the supplies to be furnished. The flexibility provided by this clause is desirable in contracts for heavy military type items where unusual fluctuations in mobilization reserve production base considerations and other requirements have been or are expected to be encountered. This alternate "Changes" clause is particularly useful in lieu of partial

termination in effecting stretch-out and cut-back programs.

Changes. The Contracting Officer may at any time, by written order, and without notice to the sureties make changes of any one or more of the following types: (a) changes in the directions as to shipment and packing of any supplies; (b) increases or decreases in the quantity of supplies to be furnished hereunder, the total increase or decrease not, however, to exceed percent of the quantity of supplies deliverable hereunder; (c) changes in the drawings or specifications; (d) extensions of the delivery schedules hereunder reducing the rate of deliveries of the supplies called for by this contract; or (e) accelerations of the delivery schedules hereunder by an increase or increases in the rate of deliveries hereunder. Unless consented to in writing by the Contractor, no change orders hereunder of the type mentioned in clause (d) of the preceding sentence shall cause decreases in the deliveries hereunder, and no change orders of the type mentioned in clause (e) of such sentence shall cause increases in the deliveries called for hereunder, amounting respectively in the aggregate in any one month to more than percent of the quantity of supplies, the delivery of which is called for in such month by the delivery schedule originally contained in this contract. If such changes cause an increase or decrease in the amount of work under this contract or in the cost of performance of this contract or in the time required for its performance an equitable adjustment shall be made, which adjustment may include in any instance an adjustment (1) in the purchase price, including (but not limited to) any adjustment in unit price fair in the light of any change in volume caused by such order, and (ii) in the delivery time or schedule, or (iii) in either the price or delivery schedule and the contract shall be modified in writing accordingly. Any claim for adjustment under this article must be asserted within 30 days from the date the change is ordered, provided, however that the Contracting Officer, if he determines that the facts justify such action, may receive, consider and adjust any such claims asserted at any time prior to the date of final settlement of the contract. If the parties fail to agree upon the adjustment to be made the dispute shall be determined as provided in Article (Disputes) hereof. But, nothing provided in this Article shall excuse the contractor from proceeding with the contract as changed.

§ 596.103-5 Inspection. In addition to the Inspection clause required by § 7.103-5 of this title, appropriate language to accomplish the following requirements shall be included in invitations for bids or requests for proposals and the resulting contracts:

(a) When new procurement is initiated for items covered by existing specifications that do not contain a statement of the contractor's responsibilities in the performance of inspections, the contractor shall be required to perform the inspections set forth in the specifications to substantiate conformance of supplies to specification requirements.

(b) Inspections which the Government may perform.

(c) Existing specifications which do not contain complete and definitive quality assurance provisions will be supplemented to the extent necessary to clearly define the inspections required to be performed by the contractor and those which the Government may perform.

(d) Contractors shall have available adequate test facilities for executing specific prescribed tests or make arrangements for the utilization of suitable test facilities.

[23 F. R. 1067, Feb. 19, 1958]

§ 596.103-8 Assignment of claims(a) Setoff as against assignee. (1) In the cases where special circumstances make it advisable in the best interest of the Government, Heads of Procuring Activities may authorize deletion of the last sentence of paragraph (a) of the assignment of claims clause, set forth in § 7.103-8 of this title. In any event, the sentence will be deleted from contracts for transportation of persons or property.

(2) Reduction of or setoff from payments to be made to an assignee will be effected with respect to liabilities of the assignor to the Government arising out of matters in connection with the contract, or of amounts which may be collected or withheld from the assignor in accordance with, or for failure to comply with, the terms of the contract, except as stated in § 7.103-8 of this title. Examples of cases in which setoff will be may include (but are not limited to):

(i) Amounts due pursuant to price redetermination clauses.

(ii) Deduction of liquidated damages. (iii) Excess costs and damages after termination for default.

(iv) Equitable adjustments and rejections under the changes, inspection and guaranty clauses.

(v) Damages resulting from fraud or criminal conduct.

(b) Refunds, etc., of Payments Received by Assignees. In any case in moneys due or to become due under any contract are or have been assigned pursuant to section 1 of the Assignment of Claims Act of 1940, as amended, no liability of any nature of the assignor to the United States or any department or agency thereof, whether arising from or independently of such contract, shall create or impose any liability on the part of the assignee to make restitution, refund, or repayment to the United States of any amount heretofore since July 1, 1950, or hereafter received under the assignment.

(c) Acknowledgment of notice of assignment. Contracting Officers will acknowledge notices of assignment filed by assignees. Where a notice of assignment of monies due under a definitive contract, which supersedes a letter contract, is received pursuant to the Assignment of Claims Act of 1940 (54 Stat. 1029), as amended, such notice should be acknowledged regardless of the fact that a notice of assignment of monies due under the letter contract had been previously acknowledged. The two notices of assignment should be considered as one and filed accordingly.

(d) Assignor's statement. Where direct payment is made to an assignee, the Contractor will furnish on each voucher, invoice, or other supporting paper, a statement to the effect that he recognizes the assignment, its validity, and the right of the assignee to receive payment.

(e) Information to be furnished to assignees. Contracting Officers will, upon request of the Contractor, furnish proposed assignees information regarding the status of the contract at the time of the assignment. In so doing, the Contracting Officer will advise the assignee that the information is so furnished only for confidential use in connection with the assignment.

§ 596.103-10 Federal, State, and local taxes. In effecting procurement outside the United States, its Territories and possessions, substitute the clause set forth in § 600.401 of this subchapter in lieu of the clause prescribed in § 11.401 of this title.

§ 596.103-11 Default-(a) Application. (1) If the Contractor (i) fails to make delivery of the supplies or to perform the services within the time speci

fied in the contract, or (ii) fails to perform any provision of the contract other than the delivery schedules, or (iii) so fails to make progress as to endanger performance of his contract in accordance with the terms thereof, the Contractor may be said to be in default.

(2) Defaults may be excusable or nonexcusable. Defaults are excusable when they arise out of the causes set forth in clauses set forth in clause (b) of the Default article. (§ 7.103-11 of this title.)

(3) Paragraphs (b) through (1) of this section apply to contracts other than those under the Federal Supply Schedule. Paragraph (j) of this section applies to contracts under the Federal Supply Schedule.

(b) Termination of contracts by agreement. When default occurs in the performance of a contract, the contract may be terminated by supplemental agreement with the contractor, provided:

(1) The default is not excusable and the Contractor agrees to pay excess costs incurred in repurchase and damages resulting from delay.

(2) The default is determined by the Contracting Officer to be excusable and the Contractor is willing to execute a termination agreement without cost to the Government. (If the Contractor refuses to execute a termination agreement without cost to the Government, the Contracting Officer may terminate the contract under the clause entitled "Termination for the Convenience of the Government.")

(3) That where a performance bond has been filed, the surety thereon is a party to the supplemental agreement.

(c) Completion of contract after default. (1) In the event that default has occurred in a contract by reason of nonexcusable delay, which results in actual damage to the Government, and the Contracting Officer deems it to be in the best interest of the Government to permit the Contractor to complete performance of the contract, a supplemental agreement may be entered into providing for completion of performance notwithstanding such default, if the Contractor assumes liability for the actual damages. The surety, if any, should either be a party to the supplemental agreement or should execute and deliver to the Contracting Officer, simultane

ously with the execution of a supplemental agreement with the contractor, a written consent extending the terms of any performance bond to cover such supplemental agreement. The agreement should distinctly state that the Government's rights to accrued damages are not thereby waived.

(2) If a performance bond has been filed in connection with the contract, or otherwise, and action outlined in subparagraph (1) of this paragraph is not deemed to be in the best interests of the Government, an agreement may be entered into with the surety, providing for completion of performance of the contract upon the same terms and conditions as the original contract, less actual damages resulting from delay, and further providing for payment directly to the surety. Such agreement should clearly state that all rights against the Contractor and the surety are reserved so far as the surety does not cure defaults of the Contractor. The Contractor will be furnished promptly with a findings of fact as indicated in paragraph (d) (2) of this section, adapting subdivision (iv) to the action taken.

(d) Termination pursuant to default article. (1) (1) Where the Contractor, and/or his surety elect not to complete performance of the contract after being afforded an opportunity to do so (see paragraph (c) of this section), or (ii) when the Contracting Officer deems it to be in the best interests of the Government to terminate the contract following default thereof, and the default consists of the failure on the part of the Contractor to make delivery of the supplies or to perform the services within the time specified in the contract or any extension thereof, the procedure set forth in subparagraphs (2) through (4) of this paragraph will be followed.

(2) The Contractor will be given notice in writing which will include the following:

(i) Reference to contract number, date, and portion of contract as to which his right to proceed is terminated.

(ii) That his right to proceed further with performance under the contract is thereby terminated.

(iii) A specific description of the acts or omissions constituting the default.

(iv) That the supplies, services or construction required by the contract will be procured in the open market against