stances. Failure to agree shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes."

(11) If this contract is partially terminated the contractor and the Contracting Officer shall agree upon such revisions in the target prices and the contract target prices as may be equitable under the circumstances. Failure to agree shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes."

(m) Adjustment of billing price. If at any time it appears that the final unit prices will be substantially greater or less than the unit prices at which units under this contract are being billed, the Contracting Officer may adjust such unit billing prices. The establishment of adjusted prices for billing purposes only shall in no way limit or affect the price revision to be computed in accordance with the provisions of clause.

(n) Subcontracts. The contractor agrees that no subcontract placed under this contract shall provide for payment on costplus-a-percentage-of-cost basis. The contractor further agrees that all subcontracts, other than those on a firm fixed-price basis, which as modified or amended exceed the total cost of $25,000, shall contain provisions (i) reserving to the Government the right to have the books and records of such subcontractor inspected and audited by a representative and (ii) requiring such subcontractors to reserve in their subcontracts a similar right for the Contracting Officer to have a Government representative inspect and audit the books and records of lower tier and subcontracts extending below a cost reimbursement type, redeterminableprice type or incentive type subcontract in a chain unbroken by firm fixed-price subcontracts.

§ 596.150-7 Cost-plus-a-percentageof-cost subcontracting. Pursuant to § 3.401 of this title and § 592.401 of this chapter, the following clause shall be included in all negotiated contracts, other than firm fixed-price contracts, unless the provisions of this clause are otherwise included in a clause prescribed by Subchapter A, Chapter I of this title:

COST-PLUS-A-PERCENTAGE-OF-COST

SUBCONTRACTING

The contractor agrees that no subcontract placed under this contract shall provide for payment on a cost-plus-a-percentage-ofcost basis.

CODIFICATION: § 596.150-7 was added, 23 F. R. 3002, May 6, 1958 and subsequently amended to read as set forth above, 23 F. R. 6105, Aug. 9, 1958.

SUBPART B-CLAUSES FOR COST-REIMBURSEMENT TYPE SUPPLY CONTRACTS [ADDED] SOURCE: $ 596.203 and 596.203-50 appear at 21 F. R. 10012, Dec. 18, 1956.

§ 596.203 Required clauses.

§ 596.203-5 Inspection of supplies and correction of defects. In addition to the Inspection of Supplies and Correction of Defects clause required by § 7.203-5 of this title, appropriate language to accomplish the requirements set forth in § 596.103-5 shall be included in requests for proposals and the resulting contracts.

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

§ 596.203-50 Allowable cost; incentive fee and payment. When in accordance with the provisions of § 3.404-4 of this title and $592.404-4 of this subchapter the cost-plus-incentive-fee contract is used, the following clause will be made a part of the contract:

ALLOWABLE COST, INCENTIVE FEE AND
PAYMENT

(a) For the performance of this contract, the Government shall pay to the Contractor: (1) The cost thereof (hereinafter referred to as "allowable cost") determined by the contracting officer to be allowable in accordance with:

(1) Part 2 of section XV of the Armed Services Procurement Regulations as in effect on the date of this contract; and

(ii) The terms of this contract; and

(2) A final contract fee determined as provided in this contract.

(b) Once each month (or at more frequent intervals, if approved by the contracting officer), the Contractor shall submit to an authorized representative of the contracting officer, in such form and reasonable detail as such representative may require, an invoice or voucher supported by a statement of cost incurred by the Contractor in the performance of this contract and claimed to constitute allowable cost. Each statement of cost shall be certified by an officer or other responsible official of the Contractor authorized by it to certify such statements.

(c) As promptly as possible after receipt of each invoice or voucher, the Government shall, subject to the provisions of (d) below, make payments thereon as approved by the contracting officer. Payment of fee shall be made to the Contractor as specified in the Schedule; provided, however, that after payment of eighty-five percent (85%) of the total minimum incentive fee set forth in the schedule, further payment on account of the fee shall be withheld until a reserve or either fifteen percent (15%) of the sum of all target fees, or one hundred thousand dollars ($100,000), whichever is less, shall have been set aside.

(d) At any time or times prior to final payment under this contract the contracting officer may have the invoices or vouchers and statements of cost audited. Each payment theretofore made shall be subject to reduction for amounts included in the related

invoice or voucher which are found by the contracting officer, on the basis of such audit, not to constitute allowable cost. Any payment may be reduced for overpayments, or increased for underpayments, on preceding invoices or vouchers.

(e) On receipt and approval of the invoice or voucher designated by the Contractor as the "completion invoice" or "completion voucher" and upon compliance by the Contractor with all the provisions of this contract (including, without limitation, the provisions relating to patents and the provisions of (f) below), the Government shall pay to the Contractor as promptly as possible any balance of allowable cost, and any part of the final contract fee which has been withheld pursuant to (c) above or otherwise not paid to the Contractor. The completion invoice or voucher shall be submitted by the Contractor as promptly as possible following completion of the work under this contract but in no event later than one (1) year (or such longer period as the Contracting Officer may in his discretion approve in writing) from the date of such completion. The final contract fee, established pursuant to (1) below, shall be evidenced by a supplemental agreement hereto, whereupon the Contractor shall promptly repay to the Government any excess fee payments theretofore made.

(f) The Contractor agrees that any refunds, rebates, or credits (including any interest thereon) accruing to or received by the Contractor or any assignee under this contract shall be paid by the Contractor to the Government, to the extent that they are properly allocable to costs for which the Contractor has been reimbursed by the Government under this contract. Reasonable expenses incurred by the Contractor for the purpose of securing such refunds, rebates, or credits shall be allowable costs hereunder when approved by the Contracting Officer. Prior to final payment under this contract. the Contractor and each assignee under this contract, whose assignment is in effect at the time of final payment under this contract, shall execute and deliver:

(1) An assignment to the Government, ir form and substance satisfactory to the Contracting Officer, of refunds, rebates, or credits (including any interest thereon) properly allocable to costs for which the Contractor has been reimbursed by the Government under this contract; and

(2) A release discharging the Government, its cfficers, agents, and employees from all liabilities, obligations, and claims arising out of or under this contract, subject only to the following exceptions:

(1) Specified claims in stated amounts or in estimated amounts where the amounts are not susceptible of exact statement by the Contractor;

(ii) Claims, together with reasonable expenses incidental thereto, based upon liabilities of the Contractor, to third parties arising out of the performance of this con

tract; provided that such claims are not known to the Contractor on the date of the execution of the release; and provided further that the Contractor gives notice of such claims in writing to the Contracting Officer not more than six (6) years after the date of the release or the date of any notice to the Contractor that the Government is prepared to make final payment, whichever is earlier; and

(iii) Claims for reimbursement of costs (other than expenses of the Contractor by reason of its indemnification of the Government against patent liability), including reasonable expenses incidental thereto, incurred by the Contractor under the provision of this contract relating to patents.

(g) Any cost incurred by the Contractor under the terms of this contract which would constitute allowable cost under the provisions of this clause shall be included in determining the amount payable under this contract, notwithstanding any provisions contained in the specifications or other documents incorporated in this contract by reference, designating services to be performed or materials to be furnished by the Contractor at its expense or without cost to the Government

(h) In order to foster economy by providing a tangible reward therefor, the target fees established in the Schedule shall be subject to adjustment in accordance with the provisions of (i) and (j) below. The following definitions apply:

(1) "Target cost" means the negotiated estimated cost of each item under this contract; and

(2) "Target fee" means the fee for each item under this contract which fee was negotiated on the assumption that each item would be produced for a cost equal to the target cost.

(1) The estimated cost and fee set forth opposite items (insert items for which target costs and target fees have been negotiated) are the target costs and target fees for those items.

(j) Within 90 days after completion of the work under this contract the Contractor shall forward to the Contracting Omcer a detailed statement of all reimbursable costs determined in accordance with the terms of this contract. Upon submission of this statement the Contractor and the Contracting Officer shall negotiate promptly to establish the final contract fee as follows:

(1) The parties shall agree to a total contract cost to be utilized in determination of the final contract fee.

(2) The final contract fee for the performance of this contract shall be the sum of all target fees increased by (insert contractor's participation) cents for every dollar by which the total contract cost as determined in (1) above is less than the sum of the target costs or decreased by (insert contractor's participation) cents for every dollar by which the total contract costs as determined in (1) above exceeds the sum of the target

597.603-3 Inventory descriptions. [Revoked] 597.604 Plant clearance period. [Revoked] 597.604-1 Rejection of inadequate schedules. [Revoked]

AUTHORITY NOTE: The citation of authority for Part 597 is changed to read:

AUTHORITY: §§ 597.000 to 597.750 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.

SUBPART E-SETTLEMENT OF CONTRACTS TERMINATED FOR CONVENIENCE; GENERAL

§ 597.515 Audit of settlement proposals and subcontract settlements-(a) General. Referral by the Contracting Officer to the Army Audit Agency of settlement proposals and requests for audit which are required to be submitted under the provisions of § 8.515 of this title will be governed by the provisions of § 606.206 of this subchapter. In addition to these requirements of audit support, Contracting Officers generally will solicit accounting counsel from the cognizant audit agency on audit problems relating to prime or subcontract termination settlement proposals.

(b) Subcontract settlement proposals. (1) Every subcontract settlement proposal will be subject to review and examination by the Contracting Officer or his authorized representative, regardless of the amount involved. In performing the review, the Contracting Officer will give consideration to the cost and price aspects of the settlement proposal. The scope of the review will vary depending on the amount involved, the complexities of the claim, and the Contracting

Officer's previous experience with the Contractor.

(2) Section 8.515 of this title provides that all subcontract settlement proposals be submitted to the cognizant audit agency for examination and recommendation when such proposals involve an amount of $25,000 or more or when the Contracting Officer considers an audit, in whole or in part, desirable. Subcontract settlement proposals in amounts less than $25,000 which are not submitted by the Contracting Officer to the audit agency for audit are nevertheless later subject to audit examination by the audit agency for the reason that the audit agency audits all prime contractors' settlement proposals and these must be supported by subcontractors' claims.

(3) Audits performed of subcontractors' termination settlement proposals by prime contractors, or higher-tier subcontractors, will be reviewed by the cognizant audit agency. Where such audits are found to be acceptable by the cognizant auditor, no further audit will be required. Where the audit is not acceptable to the cognizant auditor, he may require further audit action on the part of the prime contractor or highertier subcontractor, or by Government auditors as deemed appropriate under the circumstances.

(4) Contracting Officers will instruct prime contractors to submit their accounting analyses of subcontractors' settlement proposals along with the proposed settlement with the subcontractors at the time the proposed settlement is forwarded for review and ratification by the Contracting Officer. If the Contracting Officer is not satisfied with the accounting examination or review made by the prime contractor or the lower-tier subcontractor of a subcontract settlement proposal for less than $25,000, he will submit the proposal to the appropriate audit agency for examination and recommendation gether with a copy of the accounting analysis made by the Contractor.

to

(5) Settlement proposals under terminated subcontracts which are common to two or more prime contracts will require special consideration. To permit the Contracting Officer to make proper allocations to the prime contracts involved and to facilitate joint settlement of two or more claims by prime contractors pursuant to § 8.311 of this

title, an audit usually is advisable even though some of the claims are for less than $25,000.

(6) The Contracting Officer and the prime contractor may agree that any audit or substantiation of subcontractors' costs will be undertaken by the Government instead of by the prime contractor or higher-tier subcontractor.

(c) Reservation. Nothing contained in this paragraph will be construed to limit the authority delegated by Contracting Officers to prime contractors pursuant to § 8.518-6 of this title. [20 F. R. 1133, Feb. 24, 1955]

[Re

598.106-1

SUBPART F TERMINATION INVENTORY § 597.603 Inventory schedules. voked, 21 F. R. 1512, Mar. 9, 1956]

§ 597.603-3 Inventory descriptions. [Revoked, 21 F. R. 1512, Mar. 9, 1956]

§ 597.604 Plant clearance period. [Revoked, 21 F. R. 1512, Mar. 9, 1956] § 597.604-1 Rejection of inadequate schedules. [Revoked, 21 F. R. 1512, Mar. 9, 1956]

Part 598-Patents, Copyrights and Technical Data [Revised]

598.107

598.107-1 598.107-2

598.107-3

Classified contracts.

Classified contracts to be performed outside the United States.

Patent rights under contracts involving research and development.

License rights.

598.107-4 598.107-5

598.109

598.110

Reporting of royalties.

Followup of patent rights.

Adjustment of royalties.

velopment contracts.

Subpart B-Copyrights

Contracts for motion pictures

Subpart O-Procurement of Invention and

Patent Rights

Authorization and consent. Authorization and consent in contracts for supplies.

598.204

General policy.

Reporting of proposed licenses and assignments.

Correspondence with invention owner or his representative. Clearance to consider and procure licenses and assignments. Final report by designee where no license or assignment is procured.

Procedures applicable to procurement of invention and patent rights.

Gratuitous grants.

AUTHORITY: §§ 598.000 to 598.1509 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.

1 Added subsequent to revision.

598.1502

598.1504

598.1505

598.1506

598.1507

598.1508

598.1509

SOURCE: §§ 598.000 to 598.1509 appear at 20 F. R. 4017, June 9, 1955, except as otherwise noted.

§ 598.000 Scope of part. This part sets forth administrative requirements, procedures, and other pertinent information in connection with (a) clauses in various types of contracts securing to the United States Government appropriate patent rights and adequate protection against patent infringement risks; (b) use of copyright and technical data clauses in Army contracts; (c) security requirements covering patent applications containing classified subject matter filed by Contractors; (d) adjustment of royalties payable by Army Contractors; (e) claims arising out of the use by the Army or Army Contractors of adversely owned inventions and the settlement or other disposition of such claims; and (f) procurement by the Army of invention rights other than as an incident to the settlement of claims.

§ 598.050 Definitions. As used in this section the following terms have the meanings assigned:

(a) Chief, Patent Division. The term "Chief, Patents Division" means the Chief, Patents Division, Office of The Judge Advocate General, Department of the Army, Washington 25, D. C.

(b) Designee. The term "Designee❞ means any office, board, or person delegated, or designated to exercise, powers and authorities under any of the “applicable statutes" listed in § 598.105.

(c) Such claim. The terms "such claim" and "such a claim" mean a claim against the United States which in fact has been asserted or a claim (based upon actual past procurement and not contemplated procurement) which may reasonably be anticipated, under any of listed the "applicable statutes" § 598.105.

SUBPART A-PATENTS

in

§ 598.102 § 598.102-1 Authorization and consent in contracts for supplies. The use of the Authorization and Consent clause (§ 9.102-1 of this title) is optional in supply contracts of $5,000 and less, including purchase orders, but shall be inIcluded in supply contracts over $5,000, including construction work, except as provided in §§ 9.102 (b) and 9.102-2 of this title and § 598.102-2. [23 F. R. 6105, Aug. 9, 1958]

Authorization and consent.

Prior Amendments

1956: 21 F. R. 4287, June 19.

§ 598.102-2 Authorization and consent in contracts for research or development. The Authorization and Consent Clause (§ 9.102-2 of this title) shall be included in all contracts calling exclusively for research or development work, and may be otherwise included only in those contracts for both supplies and research or development work where the rèsearch or development work is the primary purpose of the contract. In all other contracts for both supplies and research or development work, the Authorization and Consent Clause (§ 9.102-1 of this title) shall be used in accordance with the provisions of § 598.102-1. [23 F. R. 6105, Aug. 9, 1958]

§ 598.103 Patent indemnification by Contractor.

§ 598.103-1 Patent indemnification in formally advertised contracts, commercial status predetermined. (a) In supply contracts of $5,000 or more to be awarded as a result of formal advertising, the contracting officer shall make a determination prior to issuance of the invitation for bids whether the supplies to be procured (or such supplies apart from relatively minor modification to be made thereto) normally are, or have been sold or offered for sale by any supplier to the public in the commercial open market. If it is determined that the supplies are, or have been, sold or offered for sale, except as prohibited by § 9.103 of this title, the contract shall include the clause set forth in § 9.103-1 of this title.

(b) Any items to be excluded in accordance with § 9.103-1 (b) of this title shall be listed in detail rather than in general terms.

[23 F. R. 6105, Aug. 9, 1958]

§ 598.103-2 Patent indemnification in formally advertised contracts-commercial status not predetermined. The clause set forth in § 9.103-2 of this title shall not be included in an Army contract without prior approval of the Chief, Contracts Branch, Office of the Deputy Chief of Staff for Logistics.

§ 598.103-4 Waiver of indemnity by the Government. Special patents may be excluded in accordance with § 9.103-4 of this title only with prior approval of the Chief, Contracts Branch, Office of the Deputy Chief of Staff for Logistics.