**3.10.1 CONTRACT ADMINISTRATION**

3.10.1-1. Notice of Intent To Disallow Costs

NOTICE OF INTENT TO DISALLOW COSTS (APRIL 1996)

\(a\) Notwithstanding any other clause of this contract\--

\(1\) The Contracting Officer may at any time issue to the Contractor a
written notice of intent to disallow specified costs incurred or planned
for incurrence under this contract that have been determined not to be
allowable under the contract terms; and

\(2\) The Contractor may, after receiving a notice under subparagraph
(1) above, submit a written response to the Contracting Officer, with
justification for allowance of the costs. If the Contractor does respond
within 60 days, the Contracting Officer shall, within 60 days of
receiving the response, either make a written withdrawal of the notice
or issue a written decision.

\(b\) Failure to issue a notice under this "Notice of Intent to Disallow
Costs" clause shall not affect the Government\'s rights to take
exception to incurred costs.

(*End of clause*)

3.10.1-2 Production Progress Reports

PRODUCTION PROGRESS REPORTS (APRIL 1996)

\(a\) The Contractor shall prepare and submit to the Contracting Officer
the production progress reports specified in the contract Schedule.

\(b\) During any delay in furnishing a production progress report
required under this contract, the Contracting Officer may withhold from
payment an amount not exceeding \$25,000 or 5 percent of the amount of
this contract, whichever is less.

(*End of clause*)

3.10.1-3 Penalties for Unallowable Costs

PENALTIES FOR UNALLOWABLE COSTS (APRIL 1996)

\(a\) Definition. Proposal, as used in this clause, means either-

\(1\) A final indirect cost rate proposal submitted by the Contractor
after the expiration of its fiscal year which:

\(i\) Relates to any payment made on the basis of billing rates; or

\(ii\) Will be used in negotiating the final contract price;

\(2\) The final statement of costs incurred and estimated to be incurred
under the "Incentive Price Revision" clause (if applicable), which is
used to establish the final contract price.

\(b\) Contractors which include unallowable indirect costs in a proposal
may be subject to penalties.

\(c\) The Contractor shall not include in any proposal any cost which is
unallowable.

\(d\) If the Contracting Officer determines that a cost submitted by the
Contractor in its proposal is unallowable , the Contractor shall be
assessed a penalty equal to\--

\(1\) The amount of the disallowed cost allocated to this contract; plus

\(2\) Simple interest, to be computed:

\(i\) On the amount the Contractor was paid (whether as a progress or
billing payment) in excess of the amount to which the Contractor was
entitled; and

\(ii\) Using the applicable rate effective for each six-month interval
prescribed by the Secretary of the Treasury pursuant to Pub. L. 92-41
(85 Stat. 97).

\(e\) If the Contracting Officer determines that a cost submitted by the
Contractor in its proposal includes a cost previously determined to be
unallowable for that Contractor, then the Contractor will be assessed a
penalty in an amount equal to two times the amount of the disallowed
cost allocated to this contract.

\(f\) Determinations under paragraphs (d) and (e) of this clause are
final decisions within the meaning of the 3.9, "Resolution of Protests
and Contract Disputes."

\(g\) The Contracting Officer may waive the penalties in paragraph (d)
or (e) of this.

\(h\) Payment by the Contractor of any penalty assessed under this
clause does not constitute repayment to the Government of any
unallowable cost which has been paid by the Government to the
Contractor.

(*End of clause*)

3.10.1-4 FOB Origin\--Government Bills of Lading or Prepaid Postage

F.O.B. ORIGIN-GOVERNMENT BILLS OF LADING OR PREPAID POSTAGE (APRIL 1996)

\(a\) F.o.b. origin shipments shall be made on Government bills of
lading, or, if the supplies are mailable, via the U.S. Postal Service or
a foreign postal system, as appropriate, with postage costs prepaid by
the Contractor. Any direct charge for postage costs shall be listed as a
separate item on invoices for the supplies shipped. Use of agency
official indicia mail by Contractors is not authorized. Quantities shall
not be divided into mailable lots for the express purpose of avoiding
movement by other modes of transportation.

\(b\) If Government bills of lading are not furnished with the contract
or applicable ordering document, the Contractor shall obtain them from
the Contracting Officer or designated representative.

\(c\) Unless otherwise directed, the Contractor shall address overseas
parcel post to an ultimate DOD consignee in care of a designated Army,
Air Force, or Navy (fleet) post office and not to, or in care of, a
transportation officer, or other activity at a CONUS water or aerial
terminal for transshipment.

(*End of clause*)

3.10.1-5 FOB Government Bills of Lading or Indicia Mail

F.O.B. GOVERNMENT BILLS OF LADING OR INDICIA MAIL (APRIL 1996)

\(a\) F.o.b. origin shipments shall be made on Government bills of
lading, or, if the supplies are mailable, via the U.S. Postal System,
using \`\`Penalty Permit Imprint\'\' indicia labels.

\(b\) If Government bills of lading are not furnished with the contract
or applicable ordering document, the Contractor shall obtain them from
the Contracting Officer or designated representative.

\(c\) Unless otherwise directed, the Contractor shall address overseas
parcel post to an ultimate DOD consignee in care of a designated Army,
Air Force, or Navy (fleet) post office and not to, or in care of, a
transportation officer, or other activity at a CONUS water or aerial
terminal for transshipment.

(*End of clause*)

3.10.1-6 Nonrefundable, Nonrecurring Service Charge

NONREFUNDABLE, NONRECURRING SERVICE CHARGE (APRIL 1996)

As provided herein, the Government will pay a nonrefundable,
nonrecurring charge when the rules and regulations of a Contractor
require that a customer pay (1) a charge for the initiation of service,
(2) a contribution in aid of construction, or (3) a nonrefundable
membership fee. This charge may be in addition to or in lieu of a
connection charge. Therefore, there is hereby added to the Contractor\'s
schedule a nonrefundable, nonrecurring charge for
\_\_\_\_\_\_\_\_\_\_\_\_\_ in the amount of \$\_\_\_\_\_\_\_\_\_\_\_\_\_
dollars payable \[specify dates or schedules\].

(*End of clause*)

3.10.1-7 Bankruptcy

BANKRUPTCY (APRIL 1996)

In the event the Contractor enters into proceedings relating to
bankruptcy, whether voluntary or involuntary, the Contractor agrees to
furnish, by certified mail or electronic commerce method authorized by
the contract, written notification of the bankruptcy to the Contracting
Officer responsible for administering the contract. This notification
shall be furnished within five days of the initiation of the proceedings
relating to bankruptcy filing. This notification shall include the date
on which the bankruptcy petition was filed, the identity of the court in
which the bankruptcy petition was filed, and a listing of Government
contract numbers and contracting offices for all Government contracts
against which final payment has not been made. This obligation remains
in effect until final payment under this contract.

(*End of clause*)

3.10.1-8 Suspension of Work

SUSPENSION OF WORK (APRIL 1996)

\(a\) The Contracting Officer may order the Contractor, in writing, to
suspend, delay, or interrupt all or any part of the work of this
contract for the period of time that the Contracting Officer determines
appropriate for the convenience of the Government.

\(b\) If the performance of all or any part of the work is, for an
unreasonable period of time, suspended, delayed, or interrupted (1) by
an act of the Contracting Officer in the administration of this
contract, or (2) by the Contracting Officer\'s failure to act within the
time specified in this contract (or within a reasonable time if not
specified), an adjustment shall be made for any increase in the cost of
performance of this contract (excluding profit) necessarily caused by
the unreasonable suspension, delay, or interruption, and the contract
modified in writing accordingly. However, no adjustment shall be made
under this clause for any suspension, delay, or interruption to the
extent that performance would have been so suspended, delayed, or
interrupted by any other cause, including the fault or negligence of the
Contractor, or for which an equitable adjustment is provided for or
excluded under any other term or condition of this contract.

\(c\) A claim under this clause shall not be allowed (1) for any costs
incurred more than 20 days before the Contractor shall have notified the
Contracting Officer in writing of the act or failure to act involved
(but this requirement shall not apply as to a claim resulting from a
suspension order), and (2) unless the claim, in an amount stated, is
asserted in writing as soon as practicable after the termination of the
suspension, delay, or interruption, but not later than the date of final
payment under the contract.

(*End of clause*)

3.10.1-9 Stop-Work Order

STOP-WORK ORDER (APRIL 1996)

\(a\) The Contracting Officer may, at any time, by written order to the
Contractor, require the Contractor to stop all, or any part, of the work
called for by this contract for a period of 90 days after the order is
delivered to the Contractor, and for any further period to which the
parties may agree. The order shall be specifically identified as a
stop-work order issued under this clause. Upon receipt of the order, the
Contractor shall immediately comply with its terms and take all
reasonable steps to minimize the incurrence of costs allocable to the
work covered by the order during the period of work stoppage. Within a
period of 90 days after a stop-work order is delivered to the
Contractor, or within any extension of that period to which the parties
shall have agreed, the Contracting Officer shall either\--

\(1\) Cancel the stop-work order; or

\(2\) Terminate the work covered by the order as provided in the default
or the termination provisions of this contract.

\(b\) If a stop-work order issued under this clause is canceled or the
period of the order or any extension thereof expires, the Contractor
shall resume work. The Contracting Officer shall make an equitable
adjustment in the delivery schedule or contract price, or both, and the
contract shall be modified, in writing, accordingly, if-

\(1\) The stop-work order results in an increase in the time required
for, or in the Contractor\'s cost properly allocable to, the performance
of any part of this contract; and

\(2\) The Contractor asserts its right to the adjustment within 30 days
after the end of the period of work stoppage; provided, that, if the
Contracting Officer decides the facts justify the action, the
Contracting Officer may receive and act upon a proposal submitted at any
time before final payment under this contract.

\(c\) If a stop-work order is not canceled and the work covered by the
order is terminated for the convenience of the Government, the
Contracting Officer shall allow reasonable costs resulting from the
stop-work order in arriving at the termination settlement.

\(d\) If a stop-work order is not canceled and the work covered by the
order is terminated for default, the Contracting Officer shall allow, by
equitable adjustment or otherwise, reasonable costs resulting from the
stop-work order.

(*End of clause*)

[Alternate I]{.underline}

If this clause is inserted in a cost-reimbursement contract, in
paragraph (b) substitute the words "an equitable adjustment in the
delivery schedule, the estimated cost, the fee, or a combination
thereof, and in any other terms of the contract that may be affected for
the words an equitable adjustment in the delivery schedule or contract
price, or both."

3.10.1-10 Stop-Work Order\--Facilities

STOP-WORK ORDER\--FACILITIES (APRIL 1996)

\(a\) The Contracting Officer may, at any time, by written order to the
Contractor, require the Contractor to stop all, or any part, of the
acquisition, construction, or installation work called for by this
contract for a period of 90 days after the order is delivered to the
Contractor, and for any further period to which the parties may agree.
The order shall be specifically identified as a stop-work order issued
under this clause. Upon receipt of the order, the Contractor shall, at
Government expense, immediately comply with its terms and take all
reasonable steps to minimize the incurrence of cost allocable to the
work covered by the order during the period of work stoppage. Within a
period of 90 days after a stop-work order is delivered to the
Contractor, or within any extension of that period to which the parties
shall have agreed, the Contracting Officer shall either-

\(1\) Cancel the stop-work order; or

\(2\) Terminate the work covered by the order as provided in the
"Termination of Work" clause of this contract.

\(b\) If a stop-work order issued under this clause is canceled or the
period of the order or any extension thereof expires, the Contractor
shall resume work. The Contracting Officer shall make an equitable
adjustment in the delivery completion schedule, the estimated cost, or
both, and the contract shall be modified, in writing, accordingly, if\--

\(1\) The stop-work order results in an increase in the time required
for, or in the Contractor\'s cost properly allocable to, the performance
of any part of this contract; and

\(2\) The Contractor asserts its right to the adjustment within 30 days
after the end of the period of work stoppage; provided, that, if the
Contracting Officer decides the facts justify the action, the
Contracting Officer may receive and act upon a proposal submitted at any
time before final payment under this contract.

\(c\) If a stop-work order is not canceled and the work covered by the
order is terminated, the Contracting Officer shall allow reasonable
costs resulting from the stop-work order in arriving at the termination
settlement.

\(d\) An appropriate equitable adjustment may be made in any related
contract of the Contractor that provides for adjustment and is affected
by any stop-work order under this clause. The Government shall not be
liable to the Contractor for damages or loss of profits because of a
stop-work order issued under this clause.

(*End of clause*)

3.10.1-11 Government Delay of Work

GOVERNMENT DELAY OF WORK (APRIL 1996)

\(a\) If the performance of all or any part of the work of this contract
is delayed or interrupted (1) by an act of the Contracting Officer in
the administration of this contract that is not expressly or impliedly
authorized by this contract, or (2) by a failure of the Contracting
Officer to act within the time specified in this contract, or within a
reasonable time if not specified, an adjustment (excluding profit) shall
be made for any increase in the cost of performance of this contract
caused by the delay or interruption and the contract shall be modified
in writing accordingly. Adjustment shall also be made in the delivery or
performance dates and any other contractual term or condition affected
by the delay or interruption. However, no adjustment shall be made under
this clause for any delay or interruption to the extent that performance
would have been delayed or interrupted by any other cause, including the
fault or negligence of the Contractor, or for which an adjustment is
provided or excluded under any other term or condition of this contract.

\(b\) A claim under this clause shall not be allowed (1) for any costs
incurred more than 20 days before the Contractor shall have notified the
Contracting Officer in writing of the act or failure to act involved,
and (2) unless the claim, in an amount stated, is asserted in writing as
soon as practicable after the termination of the delay or interruption,
but not later than the day of final payment under the contract.

(*End of clause*)

3.10.1-12 Changes\--Fixed-Price

CHANGES-FIXED-PRICE (APRIL 1996)

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in any one or more of the following:

\(1\) Drawings, designs, or specifications when the supplies to be
furnished are to be specially manufactured for the Government in
accordance with the drawings, designs, or specifications.

\(2\) Method of shipment or packing.

\(3\) Place of delivery.

\(b\) If any such change causes an increase or decrease in the cost of,
or the time required for, performance of any part of the work under this
contract, whether or not changed by the order, the Contracting Officer
shall make an equitable adjustment in the contract price, the delivery
schedule, or both, and shall modify the contract.

\(c\) The Contractor must assert its right to an adjustment under this
clause within 30 days from the date of receipt of the written order.
However, if the Contracting Officer decides that the facts justify it,
the Contracting Officer may receive and act upon a proposal submitted
before final payment of the contract.

\(d\) If the Contractor\'s proposal includes the cost of property made
obsolete or excess by the change, the Contracting Officer shall have the
right to prescribe the manner of the disposition of the property.

\(e\) Failure to agree to any adjustment shall be a dispute under the
"Disputes" clause. However, nothing in this clause shall excuse the
Contractor from proceeding with the contract as changed.

(*End of clause*)

Alternate I

If the requirement is for services, other than architect-engineer or
other professional services, and no supplies are to be furnished,
substitute the following paragraph (a) for paragraph (a) of the basic
clause:

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in any one or more of the following:

\(1\) Description of services to be performed.

\(2\) Time of performance (i.e., hours of the day, days of the week,
etc.).

\(3\) Place of performance of the services.

Alternate II

If the requirement is for services (other than architect-engineer
services, transportation, or research and development) and supplies are
to be furnished, substitute the following paragraph (a) for paragraph
(a) of the basic clause:

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in any one or more of the following:

\(1\) Description of services to be performed.

\(2\) Time of performance (i.e., hours of the day, days of the week,
etc.).

\(3\) Place of performance of the services.

\(4\) Drawings, designs, or specifications when the supplies to be
furnished are to be specially manufactured for the Government in
accordance with the drawings, designs, or specifications.

\(5\) Method of shipment or packing of supplies.

\(6\) Place of delivery.

Alternate III

If the requirement is for architect-engineer or other professional
services, substitute the following paragraph (a) for paragraph (a) of
the basic clause and add the following paragraph (f):

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in the services to be performed.

\(f\) No services for which an additional cost or fee will be charged by
the Contractor shall be furnished without the prior written
authorization of the Contracting Officer.

Alternate IV

If the requirement is for transportation services, substitute the
following paragraph (a) for paragraph (a) of the basic clause:

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in any one or more of the following:

\(1\) Specifications.

\(2\) Work or services.

\(3\) Place of origin.

\(4\) Place of delivery.

\(5\) Tonnage to be shipped.

\(6\) Amount of Government-furnished property.

Alternate V

If the requirement is for research and development and it is desired to
include the clause, substitute the following subparagraphs (a) (1) and
(a)(3) and paragraph (b) for subparagraphs (a)(1) and (a)(3) and
paragraph (b) of the basic clause:

\(1\) Drawings, designs, or specifications.

\(3\) Place of inspection, delivery, or acceptance.

\(b\) If any such change causes an increase or decrease in the cost of,
or time required for, performing this contract, whether or not changed
by the order, the Contracting Officer shall make an equitable adjustment
in (1) the contract price, the time of performance, or both; and (2)
other affected terms of the contract, and shall modify the contract
accordingly.

3.10.1-13 Changes\--Cost-Reimbursement

CHANGES-COST-REIMBURSEMENT (APRIL 1996)

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in any one or more of the following:

\(1\) Drawings, designs, or specifications when the supplies to be
furnished are to be specially manufactured for the Government in
accordance with the drawings, designs, or specifications.

\(2\) Method of shipment or packing.

\(3\) Place of delivery.

\(b\) If any such change causes an increase or decrease in the estimated
cost of, or the time required for, performance of any part of the work
under this contract, whether or not changed by the order, or otherwise
affects any other terms and conditions of this contract, the Contracting
Officer shall make an equitable adjustment in the (1) estimated cost,
delivery or completion schedule, or both; (2) amount of any fixed fee;
and (3) other affected terms and shall modify the contract accordingly.

\(c\) The Contractor must assert its right to an adjustment under this
clause within 30 days from the date of receipt of the written order.
However, if the Contracting Officer decides that the facts justify it,
the Contracting Officer may receive and act upon a proposal submitted
before final payment of the contract.

\(d\) Failure to agree to any adjustment shall be a dispute under the
Disputes clause. However, nothing in this clause shall excuse the
Contractor from proceeding with the contract as changed.

\(e\) Notwithstanding the terms and conditions of paragraphs (a) and (b)
above, the estimated cost of this contract and, if this contract is
incrementally funded, the funds allotted for the performance of this
contract, shall not be increased or considered to be increased except by
specific written modification of the contract indicating the new
contract estimated cost and, if this contract is incrementally funded,
the new amount allotted to the contract. Until this modification is
made, the Contractor shall not be obligated to continue performance or
incur costs beyond the point established in the "Limitation of Cost or
Limitation of Funds" clause of this contract.

(*End of clause*)

Alternate I

If the requirement is for services and no supplies are to be furnished,
substitute the following paragraph (a) for paragraph (a) of the basic
clause:

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in any one or more of the following:

\(1\) Description of services to be performed.

\(2\) Time of performance (i.e., hours of the day, days of the week,
etc.).

\(3\) Place of performance of the services.

Alternate II

If the requirement is for services and supplies are to be furnished,
substitute the following paragraph (a) for paragraph (a) of the basic
clause:

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in any one or more of the following:

\(1\) Description of services to be performed.

\(2\) Time of performance (i.e., hours of the day, days of the week,
etc.).

\(3\) Place of performance of the services.

\(4\) Drawings, designs, or specifications when the supplies to be
furnished are to be specially manufactured for the Government in
accordance with the drawings, designs, or specifications.

\(5\) Method of shipment or packing of supplies.

\(6\) Place of delivery.

Alternate III

If the requirement is for construction, substitute the following
paragraph (a) for paragraph (a) of the basic clause:

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in the plans and specifications or instructions
incorporated in the contract.

Alternate IV

If a facilities contract is contemplated, substitute the following
paragraphs (a) and (e) for paragraphs (a) and (e) of the basic clause:

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in the facilities or work described in the
schedule.

\(e\) Any related contract with the Contractor may be equitably adjusted
if it provides for adjustment and is affected by a change ordered under
this clause.

Alternate V

If the requirement is for research and development, and it is desired to
include the clause, substitute the following subparagraphs (a)(1) and
(a)(3) for subparagraphs (a)(1) and (a)(3) of the basic clause:

\(1\) Drawings, designs, or specifications.

\(3\) Place of inspection, delivery, or acceptance.

3.10.1-14 Changes\--Time and Materials or Labor Hours

CHANGES-TIME-AND-MATERIALS OR LABOR-HOURS (APRIL 1996)

\(a\) The Contracting Officer may at any time, by written order, and
without notice to the sureties, if any, make changes within the general
scope of this contract in any one or more of the following:

\(1\) Drawings, designs, or specifications.

\(2\) Method of shipment or packing.

\(3\) Place of delivery.

\(4\) Amount of Government-furnished property.

\(b\) If any change causes an increase or decrease in any hourly rate,
the ceiling price, or the time required for performance of any part of
the work under this contract, whether or not changed by the order, or
otherwise affects any other terms and conditions of this contract, the
Contracting Officer shall make an equitable adjustment in the (1)
ceiling price, (2) hourly rates, (3) delivery schedule, and (4) other
affected terms, and shall modify the contract accordingly.

\(c\) The Contractor must assert its right to an adjustment under this
clause within 30 days from the date of receipt of the written order.
However, if the Contracting Officer decides that the facts justify it,
the Contracting Officer may receive and act upon a proposal submitted
before final payment of the contract.

\(d\) Failure to agree to any adjustment shall be a dispute under the
"Disputes" clause. However, nothing in this clause shall excuse the
Contractor from proceeding with the contract as changed.

(*End of clause*)

3.1.10-15 Changes\--Construction, Dismantling, Demolition, or Removal of
Improvements

CHANGES\--CONSTRUCTION, DISMANTLING, DEMOLITION, OR REMOVAL OF
IMPROVEMENTS (APRIL 1996)

\(a\) The Contracting Officer may, at any time, without notice to the
sureties, if any, by written order designated or indicated to be a
change order, make changes in the work within the general scope of the
contract, including changes-

\(1\) In the specifications (including drawings and designs);

\(2\) In the method or manner of performance of the work;

\(3\) In the Government-furnished facilities, equipment, materials,
services, or site; or

\(4\) Directing acceleration in the performance of the work.

\(b\) Any other written or oral order (which, as used in this paragraph
(b), includes direction, instruction, interpretation, or determination)
from the Contracting Officer that causes a change shall be treated as a
change order under this clause; provided, that the Contractor gives the
Contracting Officer written notice stating (1) the date, circumstances,
and source of the order and (2) that the Contractor regards the order as
a change order.

\(c\) Except as provided in this clause, no order, statement, or conduct
of the Contracting Officer shall be treated as a change under this
clause or entitle the Contractor to an equitable adjustment.

\(d\) If any change under this clause causes an increase or decrease in
the Contractor\'s cost of, or the time required for, the performance of
any part of the work under this contract, whether or not changed by any
such order, the Contracting Officer shall make an equitable adjustment
and modify the contract in writing. However, except for an adjustment
based on defective specifications, no adjustment for any change under
paragraph (b) of this clause shall be made for any costs incurred more
than 20 days before the Contractor gives written notice as required. In
the case of defective specifications for which the Government is
responsible, the equitable adjustment shall include any increased cost
reasonably incurred by the Contractor in attempting to comply with the
defective specifications.

\(e\) The Contractor must assert its right to an adjustment under this
clause within 30 days after (1) receipt of a written change order under
paragraph (a) of this clause or (2) the furnishing of a written notice
under paragraph (b) of this clause, by submitting to the Contracting
Officer a written statement describing the general nature and amount of
proposal, unless this period is extended by the Government. The
statement of proposal for adjustment may be included in the notice under
paragraph (b) above.

\(f\) No proposal by the Contractor for an equitable adjustment shall be
allowed if asserted after final payment under this contract.

(*End of clause*)

3.10.1-16 Changes and Changed Conditions

CHANGES AND CHANGED CONDITIONS (APRIL 1996)

\(a\) The Contracting Officer may, in writing, order changes in the
drawings and specifications within the general scope of the contract.

\(b\) The Contractor shall promptly notify the Contracting Officer, in
writing, of subsurface or latent physical conditions differing
materially from those indicated in this contract or unknown unusual
physical conditions at the site before proceeding with the work.

\(c\) If changes under paragraph (a) or conditions under paragraph (b)
increase or decrease the cost of, or time required for performing the
work, the Contracting Officer shall make an equitable adjustment (see
paragraph (d)) upon submittal of a proposal for adjustment (hereafter
referred to as proposal) by the Contractor before final payment under
the contract.

\(d\) The Contracting Officer shall not make an equitable adjustment
under paragraph (b) unless-

\(1\) The Contractor has submitted and the Contracting Officer has
received the required written notice; or

\(2\) The Contracting Officer waives the requirement for the written
notice.

\(e\) Failure to agree to any adjustment shall be a dispute under the
"Disputes" clause.

(*End of clause*)

3.10.1-17 Change Order Accounting

CHANGE ORDER ACCOUNTING (APRIL 1996)

The Contracting Officer may require change order accounting whenever the
estimated cost of a change or series of related changes exceeds
\$100,000. The Contractor, for each change or series of related changes,
shall maintain separate accounts, by job order or other suitable
accounting procedure, of all incurred segregable, direct costs (less
allocable credits) of work, both changed and not changed, allocable to
the change. The Contractor shall maintain such accounts until the
parties agree to an equitable adjustment for the changes ordered by the
Contracting Officer or the matter is conclusively disposed of in
accordance with the "Disputes" clause.

(*End of clause*)

3.10.1-18 Notification of Changes.

NOTIFICATION OF CHANGES (APRIL 1996)

\(a\) Definitions.

"Contracting Officer," as used in this clause, does not include any
representative of the Contracting Officer. Specifically Authorized
Representative (SAR), as used in this clause, means any person the
Contracting Officer has so designated by written notice (a copy of which
shall be provided to the Contractor) which shall refer to this
subparagraph and shall be issued to the designated representative before
the SAR exercises such authority.

\(b\) Notice. The primary purpose of this clause is to obtain prompt
reporting of Government conduct that the Contractor considers to
constitute a change to this contract. Except for changes identified as
such in writing and signed by the Contracting Officer, the Contractor
shall notify the Contracting Officer in writing promptly, within \-\--
(to be negotiated) calendar days from the date that the Contractor
identifies any Government conduct (including actions, inactions, and
written or oral communications) that the Contractor regards as a change
to the contract terms and conditions. On the basis of the most accurate
information available to the Contractor, the notice shall state\--

\(1\) The date, nature, and circumstances of the conduct regarded as a
change;

\(2\) The name, function, and activity of each Government individual and
Contractor official or employee involved in or knowledgeable about such
conduct;

\(3\) The identification of any documents and the substance of any oral
communication involved in such conduct;

\(4\) In the instance of alleged acceleration of scheduled performance
or delivery, the basis upon which it arose;

\(5\) The particular elements of contract performance for which the
Contractor may seek an equitable adjustment under this clause,
including-

\(I\) What contract line items have been or may be affected by the
alleged change;

\(ii\) What labor or materials or both have been or may be added,
deleted, or wasted by the alleged change;

\(iii\) To the extent practicable, what delay and disruption in the
manner and sequence of performance and effect on continued performance
have been or may be caused by the alleged change;

\(iv\) What adjustments to contract price, delivery schedule, and other
provisions affected by the alleged change are estimated;

\(6\) The Contractor\'s estimate of the time by which the Government
must respond to the Contractor\'s notice to minimize cost, delay or
disruption of performance.

\(c\) Continued performance. Following submission of the notice required
by (b) above, the Contractor shall diligently continue performance of
this contract to the maximum extent possible in accordance with its
terms and conditions as construed by the Contractor, unless the notice
reports a direction of the Contracting Officer or a communication from a
SAR of the Contracting Officer, in either of which events the Contractor
shall continue performance; provided, however, that if the Contractor
regards the direction or communication as a change as described in (b)
above, notice shall be given in the manner provided. All directions,
communications, interpretations, orders and similar actions of the SAR
shall be reduced to writing promptly and copies furnished to the
Contractor and to the Contracting Officer. The Contracting Officer shall
promptly countermand any action which exceeds the authority of the SAR.

\(d\) Government response. The Contracting Officer shall promptly,
within \-\-- (to be negotiated) calendar days after receipt of notice,
respond to the notice in writing. In responding, the Contracting Officer
shall either\--

\(1\) Confirm that the conduct of which the Contractor gave notice
constitutes a change and when necessary direct the mode of further
performance;

\(2\) Countermand any communication regarded as a change;

\(3\) Deny that the conduct of which the Contractor gave notice
constitutes a change and when necessary direct the mode of further
performance; or

\(4\) In the event the Contractor\'s notice information is inadequate to
make a decision under (1), (2), or (3) above, advise the Contractor what
additional information is required, and establish the date by which it
should be furnished and the date thereafter by which the Government will
respond.

\(e\) Equitable adjustments.

\(1\) If the Contracting Officer confirms that Government conduct
effected a change as alleged by the Contractor, and the conduct causes
an increase or decrease in the Contractor\'s cost of, or the time
required for, performance of any part of the work under this contract,
whether changed or not changed by such conduct, an equitable adjustment
shall be made\--

\(i\) In the contract price or delivery schedule or both; and

\(ii\) In such other provisions of the contract as may be affected.

\(2\) The contract shall be modified in writing accordingly. In the case
of drawings, designs or specifications which are defective and for which
the Government is responsible, the equitable adjustment shall include
the cost and time extension for delay reasonably incurred by the
Contractor in attempting to comply with the defective drawings, designs
or specifications before the Contractor identified, or reasonably should
have identified, such defect. When the cost of property made obsolete or
excess as a result of a change confirmed by the Contracting Officer
under this clause is included in the equitable adjustment, the
Contracting Officer shall have the right to prescribe the manner of
disposition of the property. The equitable adjustment shall not include
increased costs or time extensions for delay resulting from the
Contractor\'s failure to provide notice or to continue performance as
provided, respectively, in (b) and (c) above.

Note: The phrases contract price and cost wherever they appear in the
clause, may be appropriately modified to apply to cost-reimbursement or
incentive contracts, or to combinations thereof.

(*End of clause*)

**3.10.2 SUBCONTRACTING**

3.10.2-1 Subcontracts (Fixed-Price Contracts)

SUBCONTRACTS (FIXED-PRICE CONTRACTS) (APRIL 1996)

\(a\) This clause does not apply to firm-fixed-price contracts and
fixed-price contracts with economic price adjustment. However, it does
apply to subcontracts resulting from unpriced modifications to such
contracts.

\(b\) Subcontract, as used in this clause, includes but is not limited
to purchase orders, and changes and modifications to purchase orders.
The Contractor shall notify the Contracting Officer reasonably in
advance of entering into any subcontract if the Contractor does not have
an approved purchasing system and if the subcontract:

\(1\) Is proposed to exceed \$100,000; or

\(2\) Is one of a number of subcontracts with a single subcontractor,
under this contract, for the same or related supplies or services, that
in the aggregate are expected to exceed \$100,000.

\(c\) The advance notification required by paragraph (b) above shall
include-

\(1\) A description of the supplies or services to be subcontracted;

\(2\) Identification of the type of subcontract to be used;

\(3\) Identification of the proposed subcontractor and an explanation of
why and how the proposed subcontractor was selected, including the
competition obtained;

\(4\) The proposed subcontract price and the Contractor\'s cost or price
analysis;

\(5\) The subcontractor\'s current, complete, and accurate cost or
pricing data and Certificate of Current Cost or Pricing Data, if
required by other contract provisions;

\(6\) The subcontractor\'s Disclosure Statement or Certificate relating
to Cost Accounting Standards when such data are required by other
provisions of this contract; and

\(7\) A negotiation memorandum reflecting-

\(i\) The principal elements of the subcontract price negotiations;

\(ii\) The most significant considerations controlling establishment of
initial or revised prices;

\(iii\) The reason cost or pricing data were or were not required;

\(iv\) The extent, if any, to which the Contractor did not rely on the
subcontractor\'s cost or pricing data in determining the price objective
and in negotiating the final price;

\(v\) The extent, if any, to which it was recognized in the negotiation
that the subcontractor\'s cost or pricing data were not accurate,
complete, or current; the action taken by the Contractor and
subcontractor; and the effect of any such defective data on the total
price negotiated;

\(vi\) The reasons for any significant difference between the
Contractor\'s price objective and the price negotiated; and

\(vii\) A complete explanation of the incentive fee or profit plan when
incentives are used. The explanation shall identify each critical
performance element, management decisions used to quantify each
incentive element, reasons for the incentives, and a summary of all
trade-off possibilities considered.

\(d\) The Contractor shall obtain the Contracting Officer\'s written
consent before placing any subcontract for which advance notification is
required under paragraph (b) above. However, the Contracting Officer may
ratify in writing any such subcontract. Ratification shall constitute
the consent of the Contracting Officer.

\(e\) Even if the Contractor\'s purchasing system has been approved, the
Contractor shall obtain the Contracting Officer\'s written consent
before placing subcontracts identified below:

\(f\) Unless the consent or approval specifically provides otherwise,
neither consent by the Contracting Officer to any subcontract nor
approval of the Contractor\'s purchasing system shall constitute a
determination (1) of the acceptability of any subcontract terms or
conditions, (2) of the acceptability of any subcontract price or of any
amount paid under any subcontract, or (3) to relieve the Contractor of
any responsibility for performing this contract.

\(g\) No subcontract placed under this contract shall provide for
payment on a cost-plus-a-percentage-of-cost basis.

\(h\) The Government reserves the right to review the Contractor\'s
purchasing system. (*End of clause*)

Alternate I

If the Contracting Officer elects to delete the requirement for advance
notification of, or consent to, any subcontracts that were evaluated
during negotiations (this election is not authorized for acquisition of
major systems and subsystems or their components), add the following
paragraph (i) to the basic clause:

\(i\) Paragraphs (b) and (c) of this clause do not apply to the
following subcontracts, which were evaluated during negotiations:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\[list subcontracts\]

3.10.2-2 Subcontracts (Cost-Reimbursement and Ceiling Priced Contracts)

SUBCONTRACTS (COST-REIMBURSEMENT AND CEILING PRICED CONTRACTS)
(APRIL 1996)

\(a\) Subcontract, as used in this clause, includes but is not limited
to purchase orders, and changes and modifications to purchase orders.
The Contractor shall notify the Contracting Officer reasonably in
advance of entering into any subcontract if:

\(1\) The proposed subcontract is of the cost-reimbursement,
time-and-materials, or labor-hour type;

\(2\) The proposed subcontract is fixed-price and exceeds either
\$100,000 or 5 percent of the total estimated cost of this contract;

\(3\) The proposed subcontract has experimental, developmental, or
research work as one of its purposes; or

\(4\) This contract is not a facilities contract and the proposed
subcontract provides for the fabrication, purchase, rental,
installation, or other acquisition of special test equipment valued in
excess of \$10,000 or of any items of facilities.

(b)(1) In the case of a proposed subcontract that (i) is of the
cost-reimbursement, time-and-materials, or labor-hour type and is
estimated to exceed \$10,000, including any fee, (ii) is proposed to
exceed \$100,000, or (iii) is one of a number of subcontracts with a
single subcontractor, under this contract, for the same or related
supplies or services that, in the aggregate, are expected to exceed
\$100,000, the advance notification required by paragraph (a) above
shall include the information specified in subparagraph (2) below.

(2)(i) A description of the supplies or services to be subcontracted.

\(ii\) Identification of the type of subcontract to be used.

\(iii\) Identification of the proposed subcontractor and an explanation
of why and how the proposed subcontractor was selected, including the
competition obtained.

\(iv\) The proposed subcontract price and the Contractor\'s cost or
price analysis.

\(v\) The subcontractor\'s current, complete, and accurate cost or
pricing data and Certificate of Current Cost or Pricing Data, if
required by other contract provisions.

\(vi\) The subcontractor\'s Disclosure Statement or Certificate relating
to Cost Accounting Standards when such data are required by other
provisions of this contract.

\(vii\) A negotiation memorandum reflecting-

\(A\) The principal elements of the subcontract price negotiations;

\(B\) The most significant considerations controlling establishment of
initial or revised prices;

\(C\) The reason cost or pricing data were or were not required;

\(D\) The extent, if any, to which the Contractor did not rely on the
subcontractor\'s cost or pricing data in determining the price objective
and in negotiating the final price;

\(E\) The extent to which it was recognized in the negotiation that the
subcontractor\'s cost or pricing data were not accurate, complete, or
current; the action taken by the Contractor and the subcontractor; and
the effect of any such defective data on the total price negotiated;

\(F\) The reasons for any significant difference between the
Contractor\'s price objective and the price negotiated; and

\(G\) A complete explanation of the incentive fee or profit plan when
incentives are used. The explanation shall identify each critical
performance element, management decisions used to quantify each
incentive element, reasons for the incentives, and a summary of all
trade-off possibilities considered.

\(c\) The Contractor shall obtain the Contracting Officer\'s written
consent before placing any subcontract for which advance notification is
required under paragraph (a) above. However, the Contracting Officer may
ratify in writing any such subcontract. Ratification shall constitute
the consent of the Contracting Officer.

\(d\) If the Contractor has an approved purchasing system and the
subcontract is within the scope of such approval, the Contractor may
enter into the subcontracts described in subparagraphs (a)(1) and (a)(2)
of this clause without the consent of the Contracting Officer.

\(e\) Even if the Contractor\'s purchasing system has been approved, the
Contractor shall obtain the Contracting Officer\'s written consent
before placing subcontracts identified below:

\(f\) Unless the consent or approval specifically provides otherwise,
neither consent by the Contracting Officer to any subcontract nor
approval of the Contractor\'s purchasing system shall constitute a
determination (1) of the acceptability of any subcontract terms or
conditions, (2) of the allowability of any cost under this contract, or
(3) to relieve the Contractor of any responsibility for performing this
contract.

\(g\) No subcontract placed under this contract shall provide for
payment on a cost-plus-a-percentage-of-cost basis.

\(h\) The Contractor shall give the Contracting Officer immediate
written notice of any action or suit filed and prompt notice of any
claim made against the Contractor by any subcontractor or vendor that,
in the opinion of the Contractor, may result in litigation related in
any way to this contract, with respect to which the Contractor may be
entitled to reimbursement from the Government.

(i)(1) The Contractor shall insert in each price redetermination or
incentive price revision subcontract under this contract the substance
of the paragraph Quarterly limitation on payments statement of the
clause "Price Redetermination-Prospective, Price
Redetermination-Retroactive," "Incentive Price Revision-Firm Target," or
"Incentive Price Revision- Successive Targets**,"** as appropriate,
modified in accordance with the paragraph titled "Subcontracts" of that
clause.

\(2\) Additionally, the Contractor shall include in each cost-
reimbursement subcontract under this contract a requirement that the
subcontractor insert the substance of the appropriate modified
subparagraph referred to in subparagraph (1) above in each lower tier
price redetermination or incentive price revision subcontract under that
subcontract.

\(j\) To facilitate small business participation in subcontracting, the
Contractor agrees to provide payments on subcontracts under this
contract that are fixed-price subcontracts with small business concerns
in conformity with the standards for customary payments**,** as in
effect on the date of this contract. The Contractor further agrees that
the need for such progress payments will not be considered a handicap or
adverse factor in the award of subcontracts.

\(k\) The Government reserves the right to review the Contractor\'s
purchasing system. (*End of clause*)

3.10.2-3 Subcontracts (Time-and-Materials and Labor-Hour Contracts.)

SUBCONTRACTS (TIME-AND-MATERIALS AND LABOR-HOUR CONTRACTS) (APRIL 1996)

\(a\) Subcontract, as used in this clause, includes but is not limited
to purchase orders, and changes and modifications to purchase orders.
The Contractor shall obtain the Contracting Officer\'s written consent
before placing any subcontract for furnishing any of the work called for
in this contract, except for purchase of raw material or commercial
stock items.

\(b\) No subcontract placed under this contract shall provide for
payment on a cost-plus-a-percentage-of-cost basis.

\(c\) The Government reserves the right to review the Contractor\'s
purchasing system.

\(d\) Unless the consent or approval specifically provides otherwise,
neither consent by the Contracting Officer to any subcontract nor
approval of the Contractor\'s purchasing system shall constitute a
determination (1) of the acceptability of any subcontract terms or
conditions, (2) of the acceptability of any subcontract price or of any
amount paid under any subcontract, or (3) to relieve the Contractor of
any responsibility for performing this contract.

(*End of clause*)

3.10.2-4 Subcontractors and Outside Associates and Consultants.

SUBCONTRACTORS AND OUTSIDE ASSOCIATES AND CONSULTANTS (APRIL 1996)

Any subcontractors and outside associates or consultants required by the
Contractor in connection with the services covered by the contract will
be limited to individuals or firms that were specifically identified and
agreed to during Screening Information Request (SIR) communications. The
Contractor shall obtain the Contracting Officer\'s written consent
before making any substitution for these subcontractors, associates, or
consultants.

(*End of clause*)

3.10.2-5 Competition in Subcontracting.

COMPETITION IN SUBCONTRACTING (APRIL 1996)

The Contractor shall select subcontractors (including suppliers) on a
competitive basis to the maximum practical extent consistent with the
objectives and requirements of the contract.

(*End of clause*)

3.10.2-6 Subcontracts for Commercial Items and Commercial Components.

Subcontracts for Commercial Items and Commercial Components

\(a\) Definition.

\(1\) "Commercial item," as used in this clause, means:

\(i\) Any item, other than real property, that is of a type customarily
used for nongovernmental purposes and that\--

\(A\) Has been sold, leased, or licensed to the general public; or

\(B\) Has been offered for sale, lease, or license to the general
public;

\(ii\) Any item that evolved from an item described in paragraph (c)(1)
of this clause through advances in technology or performance and that is
not yet available in the commercial marketplace, but will be available
in the commercial marketplace in time to satisfy the delivery
requirements under a pending Government contract;

\(iii\) Any item that would satisfy a criterion expressed in
paragraphs (c)(1) or (c)(2) of this clause, but for\--

\(A\) Modifications of a type customarily available in the commercial
marketplace; or

\(B\) \'Minor\' modifications of a type not customarily available in the
commercial marketplace made to meet Federal Government requirements.
\'Minor\' modifications means modifications that do not significantly
alter the nongovernmental function or essential physical characteristics
of an item or component, or change the purpose of a process. Factors to
be considered in determining whether a modification is minor include the
value and size of the modification and the comparative value and size of
the final product. Dollar values and percentages may be used as
guideposts, but are not conclusive evidence that a modification is
minor.

\(iv\) Any combination of items meeting the requirements of
paragraphs (c)(1), (2), (3), or (5) of this clause that are of a type
customarily combined and sold in combination to the general public;

\(v\) Installation services, maintenance, services, repair services,
training services, and other services if such services are procured for
support of an item referred to in paragraphs (c)(1), (2), (3), or (4) of
this clause, and if the source of such services\--

\(A\) Offers such services to the general public and the Federal
Government contemporaneously and under similar terms and conditions; and

\(B\) Offers to use the same work force for providing the Federal
Government with such services as the source uses for providing such
services to the general public;

\(vi\) Services of a type offered and sold competitively in substantial
quantities in the commercial marketplace based on established catalog or
market prices for specific tasks performed, under standard commercial
terms and conditions. This does not include services that are sold based
on hourly rates without an established catalog or market price for a
specific service performed;

\(vii\) Any item, combination of items, or service referred to in
subparagraphs (c)(1) through (c)(6), notwithstanding the fact that the
item, combination of items, or service is transferred between or among
separate divisions, subsidiaries, or affiliates of a Contractor; or

\(viii\) A nondevelopmental item, if the procuring agency determines the
item was developed exclusively at private expense and sold in
substantial quantities, on a competitive basis, to multiple State and
local Governments.

\(2\) "Subcontract," as used in this clause, includes a transfer of
commercial items between divisions, subsidiaries, or affiliates of the
Contractor or subcontractor at any tier.

\(b\) To the maximum extent practicable, the Contractor shall
incorporate, and require its subcontractors at all tiers to incorporate,
commercial items or nondevelopmental items as components of items to be
supplied under this contract.

\(c\) Notwithstanding any other clause of this contract, the Contractor
is not required to include any FAA Acquisition Management System
provision or clause, other than those listed below to the extent they
are applicable and as may be required to establish the reasonableness of
prices, in a subcontract at any tier for commercial items or commercial
components:

\(1\) Equal Opportunity (E.O. 11246);

\(2\) Affirmative Action for Special Disabled and Vietnam Era Veterans
(38 U.S.C. 4212(a));

\(3\) Affirmative Action for Handicapped Workers (29 U.S.C. 793); and

\(4\) Preference for Privately Owned U.S.-Flagged Commercial Vessels
(46 U.S.C. 1241) (flow down not required for subcontracts awarded
beginning May 1, 1996).

\(d\) The Contractor shall include the terms of this clause, including
this paragraph (d), in subcontracts awarded under this contract.

(*End of clause*)

**3.10.3 GOVERNMENT PROPERTY**

(RESERVED. Clauses under development.)

**3.10.4 QUALITY ASSURANCE**

3.10.4-1 Contractor Inspection Requirements

CONTRACTOR INSPECTION REQUIREMENTS (APRIL 1996)

The Contractor is responsible for performing or having performed all
inspections and tests necessary to substantiate that the supplies or
services furnished under this contract conform to contract requirements,
including any applicable technical requirements for specified
manufacturers\' parts.

(*End of clause*)

3.10.4-2 Inspection of Supplies\--Fixed-Price.

INSPECTION OF SUPPLIES\--FIXED-PRICE (APRIL 1996)

\(a\) Definition. \'Supplies,\' as used in this clause, includes but is
not limited to raw materials, components, intermediate assemblies, end
products, and lots of supplies.

\(b\) The Contractor shall provide and maintain an inspection system
acceptable to the Government covering supplies under this contract and
shall tender to the Government for acceptance only supplies that have
been inspected in accordance with the inspection system and have been
found by the Contractor to be in conformity with contract requirements.
As part of the system, the Contractor shall prepare records evidencing
all inspections made under the system and the outcome. These records
shall be kept complete and made available to the Government during
contract performance and for as long afterwards as the contract
requires. The Government may perform reviews and evaluations as
reasonably necessary to ascertain compliance with this paragraph. These
reviews and evaluations shall be conducted in a manner that will not
unduly delay the contract work. The right of review, whether exercised
or not, does not relieve the Contractor of the obligations under the
contract.

\(c\) The Government has the right to inspect and test all supplies
called for by the contract, to the extent practicable, at all places and
times, including the period of manufacture, and in any event before
acceptance. The Government shall perform inspections and tests in a
manner that will not unduly delay the work. The Government assumes no
contractual obligation to perform any inspection and test for the
benefit of the Contractor unless specifically set forth elsewhere in
this contract.

\(d\) If the Government performs inspection or test on the premises of
the Contractor or a subcontractor, the Contractor shall furnish, and
shall require subcontractors to furnish, without additional charge, all
reasonable facilities and assistance for the safe and convenient
performance of these duties. Except as otherwise provided in the
contract, the Government shall bear the expense of Government
inspections or tests made at other than the Contractor\'s or
subcontractor\'s premises; provided, that in case of rejection, the
Government shall not be liable for any reduction in the value of
inspection or test samples.

(e)(1) When supplies are not ready at the time specified by the
Contractor for inspection or test, the Contracting Officer may charge to
the Contractor the additional cost of inspection or test.

\(2\) The Contracting Officer may also charge the Contractor for any
additional cost of inspection or test when prior rejection makes
reinspection or retest necessary.

\(f\) The Government has the right either to reject or to require
correction of nonconforming supplies. Supplies are nonconforming when
they are defective in material or workmanship or are otherwise not in
conformity with contract requirements. The Government may reject
nonconforming supplies with or without disposition instructions.

\(g\) The Contractor shall remove supplies rejected or required to be
corrected. However, the Contracting Officer may require or permit
correction in place, promptly after notice, by and at the expense of the
Contractor. The Contractor shall not tender for acceptance corrected or
rejected supplies without disclosing the former rejection or requirement
for correction, and, when required, shall disclose the corrective action
taken.

\[If the contract type is fixed price incentive, the following applies;
Cost of removal, replacement, or correction shall be considered a cost
incurred, or to be incurred, in the total final negotiated cost fixed
under the incentive price revision clause. However, replacements or
corrections by the Contractor after the establishment of the total final
price shall be at no increase in the total final price.\]

\[If the contract type is a fixed-ceiling price contract with
retroactive price redetermination, the following applies; Cost of
removal, replacement, or correction shall be considered a cost incurred,
or to be incurred, when determining the price under the price
redetermined clause. However, replacements or corrections by the
contractor after the establishment of the redetermined prices shall be
at no increase in the redetermined price.\]

\(h\) If the Contractor fails to promptly remove, replace, or correct
rejected supplies that are required to be removed or to be replaced or
corrected, the Government may either (1) by contract or otherwise,
remove, replace, or correct the supplies and charge the cost to the
Contractor or (2) terminate the contract for default. Unless the
Contractor corrects or replaces the supplies within the delivery
schedule, the Contracting Officer may require their delivery and make an
equitable price reduction. Failure to agree to a price reduction shall
be a dispute.

\[If the contract type is fixed-price incentive, substitute the
following for subparagraph (h). "(h) If the Contractor fails to promptly
remove, replace, or correct rejected supplies that are required to be
removed or to be replaced or corrected, the Government may either (1) by
contract or otherwise, remove, replace, or correct the supplies and
equitably reduce the target price or, if established, the total final
price or (2) may terminate the contract for default. Unless the
Contractor corrects or replaces the nonconforming supplies within the
delivery schedule, the Contracting Officer may require their delivery
and equitably reduce any target price or, if it is established, the
total final contract price. Failure to agree upon an equitable price
reduction shall be a dispute."\]

\[If the contract type is fixed-ceiling price contract with retroactive
price redetermination, substitute the following for subparagraph (h).
"(h) If the Contractor fails to promptly remove, replace, or correct
rejected supplies that are required to be removed or to be replaced or
corrected, the Government may either (1) by contract or otherwise,
remove, replace, or correct the supplies and equitably reduce the
initial contract price or, if established, the redetermined contract
price or (2) may terminate the contract for default. Unless the
Contractor corrects or replaces the nonconforming supplies within the
delivery schedule, the Contracting Officer may require their delivery
and equitably reduce the initial contract price or, if it is
established, the redetermined contract price. Failure to agree upon an
equitable price reduction shall be a dispute."\]

\(i\) If this contract involves government quality assurance at source,
the contractor shall provide adequate advance notification as to when
supplies are scheduled for inspection and test, and when the supplies
will be ready for government inspection. Unless otherwise stated in the
contract, this shall normally be at least 2 days if a Government
representative is in residence in the Contractor's plant, or 7 days
otherwise.

\(j\) The Government shall accept or reject supplies as promptly as
practicable when presented for inspection and test, or after delivery,
unless otherwise provided in the contract. Government failure to inspect
and accept or reject the supplies shall not relieve the Contractor from
responsibility, nor impose liability on the Government, for
nonconforming supplies.

\(k\) Inspections and tests by the Government do not relieve the
Contractor of responsibility for defects or other failures to meet
contract requirements discovered before acceptance. Acceptance shall be
conclusive, except for latent defects, fraud, gross mistakes amounting
to fraud, or as otherwise provided in the contract.

\(l\) If acceptance is not conclusive for any of the reasons in
paragraph (k) hereof, the Government, in addition to any other rights
and remedies provided by law, or under other provisions of this
contract, shall have the right to require the Contractor (1) at no
increase in contract price, (or target price, total final price, initial
contract price, or the redetermined price of the contract) to correct or
replace the defective or nonconforming supplies at the original point of
delivery or at the Contractor\'s plant at the Contracting Officer\'s
election, and in accordance with a reasonable delivery schedule as may
be agreed upon between the Contractor and the Contracting Officer;
provided, that the Contracting Officer may require a reduction in
contract price (or any target price, total final price, the initial
price, or redetermined price of the contract) if the Contractor fails to
meet such delivery schedule, or (2) within a reasonable time after
receipt by the Contractor of notice of defects or nonconformance, to
repay such portion of the contract price as is equitable under the
circumstances if the Contracting Officer elects not to require
correction or replacement. When supplies are returned to the Contractor,
the Contractor shall bear the transportation cost from the original
point of delivery to the Contractor\'s plant and return to the original
point when that point is not the Contractor\'s plant. If the Contractor
fails to perform or act as required in (1) or (2) above and does not
cure such failure within a period of 10 days (or such longer period as
the Contracting Officer may authorize in writing) after receipt of
notice from the Contracting Officer specifying such failure, the
Government shall have the right by contract or otherwise to replace or
correct such supplies and charge to the Contractor the cost occasioned
by the Government thereby, to equitably reduce any target price or, if
established, the total final price, or to equitably reduce the initial
contract price, or, if established, the redetermined price of the
contract.

(*End of clause*)

3.10.4-3 Inspection of Supplies - Cost Reimbursement

INSPECTION OF SUPPLIES\--COST-REIMBURSEMENT (APRIL 1996)

\(a\) Definitions

\(1\) \'Contractor\'s managerial personnel,\' as used in this clause,
means any of the Contractor\'s directors, officers, managers,
superintendents, or equivalent representatives who have supervision or
direction of\--

\(i\) All or substantially all of the Contractor\'s business;

\(ii\) All or substantially all of the Contractor\'s operation at a
plant or separate location at which the contract is being performed; or

\(iii\) A separate and complete major industrial operation connected
with performing this contract.

\(2\) \'Supplies,\' as used in this clause, includes but is not limited
to raw materials, components, intermediate assemblies, end products,
lots of supplies, and, when the contract does not include the "Warranty
of Data" clause.

\(b\) The Contractor shall provide and maintain an inspection system
acceptable to the Government covering the supplies, fabricating methods,
and special tooling under this contract. Complete records of all
inspection work performed by the Contractor shall be maintained and made
available to the Government during contract performance and for as long
afterwards as the contract requires.

\(c\) The Government has the right to inspect and test the contract
supplies, to the extent practicable at all places and times, including
the period of manufacture, and in any event before acceptance. The
Government may also inspect the plant or plants of the Contractor or any
subcontractor engaged in the contract performance. The Government shall
perform inspections and tests in a manner that will not unduly delay the
work.

\(d\) If the Government performs inspection or test on the premises of
the Contractor or a subcontractor, the Contractor shall furnish and
shall require subcontractors to furnish all reasonable facilities and
assistance for the safe and convenient performance of these duties.

\(e\) Unless otherwise specified in the contract, the Government shall
accept supplies as promptly as practicable after delivery, and supplies
shall be deemed accepted 60 days after delivery, unless accepted
earlier.

\(f\) At any time during contract performance, but no later than 6
months (or such other time as may be specified in the contract) after
acceptance of the supplies to be delivered under the contract, the
Government may require the Contractor to replace or correct any supplies
that are nonconforming at time of delivery. Supplies are nonconforming
when they are defective in material or workmanship or are otherwise not
in conformity with contract requirements. Except as otherwise provided
in paragraph (h) below, the cost of replacement or correction shall be
included in allowable cost, determined as provided in the "Allowable
Cost and Payment" clause, but no additional fee shall be paid. The
Contractor shall not tender for acceptance supplies required to be
replaced or corrected without disclosing the former requirement for
replacement or correction, and, when required, shall disclose the
corrective action taken.

(g)(1) If the Contractor fails to proceed with reasonable promptness to
perform required replacement or correction, the Government may\--

\(i\) By contract or otherwise, perform the replacement or correction
and charge to the Contractor any increased cost or make an equitable
reduction in any fixed fee paid or payable under the contract;

\(ii\) Require delivery of undelivered supplies at an equitable
reduction in any fixed fee paid or payable under the contract; or

\(iii\) Terminate the contract for default.

\(2\) Failure to agree on the amount of increased cost to be charged to
the Contractor or to the reduction in the fixed fee shall be a dispute.

\(h\) Notwithstanding paragraphs (f) and (g) above, the Government may
at any time require the Contractor to correct or replace, without cost
to the Government, nonconforming supplies, if the nonconformances are
due to (1) fraud, lack of good faith, or willful misconduct on the part
of the Contractor\'s managerial personnel or (2) the conduct of one or
more of the Contractor\'s employees selected or retained by the
Contractor after any of the Contractor\'s managerial personnel has
reasonable grounds to believe that the employee is habitually careless
or unqualified.

\(i\) This clause applies in the same manner to corrected or replacement
supplies as to supplies originally delivered.

\(j\) The Contractor shall have no obligation or liability under this
contract to replace supplies that were nonconforming at the time of
delivery, except as provided in this clause or as may be otherwise
provided in the contract.

\(k\) Except as otherwise specified in the contract, the Contractor\'s
obligation to correct or replace Government-furnished property shall be
governed by the clause pertaining to Government property.

(*End of clause*)

3.10.4-4 Inspection of Services - Fixed-Price & Cost Reimbursement

INSPECTION OF SERVICES\--FIXED-PRICE & COST REIMBURSEMENT (APRIL 1996)

\(a\) \'Services,\' as used in this clause, includes services performed,
workmanship, and material furnished or utilized in the performance of
services.

\(b\) The Contractor shall provide and maintain an inspection system
acceptable to the Government covering the services under this contract.
Complete records of all inspection work performed by the Contractor
shall be maintained and made available to the Government during contract
performance and for as long afterwards as the contract requires.

\(c\) The Government has the right to inspect and test all services
called for by the contract, to the extent practicable at all times and
places during the term of the contract. The Government shall perform
inspections and tests in a manner that will not unduly delay the work.

\(d\) If the Government performs inspections or tests on the premises of
the Contractor or a subcontractor, the Contractor shall furnish, and
shall require subcontractors to furnish, without additional charge if a
fixed-price contract, all reasonable facilities and assistance for the
safe and convenient performance of these duties.

\(e\) If any of the services do not conform with contract requirements,
the Government may require the Contractor to perform the services again
in conformity with contract requirements, at no increase in contract
amount, or if a cost reimbursement type contract, for no additional fee.
When the defects in services cannot be corrected by reperformance, the
Government may (1) require the Contractor to take necessary action to
ensure that future performance conforms to contract requirements and (2)
reduce the contract price, or any fee payable under the contract, to
reflect the reduced value of the services performed.

\(f\) If the Contractor fails to promptly perform the services again or
to take the necessary action to ensure future performance in conformity
with contract requirements, the Government may (1) by contract or
otherwise, perform the services and charge to the Contractor any cost
incurred by the Government that is directly related to the performance
of such service, (or if a cost reimbursement contract, reduce any fee
payable by an amount that is equitable under the circumstances), or (2)
terminate the contract for default.

(*End of clause*)

3.10.4-5 Inspection\--Time-and-Material and Labor-Hour.

INSPECTION\--TIME-AND-MATERIAL AND LABOR-HOUR (APRIL 1996)

\(a\) Definitions.

\(1\) \'Contractor\'s managerial personnel,\' as used in this clause,
means any of the Contractor\'s directors, officers, managers,
superintendents, or equivalent representatives who have supervision or
direction of\--

\(i\) All or substantially all of the Contractor\'s business;

\(ii\) All or substantially all of the Contractor\'s operation at any
one plant or separate location at which the contract is being performed;
or

\(iii\) A separate and complete major industrial operation connected
with the performance of this contract.

\(2\) 'Materials,\' as used in this clause, includes data when the
contract does not include the "Warranty of Data" clause.

\(b\) The Contractor shall provide and maintain an inspection system
acceptable to the Government covering the material, fabricating methods,
work, and services under this contract. Complete records of all
inspection work performed by the Contractor shall be maintained and made
available to the Government during contract performance and for as long
afterwards as the contract requires.

\(c\) The Government has the right to inspect and test all materials
furnished and services performed under this contract, to the extent
practicable at all places and times, including the period of
performance, and in any event before acceptance. The Government may also
inspect the plant or plants of the Contractor or any subcontractor
engaged in contract performance. The Government shall perform
inspections and tests in a manner that will not unduly delay the work.

\(d\) If the Government performs inspection or test on the premises of
the Contractor or a subcontractor, the Contractor shall furnish and
shall require subcontractors to furnish all reasonable facilities and
assistance for the safe and convenient performance of these duties.

\(e\) Unless otherwise specified in the contract, the Government shall
accept or reject services and materials at the place of delivery as
promptly as practicable after delivery, and they shall be presumed
accepted 60 days after the date of delivery, unless accepted earlier.

\(f\) At any time during contract performance, but not later than 6
months (or such other time as may be specified in the contract) after
acceptance of the services or materials last delivered under this
contract, the Government may require the Contractor to replace or
correct services or materials that at time of delivery failed to meet
contract requirements. Except as otherwise specified in paragraph (h)
below, the cost of replacement or correction shall be determined under
the "Payments Under Time-and-Materials and Labor-Hour Contracts" clause,
but the \'hourly rate\' for labor hours incurred in the replacement or
correction shall be reduced to exclude that portion of the rate
attributable to profit. The Contractor shall not tender for acceptance
materials and services required to be replaced or corrected without
disclosing the former requirement for replacement or correction, and,
when required, shall disclose the corrective action taken.

(g)(1) If the Contractor fails to proceed with reasonable promptness to
perform required replacement or correction, and if the replacement or
correction can be performed within the ceiling price (or the ceiling
price as increased by the Government), the Government may\--

\(i\) By contract or otherwise, perform the replacement or correction,
charge to the Contractor any increased cost, or deduct such increased
cost from any amounts paid or due under this contract; or

\(ii\) Terminate this contract for default.

\(2\) Failure to agree to the amount of increased cost to be charged to
the Contractor shall be a dispute.

\(h\) Notwithstanding paragraphs (f) and (g) above, the Government may
at any time require the Contractor to remedy by correction or
replacement, without cost to the Government, any failure by the
Contractor to comply with the requirements of this contract, if the
failure is due to (1) fraud, lack of good faith, or willful misconduct
on the part of the Contractor\'s managerial personnel or (2) the conduct
of one or more of the Contractor\'s employees selected or retained by
the Contractor after any of the Contractor\'s managerial personnel has
reasonable grounds to believe that the employee is habitually careless
or unqualified.

\(i\) This clause applies in the same manner and to the same extent to
corrected or replacement materials or services as to materials and
services originally delivered under this contract.

\(j\) The Contractor has no obligation or liability under this contract
to correct or replace materials and services that at time of delivery do
not meet contract requirements, except as provided in this clause or as
may be otherwise specified in the contract.

\(k\) Unless otherwise specified in the contract, the Contractor\'s
obligation to correct or replace Government-furnished property shall be
governed by the clause pertaining to Government property.

(*End of clause*)

3.10.4-6 Inspection of Research and Development\--Fixed-Price

INSPECTION OF RESEARCH AND DEVELOPMENT\--FIXED-PRICE (APRIL 1996)

\(a\) The Contractor shall provide and maintain an inspection system
acceptable to the Government covering the work under this contract.
Complete records of all inspection work performed by the Contractor
shall be maintained and made available to the Government during contract
performance and for as long afterwards as the contract requires.

\(b\) The Government has the right to inspect and test all work called
for by the contract, to the extent practicable at all places and times,
including the period of performance, and in any event before acceptance.
The Government may also inspect the premises of the Contractor or any
subcontractor engaged in contract performance. The Government shall
perform inspections and tests in a manner that will not unduly delay the
work.

\(c\) If the Government performs any inspection or test on the premises
of the Contractor or a subcontractor, the Contractor shall furnish and
shall require subcontractors to furnish, without additional charge, all
reasonable facilities and assistance for the safe and convenient
performance of these duties. Except as otherwise provided in the
contract, the Government shall bear the expense of Government
inspections or tests made at other than the Contractor\'s or
subcontractor\'s premises.

\(d\) The Government shall accept or reject the work as promptly as
practicable after delivery, unless otherwise specified in the contract.
Government failure to inspect and accept or reject the work shall not
relieve the Contractor from responsibility, nor impose liability on the
Government, for nonconforming work. Work is nonconforming when it is
defective in material or workmanship or is otherwise not in conformity
with contract requirements.

\(e\) The Government has the right to reject nonconforming work. If the
Contractor fails or is unable to correct or to replace nonconforming
work within the delivery schedule (or such later time as the Contracting
Officer may authorize), the Contracting Officer may accept the work and
make an equitable price reduction. Failure to agree on a price reduction
shall be a dispute.

\(f\) Inspection and test by the Government does not relieve the
Contractor from responsibility for defects or other failures to meet the
contract requirements that may be discovered before acceptance.
Acceptance shall be conclusive, except for latent defects, fraud, gross
mistakes amounting to fraud, or as otherwise specified in the contract.
If acceptance is not conclusive for any of these causes, the Government,
in addition to any other rights and remedies provided by law, or under
other provisions of this contract shall have the right to require the
Contractor (1) at no increase in contract price, to correct or replace
the defective or nonconforming supplies (work) at the original point of
delivery or at the Contractor\'s plant at the Contracting Officer\'s
election, and in accordance with a reasonable delivery schedule as may
be agreed upon between the Contractor and the Contracting Officer;
provided, the Contracting Officer may require a reduction in contract
price if the Contractor fails to meet such delivery schedule; or (2)
within a reasonable time after the Contractor\'s receipt of notice of
defects or nonconformance, to repayment of such portion of the contract
price as is equitable under the circumstances if the Government elects
not to require correction or replacement. When supplies (work) are (is)
returned to the Contractor, the Contractor shall bear transportation
costs from the original point of delivery to the Contractor\'s plant and
return to the original point of delivery when that point is not the
Contractor\'s plant.

(*End of clause*)

3.10.4-7 Inspection of Research and Development\--Cost-Reimbursement.

INSPECTION OF RESEARCH AND DEVELOPMENT\--COST-REIMBURSEMENT (APRIL 1996)

\(a\) Definitions.

\(1\) \'Contractor\'s managerial personnel,\' as used in this clause,
means the Contractor\'s directors, officers, managers, superintendents,
or equivalent representatives who have supervision or direction of\--

\(i\) All or substantially all of the Contractor\'s business;

\(ii\) All or substantially all of the Contractor\'s operation at any
one plant or separate location at which the contract is being performed;
or

\(iii\) A separate and complete major industrial operation connected
with performing this contract.

\(2\) \'Work,\' as used in this clause, includes data when the contract
does not include the "Warranty of Data" clause.

\(b\) The Contractor shall provide and maintain an inspection system
acceptable to the Government covering the work under this contract.
Complete records of all inspection work performed by the Contractor
shall be maintained and made available to the Government during contract
performance and for as long afterwards as the contract requires.

\(c\) The Government has the right to inspect and test all work called
for by the contract, to the extent practicable at all places and times,
including the period of performance, and in any event before acceptance.
The Government may also inspect the plant or plants of the Contractor or
its subcontractors engaged in the contract performance. The Government
shall perform inspections and tests in a manner that will not unduly
delay the work.

\(d\) If the Government performs any inspection or test on the premises
of the Contractor or a subcontractor, the Contractor shall furnish and
shall require subcontractors to furnish all reasonable facilities and
assistance for the safe and convenient performance of these duties.

\(e\) Unless otherwise provided in the contract, the Government shall
accept work as promptly as practicable after delivery, and work shall be
deemed accepted 90 days after delivery, unless accepted earlier.

\(f\) At any time during contract performance, but no later than 6
months (or such other time as may be specified in the contract) after
acceptance of all of the end items (other than designs, drawings, or
reports) to be delivered under the contract, the Government may require
the Contractor to replace or correct work not meeting contract
requirements. Time devoted to the replacement or correction of such work
shall not be included in the computation of the above time period.
Except as otherwise provided in paragraph (h) below, the cost of
replacement or correction shall be determined as specified in the
"Allowable Cost and Payment" clause, but no additional fee shall be
paid. The Contractor shall not tender for acceptance work required to be
replaced or corrected without disclosing the former requirement for
replacement or correction, and, when required, shall disclose the
corrective action taken.

(g)(1) If the Contractor fails to proceed with reasonable promptness to
perform required replacement or correction, the Government may\--

\(i\) By contract or otherwise, perform the replacement or correction,
charge to the Contractor any increased cost, or make an equitable
reduction in any fixed fee paid or payable under the contract;

\(ii\) Require delivery of any undelivered articles and shall have the
right to make an equitable reduction in any fixed fee paid or payable
under the contract; or

\(iii\) Terminate the contract for default.

\(2\) Failure to agree on the amount of increased cost to be charged the
Contractor or to the reduction in fixed fee shall be a dispute.

\(h\) Notwithstanding paragraphs (f) and (g) above, the Government may
at any time require the Contractor to remedy by correction or
replacement, without cost to the Government, any failure by the
Contractor to comply with the requirements of this contract, if the
failure is due to (1) fraud, lack of good faith, or willful misconduct
on the part of the Contractor\'s managerial personnel or (2) the conduct
of one or more of the Contractor\'s employees selected or retained by
the Contractor after any of the Contractor\'s managerial personnel has
reasonable grounds to believe that the employee is habitually careless
or unqualified.

\(i\) This clause shall apply in the same manner to a corrected or
replacement end item or components as to work originally delivered.

\(j\) The Contractor has no obligation or liability under the contract
to correct or replace articles not meeting contract requirements at time
of delivery, except as provided in this clause or as may otherwise be
specified in the contract.

\(k\) Unless otherwise provided in the contract, the Contractor\'s
obligations to correct or replace Government-furnished property shall be
governed by the clause pertaining to Government property.

\(l\) If the contract is on a no-fee basis, substitute the following
paragraphs "(f)" and "(g)" for paragraphs (f) and (g) above.

\(f\) At any time during contract performance, but not later than 6
months (or such other time as may be specified in the contract) after
acceptance of all of the end items (other than designs, drawings, or
reports) to be delivered under the contract, the Government may require
the Contractor to correct or replace work not meeting contract
requirements. Time devoted to the correction or replacement of such work
shall not be included in the computation of the above time period.
Except as otherwise provided in paragraph (g) below, the allowability of
the cost of any such replacement or correction shall be determined as
specified in the "Allowable Cost and Payment" clause. The Contractor
shall not tender for acceptance corrected work without disclosing the
former requirement for correction, and, when required, shall disclose
the corrective action taken.

\(g\) If the Contractor fails to proceed with reasonable promptness to
perform required replacement or correction, the Government may (1) by
contract or otherwise, perform the replacement or correction and charge
to the Contractor any increased cost, (2) require delivery of any
undelivered articles, or (3) terminate the contract for default. Failure
to agree on the amount of increased cost to be charged to the Contractor
shall be a dispute."

(*End of clause*)

3.10.4-8 Inspection of Research and Development (Short Form)

INSPECTION OF RESEARCH AND DEVELOPMENT (SHORT FORM) (APRIL 1996)

The Government has the right to inspect and evaluate the work performed
or being performed under the contract, and the premises where the work
is being performed, at all reasonable times and in a manner that will
not unduly delay the work. If the Government performs inspection or
evaluation on the premises of the Contractor or a subcontractor, the
Contractor shall furnish and shall require subcontractors to furnish all
reasonable facilities and assistance for the safe and convenient
performance of these duties.

(*End of clause*)

3.10.4-9 Inspection of Facilities.

INSPECTION OF FACILITIES (APRIL 1996)

\(a\) Definition. \'Contractor\'s managerial personnel,\' as used in
this clause, is defined in the "Liability for the Facilities" clause of
this contract.

\(b\) The Contractor shall provide and maintain an inspection system
acceptable to the Government covering the facilities and work called for
by this contract. Complete records of all inspection work performed by
the Contractor shall be maintained and made available to the Government
during contract performance and for as long afterwards as the contract
requires.

\(c\) The Government has the right to inspect and test the facilities
and work called for by the contract, to the extent practicable at all
places and times, including the period of manufacture. The Government
may also inspect the facilities and work at the plant or plants of the
Contractor or its subcontractors engaged in the performance of the
contract. The Government shall perform inspections and tests in a manner
that will not unduly delay the work to be performed by the Contractor
under this contract or any related contract.

\(d\) If the Government performs inspection or test on the premises of
the Contractor or a subcontractor, the Contractor shall furnish and
shall require subcontractors to furnish all reasonable facilities and
assistance for the safe and convenient performance of these duties.

\(e\) The Contracting Officer may, at any time, require the Contractor
to correct or replace facilities or work that is defective or does not
conform to contract requirements. Except as provided in paragraph (f)
below, corrections and replacements shall be at Government expense if,
under the terms of this contract, the facilities or work corrected or
replaced were initially furnished, or required to be performed at
Government expense.

\(f\) The Contracting Officer may, at any time, require the Contractor
to correct or replace facilities or work that is defective or does not
conform to contract requirements, without cost to the Government under
this contract or any related contract or subcontract, if the defects or
failures are due to fraud, lack of good faith, or willful misconduct on
the part of the Contractor\'s managerial personnel; or to the conduct of
one or more of the Contractor\'s employees selected or retained by the
Contractor after any of the Contractor\'s managerial personnel has
reasonable grounds to believe that the employee is habitually careless
or unqualified.

\(g\) Corrected or replacement facilities or work shall be subject to
this clause in the same manner as facilities or work originally
completed under the contract.

(*End of clause*)

3.10.4-10 Inspection of Construction.

INSPECTION OF CONSTRUCTION (APRIL 1996)

\(a\) \'Work\' includes, but is not limited to, materials, workmanship,
and manufacture and fabrication of components.

\(b\) The Contractor shall maintain an adequate inspection system and
perform such inspections as will ensure that the work performed under
the contract conforms to contract requirements. The Contractor shall
maintain complete inspection records and make them available to the
Government. All work shall be conducted under the general direction of
the Contracting Officer and is subject to Government inspection and test
at all places and at all reasonable times before acceptance to ensure
strict compliance with the terms of the contract.

\(c\) Government inspections and tests are for the sole benefit of the
Government and do not\--

\(1\) Relieve the Contractor of responsibility for providing adequate
quality control measures;

\(2\) Relieve the Contractor of responsibility for damage to or loss of
the material before acceptance;

\(3\) Constitute or imply acceptance; or

\(4\) Affect the continuing rights of the Government after acceptance of
the completed work under paragraph (i) below.

\(d\) The presence or absence of a Government inspector does not relieve
the Contractor from any contract requirement, nor is the inspector
authorized to change any term or condition of the specification without
the Contracting Officer\'s written authorization.

\(e\) The Contractor shall promptly furnish, without additional charge,
all facilities, labor, and material reasonably needed for performing
such safe and convenient inspections and tests as may be required by the
Contracting Officer. The Government may charge to the Contractor any
additional cost of inspection or test when work is not ready at the time
specified by the Contractor for inspection or test, or when prior
rejection makes reinspection or retest necessary. The Government shall
perform all inspections and tests in a manner that will not
unnecessarily delay the work. Special, full size, and performance tests
shall be performed as described in the contract.

\(f\) The Contractor shall, without charge, replace or correct work
found by the Government not to conform to contract requirements, unless
in the public interest the Government consents to accept the work with
an appropriate adjustment in contract price. The Contractor shall
promptly segregate and remove rejected material from the premises.

\(g\) If the Contractor does not promptly replace or correct rejected
work, the Government may (1) by contract or otherwise, replace or
correct the work and charge the cost to the Contractor or (2) terminate
for default the Contractor\'s right to proceed.

\(h\) If, before acceptance of the entire work, the Government decides
to examine already completed work by removing it or tearing it out, the
Contractor, on request, shall promptly furnish all necessary facilities,
labor, and material. If the work is found to be defective or
nonconforming in any material respect due to the fault of the Contractor
or its subcontractors, the Contractor shall defray the expenses of the
examination and of satisfactory reconstruction. However, if the work is
found to meet contract requirements, the Contracting Officer shall make
an equitable adjustment for the additional services involved in the
examination and reconstruction, including, if completion of the work was
thereby delayed, an extension of time.

\(i\) Unless otherwise specified in the contract, the Government shall
accept, as promptly as practicable after completion and inspection, all
work required by the contract or that portion of the work the
Contracting Officer determines can be accepted separately. Acceptance
shall be final and conclusive except for latent defects, fraud, gross
mistakes amounting to fraud, or the Government\'s rights under any
warranty or guarantee.

(*End of clause*)

3.10.4-11 Inspection\--Dismantling, Demolition, or Removal of
Improvements.

INSPECTION\--DISMANTLING, DEMOLITION, OR REMOVAL OF IMPROVEMENTS
(APRIL 1996)

\(a\) Unless otherwise designated by the specifications, all workmanship
performed under the contract is subject to Government inspection at all
times and places where dismantling or demolition work is being
performed. The Contractor shall furnish promptly and without additional
charge all reasonable facilities, labor, and materials necessary for
safe and convenient inspection by the Government. The Government shall
perform inspections in a manner that will not unduly delay the work.

\(b\) The Contractor is responsible for damage to property caused by
defective workmanship. The Contractor shall promptly segregate and
remove from the premises any unsatisfactory facilities, materials, and
equipment used in contract performance, and promptly replace them with
satisfactory items. If the Contractor fails to proceed at once in a
workmanlike manner with performance of the work or with the correction
of defective workmanship, the Government may (1) by contract or
otherwise, replace the facilities, materials, and equipment or correct
the workmanship and charge the cost to the Contractor and (2) terminate
for default the Contractor\'s right to proceed. The Contractor and any
surety shall be liable, to the extent specified in the contract for any
damage or cost of repair or replacement.

(*End of clause*)

3.10.4-12 Inspection of Transportation.

INSPECTION OF TRANSPORTATION (APRIL 1996)

The Government has the right to inspect and test the Contractor\'s
services, facilities, and equipment at all reasonable times. The
Contractor shall furnish Government representatives with the free access
and reasonable facilities and assistance required to accomplish their
inspections and tests.

(*End of clause*)

3.10.4-13 Higher-Level Contract Quality Requirement

HIGHER-LEVEL CONTRACT QUALITY REQUIREMENT (APRIL 1996)

\(a\) The Contractor shall comply with the standard titled
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \[Contracting Officer insert the
title and number of the standard\], which is hereby incorporated into
this contract.

\(b\) The Contractor shall establish and maintain a Quality System in
accordance with the above referenced standard(s) and the contractor's
Quality System Plan (QSP). This QSP is hereby incorporated into this
contract when approved by the Contracting Officer. If the QSP is
submitted as part of a response to a Screening Information Request (SIR)
submission and approved before award, then the QSP is hereby
incorporated into this contract at time of award. The QSP shall describe
the Contractor's provisions for quality assurance, inspection and test
of all supplies to be provided under this contract, in accordance with
the terms of this contract, including but not limited to the contract
specifications and the above referenced standard. (Note; Formal
third-party ISO9000 registration is not required. Formal third-party
ISO9000 registration does not relieve the contractor from the
requirements of submitting a QSP.)

\(c\) In the event of conflict between the Quality System Plan (QSP) and
the above referenced standard(s), the applicable ANSI/ASQC documents
shall control.

\(d\) Calibration systems and measuring and test equipment shall be
controlled in accordance with MIL-STD-45662.

\(e\) Government Furnished Property shall be controlled to assure
acceptability upon receipt, preclude degradation, damage or misuse
during storage, use or test, and assure proper final disposition in
accordance with the contract.

\(f\) Site installation activities, maintenance, and support services
shall be controlled in accordance with contract requirements.

(*End of clause*)

3.10.4-14 Assignment of a Quality Reliability Officer (QRO)

ASSIGNMENT OF QUALITY RELIABILITY OFFICER (QRO) (APRIL 1996)

The following provisions are a part of this contract.

\(a\) The Government's Quality and Reliability Officer (QRO) assigned to
this contract, and designated as such by the Government, has the
authority to verify that the contractor's quality system complies with
contract requirements, including the contractor's Quality System Plan
(QSP) (if applicable), to witness tests, and to inspect and accept or
reject supplies provided under this contract.

\(b\) Prior to shipment thereof, the Contractor shall submit to the QRO,
for inspection and preliminary acceptance, all supplies which are
subject to final Government inspection and acceptance at destination.
Preliminary acceptance by the QRO constitutes verification by the
Government that supplies comply with all contract requirements which are
to be completed prior to shipment, including satisfactory completion of
factory tests. Any supplies determined by the QRO to be nonconforming
shall be corrected prior to shipment. All other supplies, except those
specified to be accepted by the Contracting Officer, shall be submitted
to the QRO for final inspection and acceptance prior to shipment. For
all supplies subject to preliminary acceptance, final acceptance and
passage of title to the Government shall occur at destination.

\(c\) Failure of the Contractor to maintain and operate a Quality System
in accordance with the terms of the contract may, based upon a written
determination of the QRO (and consistent with the quality system
requirements of the contract), be grounds for rejection of affected
supplies.

\(d\) The Contractor shall provide appropriate office space for the QRO
and

his/her staff for the performance of Government evaluations and
administrative functions. The office area shall be secure to accommodate
meetings of a sensitive nature. File cabinets and suitable desks, both
with locking capabilities, typewriters and chairs, all in good repair,
and other miscellaneous office equipment, as required, shall be supplied
by the Contractor. The Contractor shall provide secretarial help, as
required by the QRO, for typing documents related to the contract. A
telephone shall be provided to each desk, with no less than one line per
two QRO staff members. The cost of long distance calls placed by the QRO
staff will be borne by the Government. The contractor shall provide
parking space to the extent available. In the event a change in location
of the QRO staff is required, Contractor/QRO coordination will take
place in order to facilitate Government planning and implementation of a
smooth transition.

\(e\) Notification of Readiness for Inspection. Unless otherwise
specified in the

contract, the contractor shall notify the designated resident QRO in
writing within 2 workdays (7 workdays if there is not a resident FAA
QRO) of the time (1) when contractor inspection or tests will be
performed in accordance with the conditions of the contract and (2) when
the supplies or services performed will be ready for government
inspection.

(*End of clause*)

3.10.4-15 Certificate of Conformance

CERTIFICATE OF CONFORMANCE (APRIL 1996)

\(a\) When authorized in writing by the Contracting Officer, the
Contractor shall ship with a Certificate of Conformance any supplies for
which the contract would otherwise require inspection at source. In no
case shall the Government\'s right to inspect supplies under the
inspection provisions of this contract be prejudiced. Shipments of such
supplies will not be made under this contract until use of the
Certificate of Conformance has been authorized in writing by the
Contracting Officer, or inspection and acceptance have occurred.

\(b\) The Contractor\'s signed certificate shall be attached to or
included on the top copy of the inspection or receiving report
distributed to the payment office or attached to the Contracting Officer
copy when requested by the Contracting Officer. In addition, a copy of
the signed certificate shall also be attached to or entered on copies of
the inspection or receiving report accompanying the shipment.

\(c\) The Government has the right to reject defective supplies or
services within a reasonable time after delivery by written notification
to the Contractor. The Contractor shall in such event promptly replace,
correct, or repair the rejected supplies or services at the
Contractor\'s expense.

\(d\) The certificate shall read as follows:

\'I certify that on \_\_\_\_ \[insert date\], the \_\_\_\_ \[insert
Contractor\'s name\] furnished the supplies or services called for by
Contract No. \_\_\_\_ via \_\_\_\_ \[Carrier\] on .\_\_\_\_ \[identify
the bill of lading or shipping document\] in accordance with all
applicable requirements. I further certify that the supplies or services
are of the quality specified and conform in all respects with the
contract requirements, including specifications, drawings, preservation,
packaging, packing, marking requirements, and physical item
identification (part number), and are in the quantity shown on this or
on the attached acceptance document.\'

  ---------- ----------------------- -------------------------------------
             Date of Execution:      

             Signature:              

             Title:                  
  ---------- ----------------------- -------------------------------------

(*End of clause*)

3.10.4-16 Responsibility for Supplies.

RESPONSIBILITY FOR SUPPLIES (APRIL 1996)

\(a\) Title to supplies furnished under this contract shall pass to the
Government upon formal acceptance, regardless of when or where the
Government takes physical possession, unless the contract specifically
provides for earlier passage of title.

\(b\) Unless the contract specifically provides otherwise, risk of loss
of or damage to supplies shall remain with the Contractor until, and
shall pass to the Government upon\--

\(1\) Delivery of the supplies to a carrier, if transportation is f.o.b.
origin; or

\(2\) Acceptance by the Government or delivery of the supplies to the
Government at the destination specified in the contract, whichever is
later, if transportation is f.o.b. destination.

\(c\) Paragraph (b) above shall not apply to supplies that so fail to
conform to contract requirements as to give a right of rejection. The
risk of loss of or damage to such nonconforming supplies remains with
the Contractor until cure or acceptance. After cure or acceptance,
paragraph (b) above shall apply.

\(d\) Under paragraph (b) above, the Contractor shall not be liable for
loss of or damage to supplies caused by the negligence of officers,
agents, or employees of the Government acting within the scope of their
employment.

(*End of clause*)

**3.10.5 PRODUCT IMPROVEMENT/TECHNOLOGY ENHANCEMENT**

3.10.5-1 Product Improvement/Technology Enhancement

PRODUCT IMPROVEMENT/TECHNOLOGY ENHANCEMENT (APRIL 1996)

\(a\) At any time during the performance of a contract, a Contractor may
submit, or the FAA may solicit product improvement/technology
enhancement proposals for FAA review. Contractors are encouraged to
discuss product improvement/ technology enhancement ideas with the FAA
prior to preparing and submitting a formal proposal. These proposals
should suggest methods for performing more economically and/or methods
for incorporating emerging technology. Changes may be proposed to save
money, to improve performance or reliability, to save energy or space,
to satisfy increased data processing requirements, to incorporate
technological advances in software, or for other technical or business
reasons that the Contractor believes may be advantageous to the FAA.
Discontinuance of equipment is subject to negotiations and to the FAA's
written approval prior to the introduction of a substitute product.

\(b\) The Government is not liable for product improvement/technology
enhancement proposal preparation costs or any delay in acting upon any
proposal. The Contractor has the right to withdraw, in whole or in part,
any proposal not accepted by the FAA within the period specified in the
proposal. The decision of the Contracting Officer as to the acceptance
or rejection of a proposed change is final and not subject to dispute.
Proposals will be valid for a reasonable period of time but not less
than 30 days.

\(c\) The FAA may approve any proposed change may be approved, in whole
or in part, and, if approved, the change will be incorporated into the
contract by mutual agreement. The contract modification will include an
equitable adjustment for the resultant costs or savings, if any, and
modify any other affected provision of the contract, if any. Until the
effective date of the modification, the Contractor shall perform in
accordance with the existing contract.

\(d\) As a minimum, the following information should be submitted by the
Contractor with each proposal. The extent and detail provided should be
proportionate to the complexity and/or value of the proposed change.

\(1\) A description of the difference between the existing contract
requirement and the proposed change, and the comparative advantages and
disadvantages of each;

\(2\) A discussion of the functions of systems, equipment, facilities,
services and supplies for the purpose of achieving the essential
functions at the lowest life cycle cost and consistent with required
performance, reliability, quality, and safety;

\(3\) Itemized requirements of the contract which must be changed if the
proposal is adopted, and the proposed revision to the contract for each
such change;

\(4\) An estimate of the changes in performance and cost, if any, that
will result from adoption of the proposal;

\(5\) An evaluation of the effects the proposed change would have on
collateral costs to the Government, such as FAA-furnished property
costs, costs of related items, and costs of maintenance and operation;

\(6\) A statement of the time by which work must begin on change so as
to obtain the maximum benefits of the changes during the remainder of
the contract;

\(7\) A statement of the effect on the contract completion date or
delivery schedule; and

\(8\) A reasonable method for sharing in the proposed savings, if any,
if the proposed change would result in a reduction in the overall life
cycle costs.

(*End of clause*)

**3.10.6 TERMINATION OF CONTRACTS**

3.10.6-1 Termination for convenience at the FAA (Fixed Price)

TERMINATION FOR CONVENIENCE OF THE FAA (FIXED PRICE) (APRIL 1996)

\(a\) The FAA may terminate performance of work under this contract in
whole or, from time to time, in part if the Contracting Officer
determines that a termination is in the FAA\'s interest. The Contracting
Officer shall terminate by delivering to the Contractor a Notice of
Termination specifying the extent of termination and the effective date.

\(b\) After receipt of a Notice of Termination, and except as directed
by the Contracting Officer, the Contractor shall immediately proceed
with the following obligations, regardless of any delay in determining
or adjusting any amounts due under this clause:

\(1\) Stop work as specified in the notice.

\(2\) Place no further subcontracts or orders (referred to as
subcontracts in this clause) for materials, services, or facilities,
except as necessary to complete the continued portion of the contract.

\(3\) Terminate all subcontracts to the extent they relate to the work
terminated.

\(4\) Assign to the FAA, as directed by the Contracting Officer, all
right, title, and interest of the Contractor under the subcontracts
terminated, in which case the FAA shall have the right to settle or to
pay any termination settlement proposal arising out of those
terminations.

\(5\) With approval or ratification to the extent required by the
Contracting Officer, settle all outstanding liabilities and termination
settlement proposals arising from the termination of subcontracts; the
approval or ratification will be final for purposes of this clause.

\(6\) As directed by the Contracting Officer, transfer title and deliver
to the FAA (i) the fabricated or unfabricated parts, work in process,
completed work, supplies, and other material produced or acquired for
the work terminated, and (ii) the completed or partially completed
plans, drawings, information, and other property that, if the contract
had been completed, would be required to be furnished to the FAA.

\(7\) Complete performance of the work not terminated.

\(8\) Take any action that may be necessary, or that the Contracting
Officer may direct, for the protection and preservation of the property
related to this contract that is in the possession of the contractor and
in which the FAA has or may acquire an interest.

\(9\) Use its best efforts to sell, as directed or authorized by the
Contracting Officer, any property of the types referred to in
subparagraph (6) above; provided, however, that the Contractor (i) is
not required to extend credit to any purchaser and (ii) may acquire the
property under the conditions prescribed by, and at prices approved by,
the Contracting Officer. The proceeds of any transfer or disposition
will be applied to reduce any payments to be made by the FAA under this
contract, credited to the price or cost of the work, or paid in any
other manner directed by the Contracting Officer.

\(c\) The Contractor may submit to the Contracting Officer a list,
certified as to quantity and quality, of termination inventory not
previously disposed of, excluding items authorized for disposition by
the Contracting Officer. The Contractor may request the FAA to remove
those items or enter into an agreement for their storage. Within 15
days, the FAA will accept title to those items and remove them or enter
into a storage agreement. The Contracting Officer may verify the list
upon removal of the items, or if stored, within 45 days from submission
of the list, and shall correct the list, as necessary, before final
settlement.

\(d\) After termination, the Contractor shall submit a final termination
settlement proposal to the Contracting Officer in the form and with the
certification prescribed by the Contracting Officer. The Contractor
shall submit the proposal promptly, but no later than 1-year from the
effective date of termination, unless extended in writing by the
Contracting Officer upon written request of the Contractor within this
1-year period. However, if the Contracting Officer determines that the
facts justify it, a termination settlement proposal may be received and
acted on after 1 year or any extension. If the Contractor fails to
submit the proposal within the time allowed, the Contracting Officer may
determine, on the basis of information available, the amount, if any,
due the Contractor because of the termination and shall pay the amount
determined.

\(e\) Subject to paragraph (d) above, the Contractor and the Contracting
Officer may agree upon the whole or any part of the amount to be paid
because of the termination. The amount may include a reasonable
allowance for profit on work done. However, the agreed amount, whether
under this paragraph (e) or paragraph (f) below, exclusive of costs
shown in subparagraph (f)(3) below, may not exceed the total contract
price as reduced by (1) the amount of payments previously made and (2)
the contract price of work not terminated. The contract shall be
amended, and the Contractor paid the agreed amount. Paragraph (f) below
shall not limit, restrict, or affect the amount that may be agreed upon
to be paid under this paragraph.

\(f\) If the Contractor and the Contracting Officer fail to agree on the
whole amount to be paid because of the termination of work, the
Contracting Officer shall pay the Contractor the amounts determined by
the Contracting Officer as follows, but without duplication of any
amounts agreed on under paragraph (e) above:

\(1\) The contract price for completed supplies or services accepted by
the FAA (or sold or acquired under subparagraph (b)(9) above) not
previously paid for, adjusted for any saving of freight and other
charges.

\(2\) The total of\--

\(i\) The costs incurred in the performance of the work terminated,
including initial costs and preparatory expense allocable thereto, but
excluding any costs attributable to supplies or services paid or to be
paid under subparagraph (f)(1) above;

\(ii\) The cost of setting and paying termination settlement proposals
under terminated subcontracts that are properly chargeable to the
terminated portion of the contract if not included in subdivision (i)
above; and

\(iii\) A sum, as profit on subdivision (i) above, determined by the
Contracting Officer to be fair and reasonable; however, if it appears
that the Contractor would have sustained a loss on the entire contract
had it been completed, the Contracting Officer shall allow no profit
under this subdivision (iii) and shall reduce the settlement to reflect
the indicated rate of loss.

\(3\) The reasonable costs of settlement of the work terminated,
including\--

\(i\) Accounting, legal, clerical, and other expenses reasonably
necessary for the preparation of termination settlement proposals and
supporting data;

\(ii\) The termination and settlement of subcontracts (excluding the
amounts of such settlements); and

\(iii\) Storage, transportation, and other costs incurred, reasonably
necessary for the preservation, protection, or disposition of the
termination inventory.

\(g\) Except for normal spoilage, and except to the extent that the FAA
expressly assumed the risk of loss, the Contracting Officer shall
exclude from the amounts payable to the Contractor under paragraph (f)
above, the fair value, as determined by the Contracting Officer, of
property that is destroyed, lost, stolen, or damaged so as to become
undeliverable to the FAA or to a buyer.

\(h\) The cost principles and procedures, in effect on the date of this
contract, shall govern all costs claimed, agreed to, or determined under
this clause.

\(i\) The Contractor shall have the right of appeal, under the
Acquisition Management System, Resolution of Protests and Disputes, from
any determination made by the Contracting Officer under paragraph (d),
(f), or (k), except that if the Contractor failed to submit the
termination settlement proposal within the time provided in paragraph
(d) or (k), and failed to request a time extension, there is no right of
appeal. If the Contracting Officer has made a determination of the
amount due under paragraph (d), (f), or (k), the FAA shall pay the
Contractor (1) the amount determined by the Contracting Officer if there
is no right of appeal or if no timely appeal has been taken, or (2) the
amount finally determined on an appeal.

\(j\) In arriving at the amount due the Contractor under this clause,
there shall be deducted\--

\(1\) All unliquidated advance or other payments to the Contractor under
the terminated portion of this contract;

\(2\) Any claim which the FAA has against the Contractor under this
contract; and

\(3\) The agreed price for, or the proceeds of sale of, materials,
supplies, or other things acquired by the Contractor or sold under the
provisions of this clause and not recovered by or credited to the FAA.

\(k\) If the termination is partial, the Contractor may file a proposal
with the Contracting Officer for an equitable adjustment of the price(s)
of the continued portion of the contract. The Contracting Officer shall
make any equitable adjustment agreed upon. Any proposal by the
Contractor for an equitable adjustment under this clause shall be
requested within 90 days from the effective date of termination unless
extended in writing by the Contracting Officer.

(l)(1) The FAA may, under the terms and conditions it prescribes, make
partial payments and payments against costs incurred by the Contractor
for the terminated portion of the contract, if the Contracting Officer
believes the total of these payments will not exceed the amount to which
the Contractor will be entitled.

\(2\) If the total payments exceed the amount finally determined to be
due, the Contractor shall repay the excess to the FAA upon demand,
together with interest computed at the rate established by the Secretary
of the Treasury under 50 U.S.C. App. 1215(b)(2). Interest shall be
computed for the period from the date the excess payment is received by
the Contractor to the date the excess is repaid. Interest shall not be
charged on any excess payment due to a reduction in the Contractor\'s
termination settlement proposal because of retention or other
disposition of termination inventory until 10 days after the date of the
retention or disposition, or a later date determined by the Contracting
Officer because of the circumstances.

\(m\) Unless otherwise provided in this contract or by statute, the
Contractor shall maintain all records and documents relating to the
terminated portion of this contract for 3 years after final settlement.
This includes all books and other evidence bearing on the Contractor\'s
costs and expenses under this contract. The Contractor shall make these
records and documents available to the FAA, at the Contractor\'s office,
at all reasonable times, without any direct charge. If approved by the
Contracting Officer, photographs, microphotographs, or other authentic
reproductions may be maintained instead of original records and
documents.

(*End of clause*)\|

3.10-6-2. Termination for the Convenience of the FAA (Educational and
Other Nonprofit Institutions)

Termination for the Convenience of the FAA (Educational and Other
Nonprofit Institutions (APRIL 1996)

\(a\) The FAA may terminate performance of work under this contract in
whole or, from time to time, in part if the Contracting Officer
determines that a termination is in the FAA\'s interest. The Contracting
Officer shall terminate by delivering to the Contractor a Notice of
Termination specifying the extent of the termination and the effective
date.

\(b\) After receipt of a Notice of Termination and except as directed by
the Contracting Officer, the Contractor shall immediately proceed with
the following obligations:

\(1\) Stop work as specified in the notice.

\(2\) Place no further subcontracts or orders (referred to as
subcontracts in this clause), except as necessary to complete the
continued portion of the contract.

\(3\) Terminate all applicable subcontracts and cancel or divert
applicable commitments covering personal services that extend beyond the
effective date of termination.

\(4\) Assign to the FAA, as directed by the Contracting Officer, all
right, title, and interest of the Contractor under the subcontracts
terminated, in which case the FAA shall have the right to settle or pay
any termination settlement proposal arising out of those terminations.

\(5\) With approval or ratification to the extent required by the
Contracting Officer, settle all outstanding liabilities and termination
settlement proposals arising from the termination of subcontracts;
approval or ratification will be final for purposes of this clause.

\(6\) Transfer title (if not already transferred) and, as directed by
the Contracting Officer, deliver to the FAA any information and items
that, if the contract had been completed, would have been required to be
furnished, including (i) materials or equipment produced, in process, or
acquired for the work terminated and (ii) completed or partially
completed plans, drawings, and information.

\(7\) Complete performance of the work not terminated.

\(8\) Take any action that may be necessary, or that the Contracting
Officer may direct, for the protection and preservation of the property
related to this contract and is in the possession of the Contractor and
in which the FAA has or may acquire an interest.

\(9\) Use its best efforts to sell, as directed or authorized by the
Contracting Officer, termination inventory other than that retained by
the FAA under subparagraph (6) above; provided, however, that the
Contractor (i) is not required to extend credit to \_\_\_\_\_\_\_\_\_
any purchaser and (ii) may acquire the property under the conditions
prescribed by, and at prices approved by, the Contracting Officer. The
proceeds of any transfer or disposition will be applied to reduce any
payments to be made by the FAA under this contract, credited to the
price or cost of the work, or paid in any other manner directed by the
Contracting Officer.

\(c\) After termination, the Contractor shall submit a final termination
settlement proposal to the Contracting Officer in the form and with the
certification prescribed by the Contracting Officer. The Contractor
shall submit the proposal promptly but no later than 1 year from the
effective date of termination unless extended in writing by the
Contracting Officer upon written request of the Contractor within this
1-year period. If the Contractor fails to submit the termination
settlement proposal within the time allowed, the Contracting Officer may
determine, on the basis of information available, the amount, if any,
due the Contractor because of the termination and shall pay the amount
determined.

\(d\) Subject to paragraph (c) above, the Contractor and the Contracting
Officer may agree upon the whole or any part of the amount to be paid
because of the termination. This amount may include reasonable
cancellation charges incurred by the Contractor and any reasonable loss
on outstanding commitments for personal services that the Contractor is
unable to cancel; provided, that the Contractor exercised reasonable
diligence in diverting such commitments to other operations. The
contract shall be amended and the Contractor paid the agreed amount.

\(e\) The cost principles and procedures, in effect on the date of the
contract, shall govern all costs claimed, agreed to, or determined under
this clause.

\(f\) The FAA may, under the terms and conditions it prescribes, make
partial payments against costs incurred by the Contractor for the
terminated portion of this contract, if the Contracting Officer believes
the total of these payments will not exceed the amount to which the
Contractor will be entitled.

\(g\) The Contractor has the right of appeal as provided under the
Acquisition Management System, Resolution of Protests and Disputes,
except that if the Contractor failed to submit the termination
settlement proposal within the time provided in paragraph (c) and failed
to request a time extension, there is no right of appeal.

(*End of clause*)\|

3.10.6-3 Termination (Cost-Reimbursement)

TERMINATION (COST-REIMBURSEMENT) (APRIL 1996)

\(a\) The FAA may terminate performance of work under this contract in
whole or, from time to time, in part, if\--

\(1\) The Contracting Officer determines that a termination is in the
FAA\'s interest; or

\(2\) The Contractor defaults in performing this contract. \'Default\'
includes failure to make progress in the work so as to endanger
performance.

\(b\) The Contracting Officer shall terminate by delivering to the
Contractor a Notice of Termination specifying whether termination is for
default of the Contractor or for convenience of the FAA, the extent of
termination, and the effective date. If, after termination for default,
it is determined that the Contractor was not in default or 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 as set forth in the "Excusable Delays" clause, the rights
and obligations of the parties will be the same as if the termination
was for the convenience of the FAA.

\(c\) After receipt of a Notice of Termination, and except as directed
by the Contracting Officer, the Contractor shall immediately proceed
with the following obligations, regardless of any delay in determining
or adjusting any amounts due under this clause:

\(1\) Stop work as specified in the notice.

\(2\) Place no further subcontracts or orders (referred to as
subcontracts in this clause), except as necessary to complete the
continued portion of the contract.

\(3\) Terminate all subcontracts to the extent they relate to the work
terminated.

\(4\) Assign to the FAA, as directed by the Contracting Officer, all
right, title, and interest of the Contractor under the subcontracts
terminated, in which case the FAA shall have the right to settle or to
pay any termination settlement proposal arising out of those
terminations.

\(5\) With approval or ratification to the extent required by the
Contracting Officer, settle all outstanding liabilities and termination
settlement proposals arising from the termination of subcontracts, the
cost of which would be reimbursable in whole or in part, under this
contract; approval or ratification will be final for purposes of this
clause.

\(6\) Transfer title (if not already transferred) and, as directed by
the Contracting Officer, deliver to the FAA (i) the fabricated or
unfabricated parts, work in process, completed work, supplies, and other
material produced or acquired for the work terminated, (ii) the
completed or partially completed plans, drawings, information, and other
property that, if the contract had been completed, would be required to
be furnished to the FAA, and (iii) the jigs, dies, fixtures, and other
special tools and tooling acquired or manufactured for this contract,
the cost of which the Contractor has been or will be reimbursed under
this contract.

\(7\) Complete performance of the work not terminated.

\(8\) Take any action that may be necessary, or that the Contracting
Officer may direct, for the protection and preservation of the property
related to this contract that is in the possession of the Contractor and
in which the FAA has or may acquire an interest.

\(9\) Use its best efforts to sell, as directed or authorized by

the Contracting Officer, any property of the types referred to in
subparagraph (6) above; provided, however, that the Contractor (i) is
not required to extend credit to any purchaser and (ii) may acquire the
property under the conditions prescribed by, and at prices approved by,
the Contracting Officer. The proceeds of any transfer or disposition
will be applied to reduce any payments to be made by the FAA under this
contract credited to the price or cost of the work, or paid in any other
manner directed by the Contracting Officer.

\(d\) The Contractor shall submit to the Contracting Officer a list,
certified as to quantity and quality, of termination inventory not
previously disposed of, excluding items authorized for disposition by
the Contracting Officer. The Contractor may request the FAA to remove
those items or enter into an agreement for their storage. Within 15
days, the FAA will accept the items and remove them or enter into a
storage agreement. The Contracting Officer may verify the list upon
removal of the items, or if stored, within 45 days from submission of
the list, and shall correct the list, as necessary, before final
settlement.

\(e\) After termination, the Contractor shall submit a final termination
settlement proposal to the Contracting Officer in the form and with the
certification prescribed by the Contracting Officer. The Contractor
shall submit the proposal promptly, but no later than 1 year from the
effective date of termination, unless extended in writing by the
Contracting Officer upon written request of the Contractor within this
1-year period. However, if the Contracting Officer determines that the
facts justify it, a termination settlement proposal may be received and
acted on after 1 year or any extension. If the Contractor fails to
submit the proposal within the time allowed, the Contracting Officer may
determine, on the basis of information available, the amount, if any,
due the Contractor because of the termination and shall pay the amount
determined.

\(f\) Subject to paragraph (e) above, the Contractor and the Contracting
Officer may agree on the whole or any part of the amount to be paid
(including an allowance for fee) because of the termination. The
contract shall be amended, and the Contractor paid the agreed amount.

\(g\) If the Contractor and the Contracting Officer fail to agree in
whole or in part on the amount of costs and/or fee to be paid because of
the termination of work, the Contracting Officer shall determine, on the
basis of information available, the amount, if any, due the Contractor,
and shall pay that amount, which shall include the following:

\(1\) All costs reimbursable under this contract, not previously paid,
for the performance of this contract before the effective date of the
termination, and those costs that may continue for a reasonable time
with the approval of or as directed by the Contracting Officer; however,
the Contractor shall discontinue those costs as rapidly as practicable.

\(2\) The cost of settling and paying termination settlement proposals
under terminated subcontracts that are properly chargeable to the
terminated portion of the contract if not included in subparagraph (1)
above.

\(3\) The reasonable costs of settlement of the work terminated,
including\--

\(i\) Accounting, legal, clerical, and other expenses reasonably
necessary for the preparation of termination settlement proposals and
supporting data;

\(ii\) The termination and settlement of subcontracts (excluding the
amounts of such settlements); and

\(iii\) Storage, transportation, and other costs incurred, reasonably
necessary for the preservation, protection, or disposition of the
termination inventory.

If the termination is for default no amounts for the preparation of the
Contractor\'s termination settlement proposal may be included.

\(4\) A portion of the fee payable under the contract determined as
follows:

\(i\) If the contract is terminated for the convenience of the FAA, the
settlement shall include a percentage of the fee equal to the percentage
of completion of work contemplated under the contract, but excluding
subcontract effort included in subcontractors\' termination proposals,
less previous payments for fee.

\(ii\) If the contract is terminated for default, the total fee payable
shall be such proportionate part of the fee as the total number of
articles (or amount of services) delivered to and accepted by the FAA is
to the total number of articles (or amount of services) of a like kind
required by the contract.

\(5\) If the settlement includes only fee, it will be determined under
subparagraph (g)(4) above.

\(h\) The cost principles and procedures, in effect on the date of this
contract shall govern all costs claimed, agreed to, or determined under
this clause.

\(i\) The Contractor shall have the right of appeal, under the
Acquisition Management System, Resolution of Protests and Disputes, from
any determination made by the Contracting Officer under paragraph (e) or
(g) above or paragraph (k) below, except that if the Contractor failed
to submit the termination settlement proposal within the time provided
in paragraph (e) and failed to request a time extension, there is no
right of appeal. If the Contracting Officer has made a determination of
the amount due under paragraph (e), (g) or (k), the FAA shall pay the
Contractor (1) the amount determined by the Contracting Officer if there
is no right of appeal or if no timely appeal has been taken, or (2) the
amount finally determined on an appeal.

\(j\) In arriving at the amount due the Contractor under this clause,
there shall be deducted\--

\(1\) All unliquidated advance or other payments to the Contractor,
under the terminated portion of this contract;

\(2\) Any claim which the FAA has against the Contractor under this
contract; and

\(3\) The agreed price for, or the proceeds of sale of materials,
supplies, or other things acquired by the Contractor or sold under this
clause and not recovered by or credited to the FAA.

\(k\) The Contractor and Contracting Officer must agree to any equitable
adjustment in fee for the continued portion of the contract when there
is a partial termination. The Contracting Officer shall amend the
contract to reflect the agreement.

(l)(1) The FAA may, under the terms and conditions it prescribes, make
partial payments and payments against costs incurred by the Contractor
for the terminated portion of the contract, if the Contracting Officer
believes the total of these payments will not exceed the amount to which
the Contractor will be entitled.

\(2\) If the total payments exceed the amount finally determined to be
due, the Contractor shall repay the excess to the FAA upon demand,
together with interest computed at the rate established by the Secretary
of the Treasury under 50 U.S.C. App. 1215(b)(2). Interest shall be
computed for the period from the date the excess payment is received by
the Contractor to the date the excess is repaid. Interest shall not be
charged on any excess payment due to a reduction in the Contractor\'s
termination settlement proposal because \_\_\_\_\_\_\_\_\_ of retention
or other disposition of termination inventory until 10 days after the
date of the retention or disposition, or a later date determined by the
Contracting Officer because of the circumstances.

\(m\) The provisions of this clause relating to fee are Inapplicable if
this contract does not include a fee.

(*End of clause*)

Alternate i

Construction. If the contract is for construction, the contracting
officer may substitute the following subparagraph (g)(4) for
subparagraph (g)(4) of the basic clause as follows:

\(g\) (4) A portion of the fee payable under the contract determined as
follows:

\(i\) If the contract is terminated for the convenience of the FAA, the
settlement shall include a percentage of the fee equal to the percentage
of completion of work contemplated under the contract, but excluding
subcontract effort included in subcontractors\' termination settlement
proposals, less previous payments for fee.

\(ii\) If the contract is terminated for default, the total fee payable
shall be such proportionate part of the fee as the actual work in place
is to the total work in place required by the contract.

Alternate II

Partial Payments. If the contract is with an agency of the U.S.
Government or with State, local, or foreign governments or their
agencies, and if the contracting officer determines that the requirement
to pay interest on excess partial payments is inappropriate, the
contracting officer may use Alternate II which deletes subparagraph
(l)(2) from the basic clause.

Alternate III

Partial Payments Construction. If the contract is for construction and
with an agency of the U.S. Government or with State, contracting officer
determines that the requirement to pay interest on excess partial, use
Alternate III which substitutes the following subparagraph (g)(4) for
(g)(4) of the basic clause. Alternate III also allows deletion of
subparagraph (l)(2) from the basic clause if the contracting officer
determines that the requirement to pay interest on excess partial
payments is inappropriate.

(g)(4) A portion of the fee payable under the contract determined as
follows:

\(i\) If the contract is terminated for the convenience of the FAA, the
settlement shall include a percentage of the fee equal to the percentage
of completion of work contemplated under the contract, but excluding
subcontract effort included in subcontractors\' termination settlement
proposals, less previous payments for fee.

\(ii\) If the contract is terminated for default, the total fee payable
shall be such proportionate part of the fee as the actual work in place
is to the total work in place required by the contract.

Alternate IV

Time and Material and Labor Hour Contracts. If the contract is a
time-and-material or labor-hour contract, the contracting officer may
use Alternate IV, which substitutes the following paragraphs (g) and (k)
for paragraphs (g) and (k) of the basic clause:

\(g\) If the Contractor and the Contracting Officer fail to agree in
whole or in part on the amount to be paid because of the termination of
work, the Contracting Officer shall determine, on the basis of
information available, the amount, if any, due the Contractor and shall
pay the amount determined as follows:

\(1\) If the termination is for the convenience of the FAA, include\--

\(i\) An amount for direct labor hours (as defined in the Schedule of
the contract) determined by multiplying the number of direct labor hours
expended before the effective date of termination by the hourly rate(s)
in the Schedule, less any hourly rate payments already made to the
Contractor;

\(ii\) An amount (computed under the provisions for payment of
materials) for material expenses incurred before the effective date of
termination, not previously paid to the Contractor;

\(iii\) An amount for labor and material expenses computed as if the
expenses were incurred before the effective date of termination, if they
are reasonably incurred after the effective date, with the approval of
or as directed by the Contracting Officer; however, the Contractor shall
discontinue these expenses as rapidly as practicable;

\(iv\) If not included in (i), (ii), or (iii) above, the cost of
settling and paying termination settlement proposals under terminated
subcontracts that are properly chargeable to the terminated portion of
contract; and

\(v\) The reasonable costs of settlement of the work terminated,
including-

\(A\) Accounting, legal, clerical, and other expenses reasonably
necessary for the preparation of termination settlement proposals and
supporting data;

\(B\) termination and settlement of subcontracts (excluding the amounts
of such settlements); and

\(C\) Storage, transportation, and other costs incurred, necessary for
the protection or disposition of the termination inventory.

\(2\) If the termination is for default of the Contractor, include the
amounts computed under (1) above but omit-

\(i\) Any amount for preparation of the Contractor\'s termination
settlement proposal; and

\(ii\) The portion of the hourly rate allocable to profit for any direct
labor hours expended in furnishing materials and services not delivered
to and accepted by the FAA.

\(k\) If the termination is partial, the Contractor may file with the
Contracting Officer a proposal for an equitable adjustment of price(s)
for the continued portion of the contract. The Contracting Officer shall
make any equitable adjustment agreed upon. Any proposal by the
Contractor for an equitable adjustment under this clause shall be
requested within 90 days from the effective date of determination,
unless extended in writing by the Contracting Officer.

Alternate V

Time and Material and Labor Hour Contracts. If the contract is with an
agency of the U.S. Government or with State, local, or foreign
governments or their agencies, and if the contracting officer determines
that the requirement to pay interest on excess partial payments is
inappropriate, the contracting officer may use Alternate V, which
substitutes the following paragraphs (g) and (k) for paragraphs (g) and
(k) of the basic clause. Also, subparagraph (l)(2) may be deleted from
the basic clause if the contracting officer determines that the
requirement to pay interest on excess partial payments is inappropriate.

\(g\) If the Contractor and the Contracting Officer fail to agree in
whole or in part on the amount to be paid because of the termination of
work, the Contracting Officer shall determine, on the basis of
information available, the amount, if any, due the Contractor and shall
pay the amount determined as follows:

\(1\) If the termination is for the convenience of the FAA, include\--

\(i\) An amount for direct labor hours (as defined in the Schedule of
the contract) determined by multiplying the number of direct labor hours
expended before the effective date of termination by the hourly rate(s)
in the Schedule, less any hourly rate payments already made to the
contractor;

\(ii\) An amount (computed under the provisions for payment of
materials) for material expenses incurred before the effective date of
termination, not previously paid to the Contractor;

\(iii\) An amount for labor and material expenses computed as if the
expenses were incurred before the effective date of termination if they
are reasonably incurred after the effective date, with the approval of
or as directed by the Contracting Officer; however, the Contractor shall
discontinue these expenses as rapidly as practicable;

\(iv\) If not included in (i), (ii), or (iii) above, the cost of
settling and paying termination settlement proposals under terminated
subcontracts that are properly chargeable to the terminated portion of
the contract; and

\(v\) The reasonable costs of settlement of the work terminated,
including-

\(A\) Accounting, legal, clerical, and other expenses reasonably
necessary for the preparation of termination settlement proposals and
supporting data;

\(B\) The termination and settlement of subcontracts (excluding the
amounts of such settlements); and

\(C\) Storage, transportation, and other costs incurred, reasonably
necessary for the protection or disposition of the termination
inventory.

\(2\) If the termination is for default of the Contractor, include the
amounts computed under (1) above but omit\--

\(i\) Any amount for preparation of the Contractor\'s termination
settlement proposal; and

\(ii\) The portion of the hourly rate allocable to profit for any direct
labor hours expended in furnishing materials and services not delivered
to and accepted by the FAA.

\(k\) If the termination is partial, the Contractor may file with the
Contracting Officer a proposal for an equitable adjustment of the
price(s) for the continued portion of the contract. The Contracting
Officer shall make any equitable adjustment agreed upon. Any proposal by
the Contractor for an equitable adjustment under this clause shall be
requested within 90 days from the effective date of termination, unless
extended in writing by the Contracting Officer.

3.10.6-4 Default (Fixed-Price Supply and Service)

Default (Fixed Price Supply and Service)

(a)(1) The FAA may, subject to paragraphs (c) and (d) below, by written
notice of default to the Contractor, terminate this contract in whole or
in part if the Contractor fails to\--

\(i\) Deliver the supplies or to perform the services within the time
specified in this contract or any extension;

\(ii\) Make progress, so as to endanger performance of this contract
(but see subparagraph (a)(2) below); or

\(iii\) Perform any of the other provisions of this contract (but see
subparagraph (a)(2) below).

\(2\) Prior to terminating a contract for default, the FAA will issue a
show cause notice permitting the Contractor to present any defenses it
may have to the default termination.

\(b\) If the FAA terminates this contract in whole or in part, it may
acquire, under the terms and in the manner the Contracting Officer
considers appropriate, supplies or services similar to those terminated,
and the Contractor will be liable to the FAA for any excess costs for
those supplies or services. However, the Contractor shall continue the
work not terminated.

\(c\) Except for defaults of subcontractors at any tier, the Contractor
shall not be liable for any excess costs if the failure to perform the
contract arises from causes beyond the control and without the fault or
negligence of the Contractor. Examples of such causes include (1) acts
of God or of the public enemy, (2) acts of the FAA in either its
sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics,
(6) quarantine restrictions, (7) strikes, (8) freight embargoes, and (9)
unusually severe weather. In each instance the failure to perform must
be beyond the control and without the fault or negligence of the
Contractor.

\(d\) If the failure to perform is caused by the default of a
subcontractor at any tier, and if the cause of the default is beyond the
control of both the Contractor and subcontractor, and without the fault
or negligence of either, the Contractor shall not be liable for any
excess costs for failure to perform, unless the subcontracted supplies
or services were obtainable from other sources in sufficient time for
the Contractor to meet the required delivery schedule.

\(e\) If this contract is terminated for default, the FAA may require
the Contractor to transfer title and deliver to the FAA, as directed by
the Contracting Officer, any (1) completed supplies, and (2) partially
completed supplies and materials, parts, tools, dies, jigs, fixtures,
plans, drawings, information, and contract rights (collectively referred
to as \'manufacturing materials\' in this clause) that the Contractor
has specifically produced or acquired for the terminated portion of this
contract. Upon direction of the Contracting Officer, the Contractor
shall also protect and preserve property in its possession in which the
FAA has an interest.

\(f\) The FAA shall pay contract price for completed supplies delivered
and accepted. The Contractor and Contracting Officer shall agree on the
amount of payment for manufacturing materials delivered and accepted and
for the protection and preservation of the property. Failure to agree
will be a dispute under the "Disputes" clause. The FAA may withhold from
these amounts any sum the Contracting Officer determines to be necessary
to protect the FAA against loss because of outstanding liens or claims
of former lien holders.

\(g\) If, after termination, it is determined that the Contractor was
not in default, or that the default was excusable, the rights and
obligations of the parties shall be the same as if the termination had
been issued for the convenience of the FAA.

\(h\) The rights and remedies of the FAA in this clause are in addition
to any other rights and remedies provided by law or under this contract.

(*End of clause*)\|

3.10.6-5 Default (Fixed-Price Research and Development)

Default (Fixed Price Research and Development) (APRIL 1996)

\(a\) The FAA may, subject to paragraphs (c) and (d) below, by written
Notice of Default to the Contractor, terminate this contract in whole or
in part if the Contractor fails to\--

\(1\) Perform the work under the contract within the time specified in
this contract or any extension;

\(2\) Prosecute the work so as to endanger performance of this contract
(but see subparagraph (a)(2) below); or

\(3\) Perform any of the other provisions of this contract (but see
subparagraph (a)(2) below).

\(c\) If the FAA terminates this contract in whole or in part, it may
acquire, under the terms and in the manner the Contracting Officer
considers appropriate, work similar to the work terminated, and the
Contractor will be liable to the FAA for any excess costs for the
similar work. However, the Contractor shall continue the work not
terminated.

\(d\) Except for defaults of subcontractors at any tier, the Contractor
shall not be liable for any excess costs if the failure to perform the
contract arises from causes beyond the control and without the fault or
negligence of the Contractor. Examples of such causes include (1) acts
of God or of the public enemy, (2) acts of the FAA in either its
sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics,
(6) quarantine restrictions, (7) strikes, (8) freight embargoes, and (9)
unusually severe weather. In each instance the failure to perform must
be beyond the control and without the fault or negligence of the
Contractor.

\(e\) If the failure to perform is caused by the default of a
subcontractor at any tier, and if the cause of the default is beyond the
control of both the Contractor and subcontractor, and without the fault
or negligence of either, the Contractor shall not be liable for any
excess costs for failure to perform, unless the subcontracted supplies
or services were obtainable from other sources in sufficient time for
the Contractor to meet the required delivery schedule or other
performance requirements.

\(f\) If this contract is terminated for default, the FAA may require
the Contractor to transfer title and deliver to the FAA, as directed by
the Contracting Officer, any (1) completed or partially completed work
not previously delivered to, and accepted by, the FAA and (2) other
property, including contract rights, specifically produced or acquired
for the terminated portion of this contract. Upon direction of the
Contracting Officer, the Contractor shall also protect and preserve
property in its possession in which the FAA has an interest.

\(g\) The FAA shall pay the contract price, if separately stated, for
completed work it has accepted and the amount agreed upon by the
Contractor and the Contracting Officer for (1) completed work for which
no separate price is stated, (2) partially completed work, (3) other
property described above that it accepts, and (4) the protection and
preservation of the property. Failure to agree will be a dispute under
the Acquisition Management System, Resolution of Protests and Disputes.
The FAA may withhold from these amounts any sum the Contracting Officer
determines to be necessary to protect the FAA against loss from
outstanding liens or claims of former lien holders

\(h\) If, after termination, it is determined that the Contractor was
not in default, or that the default was excusable, the rights and
obligations of the parties shall be the same as if the termination had
been issued for the convenience of the FAA.

\(i\) The rights and remedies of the FAA in this clause are in addition
to any other rights and remedies provided by law or under this contract.

(*End of clause*)\|

3.10.6-6 Default (Fixed Price Construction)

Default (Fixed Price Construction) (APRIL 1996)

\(a\) If the Contractor refuses or fails to prosecute the work or any
separable part, with the diligence that will insure its completion
within the time specified in this contract including any extension, or
fails to complete the work within this time, the FAA may, by written
notice to the Contractor, terminate the right to proceed with the work
(or the separable part of the work) that has been delayed. In this
event, the FAA may take over the work and complete it by contract or
otherwise, and may take possession of and use any materials, appliances,
and plant on the work site necessary for completing the work. The
Contractor and its sureties shall be liable for any damage to the FAA
resulting from the Contractor\'s refusal or failure to complete the work
within the specified time, whether or not the Contractor\'s right to
proceed with the work is terminated. This liability includes any
increased costs incurred by the FAA in completing the work.

\(b\) The Contractor\'s right to proceed shall not be terminated nor the
Contractor charged with damages under this clause, if\--

\(1\) The delay in completing the work arises from unforeseeable causes
beyond the control and without the fault or negligence of the
Contractor. Examples of such causes include (i) acts of God or of the
public enemy, (ii) acts of the FAA in either its sovereign or
contractual capacity, (iii) acts of another Contractor in the
performance of a contract with the FAA, (iv) fires, (v) floods, (vi)
epidemics, (vii) quarantine restrictions, (viii) strikes, (ix) freight
embargoes, (x) unusually severe weather, or (xi) delays of
subcontractors or suppliers at any tier arising from unforeseeable
causes beyond the control and without the fault or negligence of both
the Contractor and the subcontractors or suppliers; and

\(2\) The Contractor, within 10 days from the beginning of any delay
(unless extended by the Contracting Officer), notifies the Contracting
Officer in writing of the causes of delay. The Contracting Officer shall
ascertain the facts and the extent of delay. If, in the judgment of the
Contracting Officer, the findings of fact warrant such action, the time
for completing the work shall be extended. The findings of the
Contracting Officer shall be final and conclusive on the parties, but
subject to appeal under the Acquisition Management System, Resolution of
Protests and Disputes.

\(c\) If, after termination of the Contractor\'s right to proceed it is
determined that the Contractor was not in default, or that the delay was
excusable, the rights and obligations of the parties will be the same as
if the termination had been issued for the convenience the FAA.

\(d\) The rights and remedies of the FAA in this clause are in addition
to any other rights and remedies provided by law or under this contract.

(*End of clause*)\|

3.10.6-7 Excusable Delays

Excusable Delays (APRIL 1996)

\(a\) Except for defaults of subcontractors at any tier, the Contractor
shall not be in default because of any failure to perform this contract
under its terms if the failure arises from causes beyond the control and
without the fault or negligence of the Contractor. Examples of these
causes are (1) acts of God or of the public enemy, (2) acts of the FAA
in either its sovereign or contractual capacity, (3) fires, (4) floods,
(5) epidemics, (6) quarantine restrictions, (7) strikes, (8) freight
embargoes, and (9) unusually severe weather. In each instance, the
failure to perform must be beyond the control and without the fault or
negligence of the Contractor. \'Default\' includes failure to make
progress in the work so as to endanger performance.

\(b\) If the failure to perform is caused by the failure of a
subcontractor at any tier to perform or make progress, and if the cause
of the failure was beyond the control of both the Contractor and
subcontractor, and without the fault or negligence of either, the
Contractor shall not be deemed to be in default, unless\--

\(1\) The subcontracted supplies or services were obtainable from other
sources;

\(2\) The Contracting Officer ordered the Contractor in writing to
purchase these supplies or services from the other source; and

\(3\) The Contractor failed to comply reasonably with this order.

\(c\) Upon request of the Contractor, the Contracting Officer shall
ascertain the facts and extent of the failure. If the Contracting
Officer determines that any failure to perform results from one or more
of the causes above, the delivery schedule shall be revised, subject to
the rights of the FAA under the "Termination" clause of this contract.

(*End of clause*)

[Communication service contracts]{.underline}. This regulation does not
prescribe a clause for the cancellation or termination of orders under
communication service contracts with common carriers because of special
agency requirements that apply to these services.

**3.10.7 EXTRAORDINARY CONTRACTUAL ACTIONS**

3.10.7-1 Indemnification under Public Law 85-804

INDEMNIFICATION UNDER PUBLIC LAW 85-804 (APRIL 1996)

\(a\) A Contractor's principal officials, as used in this clause, means
directors, officers, managers, superintendents, or other representatives
supervising or directing

\(1\) All or substantially all of the Contractor's business;

\(2\) All or substantially all of the Contractor's operations at any one
plant or separate location in which this contract is being performed; or

\(3\) A separate and complete major industrial operation in connection
with the performance of this contract.

\(b\) Under Public Law 85-804 and Executive Order 10789, as amended, and
regardless of any other provisions of this contract, the FAA will,
subject to the limitations contained in the other paragraphs of this
clause, indemnify the Contractor against:

\(1\) Claims (including reasonable expenses of litigation or settlement)
by third persons (including employees of the Contractor) for death;
personal injury; or loss of, damage to, or loss of use of property;

\(2\) Loss of, damage to, or loss of use of Contractor property,
excluding loss of profit; and (c) loss of, damage to, or loss of use of
Government property, excluding loss of profit.

\(c\) This indemnification applies only to the extent that the claim,
loss or damage:

\(1\) Arises out of or results from a risk defined in the contract as
unusually hazardous or nuclear and

\(2\) Is not compensated for by insurance or otherwise. Any such claim,
loss, or damage, to the extent that it is within the deductible amounts
of the Contractor's insurance, is not covered under this clause. If
insurance coverage or other financial protection in effect on the date
the approving official authorizes use this clause is reduced, the
Government's liability under this clause shall not increase as a result.

\(d\) When the claim, loss, or damage is caused by willful misconduct or
lack of good faith on the part of any of the Contractor's principal
officials, the Contractor will not be indemnified for:

\(1\) Government claims against the Contractor (other than those arising
through subrogation); or

\(2\) Loss or damage affecting the Contractor's property.

\(e\) With the Contracting Officer's prior written approval, the
Contractor may, in any subcontract under this contract, indemnify the
subcontractor against any risk defined in the contract as unusually
hazardous or nuclear. This indemnification will provide, between the
Contractor and the subcontractor, the same rights and duties, and the
same evidence or proof, and Government settlement or defense of claims
as this clause provides. The Contracting Officer may also approve
indemnification of subcontractor's at any lower tier, under the same
terms and conditions. The Government will indemnify the Contractor
against liability to subcontractors incurred under subcontract
provisions approved by the Contracting Officer.

\(f\) The rights and obligations of the parties under this clause will
survive this contract's termination, expiration, or completion. The
Government will make no payment under this clause unless the agency head
determines that the amount is just and reasonable. The Government may
pay the Contractor or subcontractors, or may directly pay parties to
whom the Contractor or subcontractors may be liable.

\(g\) The Contractor will:

\(1\) Promptly notify the Contracting Officer of any claim or action
against, or any loss by, the Contractor or any subcontractors that may
reasonably be expected to involve indemnification under this clause;

\(2\) Immediately furnish to the Government copies of all pertinent
papers the Contractor receives;

\(3\) Furnish evidence or proof of any claim, loss, or damage covered by
this clause in the manner and form the Government requires; and

\(4\) Comply with the Government's directions and execute any
authorizations required in connection with settlement or defense of
claims or actions.

\(h\) The Government may direct, control, or assist in settling or
defending any claim or action that may involve indemnification under
this clause.

(*End of clause*)

Alternate I

In cost reimbursement contracts, add the following paragraph to the end
of the basic clause:

The cost of insurance (including self-insurance programs) covering a
risk defined in this contract as unusually hazardous or nuclear shall
not be reimbursed except to the extent that the Contracting Officer has
required or approved this insurance. The Government's obligations under
this clause are (a) excepted from the release required under this
contract's clause relating to allowable cost; and (b) not affected by
this contract's "Limitation of Cost" or "Limitation of Funds" clause.

(*End of clause*)