**FEDERAL EMPLOYEES**

**HEALTH BENEFITS PROGRAM**

# STANDARD CONTRACT

***FOR***

***COMMUNITY-RATED***

***HEALTH MAINTENANCE ORGANIZATION***

***CARRIERS***

**2000**

(INSERT SIGNATURE PAGE OF CONTRACT)

TABLE OF CONTENTS

This is a community-rated contract for the Health Maintenance
Organization Carrier and consists of the cover page, the table of
contents and the provisions, clauses and appendices as included in PARTS
1 through 6.

PART I - GENERAL PROVISIONS

1.1 DEFINITIONS OF FEHB TERMS

1.2 ENTIRE CONTRACT

1.3 ORDER OF PRECEDENCE

1.4 INCORPORATION OF LAWS AND REGULATIONS

1.5 RECORDS AND INFORMATION TO BE FURNISHED BY OPM

1.6 CONFIDENTIALITY OF RECORDS (FEHBAR)

1.7 STATISTICS AND SPECIAL STUDIES

1.8 NOTICE

1.9 FEHB QUALITY ASSURANCE

1.10 NOTICE OF SIGNIFICANT EVENTS (FEHBAR)

1.11 FEHB INSPECTION (FEHBAR)

1.12 CORRECTION OF DEFICIENCIES

1.13 INFORMATION AND MARKETING MATERIALS

1.14 MISLEADING, DECEPTIVE OR UNFAIR ADVERTISING (FEHBAR)

1.15 RENEWAL AND WITHDRAWAL OF APPROVAL (FEHBAR)

1.16 \[RESERVED\]

1.17 NOVATION AGREEMENT (FEHBAR)

1.18 AGREEMENT TO RECOGNIZE CARRIER\'S CHANGE OF NAME (FEHBAR)

1.19 CERTIFICATION UNDER P.L. 104-191 (HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT OF 1996)

1.20 PATIENTS' BILL OF RIGHTS

1.21 \[RESERVED\]

1.22 HIPAA COMPLIANCE

1**.**23 NOTICE TO ENROLLEES ON TERMINATION OF FEHBP OR PROVIDER
CONTRACT

1.24 TRANSITIONAL CARE

PART II - BENEFITS

2.1 ENROLLMENT ELIGIBILITY AND EVIDENCE OF ENROLLMENT

2.2 BENEFITS PROVIDED

2.3 PAYMENT OF BENEFITS AND PROVISION OF SERVICES AND SUPPLIES

2.4 TERMINATION OF COVERAGE AND CONVERSION PRIVILEGES

2.5 SUBROGATION

2.6 COORDINATION OF BENEFITS (FEHBAR)

2.7 DEBARMENT AND OTHER SANCTIONS

2.8 FILING HEALTH BENEFIT CLAIMS/COURT REVIEW OF DISPUTED CLAIMS

2.9 PROTECTION OF MEMBERS AGAINST PROVIDER CLAIMS

2.10 INDEPENDENT LABORATORIES

2.11 CLAIMS PROCESSING

2.12 CALCULATION OF COST SHARING PROVISIONS

2.13 BENEFITS PAYMENTS WHEN MEDICARE IS PRIMARY

2.14 CONTINUING REQUIREMENTS AFTER TERMINATION OF THE CARRIER

PART III - PAYMENTS, CHARGES

AND ACCOUNTING

3.1 PAYMENTS (FEHBAR)

3.2 ACCOUNTING AND PRICE ADJUSTMENT (FEHBAR)

3.3 RATE REDUCTION FOR DEFECTIVE PRICING OR DEFECTIVE COST OR PRICING
DATA (FEHBAR)

3.4 CONTRACTOR RECORDS RETENTION (FEHBAR)

3.5 APPROVAL FOR THE ASSIGNMENT OF CLAIMS (FEHBAR)

3.6 DISCREPANCIES BETWEEN ENROLLMENT AND PAYMENTS TO CARRIER

3.7 SURVEY CHARGES

PART IV - SPECIAL PROVISIONS

1.  ALTERATIONS IN CONTRACT (FAR)

PART V - STANDARD CLAUSES

This contract shall include all of the following standard clauses
required by the Federal Acquisition Regulation (FAR) or Federal
Employees Health Benefits Acquisition Regulation (FEHBAR).

5.1 DEFINITIONS

5.2 \[RESERVED\]

5.3 GRATUITIES

5.4 COVENANT AGAINST CONTINGENT FEES

5.5 ANTI-KICKBACK PROCEDURES

5.6 \[RESERVED\]

5.7 AUDIT AND RECORDS-NEGOTIATION

5.8 thru 5.13 \[RESERVED\]

5.14 UTILIZATION OF SMALL BUSINESS CONCERNS

5.15 \[RESERVED\]

5.16 \[RESERVED\]

5.17 CONVICT LABOR

18. CONTRACT WORK HOURS AND SAFETY STANDARDS ACT-OVERTIME COMPENSATION

19. EQUAL OPPORTUNITY

5.20 \[RESERVED\]

5.21 NOTIFICATION OF VISA DENIAL

22. AFFIRMATIVE ACTION FOR DISABLED VETERANS AND VETERANS OF THE VIETNAM
    ERA

23. AFFIRMATIVE ACTION FOR WORKERS WITH DISABILITIES

5.24 CLEAN AIR AND WATER

5.25 DRUG FREE WORKPLACE

5.26 FEDERAL, STATE, AND LOCAL TAXES

5.27 \[RESERVED\]

5.28 TAXES-CONTRACTS PERFORMED IN U.S. POSSESSIONS OR PUERTO RICO

> 5.29 TAXES - FOREIGN NEGOTIATED
>
> BENEFITS CONTRACTS (JAN 1998)
>
> (FEHBAR 1652.229-70)

30. COST ACCOUNTING STANDARDS

31. DISCLOSURE AND CONSISTENCY OF COST ACCOUNTING PRACTICES

5.32 ADMINISTRATION OF COST ACCOUNTING STANDARDS

5.33 DISCOUNTS FOR PROMPT PAYMENT

5.34 INTEREST (FEHBAR MODIFICATION OF FAR)

5.35 ASSIGNMENT OF CLAIMS

5.36 DISPUTES

5.37 \[RESERVED\]

5.38 CHANGES\--NEGOTIATED BENEFITS

CONTRACTS

5.39 \[RESERVED\]

5.40 GOVERNMENT PROPERTY

(NEGOTIATED BENEFITS

CONTRACTS)

5.41 \[RESERVED\]

5.42 PREFERENCE FOR U.S.-FLAG AIR CARRIERS

5.43 \[RESERVED\]

5.44 AUTHORIZED DEVIATIONS IN CLAUSES

5.45 LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL TRANSACTIONS

5.46 \[RESERVED\]

5.47 PROTECTING THE GOVERNMENT\'S INTEREST WHEN SUBCONTRACTING WITH
CONTRACTORS DEBARRED, SUSPENDED OR PROPOSED FOR

DEBARMENT

5.48 BANKRUPTCY

5.49 FEHBP TERMINATION FOR

CONVENIENCE OF THE

GOVERNMENT\--NEGOTIATED

BENEFITS CONTRACTS

5.50 FEHBP TERMINATION FOR DEFAULT\-- NEGOTIATED BENEFITS CONTRACTS

5.51 \[RESERVED\]

5.52 \[RESERVED\]

5.53 NOTICE TO THE GOVERNMENT OF

> LABOR DISPUTES

5.54 \[RESERVED\]

5.55 EMPLOYMENT REPORTS ON DISABLED VETERANS AND VETERANS OF THE VIETNAM
ERA

5.56 AUTHORIZATION AND CONSENT

5.57 NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT INFRINGEMENT

58. PAYMENT BY ELECTRONIC FUNDS TRANSFER---CENTRAL CONTRACTOR
    REGISTRATION

59. PROHIBITION OF SEGREGATED FACILITIES

PART VI \-- APPENDICES

A- BROCHURE TEXT

B- SCHEDULE OF RATES, CHARGES AND LIMITATIONS

C- CONTRACT ADMINISTRATION DATA

D- (a) FEHBP SUPPLEMENTAL LITERATURE GUIDELINES JANUARY 2000; (b)
ADVERTISEMENTS OF ACCIDENT AND SICKNESS INSURANCE MODEL REGULATION
(1999)

E- ORDER OF BENEFIT DETERMINATION RULES, GROUP COORDINATION OF BENEFITS
REGULATION, MODEL REGULATION SERVICE - JANUARY 1996, NATIONAL
ASSOCIATION OF INSURANCE COMMISSIONERS

PART I - GENERAL PROVISIONS

SECTION 1.1

DEFINITIONS OF FEHB TERMS (JAN 1997)

For purpose of this contract, the following definitions apply:

FEHBP: Federal Employees Health Benefits Program.

Enrollee: The Federal employee, annuitant, former spouse,
temporarily-covered former Federal employee or dependent, enrolled under
this contract.

Member: The Enrollee and/or an eligible dependent for benefit purposes,
and sometimes referred to as subscriber.

Act: The Federal Employees Health Benefits Act, as amended; chapter 89
of title 5, United States Code.

> Regulations: (1) The Federal Employees Health Benefits Regulations;
> part 890, title 5, Code of Federal Regulations, and (2) chapters 1 and
> 16 of title 48, Code of Federal Regulations.

Benefits: Covered services or payment for covered services set forth in
Appendix A, to which Members are entitled to the extent provided by this
contract.

Carrier: As defined by chapter 89 of title 5, United States Code, and
may be used interchangeably with the term Contractor.

Subcontractor: Any supplier, distributor, vendor, or firm that furnishes
supplies or services to or for a prime contractor, or another
subcontractor, except for providers of direct medical services or
supplies pursuant to the Carrier\'s health benefits plan.

SECTION 1.2

ENTIRE CONTRACT (JAN 1996)

\(a\) This document as described in the Table of Contents constitutes
the entire contract between the parties. No oral statement of any person
shall modify or otherwise affect the terms, conditions, or
specifications stated in this contract. All modifications to the
contract must be made in writing by the duly authorized Contracting
Officer.

\(b\) All statements concerning coverage or benefits made by OPM, the
Carrier or by any individual covered under this policy shall be deemed
representations and not warranties. No such statement shall convey or
void any coverage, increase or reduce any benefits under this policy or
be used in the prosecution of or defense of a claim under this policy
unless it is contained in writing and a copy of the instrument
containing the statement is or has been furnished to the Member or to
the person making the claim.

SECTION 1.3

ORDER OF PRECEDENCE (JAN 1996)

Any inconsistency in this contract shall be resolved by giving
precedence in the following descending order: The Act, the regulations
in part 890, title 5, Code of Federal Regulations, the regulations in
chapters 1 and 16, title 48, Code of Federal Regulations, and this
contract.

SECTION 1.4

INCORPORATION OF LAWS AND REGULATIONS (JAN 1996)

\(a\) The applicable provisions of (1) chapter 89 of title 5, United
States Code; (2) OPM\'s regulations as contained in part 890, title 5,
Code of Federal Regulations; and (3) chapters 1 and 16 of title 48, Code
of Federal Regulations constitute a part of this contract as if fully
set forth herein, and the other provisions of this contract shall be
construed so as to comply therewith.

\(b\) If the Regulations are changed in a manner which would increase
the Carrier\'s liability under this contract, the change will be made
effective for the contract period subsequent to the period in which the
change is promulgated and, if the change is promulgated in November or
December, the change will not be effective until the second contract
year following the year in which the change is promulgated; unless (i)
The Carrier agrees to an earlier date or (ii) the change is ordered by
the Contracting Officer pursuant to the *Changes\--Negotiated Benefits
Contracts* clause of the contract.

SECTION 1.5

RECORDS AND INFORMATION TO BE FURNISHED BY OPM (JAN 1997)

\(a\) The OPM shall maintain or cause to be maintained records from
which may be determined the names and social security numbers of all
Enrollees. Such information shall be furnished to the Carrier by the
OPM, or other agencies of the Federal Government, at such times and in
such form and detail as will enable the Carrier to maintain a currently
accurate record of all Enrollees.

\(b\) The OPM shall direct the agencies to provide the Carrier, not less
often than quarterly, the names of Enrollees enrolled under the contract
by payroll office and the premium paid for those Enrollees for the
current pay cycle. The Carrier shall at least quarterly reconcile its
enrollment records with those provided by the Government.

\(c\) Neither clerical error (whether by the OPM, by any other
Government agency, or by the Carrier) in keeping any records pertaining
to coverage under this contract, nor delays in making entries thereon,
nor failure to make or account for any deduction of enrollment charges,
shall invalidate coverage otherwise validly in force or continue
coverage otherwise validly terminated. If any relevant facts pertaining
to any individual to whom coverage under this contract relates shall be
found to have been misstated, and if such misstatement affects the
existence or the amount or extent of coverage, the true facts shall be
used in determining whether coverage is in force under the terms of this
contract.

SECTION 1.6

CONFIDENTIALITY OF RECORDS (JAN 1991) (FEHBAR 1652.224-70)

\(a\) The Carrier shall use the personal data on employees and
annuitants that is provided by agencies and OPM, including social
security numbers, for only those routine uses stipulated for the data
and published annually in the Federal Register as part of OPM\'s notice
of systems of records.

\(b\) The Carrier shall also hold all medical records, and information
relating thereto, of Federal subscribers confidential except as follows:

\(1\) As may be reasonably necessary for the administration of this
contract;

\(2\) As authorized by the patient or his or her guardian;

\(3\) As disclosure is necessary to permit Government officials having
authority to investigate and prosecute alleged civil or criminal
actions;

\(4\) As necessary to audit the contract;

\(5\) As necessary to carry out the coordination of benefit provisions
of this contract; and

\(6\) For bona fide medical research or educational purposes. Release of
information for medical research or educational purposes shall be
limited to aggregated information of a statistical nature that does not
identify any individual by name, social security number, or any other
identifier unique to an individual.

\(c\) If the Carrier uses medical records for the administration of the
contract, or for bona fide research or educational purposes, it shall so
state in the Plan\'s brochure.

SECTION 1.7

STATISTICS AND SPECIAL STUDIES (JAN 1999)

\(a\) The Carrier shall maintain or cause to be maintained statistical
records of its operations under the contract and shall furnish OPM, in
the form prescribed by the Contracting Officer, the statistical reports
reasonably necessary for the OPM to carry out its functions under
Section 1308 and Chapter 89 of title 5, United States Code.

\(b\) The Carrier shall furnish such other reasonable statistical data
and reports of special studies as the Contracting Officer may from time
to time request for the purpose of carrying out its functions under
Chapter 89 of title 5, United States Code.

\(c\) The Carrier shall furnish the routine reports in the required
number of copies to the addresses specified in Appendix C, *Contract
Administration Data.*

\(d\) The Carrier shall notify the OPM Contract Representative
immediately upon a change in the name or address of the Carrier\'s
contract administrator(s).

SECTION 1.8

NOTICE (JAN 1991)

Where the contract requires that notice be given to the other party,
such notice shall be given in writing to the address specified in
Appendix C, *Contract Administration Data.*

SECTION 1.9

FEHB QUALITY ASSURANCE (JAN 1999)

\(a\) The Carrier shall develop and apply a quality assurance program
specifying procedures for assuring contract quality. At a minimum the
program must include procedures to address:

\(1\) Accuracy of Payments.

\(i\) Processing Accuracy - the number of FEHB claims processed
accurately divided by the total number of FEHB claims processed for the
given time period, expressed as a percentage.

[required standard]{.smallcaps}: An average of 95 percent of FEHB claims
must be processed accurately.

\(ii\) COB Processing - the Carrier must demonstrate that a
statistically valid sampling technique is routinely used to identify
FEHB claims prior to or after processing that require(d) coordination of
benefits (COB) with a third party payer. As an alternative, the Carrier
may provide evidence that it pursues all claims for COB.

\(2\) Timeliness of Payments to Members or Providers

\(i\) Average Processing Time (All FEHB Claims) - the average number of
working days from the date an FEHB claim is received to the date it is
adjudicated (paid, denied or a request for further information is sent
out), for the given time period, expressed as a cumulative percentage.

[required standard]{.smallcaps}:

\(A\) An average of 60 percent of FEHB claims received over the given
time period are adjudicated within 20 working days (28 calendar days).

\(B\) An average of 80 percent of FEHB claims received over the given
time period are adjudicated within 30 working days (42 calendar days).

\(C\) An average of 95 percent of FEHB claims received over the given
time period are adjudicated within 60 working days (84 calendar days).

\(3\) Quality of Services and Responsiveness to Members

\(i\) Member Inquiries - the number of working days taken to respond to
an FEHB member\'s written inquiry, expressed as a cumulative percentage
for the given time period.

[required standard]{.smallcaps}:

\(A\) An average of 60 percent of FEHB member written inquiries are
responded to within 10 working days (14 calendar days).

\(B\) An average of 90 percent of FEHB member written inquiries are
responded to within 30 working days (42 calendar days).

\(ii\) Telephone Access - the Carrier shall report on the following
statistics concerning telephone access to the member services department
(or its equivalent) for the given time period. Except that, if the
Carrier does not have a computerized phone system, report results of
periodic surveys on telephone access.

\(A\) Telephone Waiting Time - the number of seconds elapsed before a
member\'s telephone call is connected to a Carrier

representative.

[required standard]{.smallcaps}: On average, no more than 1.5 minutes
elapse before a member\'s telephone call is connected to a Carrier
representative.

\(B\) Telephone Blockage Rate - the percentage of time that callers
receive a busy signal when calling the Carrier.

[required standard]{.smallcaps}: On average, callers receive a busy
signal no more than 10 percent of the time.

\(C\) Telephone Abandonment Rate - the number of calls attempted but not
completed (presumably because callers tired of waiting to be connected
to a Carrier representative) divided by the total number of calls
attempted (both completed and not completed), expressed as a percentage.

[required standard]{.smallcaps}: On average, no more than 8 percent of
calls are abandoned.

\(4\) Responsiveness to FEHB Member Requests for Reconsideration.

[required standard]{.smallcaps}: For 100 percent of written FEHB
disputed claim requests received for the given time period, within 30
days after receipt by the Carrier, the Carrier must affirm the denial in
writing to the FEHB member, pay the claim, provide the service, or
request additional information reasonably necessary to make a
determination.

\(5\) Quality Assurance Plan - the Carrier must demonstrate that a
statistically valid sampling technique is routinely used prior to or
after processing to randomly sample FEHB claims against Carrier quality
assurance and abuse prevention standards.

\(6\) Physician Credentialing - the Carrier must demonstrate that it
requires the following credential checks of all of its physicians, both
during the initial hiring process and during periodic re-credentialing.
As an alternative, the Carrier may demonstrate that the following
credential checks are performed by a secondary source, such as a
hospital.

\(A\) Verification of medical school graduation records.

\(B\) Routine check with local and/or state medical societies and/or
boards.

\(C\) Routine check of the Department of Health and Human Services
(DHHS) list of debarred providers.

\(D\) Routine check of the National Practitioner Data Bank.

\(7\) Appointments - All Health Maintenance Organization carriers must
meet the following standards for the given time period. *Except that*,
if this information is not routinely collected, report results from
periodic surveys.

[required standard]{.smallcaps}:

\(i\) Urgent appointments are available, on average, within 24 hours of
an authorized request for one.

\(ii\) Routine appointments are available, on average, within 1 month of
an authorized request for one.

\(iii\) Average office waiting times - on average, members who arrive on
time for a scheduled appointment wait no more than 30 minutes before
they are seen by the provider of the medical service.

*(NOTE: For the purpose of this standard (7), a simplified
classification system is used in which all appointments are classified
as either emergency, urgent or routine. Emergency appointments must be
seen immediately to prevent health deterioration. Urgent appointments
are those for the sudden, acute onset of symptoms that must be seen
within 1 (one) day to prevent health deterioration. All other
appointments are considered routine.)*

\(8\) Assessing Quality of Health Care. The Carrier shall collect data
on the measures endorsed by the Foundation for Accountability (FACCT),
as requested by the OPM for services rendered through the Carrier\'s
Preferred Provider Organization and/or Point of Service networks.
Further, the Carrier shall provide statistical reports in accordance
with FACCT guidelines when requested by OPM. The Carrier may be asked to
collect data on one or more measures in a specified geographic locality.
In addition, the Carrier shall report on measures developed by the
National Committee for Quality Assurance as directed by OPM.

\(b\) The Carrier shall conduct a program to assess its vulnerability to
fraud and abuse and shall operate a system designed to detect and
eliminate fraud and abuse internally by Carrier employees and
subcontractors, by providers providing goods or services to FEHB
Members, and by individual FEHB Members.

\(c\) The Carrier shall keep complete records of its quality assurance
procedures and fraud program and the results of their implementation and
make them available to the Government as determined by OPM. If the
Carrier cannot separate FEHB claims from all other claims, the Carrier
may report compliance based on all claims and indicate this on the
report.

\(d\) The Contracting Officer may order the correction of a deficiency
in the Carrier\'s quality assurance program or fraud program. The
Carrier shall take the necessary action promptly to implement the
Contracting Officer\'s order.

\(e\) Assessing Member Services. In addition to any other means of
surveying Plan members that the Carrier may develop, the carrier shall
participate in either a National Committee for Quality Assurance (NCQA)
Health Plan Employer Data and Information Set (HEDIS) consumer survey or
an FEHB-specific consumer survey, to provide feedback to enrollees on
enrollee experience with the various FEHB plans. The Carrier shall take
into account the published results of the survey, or other results as
directed by OPM, in identifying areas for improvement as part of the
Carrier's quality assurance program. Payment of survey charges will be
in accordance with Section 3.7.

SECTION 1.10

NOTICE OF SIGNIFICANT EVENTS (JAN 1997) (FEHBAR 1652.222-70)

\(a\) The Carrier agrees to notify the Contracting Officer of any
Significant Event within ten (10) working days after the Carrier becomes
aware of it. As used in this section, a Significant Event is any
occurrence or anticipated occurrence that might reasonably be expected
to have a material effect upon the Carrier\'s ability to meet its
obligations under this contract, including, but not limited to, any of
the following:

\(1\) Disposal of major assets;

\(2\) Loss of 15% or more of the Carrier\'s overall membership;

\(3\) Termination or modification of any

contract or subcontract if such termination or modification might have a
material effect on the Carrier\'s obligations under this contract;

\(4\) Addition or termination of provider agreements;

\(5\) Any changes in underwriters, reinsurers or participating plans;

\(6\) The imposition of, or notice of the intent to impose, a
receivership, conservatorship, or special regulatory monitoring;

\(7\) The withdrawal of, or notice of intent to withdraw State
licensing, HHS qualification, or any other status under Federal or State
law;

\(8\) Default on a loan or other financial obligation;

\(9\) Any actual or potential labor dispute that delays or threatens to
delay timely performance or substantially impairs the functioning of the
Carrier\'s facilities or facilities used by the Carrier in the
performance of the contract;

\(10\) Any change in its charter, constitution, or by-laws which affects
any provision of this contract or the Carrier\'s participation in the
Federal Employees Health Benefits Program;

\(11\) Any significant changes in policies and procedures or
interpretations of the contract or brochure which would affect the
benefits available under the contract or the costs charged to the
contract;

\(12\) Any fraud, embezzlement or misappropriation of FEHB funds; or

\(13\) Any written exceptions, reservations or qualifications expressed
by the independent accounting firm (which ascribes to the standards of
the American Institute of Certified Public Accountants) contracted with
by the Carrier to provide an opinion on its annual financial statements.

\(b\) Upon learning of a Significant Event OPM may institute action, in
proportion to the seriousness of the event, to protect the interest of
Members, including, but not limited to\--

\(1\) Directing the Carrier to take corrective action;

\(2\) Suspending new enrollments under this contract;

\(3\) Advising Enrollees of the Significant Event and providing them an
opportunity to transfer to another plan;

\(4\) Withholding payment of subscription income or restricting access
to the Carrier\'s Letter of Credit account;

\(5\) Terminating the enrollment of those Enrollees who, in the judgment
of OPM, would be adversely affected by he Significant Event; or

\(6\) Terminating this contract pursuant to Section 1.15, *Renewal and
Withdrawal of Approval.*

\(c\) Prior to taking action as described in paragraph (b) of this
clause, the OPM will notify the Carrier and offer an opportunity to
respond.

\(d\) The Carrier shall insert this clause in any subcontract or
subcontract modification if both the amount of the subcontract or
modification charged to the FEHBP (or, in the case of a community-rated
carrier, applicable to the FEHBP) exceeds \$100,000 and the amount of
the subcontract or modification to be charged to the FEHBP (or, in the
case of a community-rated carrier, applicable to the FEHBP) exceeds 25
percent of the total cost of the subcontract or modification. If the
Carrier is an HMO, it shall also insert this clause in all provider
agreements over \$25,000. If the Carrier is not an HMO, it shall also
insert this clause in the contract with its underwriter, if any. The
Carrier shall substitute \"Contractor\" or other appropriate reference
for the term \"Carrier.\"

SECTION 1.11

FEHB INSPECTION (JAN 1991) (FEHBAR 1652.246-70)

\(a\) The Government or its agent 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 or
its agent performs inspection or evaluation on the premises of the
Carrier or a subcontractor, the Carrier shall furnish and require the
subcontractor to furnish all reasonable facilities and assistance for
the safe and convenient performance of these duties.

\(b\) The Carrier shall insert this clause in all subcontracts for
underwriting and administrative services and shall substitute
\"Contractor\" or other appropriate reference for the term \"Carrier.\"

SECTION 1.12

CORRECTION OF DEFICIENCIES (JAN 1997)

\(a\) The Carrier shall maintain sufficient financial resources,
facilities, providers, staff and other necessary resources to meet its
obligations under this contract. If the OPM determines that the Carrier
does not demonstrate the ability to meet its obligations under this
contract, the OPM shall notify the Carrier of the asserted deficiencies.
The Carrier agrees that, within ten (10) working days following
notification, it shall present detailed plans for correcting the
deficiencies. These plans shall be presented in a form prescribed by the
OPM. Pending submission or implementation of plans required under this
Section, the OPM may institute action as it deems necessary to protect
the interests of Members, including, but not limited to:

\(1\) Suspending new enrollments under this contract;

\(2\) Advising Enrollees of the asserted deficiencies and providing them
an opportunity to transfer to another plan;

\(3\) Withholding payment of subscription income or restricting access
to the Carrier\'s Letter of Credit account; or

\(4\) Terminating the enrollment of those Enrollees who, in the judgment
of OPM, would be adversely affected by the deficiency.

\(b\) The Carrier agrees that failure to submit or to diligently
implement plans which are required under this Section shall constitute
sufficient grounds for termination of this contract pursuant to Section
1.15*, Renewal and Withdrawal of Approval.*

\(c\) Prior to taking action as described in paragraph (a) the OPM shall
notify the Carrier and offer an opportunity to respond.

\(d\) The Carrier shall include the substance of this clause in the
contract with its underwriter and substitute an appropriate term for
\"Carrier.\"

SECTION 1.13

INFORMATION AND MARKETING MATERIALS (JAN 1999)

\(a\) OPM and the Carrier shall agree upon language setting forth the
benefits, exclusions and other language of the Plan. OPM in its sole
discretion, may order the Carrier to print and distribute the agreed
upon brochure text in a format and quantity approved by OPM, including
an electronic brochure version for OPM's World Wide Web Site. This
formatted document is referred to as the FEHB brochure. The Carrier
shall distribute the FEHB brochure to all Federal employees, annuitants,
former spouses and former employees and dependents enrolled in the Plan.
The Carrier shall also distribute the document(s) to Federal agencies to
be made available to such individuals who are eligible to enroll under
this contract. At the direction of OPM, the Carrier shall produce and
distribute an audio cassette version of the approved language. The
Carrier may print additional FEHB brochures for distribution or its own
use, but only in the approved format and at its own expense.

\(b\) Supplemental material. Only marketing materials or other
supplemental literature prepared in accordance with FEHBAR 1625.203-70
(Section 1.14 of this contract) may be distributed or displayed at or
through Federal facilities.

\(c\) The Carrier shall reflect the statement of benefits in the agreed
upon brochure text included at Appendix A of this contract, verbatim, in
the FEHB brochure.

\(d\) OPM may order the Carrier to prepare an addendum or reissue the
FEHB brochure or any piece(s) of supplemental marketing material at no
expense to the Government if it is found to not conform to the agreed
upon brochure text and/or supplemental marketing materials preparations
described in paragraphs (a), (b) and (c) of this section.

SECTION 1.14

MISLEADING, DECEPTIVE OR UNFAIR ADVERTISING (JAN 1991)(FEHBAR
1652.203-70)

\(a\) The Carrier agrees that any advertising material, including that
labeled promotional material, marketing material, or supplemental
literature, shall be truthful and not misleading.

\(b\) Criteria to assess compliance with paragraph (a) of this clause
are available in the FEHB Supplemental Literature Guidelines which are
developed by OPM and should be used, along with the additional
guidelines set forth in FEHBAR 1603.702, as the primary guide in
preparing material; further guidance is provided in the NAIC
*Advertisements of Accident and Sickness Insurance Model Regulation*.
The guidelines contained in this document are periodically updated and
provided to the Carrier by OPM.

\(c\) Failure to conform to paragraph (a) of

this clause may result in a reduction in the service charge, if
appropriate, and corrective action to protect the interest of Federal
Members. Corrective action will be appropriate to the circumstances and
may include, but is not limited to the following actions by OPM:

\(1\) Directing the Carrier to cease and desist distribution,
publication, or broadcast of the material;

\(2\) Directing the Carrier to issue corrections at the Carrier\'s
expense and in the same manner and media as the original material was
made; and

\(3\) Directing the Carrier to provide, at the Carrier\'s expense, the
correction in writing by certified mail to all enrollees of the Plan(s)
that had been the subject of the original material.

\(d\) Egregious or repeated offenses may result in the following action
by OPM:

\(1\) Suspending new enrollments in the Carrier\'s Plan(s);

\(2\) Providing Enrollees an opportunity to transfer to another plan;
and

\(3\) Terminating the contract in accordance with Section 1.15, *Renewal
and Withdrawal of Approval.*

\(e\) Prior to taking action as described in paragraphs (c) and (d) of
this clause, the OPM will notify the Carrier and offer an opportunity to
respond.

\(f\) The Carrier shall incorporate this clause in subcontracts with its
underwriter, if any, and other subcontractors directly involved in the
preparation or distribution of such advertising material and shall
substitute \"Contractor\" or other appropriate reference for the term
\"Carrier.\"

SECTION 1.15

RENEWAL AND WITHDRAWAL OF APPROVAL (JAN 1991) (FEHBAR 1652.249-70)

\(a\) The contract renews automatically for a term of one (1) year each
January first, unless written notice of non-renewal is given either by
OPM or the Carrier not less than 60 calendar days before the renewal
date, or unless modified by mutual agreement.

\(b\) This contract also may be terminated at other times by order of
OPM pursuant to 5 U.S.C. 8902(e). After OPM notifies the Carrier of its
intent to terminate the contract, OPM may take action as it deems
necessary to protect the interests of Members, including but not limited
to\--

\(1\) Suspending new enrollments under the contract;

\(2\) Advising Enrollees of the asserted deficiencies; and

\(3\) Providing Enrollees an opportunity to transfer to another plan.

\(c\) OPM may, after proper notice, terminate the contract at the end of
the contract term if it finds that the Carrier did not have at least 300
Enrollees enrolled in its Plan at any time during the two preceding
contract terms.

SECTION 1.16

\[RESERVED\]

SECTION 1.17

NOVATION AGREEMENT (JAN 1996)

The agreement at FEHBAR 1642.1204 shall be submitted for approval to OPM
when the Carrier\'s assets or the entire portion of the assets pertinent
to the performance of this contract, as determined by the Government,
are transferred.

SECTION 1.18

AGREEMENT TO RECOGNIZE CARRIER\'S CHANGE OF NAME (JAN 1996)

The agreement at FEHBAR 1642.1205 shall be submitted for approval to OPM
when the Carrier changes its name and the Government\'s and
Contractor\'s rights and obligations remain unaffected.

SECTION 1.19

CERTIFICATION UNDER P. L. 104-191 (HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT OF 1996) (JAN 1998)

The Carrier shall issue a certification of coverage for enrollees in
accordance with the regulations issued by the Health Care Financing
Administration.

SECTION 1.20

PATIENTS' BILL OF RIGHTS (JAN 1999)

\(a\) The Carrier shall implement the recommendations in the Health Care
Consumer Bill of Rights and Responsibilities ("Patient Bill of Rights")
in accordance with OPM guidance.

\(b\) During the Carrier's provider contract renewal process, the
Carrier shall make any necessary modifications to such provider
contracts to comply with the recommendations of the Patient Bill of
Rights in accordance with OPM guidance. All new provider contracts with
the Carrier shall comply with the recommendations of the Patient Bill of
Rights in accordance with OPM guidance.

SECTION 1.21

\[RESERVED\]

SECTION 1.22

HIPAA COMPLIANCE (JAN 1998)

\(a\) The Carrier shall comply with and shall take all steps reasonably
necessary to ensure that its affiliates, subcontractors, and agents
comply with the guaranteed availability provisions of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) and
implementing regulations. "Guaranteed availability" means the Carrier,
affiliates, subcontractors, and agents do not engage in practices
that: 1) decline to offer health insurance coverage (as defined in
section 2791(b)(1) of the Public Health Service Act "the Act" ) to, or
deny enrollment of an eligible individual (as defined in section 2741(b)
of the Act); or, 2) impose any preexisting condition exclusion (as
defined in section 2701(b)(1)(A) of the Act), with respect to such
coverage.

\(b\) A State or Federal enforcement action as the result of
noncompliance with the requirements of HIPAA is a significant event
under Section 1.10 of this contract, Notice of Significant Events. If
the Carrier, or any affiliate, subcontractor, or agent, is notified of
any enforcement action by any Federal or State authority with regard to
HIPAA compliance, the Carrier must notify OPM within ten working days of
learning of the action.

SECTION 1.23

NOTICE TO ENROLLEES ON TERMINATION OF FEHBP OR PROVIDER CONTRACT (JAN
2000)

\(a\) Enrollees who are undergoing treatment for a chronic or disabling
condition or who are in the second or third trimester of pregnancy at
the time a carrier terminates (1) all or part of its FEHBP contract, or
(2) the enrollee's specialty provider contract for reasons other than
cause, may be able to continue to see their specialty provider for up to
90 days or through their postpartum care.

\(b\) The Carrier shall notify its enrollees in writing of its intent to
terminate all or part of its FEHBP contract, including service area
reductions, or the enrollees' specialty provider contract, for reasons
other than cause in order to allow sufficient time for the enrollees to
arrange for continued care after the 90-day period. The Carrier shall
send the notice in time to ensure it is received by the enrollees no
less than 90 days prior to the date it terminates the contract, unless
the Carrier demonstrates it was prevented from doing so for reasons
beyond its control. The Carrier's prompt notice will ensure that the
notification period and transitional care period run concurrently.

SECTION 1.24

TRANSITIONAL CARE (JAN 2000)

\(a\) Transitional care is specialized care provided for up to 90 days
or through the postpartum period to an enrollee undergoing treatment for
a chronic or disabling condition or who is in the second or third
trimester of pregnancy when his or her carrier terminates (1) all or
part of its FEHBP contract, or (2) the enrollee's specialty provider
contract for reasons other than cause. The 90-day period begins the
earlier of the date the enrollee receives the notice required under
Section 1.23, Notice to Enrollees on Termination of FEHBP or Provider
Contract, or the date the Carrier's or the provider's contract ends.

\(b\) Beginning January 1, 2000, the Carrier shall ensure the following:

\(1\) *If it terminates a part of its FEHB contract or a specialty
provider* *contract* other than for cause, it allows enrollees who are
undergoing treatment for a chronic or disabling condition or who are in
the second or third trimester of pregnancy to continue treatment under
the specialty provider for up to 90 days, or through their postpartum
period, under the same terms and conditions that existed at the
beginning of the transitional care period; and

\(2\) *If it enrolls a new member who involuntarily changed carriers
because the enrollee's former carrier was no longer available in the
FEHB Program*, it provides transitional care for the enrollee if he or
she is undergoing treatment for a chronic or disabling condition or is
in the second or third trimester of pregnancy for up to 90 days, or
through the postpartum period, under the same terms and conditions the
enrollee had under the prior carrier.

\(c\) In addition, the Carrier shall (1) pay for or provide the
transitional care required under this clause at no additional cost to
enrollees;

\(2\) require the specialty provider to promptly transfer all medical
records to the designated new provider during or upon completion of the
transition period, as authorized by the patient; and,

\(3\) require the specialty provider to give all necessary information
to the Carrier for quality assurance purposes.

PART II -- BENEFITS

SECTION 2.1

ENROLLMENT ELIGIBILITY AND EVIDENCE OF ENROLLMENT (JAN 1999)

\(a\) Enrollment.

\(1\) Each eligible individual who wishes to be enrolled in the plan
offered by this Carrier shall, as a prerequisite to such enrollment,
complete a Health Benefits Election Form or use an electronic or
telephonic method approved by OPM, within the time and under the
conditions specified in 5 CFR Part 890. The Government personnel office
having cognizance over the Enrollee shall promptly furnish notification
of such election to the Carrier.

\(2\) A person\'s eligibility for coverage, effective date of
enrollment, the level of benefits (option), the effective date of
termination or cancellation of a person\'s coverage, the date any
extension of a person\'s coverage ceases, and any continuance of
benefits beyond a period of enrollment and the date any such continuance
ceases, shall all be determined in accordance with regulations or
directions of OPM given pursuant to chapter 89, title 5, United States
Code.

\(b\) The Carrier shall, subject to the approval of the Contracting
Officer, define an area from which it will accept enrollments. The
Carrier may limit enrollment to individuals residing or employed inside
the approved area.

\(c\) The Carrier shall issue evidence of the Enrollee\'s coverage and
furnish to the Enrollee copies of any claim forms as necessary.

SECTION 2.2

BENEFITS PROVIDED (JAN 1999)

\(a\) The Carrier shall provide the benefits as described in the agreed
upon brochure text found in Appendix A.

\(1\) Benefits offered under this contract may be modified by the
Carrier to permit methods of treatment not expressly provided for, but
not prohibited by law, rule or Federal policy, if otherwise
contractually appropriate, and if such treatment is medically necessary

and is as cost effective as providing benefits to which the Member may
otherwise be entitled.

\(2\) The Carrier may pay for or provide a health service or supply in
an individual case which does not come within the specific benefit
provisions of the contract, if the Carrier determines the benefit is
within the intent of the contract, and the Carrier determines that the
provision of such benefit is in the best interests of the Federal
Employees Health Benefits Program.

\(3\) In individual cases, the Carrier, after consultation with and
concurrence by the Member and provider(s), may offer a benefit
alternative not ordinarily covered under this contract which will result
in equally effective medical treatment at no greater cost. The decision
to offer an alternative benefit is solely the Carrier\'s and is not
subject to OPM review under the disputed claims process.

\(b\) In each case when the Carrier provides a benefit in accordance
with the authority of (a)(1), (2) or (3) the Carrier shall document in
writing prior to the provision of such benefit the reasons and
justification for its determination. Such payment or provision of
services or supplies shall not be considered to be a precedent in the
disposition of similar cases.

\(c\) Except as provided for in (a) above, the Carrier shall provide
benefits for services or supplies in accordance with Appendix A.

\(d\) The Carrier, subject to (e) below, shall determine whether in its
judgment a service or supply is medically necessary or payable under
this contract.

\(e\) The Carrier agrees to pay for or provide a health service or
supply in an individual case if OPM finds that the Member is entitled
thereto under the terms of the contract.

SECTION 2.3

PAYMENT OF BENEFITS AND PROVISION OF SERVICES AND SUPPLIES (JAN 1996)

\(a\) By enrolling or accepting services under this contract, Members
are obligated to all terms, conditions, and provisions of this contract.
The Carrier may request Members to complete reasonable forms or provide
information which the Carrier may reasonably request; *provided*,
however, that the Carrier shall not require Members to complete any form
as a precondition of receiving benefits unless the form has first been
approved for use by OPM. Notwithstanding Section 2.11 *Claims
Processing,* forms requiring specific approval do not include claim
forms and other forms necessary to receive payment of individual claims.

\(b\) When members are required to file claims for covered benefits,
benefits shall be paid (with appropriate documentation of payment)
within a reasonable time after receipt of reasonable proof covering the
occurrence, character, and extent of the event for which the claim is
made. The claimant shall furnish satisfactory evidence that all services
or supplies for which expenses are claimed are covered services or
supplies within the meaning of the contract.

\(c\) The procedures and time period for receiving benefits and filing
claims shall be as specified in the agreed upon brochure text *(Appendix
A)*. However, failure to file a claim within the time required shall not
in itself invalidate or reduce any claim where timely filing was
prevented by administrative operations of Government or legal
incapacitation, provided the claim was submitted as soon as reasonably
possible.

\(d\) The Carrier may request a Member to submit to one or more medical
examinations to determine whether benefits applied for are for services
and supplies necessary for the diagnosis or treatment of an illness or
injury or covered condition. The examinations shall be made at the
expense of the Carrier.

\(e\) As a condition precedent to the provision of benefits hereunder,
the Carrier, to the extent reasonable and necessary and consistent with
Federal law, shall be entitled to obtain from any person, organization
or Government agency, including the Office of Personnel Management, all
information and records relating to visits or examination of, or
treatment rendered or supplies furnished to, a Member as the Carrier
requires in the administration of such benefits. The Carrier may obtain
from any insurance company or other organization or person any
information, with respect to any Member, which it has determined is
reasonably necessary to:

\(1\) identify enrollment in a plan,

\(2\) verify eligibility for payment of a claim for health benefits, and

\(3\) carry out the provisions of the contract, such as subrogation,
recovery of payments made in error, workers compensation, and
coordination of benefits.

\(f\) When claim filing is required, benefits are payable to the
Enrollee in the Plan or his or her assignees. However, under the
following circumstances different payment arrangements are allowed:

\(1\) Reimbursement Payments for the Enrollee. If benefits become
payable to the estate of an Enrollee or an Enrollee is a minor, or an
Enrollee is physically or mentally not competent to give a valid
release, the Carrier may either pay such benefits directly to a hospital
or other provider of services or pay such benefits to any relative by
blood or connection by marriage of the Enrollee determined by the
Carrier to be equitably entitled thereto.

\(2\) Reimbursement Payments for a minor child. If a child is covered as
a family member under the Enrollee\'s self and family enrollment and is
in the custody of a person other than the Enrollee, and if that other
person certifies to the Carrier that he or she has custody of and
financial responsibility for the dependent child, then the Carrier may
issue an identification card for the dependent child(ren) to that person
and, when claim filing is required, may reimburse that person for any
covered medical service or supply.

\(3\) Reimbursement Payments to family members covered under the
Enrollee\'s self and family enrollment. If a covered child is legally
responsible, or if a covered spouse is legally separated, and if the
covered person does not reside with the Enrollee and certifies such
conditions to the Carrier, then the Carrier may issue an identification
card to the person and when claim filing is required, the Carrier may
reimburse that person for any covered medical service or supply.

\(4\) Any payments made in good faith in accordance with paragraphs
(f)(1) through (f)(3) shall fully discharge the Carrier to the extent of
such payment.

\(g\) Overpayments. If the Carrier or OPM determines that a Member\'s
claim has been paid in error for any reason, the Carrier shall make a
diligent effort to recover an overpayment to the member from the member
or, if to the provider, from the provider. Diligent effort to recover
overpayments means that upon discovering that an overpayment exists, the
Carrier shall\--

\(1\) Send a written notice of overpayment to the member or provider
that provides: (A) an explanation of when and how the overpayment
occurred, (B) when applicable, cite the appropriate contractual benefit
provision, (C) the exact identifying information (i.e., dollar amount
overpaid, date paid, check number, date of service and provider name),
(D) a request for payment of the debt in full, and (E) an explanation of
what may occur should the debt not be paid, including possible offset to
future benefits. The notice may also offer an installment option. In
addition, the Carrier shall provide the debtor with an opportunity to
dispute the existence and amount of the debt before proceeding with
collection activities;

\(2\) After confirming that the debt does exist and in the appropriate
amount, send follow-up notices to the member or the provider at 30, 60
and 90 day intervals, if the debt remains unpaid and undisputed;

\(3\) The Carrier may off-set future benefits payable to the member or
to a provider on behalf of the member to satisfy a debt due under the
FEHBP if the debt remains unpaid and undisputed for 120 days after the
first notice.

\(4\) After applying the first three steps, refer cases to a collection
attorney or a collection agency if the debt is not recovered;

\(5\) Make diligent effort to recover overpayments until the debt is
paid in full or determined to be uncollectible by the Carrier because it
is no longer cost effective to pursue further collection efforts or it
would be against equity and good conscience to continue collection
efforts.

\(6\) Suspend recovery efforts for a debt which is based upon a claim
that has been appealed as a disputed claim under Section 2.8, until the
appeal has been resolved;

\(7\) Maintain records that document individual unrecovered overpayment
collection activities for audit or future reference.

SECTION 2.4

TERMINATION OF COVERAGE AND CONVERSION PRIVILEGES (JAN 1996)

\(a\) A Member\'s coverage is terminated as specified in regulations
issued by the OPM. Benefits after termination of coverage are as
specified in the regulations.

\(b\) A Member is entitled to a temporary continuation of coverage or an
extension of coverage under the conditions and to the extent specified
in the regulations.

\(c\) A Member whose coverage hereunder has terminated is entitled, upon
application within the times and under the conditions specified in
regulations, to a non-group contract regularly offered for the purpose
of conversion from the contract or similar contracts. The conversion
contract shall be in compliance with 5 U.S.C., chapter 89, and
regulations issued thereunder.

\(d\) Costs associated with writing or providing benefits under
conversion contracts shall not be an allowable cost of this contract.

\(e\) The Carrier shall maintain on file with OPM copies of the
conversion policies offered to persons whose coverage under this
contract terminates and advise OPM promptly of any changes in the
policies. The Contracting Officer may waive this requirement where
because of the large number of different conversion policies offered by
the Carrier it would be impractical to maintain a complete up-to-date
file of all policies. In this case the Carrier shall submit a
representative sample of the general types of policies offered and
provide copies of specific policies on demand.

SECTION 2.5

SUBROGATION (JAN 1998)

a\) The Carrier shall subrogate FEHB claims in the same manner in which
it subrogates claims for non-FEHB members, according to the following
rules:

\(1\) The Carrier shall subrogate FEHB claims if it is doing business in
a State in which subrogation is permitted, and in which the Carrier
subrogates for non-FEHB members;

\(2\) The Carrier shall subrogate FEHB claims if it is doing business in
a State in which subrogation is prohibited, but in which the Carrier
subrogates for at least one plan covered under the Employee Retirement
Income Security Act of 1974 (ERISA);

\(3\) The Carrier shall not subrogate if it is doing business in a State
that prohibits subrogation, and in which the Carrier does not subrogate
for any plan covered under ERISA;

\(4\) For Carriers doing business in more than one State, the Carrier
shall apply the rules in (1) through (3) of this subsection according to
the rule applicable to the State in which the subrogation would take
place.

\(b\) The Carrier\'s subrogation procedures and policies shall be shown
in the agreed upon brochure text or made available to the enrollees upon
request.

SECTION 2.6

COORDINATION OF BENEFITS (JAN 1991) (FEHBAR 1652.204-71)

\(a\) The Carrier shall coordinate the payment of benefits under this
contract with the payment of benefits under Medicare, other group health
benefits coverages, and the payment of medical and hospital costs under
no-fault or other automobile insurance that pays benefits without regard
to fault.

\(b\) The Carrier shall not pay benefits under this contract until it
has determined whether it is the primary carrier or unless permitted to
do so by the Contracting Officer.

\(c\) In coordinating benefits between plans, the Carrier shall follow
the order of precedence established by the NAIC Model Guidelines for
Coordination of Benefits (COB) as specified by OPM.

\(d\) Where (1) the Carrier makes payments under this contract which are
subject to COB provisions; (2) the payments are erroneous, not in
accordance with the terms of the contract, or in excess of the
limitations applicable under this contract; and (3) the Carrier is
unable to recover such COB overpayments from the Member or the providers
of services or supplies, the Contracting Officer may allow such amounts
to be charged to the contract; the Carrier must be prepared to
demonstrate that it has made a diligent effort to recover such COB
overpayments.

\(e\) COB savings shall be reported by experience-rated carriers each
year along with the Carrier\'s annual accounting statement in a form
specified by OPM.

\(f\) Changes in the order of precedence established by the NAIC Model
Guidelines implemented after January 1 of any given year shall be
required no earlier than the beginning of the following contract term.

> *\[NOTE: Subsection 2.6(b) will not be applied to this community-rated
> carrier. When there is double coverage for covered benefits, other
> than emergency services from non-Plan providers, the Health
> Maintenance Organization Carrier will continue to provide benefits in
> full, but will seek payment for the services and supplies provided, to
> the extent that the services and supplies are covered by the other
> coverage, no-fault automobile insurance or other primary plan.
> Likewise, Subsection 2.6(d) is not applicable to community-rated
> carriers.\]*

SECTION 2.7

DEBARMENT AND OTHER SANCTIONS (JAN 1999)

\(a\) Notwithstanding 5 U.S.C. 8902(j) or any other provision of the law
and regulations, if, under 5 U.S.C. 8902a, 5 CFR 970, or Public Law
103-123 (or other applicable appropriations law), a provider is barred
from participating in the Program under 5 U.S.C. or the provider\'s
services under 5 U.S.C. are excluded, the Carrier agrees that no payment
shall be made by the Carrier pursuant to any contract under 5 U.S.C.
(either to such provider or by reimbursement) for any service or supply
furnished by such provider during the period of the debarment, except as
provided in 5 CFR 970.200(b).

\(b\) The OPM shall notify the Carrier when a provider is barred from
the FEHBP.

SECTION 2.8

FILING HEALTH BENEFIT CLAIMS/COURT REVIEW OF DISPUTED CLAIMS (MAR 1995)
(FEHBAR 1652.204-72)

\(a\) General. (1) The Carrier resolves claims filed under the Plan. All
health benefit claims must be submitted initially to the Carrier. If the
Carrier denies a claim, (or a portion of a claim), the covered
individual may ask the Carrier to reconsider its denial. If the Carrier
affirms its denial or fails to respond as required by paragraph (b) of
this clause, the covered individual may ask OPM to review the claim. A
covered individual must exhaust both the Carrier and OPM review
processes specified in this clause before seeking judicial review of the
denied claim.

\(2\) This clause applies to covered individuals and to other
individuals or entities who are acting on the behalf of a covered
individual and who have the covered individual\'s specific written
consent to pursue payment of the disputed claim.

\(b\) Time limits for reconsidering a claim. (1) The covered individual
has 6 months from the date of the notice to the covered individual that
a claim (or a portion of a claim) was denied by the Carrier in which to
submit a written request for reconsideration to the Carrier. The time
limit for requesting reconsideration may be extended when the covered
individual shows that he or she was prevented by circumstances beyond
his or her control from making the request within the time limit.

\(2\) The Carrier has 30 days after the date of receipt of a
timely-filed request for reconsideration to:

\(i\) Affirm the denial in writing to the covered individual;

\(ii\) Pay the bill or provide the service; or

\(iii\) Request from the covered individual or provider additional
information needed to make a decision on the claim. The Carrier must
simultaneously notify the covered individual of the information
requested if it requests additional information from a provider. The
Carrier has 30 days after the date the information is received to affirm
the denial in writing to the covered individual or pay the bill or
provide the service. The Carrier must make its decision based on the
evidence it has if the covered individual or provider does not respond
within 60 days after the date of the Carrier\'s notice requesting
additional information. The Carrier must then send written notice to the
covered individual of its decision on the claim. The covered individual
may request OPM review as provided in paragraph (b)(3) of this clause if
the Carrier fails to act within the time limit set forth in this
paragraph.

\(3\) The covered individual may write to OPM and request that OPM
review the Carrier\'s decision if the Carrier either affirms its denial
of a claim or fails to respond to a covered individual\'s written
request for reconsideration within the time limit set forth in paragraph
(b)(2) of this clause. The covered individual must submit the request
for OPM review within the time limit specified in paragraph (e)(1) of
this clause.

\(4\) The Carrier may extend the time limit for a covered individual\'s
submission of additional information to the Carrier when the covered
individual shows he or she was not notified of the time limit or was
prevented by circumstances beyond his or her control from submitting the
additional information.

\(c\) Information required to process requests for reconsideration. (1)
The covered individual must put the request to the Carrier to reconsider
a claim in writing and give the reasons, in terms of applicable brochure
provisions, that the denied claim should have been approved.

\(2\) If the Carrier needs additional information from the covered
individual to make a decision, it must:

\(i\) Specifically identify the information needed;

\(ii\) State the reason the information is required to make a decision
on the claim;

\(iii\) Specify the time limit (60 days after the date of the Carrier\'s
request) for submitting the information; and

\(iv\) State the consequences of failure to respond within the time
limit specified, as set out in paragraph (b)(2) of this section.

\(d\) Carrier determinations. The Carrier must provide written notice to
the covered individual of its determination. If the Carrier affirms the
initial denial, the notice must inform the covered individual of:

\(1\) The specific and detailed reasons for the denial;

\(2\) The covered individual\'s right to request a review by OPM; and

\(3\) The requirement that requests for OPM review must be received
within 90 days after the date of the Carrier\'s denial notice and
include a copy of the denial notice as well as documents to support the
covered individual\'s position.

\(e\) OPM review. (1) If the covered individual seeks further review of
the denied claim, the covered individual must make a request to OPM to
review the Carrier\'s decision. Such a request to OPM must be made:

\(i\) Within 90 days after the date of the Carrier\'s notice to the
covered individual that the denial was affirmed; or

\(ii\) If the Carrier fails to respond to the covered individual as
provided in paragraph (b)(2) of this clause, within 120 days after the
date of the covered individual\'s timely request for reconsideration by
the Carrier; or

\(iii\) Within 120 days after the date the Carrier requests additional
information from the covered individual, or the date the covered
individual is notified that the Carrier is requesting additional
information from a provider. OPM may extend the time limit for a covered
individual\'s request for OPM review when the covered individual shows
he or she was not notified of the time limit or was prevented by
circumstances beyond his or her control from submitting the request for
OPM review within the time limit.

\(2\) In reviewing a claim denied by the Carrier, OPM may

\(i\) Request that the covered individual submit additional information;

\(ii\) Obtain an advisory opinion from an independent physician;

\(iii\) Obtain any other information as may in its judgment be required
to make a determination; or

\(iv\) Make its decision based solely on the information the covered
individual provided with his or her request for review.

\(3\) When OPM requests information from the Carrier, the Carrier must
release the information within 30 days after the date of OPM\'s written
request unless a different time limit is specified by OPM in its
request.

\(4\) Within 90 days after receipt of the request for review, OPM will
either:

\(i\) Give a written notice of its decision to the covered individual
and the Carrier; or

\(ii\) Notify the individual of the status of the review. If OPM does
not receive requested evidence within 15 days after expiration of the
applicable time limit in paragraph (e)(3) of this clause, OPM may make
its decision based solely on information available to it at that time
and give a written notice of its decision to the covered individual and
to the Carrier.

\(f\) OPM, upon its own motion, may reopen its review if it receives
evidence that was unavailable at the time of its original decision.

\(g\) Court review. (1) A suit to compel enrollment under § 890.102 of
Title 5, Code of Federal Regulations, must be brought against the
employing office that made the enrollment decision.

\(2\) A suit to review the legality of OPM\'s regulations under this
part must be brought against the Office of Personnel Management.

\(3\) Federal Employees Health Benefits (FEHB) carriers resolve FEHB
claims under authority of Federal statute (chapter 89, title 5, United
States Code). A covered individual may seek judicial review of OPM\'s
final action on the denial of a health benefits claim. A legal action to
review final action by OPM involving such denial of health benefits must
be brought against OPM and not against the Carrier or the Carrier\'s
subcontractors. The recovery in such a suit shall be limited to a court
order directing OPM to require the Carrier to pay the amount of benefits
in dispute.

\(4\) An action under paragraph (3) of this clause to recover on a claim
for health benefits:

\(i\) May not be brought prior to exhaustion of the administrative
remedies provided in paragraphs (a) through (f) of this clause;

\(ii\) May not be brought later than December 31 of the 3rd year after
the year in which the care or service was provided; and

\(iii\) Will be limited to the record that was before OPM when it
rendered its decision affirming the Carrier\'s denial of benefits.

SECTION 2.9

PROTECTION OF MEMBERS AGAINST PROVIDER CLAIMS (JAN 1996)

\(a\) The Carrier shall provide the Contracting Officer with evidence
that its contracts with providers (hospitals and physicians) contain a
provision that, in the event of Carrier insolvency, or inability to pay
expenses for any reason, the providers shall not look to Members for
payment. The Carrier agrees that over 90 percent of the total benefit
cost under this contract will be provided under such contracts with
providers; or

\(b\) In lieu of subsection (a) above, the Contracting Officer may
accept such other combinations of coverage which provide protection of
Members against provider claims as defined in the NAIC (National
Association of Insurance Commissioners) Model HMO Act, as amended; or

\(c\) The Carrier shall provide the Contracting Officer with
documentation that it has such other appropriate combinations of
coverage which would provide protection of Members against provider
claims in the event of Carrier insolvency, or inability to pay expenses
for any reason.

\(d\) The Carrier shall notify the Contracting Officer as soon as it is
aware that it will not be able to satisfy the requirements stated in
subsections (a), (b), or (c) above.

SECTION 2.10

INDEPENDENT LABORATORIES (JAN 1991)

In order to assure a minimum standard of quality for laboratory
services, the Carrier agrees that it will not use independent
laboratories which do not comply with Medicare or similar standards.

SECTION 2.11

CLAIMS PROCESSING (JAN 1998)

A standardized claims filing process shall be used by all FEHB carriers.
The Carrier shall apply procedures for using the standard claims
process. At a minimum the Carrier\'s program must achieve the following
objectives:

\(1\) By the year 2000, the majority of provider claims should be
submitted electronically;

\(2\) All physicians shall be notified that future claims must be
submitted electronically or on the Health Care Financing Administration
1500 form;

\(3\) The Carrier shall not use any unique physician claim form(s) for
such FEHB member claims;

\(4\) The Carrier should reject all such claims submitted on forms other
than the HCFA 1500 form and shall explain the reason on the Explanation
of Benefits form; and

\(5\) The Carrier shall advise OPM of its progress in implementing this
policy as directed by the Contracting Officer.

SECTION 2.12 CALCULATION OF COST SHARING PROVISIONS (JAN 1996)

When the Member is required to pay a specified percentage of the cost of
covered services, the Member\'s obligation for covered services shall be
based on the amount the provider has agreed to accept as full payment,
including future discounts that are known and that can be accurately
calculated at the time the claim is processed. This includes for
example, prompt pay discounts as well as other discounts granted for
various business reasons.

SECTION 2.13

BENEFITS PAYMENTS WHEN MEDICARE IS PRIMARY (JAN 1998)

When a Member who is covered by Medicare Part A, Part B, or Parts A and
B on a fee-for-service basis (a) receives services that generally are
eligible for coverage by Medicare (regardless of whether or not benefits
are paid by Medicare) and are covered by the Carrier, and (b) Medicare
is the primary payer and the Carrier is the secondary payer for the
Member under the order of benefit determination rules stated in Appendix
A of this contract, then the Carrier shall limit its payment to an
amount that supplements the benefits payable by Medicare (regardless of
whether or not Medicare benefits are paid). When emergency services have
been provided by a Medicare nonparticipating institutional provider and
the provider is not reimbursed by Medicare, the Carrier shall pay its
primary benefits. Payments that supplement Medicare include amounts
necessary to reimburse the Member for Medicare deductibles, coinsurance,
and the balance between the Medicare approved amount and the Medicare
limiting charge made by non-participating providers. This provision does
not apply to debarred providers (see Section 2.7).

SECTION 2.14

CONTINUING REQUIREMENTS AFTER TERMINATION OF THE CARRIER (JAN 2000)

\(a\) The Carrier shall fulfill all of the requirements agreed to under
the contract that continue after termination. The order of precedence
for the applicable laws, regulations, and the contract are listed in
Section 1.3.

\(b\) Contract requirements that extend beyond the date of the Carrier=s
termination include, but are not limited to, offering conversion
contracts to enrollees during the 31-day extension of coverage for
conversion, providing benefits to the enrollee until the effective date
of the new enrollment, and processing and paying claims incurred prior
to the termination date.

PART III - PAYMENTS, CHARGES AND ACCOUNTING

SECTION 3.1

PAYMENTS (JAN 1999) (FEHBAR 1652.232-70)

\(a\) OPM will pay to the Carrier, in full settlement of its obligations
under this contract, subject to adjustment for error or fraud, the
subscription charges received for the Plan by the Employees Health
Benefits Fund (hereinafter called the Fund) less the amounts set aside
by OPM for the Contingency Reserve and for the administrative expenses
of OPM, amounts assessed under FEHBAR 1609.7101-2, and amounts for
obligations due pursuant to paragraph (b) of this clause, plus any
payments made by OPM from the Contingency Reserve.

\(b\) OPM will notify the Carrier of amounts due for outstanding
obligations under the contract. Not later than 60 days after the date of
written notice from OPM, the Carrier shall reimburse OPM. If payment is
not received within the prescribed time frame, OPM shall withhold the
amount due from the subscription charges owed the Carrier under
paragraph (a) of this clause

\(c\) The specific subscription rates, charges, allowances and
limitations applicable to the contract are set forth in Appendix B.

\(d\) Recurring payments from premiums shall be due and payable not
later than thirty days after receipt by the Fund. The Contracting
Officer may authorize special nonrecurring payments from the Contingency
Reserve in accordance with OPM\'s regulations.

\(e\) In the event this contract between the Carrier and OPM is
terminated or not renewed in accordance with General Provision 1.15,
*Renewal and Withdrawal of Approval*, the Contingency Reserve of the
Carrier held by OPM shall be available to the Carrier to pay the
necessary and proper charges against this contract to the extent that
the reserves held by the Carrier are insufficient for that purpose.

> \[NOTE: The adjustment for error or fraud referenced in paragraph (a)
> and the necessary and proper charges against this contract if the
> contract is terminated or not renewed, referenced in subsection (d),
> shall be limited to the subscription rate and any contingency reserve
> payment otherwise provided for in this contract and shall not include
> claim charges or other expenses attributable to individual Members.
> Further, FEHBAR 1652.216-70, Accounting and Price Adjustment, applies
> if any adjustment to the contract price is determined.\]

SECTION 3.2

ACCOUNTING AND PRICE ADJUSTMENT (JAN 2000) (FEHBAR 1652.216-70)

\(a\) *Annual Accounting Statement*. The Carrier, not later than 90 days
after the end of each contract period, shall furnish to OPM for that
contract period an accounting of its operations under the contract. The
accounting shall be in the form prescribed by OPM.

\(b\) *Adjustment.* (1) This contract is community rated as defined in
FEHBAR 1602.170-2.

\(2\) The subscription rates agreed to in this contract shall be
equivalent to the subscription rates given to the Carrier\'s similarly
sized subscriber groups (SSSGs) as defined in FEHBAR1602.170-13.

\(3\) If, at the time of the rate reconciliation, the subscription rates
are found to be lower than the equivalent rates for the lower of the two
SSSGs, the Carrier may include an adjustment to the Federal group\'s
rates for the next contract period.

\(4\) If, at the time of the rate reconciliation, the subscription rates
are found to be higher than the equivalent rates for the lower of the
two SSSGs, the Carrier shall reimburse the Fund, for example, by
reducing the FEHB rates for the next contract term to reflect the
difference between the estimated rates and the rates which

are derived using the methodology of the lower rated SSSG.

\(5\) No upward adjustment in the rate established for this contract
will be allowed or considered by the Government or will be made by the
Carrier in this or in any other contract period on the basis of actual
costs incurred, actual benefits provided, or actual size or composition
of the FEHBP group during this contract period.

\(6\) In the event this contract is not renewed, neither the Government
nor the Carrier shall be entitled to any adjustment or claim for the
difference between the subscription rates prior to rate reconciliation
and the actual subscription rates.

\(c\) *[Exception for the 3-Year DoD Demonstration Project (10 U.S.C.
1108).]{.underline}* Similarly sized subscriber group (SSSG) rating
methodologies shall not be used to determine the reasonableness of the
Carrier's demonstration project premium rates. The Carrier's rates shall
not be adjusted for equivalency with SSSG rating methodologies. The
Carrier shall benchmark premiums against adjusted community rates if
available, Medigap offerings, or other similar products.

(End of Clause)

SECTION 3.3

RATE REDUCTION FOR DEFECTIVE PRICING OR DEFECTIVE COST OR PRICING DATA
(JAN 2000) (FEHBAR 1652.215-70)

\(a\) If any rate established in connection with this contract was
increased because (1) the Carrier submitted, or kept in its files in
support of the FEHBP rate, cost or pricing data that were not complete,
accurate, or current as certified in the Certificate of Accurate Cost or
Pricing Data (FEHBAR 1615.804-70); (2) the Carrier submitted, or kept in
its files in support of the FEHBP rate, cost or pricing data that were
not accurate as represented in the rate proposal documents; (3) the
Carrier developed FEHBP rates with a rating methodology and structure
inconsistent with that used to develop rates for similarly sized
subscriber groups (see FEHBAR §1602.170-13) as certified in the
Certificate of Accurate Cost or Pricing Data for Community Rated
Carriers; or (4) the Carrier submitted or kept in its files in support
of the FEHBP rate, data or information of any description that were not
complete, accurate, and current\--then, the rate shall be reduced in the
amount by which the price was increased because of the defective data or
information.

(b)(1) If the Contracting Officer determines under paragraph (a) of this
clause that a price or cost reduction should be made, the Carrier agrees
not to raise the following matters as a defense: (i) The Carrier was a
sole source supplier or otherwise was in a superior bargaining position
and thus the price of the contract would not have been modified even if
accurate, complete, and current cost or pricing data had been submitted
or maintained and identified.

\(ii\) The Contracting Officer should have known that the cost or
pricing data in issue were defective even though the Carrier took no
affirmative action to bring the character of the data to the attention
of the Contracting Officer.

\(iii\) The contract was based on an agreement about the total cost of
the contract and there was no agreement about the cost of each item
procured under the contract.

\(iv\) The Carrier did not submit or keep in its files a Certificate of
Current Cost or Pricing Data.

(2)(i) Except as prohibited by subdivision (b)(2)(ii) of this clause, an
offset in an amount determined appropriate by the Contracting Officer
based upon the facts shall be allowed against the amount of a contract
price reduction if\--

\(A\) The Carrier certifies to the Contracting Officer that, to the best
of the Carrier\'s knowledge and belief, the Carrier is entitled to the
offset in the amount requested; and

\(B\) The Carrier proves that the cost or pricing data were available
before the date of agreement on the price of the contract (or price of
the modification) and that the data were not submitted before such date.

\(ii\) An offset shall not be allowed if---

\(A\) The understated data was known by the Carrier to be understated
when the Certificate of Current Cost or Pricing Data was signed; or

\(B\) The Government proves that the facts demonstrate that the contract
price would not have increased in the amount to be offset even if the
available data had been submitted before the date of agreement on price.

\(c\) When the Contracting Officer determines that the rates shall be
reduced and the Government is thereby entitled to a refund, the Carrier
shall be liable to and shall pay the FEHB Fund at the time the
overpayment is repaid\--

\(1\) Simple interest on the amount of the overpayment from the date the
overpayment was paid from the FEHB Fund to the Carrier until the date
the overcharge is liquidated. In calculating the amount of interest due,
the Carrier shall use the quarterly rate determinations by the Secretary
of the Treasury under the authority of 26 U.S.C. 6621(a)(2) applicable
to the periods the overcharge was retained by the Carrier shall be used;
and,

\(2\) A penalty equal to the amount of overpayment, if the Carrier
knowingly submitted cost or pricing data which was incomplete,
inaccurate, or noncurrent.

\(d\) *[Exception for the DoD Demonstration Project.]{.underline}*
Similarly sized subscriber group (SSSG) rating methodologies shall not
be used to determine the reasonableness of the Carrier's demonstration
project premium rates. The Carrier's rates shall not be adjusted for
equivalency with SSSG rating methodologies. The Carrier shall benchmark
premiums against adjusted community rates if available, Medigap
offerings, or other similar products.

(End of Clause)

SECTION 3.4

CONTRACTOR RECORDS RETENTION (JAN 1999) (FEHBAR 1652.204-70)

Notwithstanding the provisions of Section 5.7 (FAR 52.215-2(f)) *Audit
and Records - Negotiation* the Carrier shall retain and make available
all records applicable to a contract term that support the annual
statement of operations and, for contracts that exceed the threshold at
FAR 15.403-4(a)(1), the rate submission for that contract term for a
period of 5 years after the end of the contract term to which the
records relate, except that individual enrollee and/or patient claim
records shall be maintained for 3 years after the end of the contract
term to which the claim records relate.

SECTION 3.5

APPROVAL FOR ASSIGNMENT OF CLAIMS (JAN 1991) (FEHBAR 1652.232-73)

\(a\) Notwithstanding the provisions of Section 5.35 \[FAR 52.232-23\],
*Assignment of Claims*, the Carrier shall not make any assignment under
the Assignment of Claims Act without the prior written approval of the
Contracting Officer.

\(b\) Unless a different period is specified in the Contracting
Officer\'s written approval, an assignment shall be in force only for a
period of one year from the date of the Contracting Officer\'s approval.
However, assignments may be renewed upon their expiration.

SECTION 3.6

DISCREPANCIES BETWEEN ENROLLMENT AND PAYMENTS TO CARRIER (JAN 1999)

\(a\) The OPM and the Carrier recognize that the portion of subscription
payments under Section 3.1(a) forwarded by OPM to the Carrier for
Enrollees may not be consistent with the Carrier\'s reconciliation of
enrollment under Section 1.5. Therefore, the OPM and the Carrier agree:

\(1\) That any individual discrepancies discovered in the course of
reconciliation, in which the agency certifying officer and the Carrier
agree as to the enrollment status of the individual, shall be corrected
by the applicable agency to reflect the valid enrollment(s). If the
reconciliation indicates that the subscription payments were not made or
were made in error, appropriate adjustments shall be made by the agency
to the Fund pursuant to law. Any adjustment in the subscription charges
received by the Fund from the agency as a result of a reconciliation
shall be forwarded by OPM under Section 3.1(a); and

\(2\) That the rates in Appendix B include an adjustment to the
subscription charges equal to one percent in full resolution of all
discrepancies not corrected under Section 3.6(b)(1).

\(b\) In consideration of the adjustments in Section 3.6(a)(1) and (2),
the Carrier accepts the adjustment to the subscription charges in full
resolution of all obligations of the Government in connection with the
subscription payments as described in this section 3.6, and waives any
rights it may have to claims for subscription payments under Section
3.1(a).

\(c\) The OPM and the Carrier shall review the reconciliation process
and this provision for Contract Year 2001.

SECTION 3.7

SURVEY CHARGES (JAN 2000)

\(a\) If the Carrier participates in an FEHB annual consumer assessment
survey, it shall pay OPM's contractor a pro rata share of the total cost
of consolidating and reporting the survey results to OPM. The Carrier
shall pay a separate fee for each plan option and /or rating area. The
Carrier agrees to pay the contractor's invoice within 30 days of the
billing date. If the Carrier does not remit payment to the contractor
within 60 days of the billing date, OPM shall withhold the amount due
from the Carrier's subscription charges according to FEHBAR 1652.232-70,
Payments--community-rated contracts, and forward payment to the
contractor.

\(b\) Costs incurred by the Carrier for contracting with a vendor to
conduct the survey shall be the Carrier\'s responsibility.

> PART IV \-- SPECIAL PROVISIONS

SECTION 4.1

ALTERATIONS IN CONTRACT (JAN 1998)

(FAR 52.252.4)

Portions of this contract are altered as follows:

\(a\) Sections 5.30, 5.31, 5.32. Cost Accounting Standards, part 30 of
the FAR, has not yet been implemented for the FEHBP community rated
contracts. Sections 5.30, 5.31 and 5.32 are not applicable to this
contract.

\(b\) Section 3.2. As required by Public Law 101-508, § 8909 of title 5,
U.S.C., and Section 3.2(b) of this contract are amended by the
following:

\(1\) No tax, fee, or other monetary payment may be imposed, directly or
indirectly, on a Carrier or an underwriting or plan administration
subcontractor of an approved health benefits plan by any State, the
District of Columbia, or the Commonwealth of Puerto Rico, or by any
political subdivision or other governmental authority thereof, with
respect to any payment made from the Fund.

\(2\) Paragraph (1) shall not be construed to exempt any Carrier or
subcontractor of an approved health benefits plan from the imposition,
payment, or collection of a tax, fee, or other monetary payment on the
net income or profit accruing to or realized by such Carrier or
underwriting or plan administration subcontractor from business
conducted under this Chapter, if that tax, fee, or payment is applicable
to a broad range of business activity.

\(c\) For carriers participating in the DoD Demonstration Project only:

c.  PARTICIPATION IN DoD/FEHBP

DEMONSTRATION PROJECT

(JAN 2000)

\(a\) The Carrier shall participate in the DoD/FEHBP Demonstration
Project authorized by 10 U.S.C. 1108 ("DoD Demonstration Project") under
the terms and conditions specified by OPM.

\(b\) In setting the premium rate, the Carrier shall comply with the
requirements in Section 3.2, Accounting and Price Adjustment (FEHBAR
1652.216-70), and 3.3, Rate Reduction for Defective Pricing or Defective
Cost or Pricing Data (FEHBAR 1652.215-70).

\(c\) If the Carrier has experienced costs far in excess of the premiums
for the DoD enrollment group, OPM will reimburse the Carrier first from
the Carrier's demonstration project Contingency Reserve and then from
OPM's Administrative Reserve. At the end of the demonstration project,
any surplus will be placed in the Contingency Reserve of all carriers
continuing in the FEHB Program following the termination of the DoD
demonstration project. Credit will be in proportion to the amount of
subscription charges paid and accrued to the carriers' plan during the
final year of the demonstration project.

\(d\) The Carrier shall compile, maintain, and, when requested by OPM,
report data on the plan's experience to produce reports containing the
following information and analysis:

\(1\) The number of eligible beneficiaries who elect to participate in
the demonstration project.

\(2\) The number of eligible beneficiaries who elected to participate in
the demonstration project and did not have Medicare Part B coverage
before electing to participate.

\(3\) The costs of health benefits charges and the costs (direct and
indirect) of administering the benefits and services provided to
eligible beneficiaries who elect to participate in the demonstration
project as compared to similarly situated enrollees in the FEHB Program.

\(4\) Prescription drug costs for demonstration project beneficiaries.

> PART V - REQUIRED CLAUSES

SECTION 5.1

DEFINITIONS (OCT 1995) (FAR 52.202-1)

\(a\) \"Head of the agency\" (also called \"agency head\") or
\"Secretary\" means the Secretary (or Attorney General, Administrator,
Governor, Chairperson, or other chief official, as appropriate) of the
agency; and the term \"authorized representative\" means any person,
persons, or board (other than the Contracting Officer) authorized to act
for the head of the agency or Secretary.

\(b\) Commercial component means any component that is a commercial
item.

\(c\) Commercial item means--

\(1\) Any item, other than real property, that is of a type customarily
used for nongovernmental purposes and that\--

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

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

\(2\) 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 Government solicitation;

\(3\) Any item that would satisfy a criterion expressed in paragraphs
(c)(1) or (c)(2) of this clause, but for\--

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

\(ii\) 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;

\(4\) 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;

\(5\) 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\--

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

\(ii\) 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;

\(6\) 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;

\(7\) 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

\(8\) 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.

\(d\) Component means any item supplied to the Federal Government as
part of an end tem or of another component.

> \(e\) Nondevelopmental item means\--

\(1\) Any previously developed item of supply used exclusively for
governmental purposes by a Federal agency, a State or local government,
or a foreign government with which the United States has a mutual
defense cooperation agreement;

\(2\) Any item described in paragraph (e)(1) of this definition that
requires only minor modification or modifications of a type customarily
available in the commercial marketplace in order to meet the
requirements of the procuring department or agency; or

\(3\) Any item of supply being produced that does not meet the
requirements of paragraph (e)(1) or (e)(2) solely because the item is
not yet in use.

\(f\) \"Contracting Officer\" means a person with the authority to enter
into, administer, and/or terminate contracts and make related
determinations and findings. The term includes certain authorized
representatives of the Contracting Officer acting within the limits of
their authority as delegated by the Contracting Officer.

\(g\) Except as otherwise provided in this contract, the term
\"subcontracts\" includes, but is not limited to, purchase orders and
changes and modifications to purchase orders under this contract.

SECTION 5.2

\[RESERVED\]

SECTION 5.3

GRATUITIES (APR 1984) (FAR 52.203-3)

\(a\) The right of the Contractor to proceed may be terminated by
written notice if, after notice and hearing, the agency head or a
designee determines that the Contractor, its agent, or another
representative -

\(1\) Offered or gave a gratuity (e.g., an entertainment or gift) to an
officer, official, or employee of the Government; and

\(2\) Intended, by the gratuity, to obtain a contract or favorable
treatment under a contract.

\(b\) The facts supporting this determination may be reviewed by any
court having lawful jurisdiction.

\(c\) If this contract is terminated under paragraph (a) above, the
Government is entitled \--(1) To pursue the same remedies as in a breach
of the contract; and (2) In addition to any other damages provided by
law, to exemplary damages of not less than 3 nor more than 10 times the
cost incurred by the Contractor in giving gratuities to the person
concerned, as determined by the agency head or a designee. (This
subparagraph (c)(2) is applicable only if this contract uses money
appropriated to the Department of Defense.)

\(d\) The rights and remedies of the Government provided in this clause
shall not be exclusive and are in addition to any other rights and
remedies provided by law or under this contract.

SECTION 5.4

COVENANT AGAINST CONTINGENT FEES (APR 1984) (FAR 52.203-5)

\(a\) The Contractor warrants that no person or agency has been employed
or retained to solicit or obtain this contract upon an agreement or
understanding for a contingent fee, except a bona fide employee or
agency. For breach or violation of this warranty, the Government shall
have the right to annul this contract without liability or, in its
discretion, to deduct from the contract price or consideration, or
otherwise recover, the full amount of the contingent fee.

\(b\) \"Bona fide agency,\" as used in this clause, means an established
commercial or selling agency, maintained by a contractor for the purpose
of securing business, that neither exerts nor proposes to exert improper
influence to solicit or obtain Government contracts nor holds itself out
as being able to obtain any Government contract or contracts through
improper influence.

\"Bona fide employee,\" as used in this clause, means a person, employed
by a contractor and subject to the contractor\'s supervision and control
as to time, place, and manner of performance, who neither exerts nor
proposes to exert improper influence to solicit or obtain Government
contracts nor holds out as being able to obtain any Government contract
or contracts through improper influence.

\"Contingent fee\", as used in this clause, means any commission,
percentage, brokerage, or other fee that is contingent upon the success
that a person or concern has in securing a Government contract.

"Improper influence,\" as used in this clause, means any influence that
induces or tends to induce a Government employee or officer to give
consideration or to act regarding a Government contract on any basis
other than the merits of the matter.

SECTION 5.5

ANTI-KICKBACK PROCEDURES (JUL 1995) (FAR 52.203-7)

\(a\) *Definitions*.

\"Kickback,\" as used in this clause, means any money, fee, commission,
credit, gift, gratuity, thing of value, or compensation of any kind
which is provided, directly or indirectly, to any prime Contractor,
prime Contractor employee, subcontractor, or subcontractor employee for
the purpose of improperly obtaining or rewarding favorable treatment in
connection with a prime contract or in connection with a subcontract
relating to a prime contract.

\"Person,\" as used in this clause, means a corporation, partnership,
business association of any kind, trust, joint-stock company, or
individual.

\"Prime contract,\" as used in this clause, means a contract or
contractual action entered into by the United States for the purpose of
obtaining supplies, materials, equipment, or services of any kind.

\"Prime Contractor,\" as used in this clause, means a person who has
entered into a prime contract with the United States.

\"Prime Contractor employee,\" as used in this clause, means any
officer, partner, employee, or agent of a prime Contractor.

\"Subcontract,\" as used in this clause, means a contract or contractual
action entered into by a prime Contractor or subcontractor for the
purpose of obtaining supplies, materials, equipment, or services of any
kind under a prime contract.

\"Subcontractor,\" as used in this clause, (1) means any person, other
than the prime Contractor, who offers to furnish or furnishes any
supplies, materials, equipment, or services of any kind under a prime
contract or a subcontract entered into in connection with such prime
contract, and (2) includes any person who offers to furnish or furnishes
general supplies to the prime Contractor or a higher tier subcontractor.

\"Subcontractor employee,\" as used in this clause, means any officer,
partner, employee, or agent of a subcontractor.

\(b\) The Anti-Kickback Act of 1986 (41 U.S.C. 51-58) (the Act),
prohibits any person from \--

\(1\) Providing or attempting to provide or offering to provide any
kickback;

\(2\) Soliciting, accepting, or attempting to accept any kickback; or

\(3\) Including, directly or indirectly, the amount of any kickback in
the contract price charged by a prime Contractor to the United States or
in the contract price charged by a subcontractor to a prime Contractor
or higher tier subcontractor.

(c)(1) The Contractor shall have in place and follow reasonable
procedures designed to prevent and detect possible violations described
in paragraph (b) of this clause in its own operations and direct
business relationships.

\(2\) When the Contractor has reasonable grounds to believe that a
violation described in paragraph (b) of this clause may have occurred,
the Contractor shall promptly report in writing the possible violation.
Such reports shall be made to the inspector general of the contracting
agency, the head of the contracting agency if the agency does not have
an inspector general, or the Department of Justice.

\(3\) The Contractor shall cooperate fully with any Federal agency
investigating a possible violation described in paragraph (b) of this
clause.

\(4\) The Contracting Officer may (i) offset the amount of the kickback
against any monies owed by the United States under the rime contract
and/or (ii) direct that the Prime Contractor withhold, from sums owed a
subcontractor under the prime contract, the amount of any kickback. The
Contracting Officer may order the monies withheld under subdivision
(c)(4)(ii) of this clause be paid over to the Government unless the
Government has already offset those monies under subdivision (c)(4)(i)
of this clause. In either case, the Prime Contractor shall notify the
Contracting Officer when the monies are withheld.

\(5\) The Contractor agrees to incorporate the substance of this clause,
including this subparagraph (c)(5) but excepting subparagraph (c)(1), in
all subcontracts under this contract which exceed \$100,000.

SECTION 5.6

\[RESERVED\]

SECTION 5.7

AUDIT AND RECORDS-NEGOTIATION (JUN 1999) (FAR 52.215-2)

\(a\) As used in this clause, \"records\" includes books, documents,
accounting procedures and practices, and other data, regardless of type
and regardless of whether such items are in written form, in the form of
computer data, or in any other form.

\(b\) *Examination of costs*. If this is a cost- reimbursement,
incentive, time-and-materials, labor-hour, or price redeterminable
contract, or any combination of these, the Contractor shall maintain and
the Contracting Officer, or an authorized representative of the
Contracting Officer, shall have the right to examine and audit all
records and other evidence sufficient to reflect properly all costs
claimed to have been incurred or anticipated to be incurred directly or
indirectly in performance of this contract. This right of examination
shall include inspection at all reasonable times of the Contractor\'s
plants, or parts of them, engaged in performing the contract.

\(c\) *Cost or pricing data*. If the Contractor has been required to
submit cost or pricing data in connection with any pricing action
relating to this contract, the Contracting Officer, or an authorized
representative of the Contracting Officer, in order to evaluate the
accuracy, completeness, and currency of the cost or pricing data, shall
have the right to examine and audit all of the Contractor\'s records,
including computations and projections, related to\--

\(1\) The proposal for the contract, subcontract, or modification;

\(2\) The discussions conducted on the proposal(s), including those
related to negotiating;

\(3\) Pricing of the contract, subcontract, or modification; or

\(4\) Performance of the contract, subcontract or modification.

\(d\) *Comptroller General* \-- (1) The Comptroller General of the
United States, or an authorized representative, shall have access to and
the right to examine any of the Contractor\'s directly pertinent records
involving transactions related to this contract or a subcontract
hereunder.

\(2\) This paragraph may not be construed to require the Contractor or
subcontractor to create or maintain any record that the Contractor or
subcontractor does not maintain in the ordinary course of business or
pursuant to a provision of law.

\(e\) *Reports*. If the Contractor is required to furnish cost, funding,
or performance reports, the Contracting Officer or an authorized
representative of the Contracting Officer shall have the right to
examine and audit the supporting records and materials, for the purpose
of evaluating\-- (1) The effectiveness of the Contractor\'s policies and
procedures to produce data compatible with the objectives of these
reports and (2) The data reported.

\(f\) *Availability*. The Contractor shall make available at its office
at all reasonable times the records, materials, and other evidence
described in paragraphs (a), (b), (c), (d), and (e) of this clause, for
examination, audit, or reproduction, until 3 years after final payment
under this contract or for any shorter period specified in Subpart 4.7,
Contractor Records Retention, of the Federal Acquisition Regulation
(FAR), or for any longer period required by statute or by other clauses
of this contract. In addition\--(1) If this contract is completely or
partially terminated, the Contractor shall make available the records
relating to the work terminated until 3 years after any resulting final
termination settlement; and (2) The Contractor shall make available
records relating to appeals under the Disputes clause or to litigation
or the settlement of claims arising under or relating to this contract
until such appeals, litigation, or claims are finally resolved.

\(g\) The Contractor shall insert a clause containing all the terms of
this clause, including this paragraph (g), in all subcontracts under
this contract that exceed the simplified acquisition threshold and\--

\(1\) That are cost-reimbursement, incentive, time-and-materials,
labor-hour, or price-redeterminable type or any combination of these;

\(2\) For which cost or pricing data are required; or

\(3\) That require the subcontractor to furnish reports as discussed in
paragraph (e) of this clause.

The clause may be altered only as necessary to identify properly the
contracting parties and the Contracting Officer under the Government
prime contract.

SECTIONS 5.8 THRU 5.13

\[RESERVED\]

SECTION 5.14

UTILIZATION OF SMALL BUSINESS CONCERNS (OCT 1999) (FAR 52.219-8)

\(a\) It is the policy of the United States that small business
concerns, HUBZone small usiness concerns, small business concerns owned
and controlled by socially and economically disadvantaged
individuals**,** and small business concerns owned and controlled by
women shall have the maximum practicable opportunity to participate in
performing contracts let by any Federal agency, including contracts and
subcontracts for subsystems, assemblies, components, and related
services for major systems. It is further the policy of the United
States that its prime contractors establish procedures to ensure the
timely payment of amounts due pursuant to the terms of their
subcontracts with small business concerns, HUBZone small business
concerns, small business concerns owned and controlled by socially and
economically disadvantaged individuals, and small business concerns
owned and controlled by women.

\(b\) The Contractor hereby agrees to carry out this policy in the
awarding of subcontracts to the fullest extent consistent with efficient
contract performance. The Contractor further agrees to cooperate in any
studies or surveys as may be conducted by the United States Small
Business Administration or the awarding agency of the United States as
may be necessary to determine the extent of the Contractor\'s compliance
with this clause.

\(c\) *Definitions.* As used in this contract---

\(1\) "Small business concern" means a small business as defined
pursuant to section 3 of the Small Business Act and relevant regulations
promulgated pursuant thereto.

\(2\) "HUBZone small business concern" means a small business concern
that appears on the List of Qualified HUBZone Small Business Concerns
maintained by the Small Bujsiness Administration.

\(3\) "Small business concern owned and controlled by socially and
economically disadvantaged individuals" and "small disadvantaged
business concern" mean a small business concern that represents, as part
of its offer that ---

\(i\) It has received certification as a small disadvantaged business
concern consistent with 13 CFR 124, Subpart B;

\(ii\) No material change in disadvantaged ownership and control has
occurred since its certification;

\(iii\) Where the concern is owned by one or more individuals, the net
worth of each individual upon whom the certification is based does not
exceed \$750,000 after taking into account the applicable exclusions set
forth at 13 CFR 124.104(c)(2); and

\(iv\) It is identified, on the date of its representation, as a
certified small disadvantaged business in the database maintained by the
Small Business Administration (PRO-Net).

\(d\) Contractors acting in good faith may rely on written
representations by their subcontractors regarding their status as either
a small business concern, a HUBZone small business concern, a small
business concern owned and controlled by socially and economically
disadvantaged individuals, or a small business concern owned and
controlled by women.

SECTION 5.15 THRU 5.16

\[RESERVED\]

SECTION 5.17

CONVICT LABOR (AUG 1996) (FAR 52.222-3)

The Contractor agrees not to employ in the performance of this contract
any person undergoing a sentence of imprisonment which has been imposed
by any court of a State, the District of Columbia, the Commonwealth of
Puerto Rico, the Virgin Islands, Guam, American Samoa, the Commonwealth
of the Northern Mariana Islands, or the Trust Territory of the Pacific
Islands. This limitation, however, shall not prohibit the employment by
the Contractor in the performance of this contract of persons on parole
or probation to work at paid employment during the term of their
sentence or persons who have been pardoned or who have served their
terms. Nor shall it prohibit the employment by the Contractor in the
performance of this contract of persons confined for violation of the
laws of any of the States, the District of Columbia, the Commonwealth of
Puerto Rico, the Virgin Islands, Guam, American Samoa, the Commonwealth
of the Northern MarianaIslands, or the Trust Territory of the Pacific
Islands who are authorized to work at paid employment in the community
under the laws of such jurisdiction, if-

(a)(1) The worker is paid or is in an approved work training program on
a voluntary basis;

\(2\) Representatives of local union central bodies or similar labor
union organizations have been consulted;

\(3\) Such paid employment will not result in the displacement of
employed workers, or be applied in skills, crafts, or trades in which
there is a surplus of available gainful labor in the locality, or impair
existing contracts for services; and

\(4\) The rates of pay and other conditions of employment will not be
less than those paid or provided for work of a similar nature in the
locality in which the work is being performed; and

\(b\) The Attorney General of the United States has certified that the
work-release laws or regulations of the jurisdiction involved are in
conformity with the requirements of Executive Order 11755, as amended by
Executive Orders 12608 and 12943.

SECTION 5.18

CONTRACT WORK HOURS AND SAFETY STANDARDS ACT - OVERTIME COMPENSATION
(JUL 1995) (FAR 52.222-4)

\(a\) *Overtime requirements*. No Contractor or subcontractor
contracting for any part of the contract work which may require or
involve the employment of laborers or mechanics (see Federal Acquisition
Regulation (FAR) 22.300) shall require or permit any such laborers or
mechanics in any workweek in which the individual is employed on such
work to work in excess of 40 hours in such workweek unless such laborer
or mechanic receives compensation at a rate not less than 1½ times the
basic rate of pay for all hours worked in excess of 40 hours in such
workweek.

\(b\) *Violation; liability for unpaid wages; liquidated damages*. In
the event of any violation of the provisions set forth in paragraph (a)
of this clause, the Contractor and any subcontractor responsible
therefor shall be liable for the unpaid wages. In addition, such
Contractor and subcontractor shall be liable to the United States (in
the case of work done under contract for the District of Columbia or a
territory, to such District or to such territory), for liquidated
damages. Such liquidated damages shall be computed with respect to each
individual laborer or mechanics employed in violation of the provisions
set forth in paragraph (a) of this clause in the sum of \$10 for each
calendar day on which such individual was required or permitted to work
in excess of the standard workweek of 40 hours without payment of the
overtime wages required by provisions set forth in paragraph (a) of this
clause.

\(c\) *Withholding for unpaid wages and liquidated damages*. The
Contracting Officer shall upon his or her own action or upon written
request of an authorized representative of the Department of Labor
withhold or cause to be withheld, from any moneys payable on account of
work performed by the Contractor or subcontractor under any such
contract or any other Federal contract with the same Prime Contractor,
or any other Federally-assisted contract subject to the Contract Work
Hours and Safety Standards Act which is held by the same Prime
Contractor, such sums as may be determined to be necessary to satisfy
any liabilities of such Contractor or subcontractor for unpaid wages and
liquidated damages as provided in the provisions set forth in paragraph
(b) of this clause.

\(d\) *Payrolls and basic records*. (1) The Contractor or subcontractor
shall maintain payrolls and basic payroll records during the course of
contract work and shall preserve them for a period of 3 years from the
completion of the contract for all laborers and mechanics working on the
contract. Such records shall contain the name and address of each such
employee, social security number, correct classifications, hourly rates
of wages paid, daily and weekly number of hours worked, deductions made,
and actual wages paid. Nothing in this paragraph shall require the
duplication of records required to be maintained for construction work
by Department of Labor regulations at 29 CFR 5.5(a)(3) implementing the
Davis-Bacon Act.

\(2\) The records to be maintained under paragraph (d)(1) of this clause
shall be made available by the Contractor or subcontractor for
inspection, copying, or transcription by authorized representatives of
the Contracting Officer or the Department of Labor. The Contractor or
subcontractor shall permit such representatives to interview employees
during working hours on the job.

\(e\) *Subcontracts*. The Contractor or subcontractor shall insert in
any subcontracts exceeding \$100,000 the provisions set forth in
paragraphs (a) through (e) of this clause and also a clause requiring
the subcontractors to include these provisions in any lower tier
subcontracts. The Prime Contractor shall be responsible for compliance
by any subcontractor or lower tier subcontractor with the provisions set
forth in paragraphs (a) through (e) of this clause.

SECTION 5.19

EQUAL OPPORTUNITY (FEB 1999) (FAR 52.222-26)

\(a\) If, during any 12-month period (including the 12 months preceding
the award of this contract), the Contractor has been or is awarded
nonexempt Federal contracts and/or subcontracts that have an aggregate
value in excess of \$10,000, the Contractor shall comply with
subparagraphs (b)(1) through (11) of this clause. Upon request, the
Contractor shall provide information necessary to determine the
applicability of this clause.

\(b\) During performance of this contract, the Contractor agrees as
follows:

\(1\) The Contractor shall not discriminate against any employee or
applicant for employment because of race, color, religion, sex, or
national origin. However, it shall not be a violation of this clause for
the Contractor to extend a publicly announced preference in employment
to Indians living on or near an Indian reservation, in connection with
employment opportunities on or near an Indian reservation, as permitted
by 41 CFR 60-1.5.

\(2\) The Contractor shall take affirmative action to ensure that
applicants are employed, and that employees are treated during
employment, without regard to their race, color, religion, sex, or
national origin. This shall include, but not be limited to\--

\(i\) Employment;

\(ii\) Upgrading;

\(iii\) Demotion;

\(iv\) Transfer;

\(v\) Recruitment or recruitment advertising;

\(vi\) Layoff or termination;

\(vii\) Rates of pay or other forms of compensation; and

\(viii\) Selection for training, including apprenticeship.

\(3\) The Contractor shall post in conspicuous places available to
employees and applicants for employment the notices to be provided by
the Contracting Officer that explain this clause.

\(4\) The Contractor shall, in all solicitations or advertisements for
employees placed by or on behalf of the Contractor, state that all
qualified applicants will receive consideration for employment without
regard to race, color, religion, sex, or national origin.

\(5\) The Contractor shall send, to each labor union or representative
of workers with which it has a collective bargaining agreement or other
contract or understanding, the notice to be provided by the Contracting
Officer advising the labor union or workers\' representative of the
Contractor\'s commitments under this clause, and post copies of the
notice in conspicuous places available to employees and applicants for
employment.

\(6\) The Contractor shall comply with Executive Order 11246, as
amended, and the rules, regulations, and orders of the Secretary of
Labor.

\(7\) The Contractor shall furnish to the contracting agency all
information required by Executive Order 11246, as amended, and by the
rules, regulations, and orders of the Secretary of Labor. The Contractor
shall also file Standard Form 100 (EEO-1), or any successor form, as
prescribed in 41 CFR part 60-1. Unless the Contractor has filed within
the 12 months preceding the date of contract award, the Contractor
shall, within 30 days after contract award, apply to either the regional
Office of Federal Contract Compliance Programs (OFCCP) or the local
office of the Equal Employment Opportunity Commission for the necessary
forms.

\(8\) The Contractor shall permit access to its premises, during normal
business hours, by the contracting agency or the OFCCP for the purpose
of conducting on-site compliance evaluations and complaint
investigations. The Contractor shall permit the Government to inspect
and copy any books, accounts, records (including computerized records),
and other material that may be relevant to the matter under
investigation and pertinent to compliance with Executive Order 11246, as
amended, and rules and regulations that implement the Executive Order.

\(9\) If the OFCCP determines that the Contractor is not in compliance
with this clause or any rule, regulation, or order of the Secretary of
Labor, this contract may be canceled, terminated, or suspended in whole
or in part and the Contractor may be declared ineligible for further
Government contracts, under the procedures authorized in Executive Order
11246, as amended. In addition, sanctions may be imposed and remedies
invoked against the Contractor as provided in Executive Order 11246, as
amended; in the rules, regulations, and orders of the Secretary of
Labor; or as otherwise provided by law.

\(10\) The Contractor shall include the terms and conditions of
subparagraphs (b)(1) through (11) of this clause in every subcontract or
purchase order that is not exempted by the rules, regulations, or orders
of the Secretary of Labor issued under Executive Order 11246, as
amended, so that these terms and conditions will be binding upon each
subcontractor or vendor.

\(11\) The Contractor shall take such action with respect to any
subcontract or purchase order as the Contracting Officer may direct as a
means of enforcing these terms and conditions, including sanctions for
noncompliance, provided, that if the Contractor becomes involved in, or
is threatened with, litigation with a subcontractor or vendor as a
result of any direction, the Contractor may request the United States to
enter into the litigation to protect the interests of the United States.

\(c\) Notwithstanding any other clause in this contract, disputes
relative to this clause will be governed by the procedures in 41 CFR
60-1.1.

SECTION 5.20 \[RESERVED\]

SECTION 5.21

NOTIFICATION OF VISA DENIAL (FEB 1999) (FAR 52.222-29)

It is a violation of Executive Order 11246, as amended, for a Contractor
to refuse to employ any applicant or not to assign any person hired in
the United States, on the basis that the individual\'s race, color,
religion, sex, or national origin is not compatible with the policies of
the country where the work is to be performed or for whom the work will
be performed (41 CFR 60-1.10). The Contractor agrees to notify the U.S.
Department of State, Assistant Secretary, Bureau of Political-Military
Affairs (PM), 2201 C Street NW, Room 7325, Washington, DC 20520, and the
U.S. Department of Labor, Deputy Assistant Secretary for Federal
Contract Compliance, when it has knowledge of any employee or potential
employee being denied an entry visa to a country in which the Contractor
is required to perform this contract, and it believes the denial is
attributable to the race, color, religion, sex, or national origin of
the employee or potential employee.

SECTION 5.22

AFFIRMATIVE ACTION FOR DISABLED VETERANS AND VETERANS OF THE VIETNAM ERA
(APR 1998) (FAR 52.222-35)

\(a\) Definitions as used in this clause--

"All employment openings" includes all positions except executive and
top management, those positions that will be filled from within the
contractor's organization, and positions lasting 3 days or less. This
term includes full-time employment, temporary employment of more than 3
days' duration, and part-time employment.

\"Appropriate office of the State employment service system,\" means the
local office of the Federal-State national system of public employment
offices with assigned responsibility to serve the area where the
employment opening is to be filled, including the District of Columbia,
Guam, the Commonwealth of Puerto Rico, and the Virgin Islands.

"Positions that will be filled from within the Contractor's
organization" means employment openings for which no consideration will
be given to persons outside the Contractor's organization (including any
affiliates, subsidiaries, and parent companies) and includes any
openings that the Contractor proposes to fill from regularly established
"recall" lists. The exception does not apply to a particular opening
once an employer decides to consider applicants outside of its
organization.

"Veteran of the Vietnam era" means a person who--

\(1\) Served on active duty for a period of more than 180 days, any part
of which occurred between August 5, 1964, and May 7, 1975, and was
discharged or released therefrom with other than a dishonorable
discharge; or

\(2\) Was discharged or released from active duty for a
service-connected disability if any part of such active duty was
performed between August 5, 1964, and May 7, 1975.

\(b\) *General*. (1) Regarding any position for which the employee or
applicant for employment is qualified, the Contractor shall not
discriminate against the individual because the individual is a disabled
veteran or a veteran of the Vietnam Era. The Contractor agrees to take
affirmative action to employ, advance in employment, and otherwise treat
qualified disabled veterans and veterans of the Vietnam Era without
discrimination based upon their disability or veterans\' status in all
employment practices such as \--

\(i\) Employment;

\(ii\) Upgrading;

\(iii\) Demotion or transfer;

\(iv\) Recruitment;

\(v\) Advertising;

\(vi\) Layoff or termination;

\(vii\) Rates of pay or other forms of compensation; and

\(viii\) Selection for training, including apprenticeship.

\(2\) The Contractor agrees to comply with the rules, regulations, and
relevant orders of the Secretary of Labor (Secretary) issued under the
Vietnam Era Veterans\' Readjustment Assistance Act of 1972 (the Act), as
amended.

\(c\) *Listing openings*. (1) The Contractor agrees to list all
employment openings existing at contract award or occurring during
contract performance, at an appropriate office of the State employment
service system in the locality where the opening occurs. These openings
include those occurring at any Contractor facility, including one not
connected with performing this contract. An independent corporate
affiliate is exempt from this requirement.

\(2\) State and local government agencies holding Federal contracts of
\$10,000 or more shall also list all employment openings with the
appropriate office of the State employment service.

\(3\) The listing of employment openings with the State employment
service system is required at least concurrently with using any other
recruitment source or effort and involves the obligations of placing a
bona fide job order, including accepting referrals of veterans and
non-veterans. This listing does not require hiring any particular job
applicant or hiring from any particular group of job applicants and is
not intended to relieve the Contractor from any requirements of
Executive orders or regulations concerning nondiscrimination in
employment.

\(4\) Whenever the Contractor becomes contractually bound to the listing
terms of this clause, it shall advise the State employment service
system, in each State where it has establishments, of the name and
location of each hiring location in the State. As long as the Contractor
is contractually bound to these terms and has so advised the State
system, it need not advise the State system of subsequent contracts. The
Contractor may advise the State system when it is no longer bound by
this contract clause.

\(d\) *Applicability*. This clause does not apply to the listing of
employment openings that occur and are filled outside the 50 States, the
District

of Columbia, the Commonwealth of Puerto Rico, Guam, and the Virgin
Islands.

\(e\) *Postings*. (1) The Contractor agrees to post employment notices
stating (i) the Contractor\'s obligation under the law to take
affirmative action to employ and advance in employment qualified
disabled veterans and veterans of the Vietnam era, and (ii) the rights
of applicants and employees.

\(2\) These notices shall be posted in conspicuous places that are
available to employees and applicants for employment. They shall be in a
form prescribed by the Deputy Assistant Secretary for Federal Contract
Compliance Programs, Department of Labor (Deputy Assistant Secretary),
and provided by or through the Contracting Officer.

\(3\) The Contractor shall notify each labor union or representative of
workers with which it has a collective bargaining agreement or other
contract understanding, that the Contractor is bound by the terms of the
Act, and is committed to take affirmative action to employ, and advance
in employment, qualified disabled veterans and veterans of the Vietnam
era.

\(f\) *Noncompliance*. If the Contractor does not comply with the
requirements of this clause, appropriate actions may be taken under the
rules, regulations, and relevant orders of the Secretary issued pursuant
to the Act.

\(g\) *Subcontracts*. The Contractor shall include the terms of this
clause in every subcontract or purchase order of \$10,000 or more unless
exempted by rules, regulations, or orders of the Secretary. The
Contractor shall act as specified by the Deputy Assistant Secretary to
enforce the terms, including action for noncompliance.

SECTION 5.23

AFFIRMATIVE ACTION FOR WORKERS WITH DISABILITIES (JUN 1998) (FAR
52.222-36)

\(a\) General. (1) Regarding any position for which the employee or
applicant for employment is qualified, the Contractor shall not
discriminate against any employee or applicant because of physical or
mental disability. The Contractor agrees to take affirmative action to
employ, advance in employment, and otherwise treat qualified individuals
with disabilities without discrimination based upon their physical or
mental disabilities in all employment practices such as -

\(i\) Recruitment. Advertising, and job application procedures;

\(ii\) Hiring, upgrading, promotion, award of tenure, demotion,
transfer, layoff, termination, right of return from layoff, and
rehiring;

\(iii\) Rates of pay or any other form of compensation and changes in
compensation;

\(iv\) Job assignments, job classifications, organizational structures,
position descriptions, lines of progression, and seniority lists;

\(v\) Leaves of absence, sick leave, or any other leave;

\(vi\) Fringe benefits available by virtue of employment, whether or not
administered by the Contractor;

\(vii\) Selection and financial support for training, including
apprenticeships, professional meetings, conferences, and other related
activities, and selection for leaves of absence to pursue training;

\(viii\) Activities sponsored by the Contractor, including social or
recreational programs; and

\(ix\) Any other term, condition, or privilege of employment.

\(2\) The Contractor agrees to comply with the rules, regulations, and
relevant orders of the Secretary of Labor (Secretary) issued under the
Rehabilitation Act of 1973 (29 U.S.C. 793) (the Act), as amended.

\(b\) *Postings*. (1) The Contractor agrees to post employment notices
stating (i) the Contractor\'s obligation under the law to take
affirmative action to employ and advance in employment qualified
individuals with disabilities*;* and (ii) the rights of applicants and
employees.

\(2\) These notices shall be posted in conspicuous places that are
available to employees and applicants for employment. The Contractor
shall ensure that applicants and employees with disabilities are
informed of the contents of the notice (e.g., the Contractor may have
the notice read to a visually disabled individual, or may lower the
posted notice so that it might be read by a person in a wheelchair). The
notices shall be in a form prescribed by the Deputy Assistant Secretary
for Federal Contract Compliance of the U.S. Department of Labor (Deputy
Assistant Secretary), and shall be provided by or through the
Contracting Officer.

\(3\) The Contractor shall notify each labor union or representative of
workers with which it has a collective bargaining agreement or other
contract understanding, that the Contractor is bound by the terms of
Section 503 of the Act and is committed to take affirmative action to
employ, and advance in employment, qualified individuals with physical
or mental disabilities.

\(c\) *Noncompliance*. If the Contractor does not comply with the
requirements of this clause, appropriate actions may be taken under the
rules, regulations, and relevant orders of the Secretary issued pursuant
to the Act.

\(d\) *Subcontracts*. The Contractor shall include the terms of this
clause in every subcontract or purchase order in excess of \$10,000
unless exempted by rules, regulations, or orders of the Secretary. The
Contractor shall act as specified by the Deputy Assistant Secretary to
enforce the terms, including action for noncompliance.

SECTION 5.24

CLEAN AIR AND WATER (APR 1984) (FAR 52.223-2)

\(a\) \"Air Act\", as used in this clause, means the Clean Air Act (42
U.S.C. 7401 et seq.).

\"Clean air standards,\" as used in this clause, means -

\(1\) Any enforceable rules, regulations, guidelines, standards,
limitations, orders, controls, prohibitions, work practices, or other
requirements contained in, issued under, or otherwise adopted under the
Air Act or Executive Order 11738;

\(2\) An applicable implementation plan as described in section 110(d)
of the Air Act (42 U.S.C. 7410(d));

\(3\) An approved implementation procedure or plan under section 111(c)
or section 111(d) of the Air Act (42 U.S.C. 7411(c) or (d)); or

\(4\) An approved implementation procedure under section 112(d) of the
Air Act (42 U.S.C. 7412(d)).

\"Clean water standards,\" as used in this clause, means any enforceable
limitation, control, condition, prohibition, standard, or other
requirement promulgated under the Water Act or contained in a permit
issued to a discharger by the Environmental Protection Agency (EPA) or
by a State under an approved program, as authorized by section 402 of
the Water Act (33 U.S.C. 1342), or by local government to ensure
compliance with pretreatment regulations as required by section 307 of
the Water Act (33 U.S.C. 1317).

\"Compliance\", as used in this clause, means compliance with -

\(1\) Clean air or water standards; or

\(2\) A schedule or plan ordered or approved by a court of competent
jurisdiction, the Environmental Protection Agency (EPA), or an air or
water pollution control agency under the requirements of the Air Act or
Water Act and related regulations.

\"Facility,\" as used in this clause, means any building, plant,
installation, structure, mine, vessel or other floating craft, location,
or site of operations, owned, leased, or supervised by a Contractor or
subcontractor, used in the performance of a contract or subcontract.
When a location or site of operations includes more than one building,
plant, installation, or structure, the entire location or site shall be
deemed a facility except when the Administrator, or a designee, of the
Environmental Protection Agency (EPA) determines that independent
facilities are collocated in one geographical area.

\"Water Act,\" as used in this clause, means Clean Water Act (33 U.S.C.
1251 et seq.).

\(b\) The Contractor agrees -

\(1\) To comply with all the requirements of section 114 of the Clean
Air Act (42 U.S.C. 7414) and section 308 of the Clean Water Act (33
U.S.C. 1318) relating to inspection, monitoring, entry, reports, and
information, as well as other requirements specified in section 114 and
section 308 of the Air Act and the Water Act, and all regulations and
guidelines issued to implement those acts before the award of this
contract;

\(2\) That no portion of the work required by this prime contract will
be performed in a facility listed on the EPA List of Violating
Facilities on the date when this contract was awarded unless and until
the EPA eliminates the name of the facility from the listing;

\(3\) To use best efforts to comply with clean air standards and clean
water standards at the facility in which the contract is being
performed; and

\(4\) To insert the substance of this clause into any nonexempt
subcontract, including this subparagraph (b)(4).

SECTION 5.25

DRUG-FREE WORKPLACE (JAN 1997) (FAR 52.223-6)

\(a\) *Definitions*. As used in this clause\--

\"Controlled substance\" means a controlled substance in schedules I
through V of section 202 of the Controlled Substances Act (21 U.S.C.
812) and as further defined in regulation at 21 CFR 1308.11-1308.15.

\"Conviction\" means a finding of guilt (including a plea of nolo
contendere) or imposition of sentence, or both, by any judicial body
charged with the responsibility to determine violations of the Federal
or State criminal drug statutes.

\"Criminal drug statute\" means a Federal or non-Federal criminal
statute involving the manufacture, distribution, dispensing, possession
or use of any controlled substance.

\"Drug-free workplace\" means the site(s) for the performance of work
done by the Contractor in connection with a specific contract at which
employees of the Contractor are prohibited from engaging in the unlawful
manufacture, distribution, dispensing, possession, or use of a
controlled substance.

\"Employee\" means an employee of a Contractor directly engaged in the
performance of work under a Government contract. Directly engaged is
defined to include all direct cost employees and any other Contractor
employee who has other than a minimal impact or involvement in contract
performance.

\"Individual\" means an offeror/contractor that has no more than one
employee including the offeror/contractor.

\(b\) The Contractor, if other than an individual, shall - within 30
days after award (unless a longer period is agreed to in writing for
contracts of 30 days or more performance duration); or as soon as
possible for contracts of less than 30 days performance duration -

\(1\) Publish a statement notifying its employees that the unlawful
manufacture, distribution, dispensing, possession, or use of a
controlled substance is prohibited in the contractor\'s workplace and
specifying the actions that will be taken against employees for
violations of such prohibition (2) Establish an ongoing drug-free
awareness program to inform such employees about-

\(i\) The dangers of drug abuse in the workplace;

\(ii\) The contractor\'s policy of maintaining a drug-free workplace;

\(iii\) Any available drug counseling, rehabilitation, and employee
assistance programs; and

\(iv\) The penalties that may be imposed upon employees for drug abuse
violations occurring in the workplace.

\(3\) Provide all employees engaged in performance of the contract with
a copy of the statement required by subparagraph (b)(1) of this clause;

\(4\) Notify such employees in writing in the statement required by
subparagraph (b)(1) of this clause that, as a condition of continued
employment on this contract, the employee will -

\(i\) Abide by the terms of the statement; and

\(ii\) Notify the employer in writing of the employee\'s conviction
under a criminal drug statute for a violation occurring in the workplace
no later than 5 days after such conviction.

5\) Notify the Contracting Officer in writing within 10 days after
receiving notice under subdivision (b)(4)(ii) of this clause, from an
employee or otherwise receiving actual notice of such conviction. The
notice shall include the position title of the employee;

\(6\) Within 30 days after receiving notice under subdivision (b)(4)(ii)
of this clause of a conviction, take one of the following actions with
respect to any employee who is convicted of a drug abuse violation
occurring in the workplace:

\(i\) Taking appropriate personnel action against such employee, up to
and including termination; or

\(ii\) Require such employee to satisfactorily participate in a drug
abuse assistance or rehabilitation program approved for such purposes by
a Federal, State, or local health, law enforcement, or other appropriate
agency; and

\(7\) Make a good faith effort to maintain a drug-free workplace through
implementation of subparagraphs (b)(1) through (b)(6) of this clause.

\(c\) The Contractor, if an individual, agrees by award of the contract
or acceptance of a purchase order, not to engage in the unlawful
manufacture, distribution, dispensing, possession, or use of a
controlled substance while performing this contract.

\(d\) In addition to other remedies available to the Government, the
Contractor\'s failure to comply with the requirements of paragraph (b)
or (c) of this clause may, pursuant to FAR 23.506, render the Contractor
subject to suspension of contract payments, termination of the contract
for default, and suspension or debarment.

SECTION 5.26

FEDERAL, STATE, AND LOCAL TAXES (JAN 1991) (FAR 52.229-3)

\(a\) \"Contract date,\" as used in this clause, means the date set for
bid opening or, if this is a negotiated contract or a modification, the
effective date of this contract or modification.

\"All applicable Federal, State, and local taxes and duties,\" as used
in this clause, means all taxes and duties, in effect on the contract
date, that the taxing authority is imposing and collecting on the
transactions or property covered by this contract.

\"After-imposed Federal tax,\" as used in this clause, means any new or
increased Federal excise tax or duty, or tax that was exempted or
excluded on the contract date but whose exemption was later revoked or
reduced during the contract period, on the transactions or property
covered by this contract that the Contractor is required to pay or bear
as the result of legislative, judicial, or administrative action taking
effect after the contract date. It does not include social security tax
or other employment taxes.

\"After-relieved Federal tax,\" as used in this clause, means any amount
of Federal excise tax or duty, except social security or other
employment taxes, that would otherwise have been payable on the
transactions or property covered by this contract, but which the
Contractor is not required to pay or bear, or for which the Contractor
obtains a refund or drawback, as the result of legislative, judicial, or
administrative action taking effect after the contract date.

\(b\) The contract price includes all applicable Federal, State, and
local taxes and duties.

\(c\) The contract price shall be increased by the amount of any
after-imposed Federal tax, provided the Contractor warrants in writing
that no amount for such newly imposed Federal excise tax or duty or rate
increase was included in the contract price, as a contingency reserve or
otherwise.

\(d\) The contract price shall be decreased by the amount of any
after-relieved Federal tax.

\(e\) The contract price shall be decreased by the amount of any Federal
excise tax or duty, except social security or other employment taxes,
that the Contractor is required to pay or bear, or does not obtain a
refund of, through the Contractor\'s fault, negligence, or failure to
follow instructions of the Contracting Officer.

\(f\) No adjustment shall be made in the contract price under this
clause unless the amount of the adjustment exceeds \$250.

\(g\) The Contractor shall promptly notify the Contracting Officer of
all matters relating to any Federal excise tax or duty that reasonably
may be expected to result in either an increase or decrease in the
contract price and shall take appropriate action as the Contracting
Officer directs.

\(h\) The Government shall, without liability, furnish evidence
appropriate to establish exemption from any Federal, State, or local tax
when the Contractor requests such evidence and a reasonable basis exists
to sustain the exemption.

SECTION 5.27

\[RESERVED\]

SECTION 5.28

TAXES - CONTRACTS PERFORMED IN U.S. POSSESSIONS OR PUERTO RICO (APR
1984) (FAR 52.229-5)

The term \"local taxes,\" as used in the Federal, State, and local taxes
clause of this contract, includes taxes imposed by a possession of the
United States or by Puerto Rico.

> SECTION 5.29
>
> TAXES - FOREIGN NEGOTIATED BENEFITS CONTRACTS (JAN 1998) (FEHBAR
> 1652.229-70)
>
> \(a\) To the extent that this contract provides for performing
> services outside the United States, its possessions, and Puerto Rico,
> this clause applies in lieu of any Federal, State, and local taxes
> clause of the contract.
>
> \(b\) \"Contract date,\" as used in this clause, means the effective
> date of this contract or modification.
>
> \"Country concerned,\" as used in this clause, means any country,
> other than the United States, its possessions, and Puerto Rico, in
> which expenditures under this contract are made.
>
> \"Tax\" and \"taxes,\" as used in this clause, include fees and
> charges for doing business that are levied by the government of the
> country concerned or by its political subdivisions.
>
> \"All applicable taxes and duties,\" as used in this clause, means all
> taxes and duties, in effect on the contract date, that the taxing
> authority is imposing and collecting on the transactions covered by
> this contract, pursuant to written ruling or regulation in effect on
> the contract date.
>
> \"After-imposed tax,\" as used in this clause, means any new or
> increased tax or duty, or tax that was exempted or excluded on the
> contract date but whose exemption was later revoked or reduced during
> the contract period, other than excepted tax, on the transactions
> covered by this contract that the Carrier is required to pay or bear
> as the result of legislative, judicial, or administrative action
> taking effect after the contract date.
>
> \"After-relieved tax,\" as used in this clause, means any amount of
> tax or duty, other than an excepted tax, that would otherwise have
> been payable on the transactions covered by this contract, but which
> the Carrier is not required to pay or bear, or for which the Carrier
> obtains a refund, as the result of legislative, judicial, or
> administrative action taking effect after the contract date.
>
> \"Excepted tax,\" as used in this clause, means social security or
> other employment taxes, net income and franchise taxes, excess profits
> taxes, capital stock taxes, transportation taxes, unemployment
> compensation taxes, and property taxes. \"Excepted tax\" does not
> include gross income taxes levied on or measured by sales or receipts
> from sales covered by this contract, or any tax assessed on the
> Carrier\'s possession of, interest in, or use of property, title to
> which is in the U.S. Government.
>
> \(c\) Unless otherwise provided in this contract, the contract price
> includes all applicable taxes and duties, except taxes and duties that
> the Government of the United States and the government of the country
> concerned have agreed shall not be applicable to expenditures in such
> country by or on behalf of the United States.
>
> \(d\) The contract price shall be increased by the amount of any
> after-imposed tax or of any tax or duty specifically excluded from the
> contract price by a provision of this contract that the Carrier is
> required to pay or bear, including any interest or penalty, if the
> Carrier states in writing that the contract price does not include any
> contingency for such tax and if liability for such tax, interest, or
> penalty was not incurred through the Carrier\'s fault, negligence, or
> failure to follow instructions of the Contracting Officer or to comply
> with the provisions of paragraph (i) below.
>
> \(e\) The contract price shall be decreased by the amount of any
> after-relieved tax, including any interest or penalty. The Government
> of the United States shall be entitled to interest received by the
> Carrier incident to a refund of taxes to the extent that such interest
> was earned after the Carrier was paid by the Government of the United
> States for such taxes. The Government of the United States shall be
> entitled to repayment of any penalty refunded to the Carrier to the
> extent that the penalty was paid by the Government.
>
> \(f\) The contract price shall be decreased by the amount of any tax
> or duty, other than an excepted tax, that was included in the contract
> and that the Carrier is required to pay or bear, or does not obtain a
> refund of, through the Carrier\'s fault, negligence, or failure to
> follow instructions of the Contracting Officer or to comply with the
> provisions of paragraph (i) below.
>
> \(g\) No adjustment shall be made in the contract price under this
> clause unless the amount of the adjustment exceeds \$250.
>
> \(h\) If the Carrier obtains a reduction in tax liability under the
> United States Internal Revenue Code (Title 26, U.S. Code) because of
> the payment of any tax or duty that either was included in the
> contract price or was the basis of an increase in the contract price,
> the amount of the reduction shall be paid or credited to the
> Government of the United States as the Contracting Officer directs.
>
> \(i\) The Carrier shall take all reasonable action to obtain exemption
> from or refund of any taxes or duties, including interest or penalty,
> from which the United States Government, the Carrier, any
> subcontractor, or the transactions covered by this contract are exempt
> under the laws of the country concerned or its political subdivisions
> or which the governments of the United States and of the country
> concerned have agreed shall not be applicable to expenditures in such
> country by or on behalf of the United States.
>
> \(j\) The Carrier shall promptly notify the Contracting Officer of all
> matters relating to taxes or duties that reasonably may be expected to
> result in either an increase or decrease in the contract price and
> shall take appropriate action as the Contracting Officer directs. The
> contract price shall be equitably adjusted to cover the costs of
> action taken by the Carrier at the direction of the Contracting
>
> Officer, including any interest, penalty, and reasonable attorneys\'
> fees.

SECTION 5.30

COST ACCOUNTING STANDARDS

(APR 1998) (FAR 52.230-2)

\(a\) Unless the contract is exempt under 48 CFR 9903.201-1 and
9903.201-2, the provisions of 48 CFR Part 9903 are incorporated herein
by reference and the Contractor, in connection with this contract, shall
-

\(1\) (CAS-covered Contracts Only) By submission of a Disclosure
Statement, disclose in writing the Contractor\'s cost accounting
practices as required by 48 CFR 9903.202-1 through 9903.202-5, including
methods of distinguishing direct costs from indirect costs and the basis
used for allocating indirect costs. The practices disclosed for this
contract shall be the same as the practices currently disclosed and
applied on all other contracts and subcontracts being performed by the
Contractor and which contain a Cost Accounting Standards (CAS) clause.
If the Contractor has notified the Contracting Officer that the
Disclosure Statement contains trade secrets and commercial or financial
information which is privileged and confidential, the Disclosure
Statement shall be protected and shall not be released outside of the
Government.

\(2\) Follow consistently the Contractor\'s cost accounting practices in
accumulating and reporting contract performance cost data concerning
this contract. If any change in cost accounting practices is made for
the purposes of any contract or subcontract subject to CAS requirements,
the change must be applied prospectively to this contract and the
Disclosure Statement must be amended accordingly. If the contract price
or cost allowance of this contract is affected by such changes,
adjustment shall be made in accordance with subparagraph (a)(4) or
(a)(5) of this clause, as appropriate.

\(3\) Comply with all CAS, including any modifications and
interpretations indicated thereto contained in 48 CFR Part 9904, in
effect on the date of award of this contract or, if the Contractor has
submitted cost or pricing data, on the date of final agreement on price
as shown on the Contractor\'s signed certificate of current cost or
pricing data. The Contractor shall also comply with any CAS (or
modifications to CAS) which hereafter become applicable to a contract or
subcontract of the Contractor. Such compliance shall be required
prospectively from the date of applicability to such contract or
subcontract.

(4)(i) Agree to an equitable adjustment as provided in the Changes
clause of this contract if the contract cost is affected by a change
which, pursuant to subparagraph (a)(3) of this clause, the Contractor is
required to make to the Contractor\'s established cost accounting
practices.

\(ii\) Negotiate with the Contracting Officer to determine the terms and
conditions under which a change may be made to a cost accounting
practice, other than a change made under other provisions of
subparagraph (a)(4) of this clause; provided that no agreement may be
made under this provision that will increase costs paid by the United
States.

\(iii\) When the parties agree to a change to a cost accounting
practice, other than a change under subdivision (a)(4)(i) of this
clause, negotiate an equitable adjustment as provided in the Changes
clause of this contract.

\(5\) Agree to an adjustment of the contract price or cost allowance, as
appropriate, if the Contractor or a subcontractor fails to comply with
an applicable Cost Accounting Standard, or to follow any cost accounting
practice consistently and such failure results in any increased costs
paid by the United States. Such adjustment shall provide for recovery of
the increased costs to the United States, together with interest thereon
computed at the annual rate established under section 6621 of the
Internal Revenue Code of 1986 (26 U.S.C. 6621) for such period, from the
time the payment by the United States was made to the time the
adjustment is effected. In no case shall the Government recover costs
greater than the increased cost to the Government, in the aggregate, on
the relevant contracts subject to the price adjustment, unless the
Contractor made a change in its cost accounting practices of which it
was aware or should have been aware at the time of price negotiations
and which it failed to disclose to the Government.

\(b\) If the parties fail to agree whether the Contractor or a
subcontractor has complied with an applicable CAS in 48 CFR Part 9904 or
a CAS rule or regulation in 48 CFR Part 9903 and as to any cost
adjustment demanded by the United States, such failure to agree will
constitute a dispute under the Contract Disputes Act (41 U.S.C. 601).

\(c\) The Contractor shall permit any authorized representatives of the
Government to examine and make copies of any documents, papers, or
records relating to compliance with the requirements of this clause.

\(d\) The Contractor shall include in all negotiated subcontracts which
the Contractor enters into, the substance of this clause, except
paragraph (b), and shall require such inclusion in all other
subcontracts, of any tier, including the obligation to comply with all
CAS in effect on the subcontractor's award date or if the subcontractor
has submitted cost or pricing data, on the date of final agreement on
price as shown on the subcontractor\'s signed Certificate of Current
Cost or Pricing Data. If the subcontract is awarded to a business unit
which pursuant to 48 CFR 9903.201-2 is subject to other types of CAS
coverage, the substance of the applicable clause set forth in subsection
30.201-4 of the Federal Acquisition Regulation shall be inserted. This
requirement shall apply only to negotiated subcontracts in excess of
\$500,000, except that the requirement shall not apply to negotiated
subcontracts otherwise exempt from the requirement to include a CAS
clause as specified in 48 CFR 9903.201-1.

SECTION 5.31

DISCLOSURE AND CONSISTENCY OF COST ACCOUNTING PRACTICES (APR 1998) (FAR
52.230-3)

\(a\) The Contractor, in connection with this contract, shall -

\(1\) Comply with the requirements of 48 CFR 9904.401, Consistency in
Estimating, Accumulating, and Reporting Costs, 48 CFR 9904.402,
Consistency in Allocating Costs Incurred for the Same Purpose; 48 CFR
9904.405, Accounting for Unallowable Costs; and 48 CFR 9904.406 Cost
Accounting Standard\--Cost Accounting Period, in effect on the date of
award of this contract as indicated in 48 CFR Part 9904.

\(2\) (CAS-covered Contracts Only) If it is a business unit of a company
required to submit a Disclosure Statement, disclose in writing its cost
accounting practices as required by 48 CFR 9903.202-1 through
9903.202-5. If the Contractor has notified the Contracting Officer that
the Disclosure Statement contains trade secrets and commercial or
financial information which is privileged and confidential, the
Disclosure Statement shall be protected and shall not be released
outside of the Government.

(3)(i) Follow consistently the Contractor\'s cost accounting practices.
A change to such practices may be proposed, however, by either the
Government or the Contractor, and the Contractor agrees to negotiate
with the Contracting Officer the terms and conditions under which a
change may be made. After the terms and conditions under which the
change is to be made have been agreed to, the change must be applied
prospectively to this contract, and the Disclosure Statement, if
affected, must be amended accordingly.

\(ii\) The Contractor shall, when the parties agree to a change to a
cost accounting practice and the Contracting Officer has made the
finding required in 48 CFR 9903.201-6(b), that the change is desirable
and not detrimental to the interests of the Government, negotiate an
equitable adjustment as provided in the Changes clause of this contract.
In the absence of the required finding, no agreement may be made under
this contract clause that will increase costs paid by the United States.

\(4\) Agree to an adjustment of the contract price or cost allowance, as
appropriate, if the Contractor or a subcontractor fails to comply with
the applicable CAS or to follow any cost accounting practice, and such
failure results in any increased costs paid by the United States. Such
adjustment shall provide for recovery of the increased costs to the
United States together with interest thereon computed at the annual rate
of interest established under the Internal Revenue Code of 1986 (26
U.S.C. 6621), from the time the payment by the United States was made to
the time the adjustment is effected.

\(b\) If the parties fail to agree whether the Contractor has complied
with an applicable CAS, rule, or regulation as specified in 48 CFR Parts
9903 and 9904 and as to any cost adjustment demanded by the United
States, such failure to agree will constitute a dispute under the
Contract Disputes Act (41 U.S.C. 601).

\(c\) The Contractor shall permit any authorized representatives of the
Government to examine and make copies of any documents, papers, and
records relating to compliance with the requirements of this clause.

\(d\) The Contractor shall include in all negotiated subcontracts, which
the Contractor enters into, the substance of this clause, except
paragraph (b), and shall require such inclusion in all other
subcontracts of any tier, except that -

\(1\) If the subcontract is awarded to a business unit which pursuant to
48 CFR 9903.201 or 9903.201-2 is subject to other types of CAS coverage,
the substance of the applicable clause set forth in subsection 30.201-4
of the Federal Acquisition regulation shall be inserted.

\(2\) This requirement shall apply only to negotiated subcontracts in
excess of \$500,000.

\(3\) The requirement shall not apply to negotiated subcontracts
otherwise exempt from the requirement to include a CAS clause as
specified in 48 CFR 9903.201-1.

SECTION 5.32

ADMINISTRATION OF COST ACCOUNTING STANDARDS (NOV 1999) (FAR 52.230-6)

For the purpose of administering the Cost Accounting Standards (CAS)
requirements under this contract, the Contractor shall take the steps
outlined in paragraphs (a) through (g) of this clause:

\(a\) Submit to the cognizant Contracting Officer a description of any
accounting practice change, the total potential impact of the change on
contracts containing a CAS clause and a general dollar magnitude of the
change which identifies the potential shift of costs between CAS‑covered
contracts by contract type (i.e., firm‑fixed‑price, incentive,
cost‑plus‑fixed‑fee, etc.) and other contractor business activity. As
related to CAS‑covered contracts, the analysis should identify the
potential impact on funds of the various Agencies/Departments (i.e.,
Department of Energy, National Aeronautics and Space Administration,
Army, Navy, Air Force, other Department of Defense, other Government) as
follows:

\(1\) For any change in cost accounting practices required in accordance
with subparagraph (a)(3) and subdivision (a)(4)(i) of the clause at FAR
52.230-2, Cost Accounting Standards; or subparagraph (a)(3) and
subdivisions (a)(4)(i) or (a)(4)(iv) of the clause at FAR 52.230-5, Cost
Accounting Standards\--Educational Institution; within 60 days (or such
other date as may be mutually agreed to) after award of a contract
requiring this change.

\(2\) For any change in cost accounting practices proposed in accordance
with subdivision (a)(4)(ii) or (iii) of the clause at FAR 52.230-2, Cost
Accounting Standards, and FAR 52.230-5, Cost Accounting
Standards\--Educational Institution; or with subparagraph (a)(3) of the
clause at FAR 52.230-3, Disclosure and Consistency of Cost Accounting
Practices, not less than 60 days (or such other date as may be mutually
agreed to) before the effective date of the proposed change.

\(3\) For any failure to comply with an applicable CAS or to follow a
disclosed practice (as contemplated by subparagraph (a)(5) at FAR
52.230-2, Cost Accounting Standards, and FAR 52.230-5, Cost Accounting
Standards\--Educational Institution; or by subparagraph (a)(4) at FAR
52.230-3, Disclosure and Consistency of Cost Accounting Practices):

\(i\) Within 60 days (or such other date as may be mutually agreed to)
after the date of agreement with the initial finding of noncompliance,
or

\(ii\) In the event of Contractor disagree­ment with the initial finding
of noncompliance, within 60 days of the date the Contractor is notified
by the Contracting Officer of the determination of noncompliance.

\(b\) After an ACO, or cognizant Federal agency official, determination
of materiality, submit a cost impact proposal in the form and manner
specified by the Contracting Officer within 60 days (or such other date
as may be mutually agreed to) after the date of determination of the
adequacy and compliance of a change submitted pursuant to paragraph (a)
of this clause. The cost impact proposal shall be in sufficient detail
to permit evaluation, determination, and negotiation of the cost impact
upon each separate CAS-covered contract and subcontract.

\(1\) Cost impact proposals submitted for changes in cost accounting
practices required in accordance with subparagraph (a)(3) and
subdivision (a)(4)(i) of the clause at FAR 52.230-2, Cost Accounting
Standards; or subparagraph (a)(3) and subdivisions (a)(4)(i) or
(a)(4)(iv) of the clause at FAR 52.230-5, Cost Accounting
Standards\--Educational Institution; shall identify the applicable
standard or cost principle and all contracts and subcontracts containing
the clauses entitled Cost Accounting Standards or Cost Accounting
Standards\--Educational Institution, which have an award date before the
effective date of that standard or cost principle.

\(2\) Cost impact proposals submitted for any change in cost accounting
practices proposed in accordance with subdivisions (a)(4)(ii) or (iii)
of the clause at FAR 52.230-2, Cost Accounting Standards, and FAR
52.230-5, Cost Accounting Standards\--Educational Institution; or with
subparagraph (a)(3) of the clause at FAR 52.230-3, Disclosure and
Consistency of Cost Accounting Practices, shall identify all contracts
and subcontracts containing the clause at FAR 52.230-2, Cost Accounting
Standards, FAR 52.230-5, Cost Accounting Standards\--Educational
Institution, and FAR 52.230-3, Disclosure and Consistency of Cost
Accounting Practices.

\(3\) Cost impact proposals submitted for failure to comply with an
applicable CAS or to follow a disclosed practice as contemplated by
subparagraph (a)(5) of the clause at FAR 52.230-2, Cost Accounting
Standards, and FAR 52.230-5, Cost Accounting Standards\--Educational
Institution; or by subparagraph (a)(4) of the clause at FAR 52.230-3,
Disclosure and Consistency of Cost Accounting Practices, shall identify
the cost impact on each separate CAS covered contract from the date of
failure to comply until the noncompliance is corrected.

\(c\) If the submissions required by paragraphs (a) and (b) of this
clause are not submitted within the specified time, or any extension
granted by the Contracting Officer, an amount not to exceed 10 percent
of each subsequent amount determined payable related to the
Contractor\'s CAS-covered prime contracts, up to the estimated general
dollar magnitude of the cost impact, may be withheld until such time as
the required submission has been provided in the form and manner
specified by the Contracting Officer.

\(d\) Agree to appropriate contract and subcontract amendments to
reflect adjustments established in accordance with subparagraphs (a)(4)
and (a)(5) of the clauses at FAR 52.230-2 or with subparagraphs (a)(3)
or (a)(4) of the Disclosure and Consistency of Cost Accounting Practices
clause at FAR 52.230-3.

\(e\) For all subcontracts subject to the clauses at FAR 52.230-2,
52.230-3, or 52.230-5\--‑

\(1\) So state in the body of the subcontract, in the letter of award,
or in both (self-deleting clauses shall not be used);

\(2\) Include the substance of this clause in all negotiated
subcontracts; and

\(3\) Within 30 days after award of the subcontract, submit the
following information to the Contractor\'s cognizant contract
administration office for transmittal to the contract administration
office cognizant of the subcontractor\'s facility:

\(i\) Subcontractor\'s name and subcontract number.

\(ii\) Dollar amount and date of award.

\(iii\) Name of Contractor making the award.

\(f\) Notify the Contracting Officer in writing of any adjustments
required to subcontracts under this contract and agree to an adjustment,
based on them, to this contract price or estimated cost and fee. This
notice is due within 30 days after proposed subcontract adjustments are
received and shall include a proposal for adjusting the higher tier
subcontract or the prime contract appropriately.

\(g\) For subcontracts containing the clauses at FAR 52.230-2, 52.230-3,
or 52.230-5, require the subcontractor to comply with all Standards in
effect on the date of award or of final agreement on price, as shown on
the subcontractor\'s signed Certificate of Current Cost or Pricing Data,
whichever is earlier.

(End of clause)

SECTION 5.33

DISCOUNTS FOR PROMPT PAYMENT (MAY 1997) (FAR 52.232-8)

\(a\) Discounts for prompt payment will not be considered in the
evaluation of offers. However, any offered discount will form a part of
the award, and will be taken if payment is made within the discount
period indicated in the offer by the offeror. As an alternative to
offering a prompt payment dis-count in conjunction with the offer,
offerors awarded contracts may include prompt payment discounts on
individual invoices.

\(b\) In connection with any discount offered for prompt payment, time
shall be computed from the date of the invoice. If the Contractor has
not placed a date on the invoice, the due date shall be calculated from
the date the designated billing office receives a proper invoice,
provided the agency annotates such invoice with the date of receipt at
the time of receipt. For the purpose of computing the discount earned,
payment shall be considered to have been made on the date that appears
on the payment check or, for an electronic funds transfer, the specified
payment date. When the discount date falls on a Saturday, Sunday, or
legal holiday when Federal Government offices are closed and Government
business is not expected to be conducted, payment may be made on the
following business day.

SECTION 5.34

INTEREST (JUN 1996) (FAR 52.232-17) FEHBAR (JAN 1995)

\(a\) Except as otherwise provided in this contract under a Price
Reduction for Defective Cost or Pricing Data clause or a Cost Accounting
Standards clause, all amounts that become payable by the Contractor to
the Government under this contract shall bear simple interest from the
date due until paid unless paid within 30 days of becoming due. The
interest rate shall be the interest rate established by the Secretary of
the Treasury as provided in Section 12 of the Contract Disputes Act of
1978 (Public Law 95-563), which is applicable to the period in which the
amount becomes due, as provided in paragraph (b) of this clause, and
then at the rate applicable for each six-month period as fixed by the
Secretary until the amount is paid.

\(b\) Amounts shall be due at the earliest of the following dates:

\(1\) The date fixed under this contract.

\(2\) The date of the first written demand for payment consistent with
this contract, including any demand resulting from a default
termination.

\(3\) The date the Government transmits to the Contractor a proposed
supplemental agreement to confirm completed negotiations establishing
the amount of debt.

\(4\) If this contract provides for revision of prices, the date of
written notice to the Contractor stating the amount of refund payable in
connection with a pricing proposal or a negotiated pricing agreement not
confirmed by contract modification.

\(c\) The interest charge made under this clause may be reduced under
the procedures prescribed in 32.614-2 of the Federal Acquisition
Regulation in effect on the date of this contract.

SECTION 5.35

ASSIGNMENT OF CLAIMS (JAN 1986) (FAR 52.232-23)

\(a\) The Contractor, under the Assignment of Claims Act, as amended, 31
U.S.C. 3727, 41 U.S.C. 15 (hereafter referred to as \"the Act\"), may
assign its rights to be paid amounts due or to become due as a result of
the performance of this contract to a bank, trust company, or other
financing institution, including any Federal lending agency. The
assignee under such an assignment may thereafter further assign or
reassign its right under the original assignment to any type of
financing institution described in the preceding sentence.

\(b\) Any assignment or reassignment authorized under the Act and this
clause shall cover all unpaid amounts payable under this contract, and
shall not be made to more than one party, except that an assignment or
reassignment may be made to one party as agent or trustee for two or
more parties participating in the financing of this contract.

\(c\) The Contractor shall not furnish or disclose to any assignee under
this contract any classified document (including this contract) or
information related to work under this contract until the Contracting
Officer authorizes such action in writing.

SECTION 5.36

DISPUTES (DEC 1998) (FAR 52.233-1)

\(a\) This contract is subject to the Contract Disputes Act of 1978, as
amended (41 U.S.C. 601-613).

\(b\) Except as provided in the Act, all disputes arising under or
relating to this contract shall be resolved under this clause.

\(c\) \"Claim,\" as used in this clause, means a written demand or
written assertion by one of the contracting parties seeking, as a matter
of right, the payment of money in a sum certain, the adjustment or
interpretation of contract terms, or other relief arising under or
relating to this contract. A claim arising under a contract, unlike a
claim relating to that contract, is a claim that can be resolved under a
contract clause that provides for the relief sought by the claimant.
However, a written demand or written assertion by the Contractor seeking
the payment of money exceeding \$100,000 is not a claim under the Act
until certified as required by subparagraph (d)(2) of this clause. A
voucher, invoice, or other routine request for payment that is not in
dispute when submitted is not a claim under the Act. The submission may
be converted to a claim under the Act, by complying with the submission
and certification requirements of this clause, if it is disputed either
as to liability or amount or is not acted upon in a reasonable time.

(d)(1) A claim by the Contractor shall be made in writing and, unless
otherwise stated in this contract, submitted within 6 years after
accrual of the claim to the Contracting Officer for a written decision.
A claim by the Government against the Contractor shall be subject to a
written decision by the Contracting Officer.

(2)(i) The Contractor shall provide the certification specified in
paragraph (d)(2)(iii) of this clause when submitting any claim exceeding
\$100,000.

\(ii\) The certification requirement does not apply to issues in
controversy that have not been submitted as all or part of a claim.

\(iii\) The certification shall state as follows: \"I certify that the
claim is made in good faith; that the supporting data are accurate and
complete to the best of my knowledge and belief; that the amount
requested accurately reflects the contract adjustment for which the
Contractor believes the Government is liable; and that I am duly
authorized to certify the claim on behalf of the Contractor.\"

\(3\) The certification may be executed by any person duly authorized to
bind the Contractor with respect to the claim.

\(e\) For Contractor claims of \$100,000 or less, the Contracting
Officer must, if requested in writing by the Contractor, render a
decision within 60 days of the request. For Contractor-certified claims
over \$100,000, the Contracting Officer must, within 60 days, decide the
claim or notify the Contractor of the date by which the decision will be
made.

\(f\) The Contracting Officer\'s decision shall be final unless the
Contractor appeals or files a suit as provided in the Act.

\(g\) If the claim by the Contractor is submitted to the Contracting
Officer or a claim by the Government is presented to the Contractor, the
parties, by mutual consent, may agree to use alternative dispute
resolution (ADR). If the Contractor refuses an offer for ADR, the
Contractor shall inform the Contracting Officer, in writing, of the
Contractor\'s specific reasons for rejecting the offer.

\(h\) The Government shall pay interest on the amount found due and
unpaid from (1) the date that the Contracting Officer receives the claim
(certified, if required); or (2) the date that payment otherwise would
be due, if that date is later, until the date of payment. With regard to
claims having defective certifications, as defined in FAR 33.201,
interest shall be paid from the date that the Contracting Officer
initially receives the claim. Simple interest on claims shall be paid at
the rate, fixed by the Secretary of the Treasury as provided in the Act,
which is applicable to the period during which the Contracting Officer
receives the claim and then at the rate applicable for each 6-month
period as fixed by the Treasury Secretary during the pendency of the
claim.

\(i\) The Contractor shall proceed diligently with performance of this
contract, pending final resolution of any request for relief, claim,
appeal, or action arising under or relating to the contract, and comply
with any decision of the Contracting Officer.

SECTION 5.37

\[RESERVED\]

SECTION 5.38

CHANGES\-- NEGOTIATED BENEFITS CONTRACTS (JAN 1998) (FEHBAR 1652.243-70)

\(a\) 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.

\(b\) 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 Carrier 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
Carrier from proceeding with the contract as changed.

SECTION 5.39

\[RESERVED\]

SECTION 5.40

GOVERNMENT PROPERTY (NEGOTIATED BENEFITS CONTRACTS) (JAN 1998) (FEHBAR
1652.245-70)

\(a\) Government-furnished property. (1) The Government shall deliver to
the Carrier, for use in connection with and under the terms of this
contract, the Government-furnished property described in this contract
together with any related data and information that the Carrier may
request and is reasonably required for the intended use of the property
(hereinafter referred to as \"Government-furnished property\").

\(2\) The delivery or performance dates for this contract are based upon
the expectation that Government-furnished property suitable for use
(except for property furnished \"as-is\") will be delivered to the
Carrier at the times stated in this contract or, if not so stated, in
sufficient time to enable the Carrier to meet the contract\'s
performance dates.

\(3\) If Government-furnished property is received by the Carrier in a
condition not suitable for the intended use, the Carrier shall, upon
receipt of it, notify the Contracting Officer, detailing the facts, and,
as directed by the Contracting Officer and at Government expense, either
repair, modify, return, or otherwise dispose of the property. After
completing the directed action and upon written request of the Carrier,
the Contracting Officer shall make an equitable adjustment as provided
in paragraph (h) of this clause.

\(b\) Changes in Government-furnished property. (1) The Contracting
Officer may, by written notice, (i) decrease the Government-furnished
property provided or to be provided under this contract, or (ii)
substitute other Government-furnished property for the property to be
provided by the Government, or to be acquired by the Carrier for the
Government, under this contract. The Carrier shall promptly take such
action as the Contracting Officer may direct regarding the removal,
shipment, or disposal of the property covered by such notice.

\(2\) Upon the Carrier\'s written request, the Contracting Officer shall
make an equitable adjustment to the contract in accordance with
paragraph (h) of this clause, if the Government has agreed in this
contract to make the property available for performing this contract and
there is any -

\(i\) Decrease or substitution in this property pursuant to subparagraph
(b)(1) above; or

\(ii\) Withdrawal of authority to use this property, if provided under
any other contract or lease.

\(c\) Title in Government property. (1) The Government shall retain
title to all Government-furnished property.

\(2\) All Government-furnished property and all property acquired by the
Carrier, title to which vests in the Government under this paragraph
(collectively referred to as \"Government property\"), are subject to
the provisions of this clause. Title to Government property shall not be
affected by its incorporation into or attachment to any property not
owned by the Government, nor shall Government property become a fixture
or lose its identity as personal property by being attached to any real
property.

\(d\) Use of Government property. The Government property shall be used
only for performing this contract, unless otherwise provided in this
contract or approved by the Contracting Officer.

\(e\) Property administration. (1) The Carrier shall be responsible and
accountable for all Government property provided under this contract and
shall comply with Federal Acquisition Regulation (FAR) subpart 45.5, as
in effect on the date of this contract.

\(2\) The Carrier shall establish and maintain a program for the use,
maintenance, repair, protection, and preservation of Government property
in accordance with sound industrial practice and the applicable
provisions of subpart 45.5 of the FAR.

\(3\) If damage occurs to Government property, the risk of which has
been assumed by the Government under this contract, the Government shall
replace the items or the Carrier shall make such repairs as the
Government directs. However, if the Carrier cannot effect such repairs
within the time required, the Carrier shall dispose of the property as
directed by the Contracting Officer. When any property for which the
Government is responsible is replaced or repaired, the Contracting
Officer shall make an equitable adjustment in accordance with paragraph
(h) of this clause.

\(4\) The Carrier represents that the contract price does not include
any amount for repairs or replacement for which the Government is
responsible. Repair or replacement of property for which the Carrier is
responsible shall be accomplished by the Carrier at its own expense.

\(f\) Access. The Government and all its designees shall have access at
all reasonable times to the premises in which any Government property is
located for the purpose of inspecting the Government property.

\(g\) Risk of loss. Unless otherwise provided in this contract, the
Carrier assumes the risk of, and shall be responsible for, any loss or
destruction of, or damage to, Government property upon its delivery to
the Carrier. However, the Carrier is not responsible for reasonable wear
and tear to Government property or for Government property properly
consumed in performing this contract.

\(h\) Equitable adjustment. When this clause specifies an equitable
adjustment, it shall be made to any affected contract provision in
accordance with the procedures of the Changes clause. When appropriate,
the Contracting Officer may initiate an equitable adjustment in favor of
the Government. The right to an equitable adjustment shall be the
Carrier\'s exclusive remedy. The Government shall not be liable to suit
for breach of contract for \--

\(1\) Any delay in delivery of Government-furnished property;

\(2\) Delivery of Government-furnished property in a condition not
suitable for its intended use;

\(3\) A decrease in or substitution of Government-furnished property; or

\(4\) Failure to repair or replace Government property for which the
Government is responsible.

\(i\) Final accounting and disposition of Government property. Upon
completing this contract, or at such earlier dates as may be fixed by
the Contracting Officer, the Carrier shall submit, in a form acceptable
to the Contracting Officer, inventory schedules covering all items of
Government property (including any resulting scrap) not consumed in
performing this contract or delivered to the Government. The Carrier
shall prepare for shipment, deliver f.o.b. origin, or dispose of the
Government property as may be directed or authorized by the Contracting
Officer. The net proceeds of any such disposal shall be credited to the
contract price or shall be paid to the Government as the Contracting
Officer directs.

\(j\) Abandonment and restoration of Carrier\'s premises. Unless
otherwise provided herein, the Government -

\(1\) May abandon any Government property in place, at which time all
obligations of the Government regarding such abandoned property shall
cease; and

\(2\) Has no obligation to restore or rehabilitate the Carrier\'s
premises under any circumstances (e.g., abandonment, disposition upon
completion of need, or upon contract completion). However, if the
Government-furnished property is withdrawn or is unsuitable for the
intended use, or if other Government property is substituted, then the
equitable adjustment under paragraph (h) of this clause may properly
include restoration or rehabilitation costs.

\(k\) Communications. All communications under this clause shall be in
writing.

\(l\) Overseas contracts. If this contract is to be performed outside of
the United States of America, its territories, or possessions, the words
\"Government\" and \"Government- furnished\" (wherever they appear in
this clause) shall be construed as \"United States Government\" and
\"United States Government-furnished\", respectively.

SECTION 5.41

\[RESERVED\]

SECTION 5.42

PREFERENCE FOR U.S.-FLAG AIR CARRIERS (JAN 1997) (FAR 52.247-63)

\(a\) \"International air transportation,\" as used in this clause,
means transportation by air between a place in the United States and a
place outside the United States or between two places both of which are
outside the United States.

\"United States,\" as used in this clause, means the 50 States, the
District of Columbia, the Commonwealth of Puerto Rico, and possessions
of the United States.

\"U.S.-flag air carrier,\" as used in this clause, means an air carrier
holding a certificate under 49 U.S.C. Chapter 411).

\(b\) Section 5 of the International Air Transportation Fair Competitive
Practices Act of 1974 (49 U.S.C. 1517) (Fly America Act) requires that
all Federal agencies and Government contractors and subcontractors use
U.S. -flag air carriers for U.S. Government-financed international air
transportation of personnel (and their personal effects) or property, to
the extent that service by those carriers is available. It requires the
Comptroller General of the United States, in the absence of satisfactory
proof of the necessity for foreign-flag air transportation, to disallow
expenditures from funds, appropriated or otherwise established for the
account of the United States, for international air transportation
secured aboard a foreign-flag air carrier if a U.S.-flag air carrier is
available to provide such services.

\(c\) The Contractor agrees, in performing work under this contract, to
use U.S.-flag air carriers for international air transportation of
personnel (and their personal effects) or property to the extent that
service by those carriers is available.

\(d\) In the event that the Contractor selects a carrier other than a
U.S.-flag air carrier for international air transportation, the
Contractor shall include a statement on vouchers involving such
transportation essentially as follows:

STATEMENT OF UNAVAILABILITY OF U.S.-FLAG AIR CARRIERS

International air transportation of persons (and their personal effects)
or property by U.S.-flag air carrier was not available or it was
necessary to use foreign-flag air carrier service for the following
reasons (see section 47.403 of the Federal Acquisition Regulation):

(State reasons): (End of statement)

\(e\) The Contractor shall include the substance of this clause,
including this paragraph (e), in each subcontract or purchase under this
contract that may involve international air transportation.

SECTION 5.43

\[RESERVED\]

SECTION 5.44

AUTHORIZED DEVIATIONS IN CLAUSES (APR 1984) (FAR 52.252-6)

\(a\) The use in this solicitation or contract of any Federal
Acquisition Regulation (48 CFR Chapter 1) clause with an authorized
deviation is indicated by the addition of \"(DEVIATION)\" after the date
of the clause.

\(b\) The use in this solicitation or contract of any Federal Employees
Health Benefits Acquisition Regulation (48 CFR Chapter 16) clause with
an authorized deviation is indicated by the addition of \"(DEVIATION)\"
after the name of the regulation.

SECTION 5.45

LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL TRANSACTIONS (JUN
1997) (FAR 52.203-12)

\(a\) Definitions.

\"Agency,\" as used in this clause, means executive agency as defined in
FAR 2.101.

\"Covered Federal action,\" as used in this clause, means any of the
following Federal actions:

\(1\) The awarding of any Federal contract.

\(2\) The making of any Federal grant.

\(3\) The making of any Federal loan.

\(4\) The entering into of any cooperative agreement.

\(5\) The extension, continuation, renewal, amendment, or modification
of any Federal contract, grant, loan, or cooperative agreement.

\"Indian tribe\" and \"tribal organization,\" as used in this clause,
have the meaning provided in section 4 of the Indian Self-Determination
and Education Assistance Act (25 U.S.C. 450B) and include Alaskan
Natives.

\"Influencing or attempting to influence,\" as used in this clause,
means making, with the intent to influence, any communication to or
appearance before an officer or employee or any agency, a Member of
Congress, an officer or employee of Congress, or an employee of a Member
of Congress in connection with any covered Federal action.

\"Local government,\" as used in this clause, means a unit of government
in a State and, if chartered, established, or otherwise recognized by a
State for the performance of a governmental duty, including a local
public authority, a special district, an intrastate district, a council
of governments, a sponsor group representative organization, and any
other instrumentality of a local government.

"Officer or employee of an agency,\" as used in this clause, includes
the following individuals who are employed by an agency:

\(1\) An individual who is appointed to a position in the Government
under title 5, United States Code, including a position under a
temporary appointment.

\(2\) A member of the uniformed services, as defined in subsection
101(3), title 37, United States Code.

\(3\) A special Government employee, as defined in section 202, title
18, United States Code.

\(4\) An individual who is a member of a Federal advisory committee, as
defined by the Federal Advisory Committee Act, title 5, United States
Code, appendix 2.

\"Person,\" as used in this clause, means an individual, corporation,
company, association, authority, firm, partnership, society, State, and
local government, regardless of whether such entity is operated for
profit, or not for profit. This term excludes an Indian tribe, tribal
organization, or any other Indian organization with respect to
expenditures specifically permitted by other Federal law.

\"Reasonable compensation,\" as used in this clause, means, with respect
to a regularly employed officer or employee of any person, compensation
that is consistent with the normal compensation for such officer or
employee for work that is not furnished to, not funded by, or not
furnished in cooperation with the Federal Government.

\"Reasonable payment,\" as used in this clause, means, with respect to
professional and other technical services, a payment in an amount that
is consistent with the amount normally paid for such services in the
private sector.

\"Recipient,\" as used in this clause, includes the Contractor and all
subcontractors. This term excludes an Indian tribe, tribal organization,
or any other Indian organization with respect to expenditures
specifically permitted by other Federal law.

\"Regularly employed,\" as used in this clause, means, with respect to
an officer or employee of a person requesting or receiving a Federal
contract, an officer or employee who is employed by such person for at
least 130 working days within 1 year immediately preceding the date of
the submission that initiates agency consideration of such person for
receipt of such contract. An officer or employee who is employed by such
person for less than 130 working days within 1 year immediately
preceding the date of the submission that initiates agency consideration
of such person shall be considered to be regularly employed as soon as
he or she is employed by such person for 130 working days.

\"State,\" as used in this clause, means a State of the United States,
the District of Columbia, the Commonwealth of Puerto Rico, a territory
or possession of the United States, an agency or instrumentality of a
State, and multi-State, regional, or interstate entity having
governmental duties and powers.

\(b\) Prohibitions.

\(1\) Section 1352 of title 31, United States Code, among other things,
prohibits a recipient of a Federal contract, grant, loan, or cooperative
agreement from using appropriated funds to pay any person for
influencing or attempting to influence an officer or employee of any
agency, a Member of Congress, an officer or employee of Congress, or an
employee of a Member of Congress in connection with any of the following
covered Federal actions: the awarding of any Federal contract; the
making of any Federal grant; the making of any Federal loan; the
entering into of any cooperative agreement; or the modification of any
Federal contract, grant, loan, or cooperative agreement.

\(2\) The Act also requires Contractors to furnish a disclosure if any
funds other than Federal appropriated funds (including profit or fee
received under a covered Federal transaction) have been paid, or will be
paid, to any person for influencing or attempting to influence an
officer or employee of any agency, a Member of Congress, an officer or
employee of Congress, or an employee of a Member of Congress in
connection with a Federal contract, grant, loan, or cooperative
agreement.

\(3\) The prohibitions of the Act do not apply under the following
conditions:

\(i\) Agency and legislative liaison by own employees.

\(A\) The prohibition on the use of appropriated funds, in subparagraph
(b)(1) of this clause, does not apply in the case of a payment of
reasonable compensation made to an officer or employee of a person
requesting or receiving a covered Federal action if the payment is for
agency and legislative liaison activities not directly related to a
covered Federal action.

\(B\) For purposes of subdivision (b)(3)(i)(A) of this clause, providing
any information specifically requested by an agency or Congress is
permitted at any time.

\(C\) The following agency and legislative liaison activities are
permitted at any time where they are not related to a specific
solicitation for any covered Federal action:

\(1\) Discussing with an agency the qualities and characteristics
(including individual demonstrations) of the person\'s products or
services, conditions or terms of sale, and service capabilities.

\(2\) Technical discussions and other activities regarding the
application or adaptation of the person\'s products or services for an
agency\'s use.

\(D\) The following agency and legislative liaison activities are
permitted where they are prior to formal solicitation of any covered
Federal action\--

\(1\) Providing any information not specifically requested but necessary
for an agency to make an informed decision about initiation of a covered
Federal action;

\(2\) Technical discussions regarding the preparation of an unsolicited
proposal prior to its official submission; and

\(3\) Capability presentations by persons seeking awards from an agency
pursuant to the provisions of the Small Business Act, as amended by Pub.
L. 95-507, and subsequent amendments.

\(E\) Only those services expressly authorized by subdivision
(b)(3)(i)(A) of this clause are permitted under this clause.

\(ii\) Professional and technical services.

\(A\) The prohibition on the use of appropriated funds, in subparagraph
(b)(1) of this clause, does not apply in the case of\--

\(1\) A payment of reasonable compensation made to an officer or
employee of a person requesting or receiving a covered Federal action or
an extension, continuation, renewal, amendment, or modification of a
covered Federal action, if payment is for professional or technical
services rendered directly in the preparation, submission, or
negotiation of any bid, proposal, or application for that Federal action
or for meeting requirements imposed by or pursuant to law, as a
condition for receiving that Federal action.

\(2\) Any reasonable payment to a person, other than an officer or
employee of a person requesting or receiving a covered Federal action or
an extension, continuation, renewal, amendment, or modification of a
covered Federal action if the payment is for professional or technical
services rendered directly in the preparation, submission, or
negotiation of any bid, proposal, or application for that Federal action
or for meeting requirements imposed by or pursuant to law as a condition
for receiving that Federal action. Persons other than officers or
employees of a person requesting or receiving a covered Federal action
include consultants and trade associations.

\(B\) For purposes of subdivision (b)(3)(ii)(A) of this clause,
\"professional and technical services\" shall be limited to advice and
analysis directly applying any professional or technical discipline. For
example, drafting of a legal document accompanying a bid or proposal by
a lawyer is allowable. Similarly, technical advice provided by an
engineer on the performance or operational capability of a piece of
equipment rendered directly in the negotiation of a contract is
allowable. However, communications with the intent to influence made by
a professional (such as a licensed lawyer) or a technical person (such
as a licensed accountant) are not allowable under this section unless
they provide advice and analysis directly applying their professional or
technical expertise and unless the advice or analysis is rendered
directly and solely in the preparation, submission or negotiation of a
covered Federal action. Thus, for example, communications with the
intent to influence made by a lawyer that do not provide legal advice or
analysis directly and solely related to the legal aspects of his or her
client\'s proposal, but generally advocate one proposal over another are
not allowable under this section because the lawyer is not providing
professional legal services. Similarly, communications with the intent
to influence made by an engineer providing an engineering analysis prior
to the preparation or submission of a bid or proposal are not allowable
under this section since the engineer is providing technical services
but not directly in the preparation, submission or negotiation of a
covered Federal action.

\(C\) Requirements imposed by or pursuant to law as a condition for
receiving a covered Federal award include those required by law or
regulation and any other requirements in the actual award documents.

\(D\) Only those services expressly authorized by subdivisions
(b)(3)(ii)(A)(1) and (2) of this clause are permitted under this clause.

\(E\) The reporting requirements of FAR 3.803(a) shall not apply with
respect to payments of reasonable compensation made to regularly
employed officers or employees of a person.

\(iii\) Disclosure.

\(A\) The Contractor who requests or receives from an agency a Federal
contract shall file with that agency a disclosure form, OMB standard
form LLL, Disclosure of Lobbying Activities, if such person has made or
has agreed to make any payment using nonappropriated funds (to include
profits from any covered Federal action), which would be prohibited
under subparagraph (b)(1) of this clause, if paid for with appropriated
funds.

\(B\) The Contractor shall file a disclosure form at the end of each
calendar quarter in which there occurs any event that materially affects
the accuracy of the information contained in any disclosure form
previously filed by such person under subparagraph (c)(1) of this
clause. An event that materially affects the accuracy of the information
reported includes\--

\(1\) A cumulative increase of \$25,000 or more in the amount paid or
expected to be paid for influencing or attempting to influence a covered
Federal action; or

\(2\) A change in the person(s) or individual(s) influencing or
attempting to influence a covered Federal action; or

\(3\) A change in the officer(s), employee(s), or Member(s) contacted to
influence or attempt to influence a covered Federal action.

\(C\) The Contractor shall require the submittal of a certification, and
if required, a disclosure form by any person who requests or receives
any subcontract exceeding \$100,000 under the Federal contract.

\(D\) All subcontractor disclosure forms (but not certifications) shall
be forwarded from tier to tier until received by the prime Contractor.
The prime Contractor shall submit all disclosures to the Contracting
Officer at the end of the calendar quarter in which the disclosure form
is submitted by the subcontractor. Each subcontractor certification
shall be retained in the subcontract file of the awarding Contractor.

\(iv\) Agreement. The Contractor agrees not to make any payment
prohibited by this clause.

\(v\) Penalties.

\(A\) Any person who makes an expenditure prohibited under paragraph (a)
of this clause or who fails to file or amend the disclosure form to be
filed or amended by paragraph (b) of this clause shall be subject to
civil penalties as provided for by 31 U.S.C. 1352. An imposition of a
civil penalty does not prevent the Government from seeking any other
remedy that may be applicable.

\(B\) Contractors may rely without liability on the representation made
by their subcontractors in the certification and disclosure form.

\(vi\) Cost allowability. Nothing in this clause makes allowable or
reasonable any costs which would otherwise be unallowable or
unreasonable. Conversely, costs made specifically unallowable by the
requirements in this clause will not be made allowable under any other
provision.

SECTION 5.46

\[RESERVED\]

SECTION 5.47

PROTECTING THE GOVERNMENT\'S INTEREST WHEN SUBCONTRACTING WITH
CONTRACTORS DEBARRED, SUSPENDED OR PROPOSED FOR DEBARMENT (JUL 1995)
(FAR 52.209-6)

\(a\) The Government suspends or debars Contractors to protect the
Government\'s interests. The Contractor shall not enter into any
subcontract in excess of \$25,000 with a Contractor that is debarred,
suspended, or proposed for debarment unless there is a compelling reason
to do so.

\(b\) The Contractor shall require each proposed first-tier
subcontractor, whose subcontract will exceed \$25,000, to disclose to
the Contractor, in writing, whether as of the time of award of the
subcontract, the subcontractor, or its principals, is or is not
debarred, suspended, or proposed for debarment by the Federal
Government.

\(c\) A corporate officer or a designee of the Contractor shall notify
the Contracting Officer, in writing, before entering into a subcontract
with a party that is debarred, suspended, or proposed for debarment (see
FAR 9.404 for information on the List of Parties Excluded From Federal
Procurement and Nonprocurement Programs). The notice must include the
following:

\(1\) The name of the subcontractor.

\(2\) The Contractor\'s knowledge of the reasons for the subcontractor
being on the List of Parties Excluded From Federal Procurement and
Nonprocurement Programs.

\(3\) The compelling reason(s) for doing business with the subcontractor
notwithstanding its inclusion on the List of Parties Excluded From
Federal Procurement and Nonprocurement Programs.

\(4\) The systems and procedures the Contractor has established to
ensure that it is fully protecting the Government\'s interests when
dealing with such subcontractor in view of the specific basis for the
party\'s debarment, suspension, or proposed debarment.

SECTION 5.48

BANKRUPTCY (JUL 1995) (FAR 52.242-13)

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
Office 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.

SECTION 5.49

FEHBP TERMINATION FOR CONVENIENCE OF THE GOVERNMENT\--NEGOTIATED
BENEFITS CONTRACTS (JAN 1998) (FEHBAR 1652.249-71)

\(a\) The Government 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 Government\'s interest.
The Contracting Officer shall terminate by delivering to the Carrier a
Notice of Termination specifying the extent of terminating and the
effective date.

\(b\) After receipt of a Notice of Termination, and except as directed
by the Contracting Officer, the Carrier 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 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 Government, as directed by the Contracting Officer,
all right, title, and interest of the Carrier under the subcontracts
terminated, in which case the Government 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, deliver to the Government
any data, reports, or studies that, if the contract had been completed,
would be required to be furnished to the Government.

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

\(c\) After termination, the Carrier shall submit a final termination
settlement proposal to the Contracting Officer in the form and with the
certification prescribed by the Contracting Officer. The Carrier 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 Carrier 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 Carrier 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 Carrier because of the termination and shall pay the amount
determined.

\(d\) Subject to paragraph (c) of this clause, the Carrier and the
Contracting Officer may agree upon the whole or any part of the amount
to be paid or remaining 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 (d) or
paragraph (e) of this clause, exclusive of costs shown in subparagraph
(e)(3) of this clause, 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 modified,
and the Carrier paid the agreed amount. Paragraph (e) of this clause
shall not limit, restrict, or affect the amount that may be agreed upon
to be paid under this paragraph.

\(e\) If the Carrier 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 Carrier the amounts determined by the
Contracting Officer as follows, but without duplication of any amounts
agreed on under paragraph (d) above:

\(1\) The contract price for completed services accepted by the
Government not previously paid for.

\(2\) 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 services paid or to be paid under
paragraph (e)(1) of this clause;

\(ii\) 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 subdivision
(e)(2)(i) of this clause; and

\(iii\) A sum, as profit on subdivision (e)(2)(i) of this clause,
determined by the Contracting Officer under 49.202 of the Federal
Acquisition Regulation, in effect on the date of this contract, to be
fair and reasonable.

\(3\) 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

\(f\) The cost principles and procedures of part 31 of the Federal
Acquisition Regulation, in effect on the date of this contract, shall
govern all costs claimed, agreed to, or determined under this clause.

\(g\) The Carrier shall have the right of appeal, under the Disputes
clause, from any determination made by the Contracting Officer under
paragraph (c), (e), or (i) of this clause, except that if the Carrier
failed to submit the termination settlement proposal or request for
equitable adjustment within the time provided in paragraph (c) or (i),
respectively, and failed to request a time extension, there is no right
of appeal.

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

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

\(2\) Any claim which the Government has against the Carrier under this
contract; and

\(i\) If the termination is partial, the Carrier 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 Carrier
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.

(j)(1) The Government may, under the terms and conditions it prescribes,
make partial payments and payments against costs incurred by the Carrier
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 Carrier will be entitled.

\(2\) If the total payments exceed the amount finally determined to be
due, the Carrier shall repay the excess to the Government 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 Carrier to the date the excess is repaid.

\(k\) Unless otherwise provided in this contract or by statute, the
Carrier 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 Carrier\'s
costs and expenses under this contract. The Carrier shall make these
records and documents available to the Government, at the Carrier\'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.

SECTION 5.50

FEHBP TERMINATION FOR DEFAULT\--NEGOTIATED BENEFITS CONTRACTS (JAN 1998)
(FEHBAR 1652.249-72)

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

\(i\) 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).

\(2\) The Government\'s right to terminate this contract under
subdivisions (1)(ii) and (1)(iii) above, may be exercised if the Carrier
does not cure such failure within 10 days (or more if authorized in
writing by the Contracting Officer) after receipt of the notice from the
Contracting Officer specifying the failure.

\(b\) If the Government 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 service similar to those terminated,
and the Carrier will be liable to the Government for any excess costs
for those supplies or services. However, the Carrier shall continue the
work not terminated.

c\) Except for defaults of subcontractors at any tier, the Carrier 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 Carrier. Examples of such causes include (1) acts of
God or of the public enemy, (2) acts of the Government 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
Carrier.

\(d\) 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 Carrier and subcontractor, and without the fault or
negligence of either, the Carrier 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
Carrier to meet the required delivery schedule.

\(e\) If this contract is terminated for default, the Government may
require the Carrier to transfer title and deliver to the Government, as
directed by the Contracting Officer, any completed or partially
completed information and contract rights that the Carrier has
specifically produced or acquired for the terminated portion of this
contract.

\(f\) If, after termination, it is determined that the Carrier 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 Government.

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

SECTION 5.51 thru 5.52

\[RESERVED\]

SECTION 5.53

NOTICE TO THE GOVERNMENT OF LABOR DISPUTES (FEB 1997) (FAR 52.222-1)

If the Contractor has knowledge that any actual or potential labor
dispute is delaying or threatens to delay the timely performance of this
contract, the Contractor shall immediately give notice, including all
relevant information, to the Contracting Officer.

SECTION 5.54

\[RESERVED\]

SECTION 5.55

EMPLOYMENT REPORTS ON DISABLED VETERANS AND VETERANS OF THE VIETNAM ERA
(JAN 1999) (FAR 52.222-37)

\(a\) Unless the Contractor is a State or local government agency, the
Contractor shall report at least annually, as required by the Secretary
of Labor, on\--

\(1\) The number of disabled veterans and the number of veterans of the
Vietnam era in the workforce of the contractor by job category and
hiring location; and

\(2\) The total number of new employees hired during the period covered
by the report, and of that total, the number of disabled veterans, and
the number of veterans of the Vietnam era.

\(b\) The above items shall be reported by completing the form entitled
\"Federal Contractor Veterans\' Employment Report VETS-100.\"

\(c\) Reports shall be submitted no later than September 30 of each year
beginning September 30, 1988.

\(d\) The employment activity report required by paragraph (a)(2) of
this clause shall reflect total hires during the most recent 12-month
period as of the ending date selected for the employment profile report
required by paragraph (a)(1) of this clause. Contractors may select an
ending date:

\(1\) As of the end of any pay period during the period January through
March 1st of the year the report is due, or

\(2\) As of December 31, if the contractor has previous written approval
from the Equal Employment Opportunity Commission to do so for purposes
of submitting the Employer Information eport EEO-1 (Standard Form 100).

\(e\) The count of veterans reported according to paragraph (a) of this
clause shall be based on voluntary disclosure. Each Contractor subject
to the reporting requirements at 38 U.S.C. 4212 shall invite all
disabled veterans and veterans of the Vietnam era who wish to benefit
under the affirmative action program at 38 U.S.C. 4212 to identify
themselves to the Contractor. The invitation shall state that the
information is voluntarily provided; that the information will be kept
confidential; that disclosure or refusal to provide the information will
not subject the applicant or employee to any adverse treatment; and that
the information will be used only in accordance with the regulations
promulgated under 38 U.S.C. 4212.

\(f\) Subcontracts. The Contractor shall include the terms of this
clause in every subcontract or purchase order of \$10,000 or more unless
exempted by rules, regulations, or orders of the Secretary.

SECTION 5.56

AUTHORIZATION AND CONSENT (JUL 1995) (FAR 52.227-1)

\(a\) The Government authorizes and consents to all use and manufacture,
in performing this contract or any subcontract at any tier, of any
invention described in and covered by a United States patent (1)
embodied in the structure or composition of any article the delivery of
which is accepted by the Government under this contract or (2) used in
machinery, tools, or methods whose use necessarily results from
compliance by the Contractor or a subcontractor with (i) specifications
or written provisions forming a part of this contract or (ii) specific
written instructions given by the Contracting Officer directing the
manner of performance. The entire liability to the Government for
infringement of a patent of the United States shall be determined solely
by the provisions of the indemnity clause, if any, included in this
contract or any subcontract hereunder (including any lower-tier
subcontract), and the Government assumes liability for all other
infringement to the extent of the authorization and consent hereinabove
granted.

\(b\) The Contractor agrees to include, and require inclusion of, this
clause, suitably modified to identify the parties, in all subcontracts
at any tier for supplies or services (including construction,
architect-engineer services, and materials, supplies, models, samples,
and design or testing services expected to exceed the simplified
acquisition threshold); however, omission of this clause from any
subcontract, including those at or below the simplified acquisition
threshold, does not affect this authorization and consent.

SECTION 5.57

NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT INFRINGEMENT (AUG
1996) (FAR 52.227-2)

\(a\) The Contractor shall report to the Contracting Officer, promptly
and in reasonable written detail, each notice or claim of patent or
copyright infringement based on the performance of this contract of
which the contractor has knowledge.

\(b\) In the event of any claim or suit against the Government on
account of any alleged patent or copyright infringement arising out of
the performance of this contract or out of the use of any supplies
furnished or work or services performed under this contract, the
Contractor shall furnish to the Government, when requested by the
Contracting Officer, all evidence and information in possession of the
Contractor pertaining to such suit or claim. Such evidence and
information shall be furnished at the expense of the Government except
where the Contractor has agreed to indemnify the Government.

\(c\) The Contractor agrees to include, and require inclusion of, this
clause, in all subcontracts at any tier for supplies or services
(including construction and architect-engineer subcontracts and those
for materials, supplies, models, samples, or design or testing services)
expected to exceed the simplified acquisition threshold at FAR 2.101.

SECTION 5.58

PAYMENT BY ELECTRONIC FUNDS TRANSFER---CENTRAL CONTRACTOR REGISTRATION
(MAY 1999)(FAR 52.232-33)

\(a\) *Method of payment.* (1) All payments by the Government under this
contract shall be made by electronic funds transfer (EFT), except as
provided in paragraph (a)(2) of this clause. As used in this clause, the
term "EFT" refers to the funds transfer and may also include the payment
information transfer.

\(2\) In the event the Government is unable to release one or more
payments by EFT, the Contractor agrees to either \--

\(i\) Accept payment by check or some other mutually agreeable method of
payment; or

\(ii\) Request the Government to extend the payment due date until such
time as the Government can make payment by EFT (but see paragraph (d) of
this clause).

\(b\) *Contractor's EFT information.* The Government shall make payment
to the Contractor using the EFT information contained in the Central
Contractor Registration (CCR) database. In the event that the EFT
information changes, the Contractor shall be responsible for providing
the updated information to the CCR database.

\(c\) *Mechanisms for EFT payment.* The Government may make payment by
EFT through either the Automated Clearing House (ACH) network, subject
to the rules of the National Automated Clearing House Association, or
the Fedwire Transfer System. The rules governing Federal payments
through the ACH are contained in 31 CFR part 210.

\(d\) *Suspension of payment.* If the Contractor's EFT information in
the CCR database is incorrect, then the Government need not make payment
to the Contractor under this contract until correct EFT information is
entered into the CCR database; and any invoice or contract financing
request shall be deemed not to be a proper invoice for the purpose of
prompt payment under this contract. The prompt payment terms of the
contract regarding notice of an improper invoice and delays in accrual
of interest penalties apply.

\(e\) *Contractor EFT arrangements.* If the Contractor has identified
multiple payment receiving points (*i.e.,* more than one remittance
address and/or EFT information set) in the CCR database, and the
Contractor has not notified the Government of the payment receiving
point applicable to this contract, the Government shall make payment to
the first payment receiving point (EFT information set or remittance
address as applicable) listed in the CCR database.

\(f\) *Liability for uncompleted or erroneous transfers*. (1) If an
uncompleted or erroneous transfer occurs because the Government used the
Contractor's EFT information incorrectly, the Government remains
responsible for --

\(i\) Making a correct payment;

ii\) Paying any prompt payment penalty due; and

\(iii\) Recovering any erroneously directed funds.

\(2\) If an uncompleted or erroneous transfer occurs because the
Contractor's EFT information was incorrect, or was revised within 30
days of Government release of the EFT payment transaction instruction to
the Federal Reserve System, and --

\(i\) If the funds are no longer under the control of the payment
office, the Government is deemed to have made payment and the Contractor
Is responsible for recovery of any erroneously directed funds; or

\(ii\) If the funds remain under the control of the payment office, the
Government shall not make payment, and the provisions of paragraph (d)
of this clause shall apply.

\(g\) *EFT and prompt payment.* A payment shall be deemed to have been
made in a timely manner in accordance with the prompt payment terms of
this contract if, in the EFT payment transaction instruction released to
the Federal Reserve System, the date specified for settlement of the
payment is on or before the prompt payment due date, provided the
specified payment date is a valid date under the rules of the Federal
Reserve System.

\(h\) *EFT and assignment of claims.* If the Contractor assigns the
proceeds of this contract as provided for in the assignment of claims
terms of this contract, the Contractor shall require as a condition of
any such assignment, that the assignee shall register in the CCR
database and shall be paid by EFT in accordance with the terms of this
clause. In all respects, the requirements of this clause shall apply to
the assignee as if it were the Contractor. EFT information that shows
the ultimate recipient of the transfer to be other than the Contractor,
in the absence of a proper assignment of claims acceptable to the
Government, is incorrect EFT information within the meaning of paragraph
(d) of this clause.

\(i\) *Liability for change of EFT information by financial agent.* The
Government is not liable for errors resulting from changes to EFT
information made by the Contractor's financial agent.

\(j\) *Payment information.* The payment or disbursing office shall
forward to the Contractor available payment information that is suitable
for transmission as of the date of release of the EFT instruction to the
Federal Reserve System. The Government may request the Contractor to
designate a desired format and method(s) for delivery of payment
information from a list of formats and methods the payment office is
capable of executing. However, the Government does not guarantee that
any particular format or method of delivery is available at any
particular payment office and retains the latitude to use the format and
delivery method most convenient to the Government. If the Government
makes payment by check in accordance with paragraph (a) of this clause,
the Government shall mail the payment information to the remittance
address contained in the CCR database.

(End of clause)

SECTION 5.59

PROHIBITION OF SEGREGATED FACILITIES (FEB 1999) (FAR 52.222-21)

\(a\) \"Segregated facilities,\" as used in this clause, means any
waiting rooms, work areas, rest rooms and wash rooms, restaurants and
other eating areas, time clocks, locker rooms and other storage or
dressing areas, parking lots, drinking fountains, recreation or
entertainment areas, transportation, and housing facilities provided for
employees, that are segregated by explicit directive or are in fact
segregated on the basis of race, color, religion, sex, or national
origin because of written or oral policies or employee custom. The term
does not include separate or single-user rest rooms or necessary
dressing or sleeping areas provided to assure privacy between the sexes.

\(b\) The Contractor agrees that it does not and will not maintain or
provide for its employees any segregated facilities at any of its
establishments, and that it does not and will not permit its employees
to perform their services at any location under its control where
segregated facilities are maintained. The Contractor agrees that a
breach of this clause is a violation of the Equal Opportunity clause in
this contract.

\(c\) The Contractor shall include this clause in every subcontract and
purchase order that is subject to the Equal Opportunity clause of this
contract.

> **APPENDIX A**
>
> **2000**
>
> **Brochure Text**

##### **APPENDIX A**

> BROCHURE TEXT
>
> I agree that this brochure text contains the 2000 benefits, exclusions
> and other Brochure
>
> language agreed to by the Carrier and the Office of Personnel
> Management under Contract Number CS of the Federal Employees Health
> Benefits Program.

### For the Carrier

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_

Signature of Contracting Official Date

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Typed of printed name and title

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name of contracting entity (with dba, if applicable)

[For the Office of Personnel Management]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_

Signature of Contracting Officer Date

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[Name of division chief\]

Insurance Contracts Division \_\_\_\_

Contracting Officer

###### **APPENDIX B**

> SUBSCRIPTION RATES, CHARGES, ALLOWANCES AND LIMITATIONS
>
> Community-Rated
>
> Health Maintenance Organization Carrier
>
> (Enter Carrier's name)
>
> CONTRACT NO. CS \_\_\_\_\_\_\_\_\_
>
> Effective January 1, 2000
>
> Biweekly net-to-carrier rates, with appropriate adjustments for
> Enrollees paid on other than a biweekly basis, are as follows:

+------------------------------------+---------------------------------+
| #### Regular Rates                 | DoD Demonstration Project Rates |
|                                    |                                 |
| > Self Only                        | > Self Only                     |
| > \$                               | > \$\_\                         |
| \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
|                                    |                                 |
| Self and Family                    | Self and Family                 |
| \$                                 | \$\_\                           |
| \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
+------------------------------------+---------------------------------+

######### APPENDIX C

> CONTRACT ADMINISTRATION DATA
>
> 1\. Routine Contract Administration. Except as specified below, each
> party should have one representative for administering the contract.
> The representatives are:
>
> CARRIER OPM
>
> Chief, Insurance Contracts Division \_\_\_
>
> P.O. Box 707
>
> Washington, DC 20044
>
> 2\. Notice. Where this contract requires that one party notify the
> other party in writing such notice shall be sent to:
>
> CARRIER OPM
>
> Office of Insurance Programs
>
> P.O. Box 707
>
> Washington, DC 20044
>
> 3\. Paying. The OPM paying office and Carrier office(s) designated to
> receive funds are specified below. Where the Carrier designates more
> than one receiving office, i.e., split between the Carrier and an
> Underwriter, both receiving offices with the percentage split between
> them shall be shown:
>
> CARRIER OPM
>
> Fiscal Management Division
>
> P.O. Box 547
>
> Washington, DC 20044
>
> 4\. Reporting. When required, the Carrier shall furnish the following
> reports to the address specified.
>
> ITEM: SEND TO:
>
> Fiscal Management Division
>
> P.O. Box 547
>
> Washington, DC 20044
>
> 5\. Disputed Claims. The following offices are designated for the
> receipt and processing of disputed claims.
>
> CARRIER OPM
>
> Insurance Contracts Division \_\_
>
> P.O. Box 436
>
> Washington, DC 20044
>
> As required by Section 1.7, if any information on this sheet changes,
> you must notify your Contract Representative immediately.

####### APPENDIX D

> FEHBP Supplemental Literature Guidelines
>
> AND
>
> Advertisements of Accident
>
> and Sickness Insurance Model Regulation
>
> (Model Regulation Service, NAIC)
>
> **APPENDIX D-a**
>
> **FEHB Supplemental Literature**
>
> **Guidelines**
>
> **(RV JAN 2000)**
>
> APPENDIX D-a
>
> FEHB Supplemental Literature Guidelines
>
> (RV JAN 2000)
>
> This is the primary guide a Carrier should use to assess whether the
> Carrier\'s supplemental marketing literature**,** including website
> material, complies with FEHBAR 1603.70, Misleading, Deceptive or
> Unfair Advertising. (Use the NAIC Advertisements of Accident and
> Sickness Insurance Model Regulation for additional guidance when
> needed.)
>
> a\) GENERAL
>
> 1\. Section 1.13 of the FEHB contract requires that the Carrier may
> not distribute or display marketing materials or other supplemental
> literature (including provider directories) in a Federal facility or
> arrange for the distribution of such documents by Federal agencies
> unless the documents have been prepared in accordance with FEHBAR
> 1652.203-70, and the Carrier has certified to OPM that is the case.
>
> 2\. Review supplemental marketing material for compliance each year,
> whether or not it changed from the past year.
>
> 3\. Word the literature simply and concisely to get a readily
> understandable, attractive marketing piece.
>
> 4\. Include sufficient detail to ensure accuracy.
>
> 5\. Under the FEHBP, the FEHB brochure is based on text approved by
> OPM and is a complete statement of benefits, limitations, and
> exclusions. Include the following statement (website material should
> include the statement as a preface) in all supplemental literature
> which in any way discusses Plan benefits:
>
> *\"This is a summary \[or brief description\] of the features of the
> \[insert Plan\'s name\]. Before making a final decision, please read
> the Plan\'s Federal brochure (\[insert brochure number\]). All
> benefits are subject to the definitions, limitations, and exclusions
> set forth in the Federal brochure.\"*
>
> 6\. You may include non-FEHBP benefits, i.e., benefits which are not
> FEHB benefits and are not guaranteed under the Federal contract with
> the following disclaimer:
>
> \"These benefits are neither offered nor guaranteed under contract
> with the FEHB Pro gram, but are made available to all enrollees and
> family members who become members of \[insert Plan\'s name\].\"
>
> 7\. Supplemental literature must be clearly distinguishable from the
> Federal brochure.
>
> 8\. Do not use the FEHB logo in your supplemental literature.
>
> 9\. Do not use material which conflicts with the Federal brochure. If
> your material conflicts, you must change the material or not
> distribute it.
>
> b\) RATE PRESENTATIONS
>
> Under the FEHBP there are only two categories of enrollment, Self Only
> and Self and Family. For most enrollments, the premium for each
> enrollee\'s enrollment is shared between the enrollee and the
> Government. The Government contribution is based on the formula
> provided in the FEHB law. Deductions for most enrollees\' share, along
> with the Government\'s contribution, are made in accordance with the
> schedule on which the employee or annuitant\'s (retiree) salary or
> annuitant check is issued by the enrollee\'s agency or retiree\'s
> retirement system. Most employees are paid biweekly. Annuitants are
> issued monthly checks.
>
> Employees and annuitants do not have separate categories of
> enrollment. They pay the same rates, whether on a biweekly,
> semimonthly, or monthly basis, and receive the same benefits when they
> are in the same FEHB Plan, except that active Postal employees pay a
> lesser share, as their cost sharing formula with the Postal Service
> calls for a greater Government contribution.
>
> The enrollee\'s share for each FEHB Plan for each type of enrollment
> (Self Only, Self and Family) is listed in the FEHB Guide. This Guide
> is prepared each Open Season and is distributed directly to agencies
> by OPM; they in turn distribute the Guide to employees. Biweekly and
> monthly rates are also shown on an insert you prepare for your
> brochure. Separate guides are prepared for special groups of
> enrollees, including those for which the Government makes no premium
> contribution, such as former spouses and employees and dependents with
> temporarily continued coverage.
>
> In making your rate presentations:
>
> 1\. List your FEHB rates in each piece of supplemental material which
> lists benefits. Do not list the rates of any competitor Plan.
>
> 2\. Immediately above the rates include the following statement:
>
> \"These rates do not apply to all enrollees. If you are in a special
> enrollment category, please refer to your special FEHB Guide or
> contact the agency which maintains your health benefits enrollment.\"

3\. If you wish to list Postal rates in addition to non-Postal rates,
Postal and non-Postal rates should be clearly identified and listed
separately. (Please note there are no monthly Postal rates; upon
retirement, Postal employees receive the non-postal contribution.)

> c\) BENEFIT PRESENTATIONS
>
> Please note the following:
>
> 1\. Do not compare your benefits or operations with that of any other
> Plan.
>
> 2\. Accurately describe your FEHB benefits offering.
>
> 3\. Avoid incomplete or overstated benefit descriptions, or those
> which conflict with the Federal brochure.
>
> 4\. Show applicable coverage limitations, such as day or dollar
> limitations, coinsurance or deductibles.
>
> 5\. Do not list exclusions and limitations not listed in the Federal
> brochure.
>
> 6\. Do not include general references not in the brochure.
>
> 7\. Do not reference coverage for which a Federal employee or retiree
> would have to drop FEHB coverage. Exception: 5 CFR 890.301 provides
> that an annuitant or former spouse, as defined in 5 U.S.C. 8901(10),
> who cancels FEHBP enrollment for the purpose of enrolling in a Health
> Maintenance Organization health Plan under sections 1833 or 1876 of
> the Social Security Act may register to re-enroll. Therefore, if
> your\'s is such a Health Maintenance Organization health Plan
> contracting with Medicare you must describe your Medicare supplemental
> program for Medicare-covered retirees.
>
> d\) ENROLLMENT INSTRUCTIONS
>
> Enrollment under the FEHBP is governed solely by the Federal Employees
> Health Benefits law and applicable regulations. The various Federal
> agencies have responsibility for administering the law and regulations
> during the annual open enrollment period (Open Season) and at all
> other times during the year. Agency personnel offices perform the
> basic health benefits functions, such as instructing employees about
> the conduct of the Open Season and other health benefits matters,
> answering employee questions, and processing elections and changes of
> enrollment, including determinations of eligibility and assignment of
> effective dates of coverage. Agency payroll offices make the necessary
> salary deductions.
>
> The Federal instrument for electing to enroll in a Plan or changing an
> existing enrollment in a Plan from Self Only to Self and Family (or
> the reverse) is the Standard Form (SF) 2809, or alternative electronic
> or telephonic method approved by OPM. Carriers must be able to accept
> electronic file transfers. The effective date for Open Season
> enrollments is the first day of the first pay period which begins on
> or after January 1 for employees; the effective date generally is
> January 1 for annuitants. The specific effective date for an
> individual will be assigned by the individual\'s personnel office.
>
> Covered dependents are as defined in the FEHB regulations. Basically,
> dependents are immediate family members, including spouse and
> unmarried children under age 22. When Self and Family coverage is
> established for an individual, all dependents as defined under the
> regulations are automatically covered as of the effective date
> assigned by the personnel office, whether or not they are listed on
> the SF 2809, on other documents, or communicated by electronic or
> telephonic transmittal. Family members (e.g., newborns) who are added
> under an existing Self and Family enrollment are automatically covered
> from the date the individual becomes a family member, e.g., from
> birth. Personnel offices do not issue any notification when a new
> dependent is added under an existing Self and Family enrollment and
> the enrollee does not submit a new SF 2809 or other election
> instrument.
>
> The agencies are the primary contact point for employees on health
> benefits enrollment matters. OPM\'s Office of Retirement Programs
> performs this function for annuitants (retirees). As highlighted
> below, Carriers may not impose their own enrollment requirements and
> procedures.
>
> 1\. Do not give specific instructions on enrollment.
>
> 2\. While the Carrier may ask enrollees for information (see Section
> f) and may follow-up with enrollees and, when necessary, the employing
> office, do not require that a member complete plan specific enrollment
> or application forms. (You may ask the enrollee to complete
> \"information\" forms.) You may ask the enrollee to keep you advised
> of family member changes and you may verify the change, but failure to
> complete a form does not render an eligible dependent ineligible.
>
> 3\. Personnel offices will not stock your Plan\'s forms. Do not
> indicate otherwise.
>
> 4\. If supplemental literature is directed to potential members rather
> than just-enrolled members, do not include statements indicating
> otherwise.
>
> 5\. Again, the Federal brochure, rather than any other plan document,
> is the member\'s complete statement of benefits. Do not indicate
> otherwise.
>
> e\) PROVIDER DIRECTORIES
>
> Carriers must distribute a provider directory along with the Plan's
> Federal brochure. The directory must conform to the requirements
> listed below. You must either send a copy of it along with your
> Federal brochures (except that provider directories are not to be sent
> along with the brochures you will be sending to OPM's distribution
> center for annuitants) or otherwise make them readily available to
> agencies and employees. Please send a provider directory to any
> Federal annuitant who requests a copy. Agencies and their employees
> will be advised to expect your provider directory.
>
> Please bear in mind that a Federal employee or annuitant choosing your
> Plan during the Open Season is doing so with the expectation that the
> Plan\'s provider directory is accurate and that providers shown will
> be available starting January 1.
>
> 1\. Show the Plan\'s medical facilities (if a group practice Plan) or
> individual physicians (if an individual practice Plan) or both (if a
> mixed model Plan). Show the Plan\'s hospitals also. State the
> addresses of the medical facilities and show the general location
> within the service area for individual doctors and hospitals.
>
> 2\. In the directory, display prominently the following statement:
> \"It is important to know when you enroll in this Plan, services are
> provided through The Plan\'s delivery system, as described in the
> Plan\'s Federal brochure, but the continued participation of any one
> doctor, hospital or other provider cannot be guaranteed.\"
>
> 3\. Do not list enrollment or eligibility requirements on the provider
> directory.
>
> 4\. If the geographic area from which the Carrier will accept
> enrollments is listed on the provider directory, show it exactly as
> stated in the Plan\'s Federal brochure. Likewise, show only the
> service area which has been approved by OPM. Do not list providers (or
> areas) located outside the service area (or additional geographic
> area) shown in the Plan\'s Federal brochure.
>
> f\) INFORMATION FORMS
>
> You may distribute forms to obtain information from enrollees about
> the enrollee and any dependents. For instance, to obtain the
> information regarding Medicare you will need for rate-setting purposes
> under the Federal Program, you may ask who is enrolled under Medicare
> Part A, Medicare Part B or Medicare Parts A and B. For another
> example, Health Maintenance Organization carriers may ask that a
> primary care doctor be selected. If you wish to distribute an
> information form, you may find such forms are more readily returned if
> they are postage-paid. The form should follow the requirements listed
> below:
>
> \(1\) If the member must select a medical group or IPA, also provide
> space for the member to make such a selection.
>
> \(2\) Do not indicate enrollment in the Plan is contingent upon
> completing and returning the form.

####### APPENDIX D-b

> **Advertisements of Accident**
>
> **and Sickness Insurance Model Regulation**
>
> **(Model Regulation Service, NAIC)**
>
> **\[INSERT APX. D-b (1999 REVISION)\]**

####### APPENDIX E

> **ORDER OF BENEFIT DETERMINATION RULES**
>
> **Model Regulation Service\--January 1996**

######## National Association of Insurance Commissioners

> **APPENDIX E**
>
> ORDER OF BENEFIT DETERMINATION RULES
>
> Model Regulation Service\--January 1996
>
> National Association of Insurance Commissioners

When two or more plans pay benefits, the rules for determining the order
of payment are as follows:

A. The primary plan pays or provides its benefits as if the secondary
plan or plans did not exist.

B. A plan that does not contain a coordination of benefits provision
that is consistent with this regulation is always primary. There is one
exception: coverage that is obtained by virtue of membership in a group
that is designed to supplement a part of a basic package of benefits may
provide that the supplementary coverage shall be excess to any other
parts of the plan provided by the contract holder. Examples of these
types of situations are major medical coverages that are superimposed
over base plan hospital and surgical benefits, and insurance type
coverages that are written in connection with a closed panel plan to
provide out-of-network benefits.

C. A plan may consider the benefits paid or provided by another plan in
determining its benefits only when it is secondary to that other plan.

D. The first of the following rules that describes which plan pays its
benefits before another plan is the rule to use.

\(1\) Non-Dependent or Dependent. The plan that covers the person other
than as a dependent, for example as an employee, member, subscriber or
retiree is primary and the plan that covers the person as a dependent is
secondary. However, if the person is a Medicare beneficiary and, as a
result of federal law, Medicare is secondary to the plan covering the
person as a dependent; and primary to the plan covering the person as
other than a dependent (e.g., a retired employee); then the order of
benefits between the two plans is reversed so that the plan covering the
person as an employee, member, subscriber or retiree is secondary and
the other plan is primary.

\(2\) Child Covered Under More Than One Plan. The order of benefits when
a child is covered by more than one plan is:

\(a\) The primary plan is the plan of the parent whose birthday is
earlier in the year if:

-   The parents are married;

-   The parents are not separated (whether or not they ever have been
    married); or

-   A court decree awards joint custody without specifying that one
    party has the responsibility to provide health care coverage.

If both parents have the same birthday, the plan that covered either of
the parents longer is primary.

\(b\) If the specific terms of the court decree state that one of the
parents is responsible for the child\'s health care expenses or health
care coverage and the plan of that parent has actual knowledge of those
terms, that plan is primary. This rule applies to claim determination
periods or plan years commencing after the plan is given notice of the
court decree.

\(c\) If the parents are not married, or are separated (whether or not
they ever have been married) or are divorced, the order of benefits is:

-   The plan of the custodial parent

-   The plan of the spouse of the custodial parent;

-   The plan of the non-custodial parent; and then

-   The plan of the spouse of the non- custodial parent.

\(3\) Active or inactive employee. The plan that covers a person as an
employee who is neither laid off nor retired, is primary. The same would
hold true if a person is a dependent of a person covered as a retiree
and an employee. If the other plan does not have this rule, and if, as a
result, the plans do not agree on the order of benefits, this rule is
ignored. Coverage provided an individual as a retired worker and as a
dependent of an actively working spouse will be determined under the
rule labeled B(1).

\(4\) Continuation coverage. If a person whose coverage is provided
under a right of continuation provided by federal or state law also is
covered under another plan, the plan covering the person as an employee,
member, subscriber or retiree (or as that person\'s dependent) is
primary, and the continuation coverage is secondary. If the other plan
does not have this rule, and if, as a result, the plans do not agree on
the order of benefits, this rule is ignored.

\(5\) Longer or shorter length of coverage. The plan that covered the
person as an employee, member, subscriber or retiree longer is primary.

\(6\) If the preceding rules do not determine the primary plan, the
allowable expenses shall be shared equally between the plans meeting the
following definition of plan, for purposes of order of benefits
determination. In addition, this plan will not pay more than it would
have paid had it been primary.

\(a\) A \"plan\" is any of the following that provides benefits or
services for medical or dental care or treatment. However, if separate
contracts are used to provide coordinated coverage for members of a
group, the separate contracts are considered parts of the same plan and
there is no COB among those separate contracts.

(*i*) \"Plan\" includes: group insurance, closed panel or other forms of
group or group-type coverage (whether insured or uninsured); hospital
indemnity benefits in excess of \$200 per day; medical care components
of group long-term care contracts, such as skilled nursing care; medical
benefits under group or individual automobile contracts; and Medicare or
other governmental benefits, as permitted by law.

*(ii)* \"Plan\" does not include: individual or family insurance; closed
panel or other individual coverage (except for group-type coverage);
amounts of hospital indemnity insurance of \$200 or less per day; school
accident type coverage, benefits for non-medical components of group
long-term care policies; Medicare supplement policies, Medicaid policies
and coverage under other governmental plans, unless permitted by law.

Each contract for coverage under (*i*) or (*ii*) is a separate plan. If
a plan has two parts and COB rules apply only to one of the two, each of
the parts is treated as a separate plan.