**3.2.4 Types of Contracts Clauses**

3.2.4-1 Type of Contract

TYPE OF CONTRACT (APRIL 1996)

The FAA contemplates award of a \_\_\_\_\_\_\_\_\_\_\_\_ \[Contracting
Officer insert specific type(s) of contract\] contract resulting from
this Screening Information Request.

(*End of provision*)

3.2.4-2 Fixed-Priced Contracts with Economic Price Adjustment-Standard
Supplies

ECONOMIC PRICE ADJUSTMENT-STANDARD SUPPLIES (APRIL 1996)

\(a\) The Contractor warrants that the unit price stated in the
"Schedule" for \_\_\_\_\_\_\_\_ \[insert "Schedule" line item
number(s)\] is not in excess of the Contractor\'s applicable established
price in effect on the contract date for like quantities of the same
item. The term unit price excludes any part of the price directly
resulting from requirements for preservation, packaging, or packing
beyond standard commercial practice. The term established price means a
price that (1) is an established catalog or market price for a
commercial item sold in substantial quantities to the general public,
and (2) is the net price after applying any standard trade discounts
offered by the Contractor.

\(b\) The Contractor shall promptly notify the Contracting Officer of
the amount and effective date of each decrease in any applicable
established price. Each corresponding contract unit price shall be
decreased by the same percentage that the established price is
decreased. The decrease shall apply to those items delivered on and
after the effective date of the decrease in the Contractor\'s
established price, and this contract shall be modified accordingly. The
Contractor shall certify (1) on each invoice that each unit price stated
in it reflects all decreases required by this clause or (2) on the final
invoice that all required price decreases have been applied as required
by this clause.

\(c\) If the Contractor\'s applicable established price is increased
after the contract date, the corresponding contract unit price shall be
increased, upon the Contractor\'s written request to the Contracting
Officer, by the same percentage that the established price is increased,
and the contract shall be modified accordingly, subject to the following
limitations:

\(1\) The aggregate of the increases in any contract unit price under
this clause shall not exceed 10 percent of the original contract unit
price.

\(2\) The increased contract unit price shall be effective (i) on the
effective date of the increase in the applicable established price if
the Contracting Officer receives the Contractor\'s written request
within 10 days thereafter or (ii) if the written request is received
later, on the date the Contracting Officer receives the request.

\(3\) The increased contract unit price shall not apply to quantities
scheduled under the contract for delivery before the effective date of
the increased contract unit price, unless failure to deliver before that
date results from causes beyond the control and without the fault or
negligence of the Contractor.

\(4\) No modification increasing a contract unit price shall be executed
under this paragraph (c) until the Contracting Officer verifies the
increase in the applicable established price.

\(5\) Within 30 days after receipt of the Contractor\'s written request,
the Contracting Officer may cancel, without liability to either party,
any undelivered portion of the contract items affected by the requested
increase.

\(d\) During the time allowed for the cancellation provided for in
subparagraph (c)(5) above, and thereafter if there is no cancellation,
the Contractor shall continue deliveries according to the contract
delivery schedule, and the Government shall pay for such deliveries at
the contract unit price, increased to the extent provided by paragraph
(c) above.

(*End of clause*)

3.2.4-3 Fixed-price Contracts with Economic Price
Adjustment-Semi-standard Supplies

ECONOMIC PRICE ADJUSTMENT-SEMI-STANDARD SUPPLIES (APRIL 1996)

\(a\) The Contractor warrants that the supplies identified as line items
\_\_\_\_\_\_\_\_\_ \[offeror insert "Schedule" line item number\] in the
"Schedule" are, except for modifications required by the contract
specifications, supplies for which it has an established price. The term
established price means a price that (1) is an established catalog or
market price for a commercial item sold in substantial quantities to the
general public, and (2) is the net price after applying any standard
trade discounts offered by the Contractor. The Contractor further
warrants that, as of the date of this contract, any difference between
the unit prices stated in the contract for these line items and the
Contractor\'s established prices for like quantities of the nearest
commercial equivalents are due to compliance with contract
specifications and with any contract requirements for preservation,
packaging, and packing beyond standard commercial practice.

\(b\) The Contractor shall promptly notify the Contracting Officer of
the amount and effective date of each decrease in any applicable
established price. Each corresponding contract unit price (exclusive of
any part of the unit price that reflects modifications resulting from
compliance with specifications or with requirements for preservation,
packaging, and packing beyond standard commercial practice) shall be
decreased by the same percentage that the established price is
decreased. The decrease shall apply to those items delivered on and
after the effective date of the decrease in the Contractor\'s
established price, and this contract shall be modified accordingly. The
Contractor shall certify (1) on each invoice that each unit price stated
in it reflects all decreases required by this clause or (2) in the final
invoice that all required price decreases have been applied as required
by this clause.

\(c\) If the Contractor\'s applicable established price is increased
after the contract date, the corresponding contract unit price
(exclusive of any part of the unit price resulting from compliance with
specifications or with requirements for preservation, packaging, and
packing beyond standard commercial practice) shall be increased, upon
the Contractor\'s written request to the Contracting Officer, by the
same percentage that the established price is increased, and the
contract shall be modified accordingly, subject to the following
limitations:

\(1\) The aggregate of the increases in any contract unit price under
this clause shall not exceed 10 percent of the original contract unit
price.

\(2\) The increased contract unit price shall be effective (i) on the
effective date of the increase in the applicable established price if
the Contracting Officer receives the Contractor\'s written request
within 10 days thereafter or (ii) if the written request is received
later, on the date the Contracting Officer receives the request.

\(3\) The increased contract unit price shall not apply to quantities
scheduled under the contract for delivery before the effective date of
the increased contract unit price, unless failure to deliver before that
date results from causes beyond the control and without the fault or
negligence of the Contractor.

\(4\) No modification increasing a contract unit price shall be executed
under this paragraph (c) until the Contracting Officer verifies the
increase in the applicable established price.

\(5\) Within 30 days after receipt of the Contractor\'s written request,
the Contracting Officer may cancel, without liability to either party,
any undelivered portion of the contract items affected by the requested
increase.

\(d\) During the time allowed for the cancellation provided for in
subparagraph (c)(5) above, and thereafter if there is no cancellation,
the Contractor shall continue deliveries according to the contract
delivery schedule, and the Government shall pay for such deliveries at
the contract unit price, increased to the extent provided by paragraph
(c) above.

(*End of clause*)

3.2.4-4 Fixed-Price Contracts with Economic Price Adjustment-Labor and
Material

ECONOMIC PRICE ADJUSTMENT-LABOR AND MATERIAL (APRIL 1996)

\(a\) The Contractor shall notify the Contracting Officer if, at any
time during contract performance, the rates of pay for labor (including
fringe benefits) or the unit prices for material shown in the "Schedule"
either increase or decrease. The Contractor shall furnish this notice
within 60 days after the increase or decrease, or within any additional
period that the Contracting Officer may approve in writing, but not
later than the date of final payment under this contract. The notice
shall include the Contractor\'s proposal for an adjustment in the
contract unit prices to be negotiated under paragraph (b) below, and
shall include, in the form required by the Contracting Officer,
supporting data explaining the cause, effective date, and amount of the
increase or decrease and the amount of the Contractor\'s adjustment
proposal.

\(b\) Promptly after the Contracting Officer receives the notice and
data under paragraph (a) above, the Contracting Officer and the
Contractor shall negotiate a price adjustment in the contract unit
prices and its effective date. However, the Contracting Officer may
postpone the negotiations until an accumulation of increases and
decreases in the labor rates (including fringe benefits) and unit prices
of material shown in the "Schedule" results in an adjustment allowable
under subparagraph (c)(3) below. The Contracting Officer shall modify
this contract (1) to include the price adjustment and its effective date
and (2) to revise the labor rates (including fringe benefits) or unit
prices of material as shown in the "Schedule" to reflect the increases
or decreases resulting from the adjustment. The Contractor shall
continue performance pending agreement on, or determination of, any
adjustment and its effective date.

\(c\) Any price adjustment under this clause is subject to the following
limitations:

\(1\) Any adjustment shall be limited to the effect on unit prices of
the increases or decreases in the rates of pay for labor (including
fringe benefits) or unit prices for material shown in the Schedule.
There shall be no adjustment for (i) supplies or services for which the
production cost is not affected by such changes, (ii) changes in rates
or unit prices other than those shown in the Schedule, or (iii) changes
in the quantities of labor or material used from those shown in the
"Schedule" for each item.

\(2\) No upward adjustment shall apply to supplies or services that are
required to be delivered or performed before the effective date of the
adjustment, unless the Contractor\'s failure to deliver or perform
according to the delivery schedule results from causes beyond the
Contractor\'s control and without its fault or negligence.

\(3\) There shall be no adjustment for any change in rates of pay for
labor (including fringe benefits) or unit prices for material which
would not result in a net change of at least 3 percent of the
then-current total contract price. This limitation shall not apply,
however, if, after final delivery of all contract line items, either
party requests an adjustment under paragraph (b) above.

\(4\) The aggregate of the increases in any contract unit price made
under this clause shall not exceed 10 percent of the original unit
price. There is no percentage limitation on the amount of decreases that
may be made under this clause.

\(d\) The Contractor shall include with the final invoice a
certification that the Contractor either (1) has not experienced a
decrease in rates of pay for labor (including fringe benefits) or unit
prices for material shown in the "Schedule" or (2) has given notice of
all such decreases in compliance with paragraph (a) above.

\(e\) The Contracting Officer may examine the Contractor\'s books,
records, and other supporting data relevant to the cost of labor
(including fringe benefits) and material during all reasonable times
until the end of 3 years after the date of final payment under this
contract.

(*End of clause*)

3.2.4-5 Allowable Cost and Payment

ALLOWABLE COST AND PAYMENT (APRIL 1996)

\(a\) Invoicing. The Government shall make payments to the Contractor
when requested as work progresses, but (except for small business
concerns) not more often than once every 2 weeks, in amounts determined
to be allowable by the Contracting Officer in accordance with the FAA\'s
contract cost principles and procedures in effect on the date of this
contract and the terms of this contract. The Contractor may submit to an
authorized representative of the Contracting Officer, in such form and
reasonable detail as the representative may require, an invoice or
voucher supported by a statement of the claimed allowable cost for
performing this contract. Any payments for costs under this contract,
particularly for costs of Indirect Rates under paragraph (d), shall be
subject to the provisions of the \"Limitation of Costs\" clause, or the
\"Limitation of Funds\" clause, if applicable. The Contractor shall be
responsible to manage and control the allowable cost of performance of
the contract, such that payments for any allowable costs, including
Indirect Rates under paragraph (d), shall not exceed the estimated cost
set forth in the schedule, or the funded amount, less an allowance for
fee, if the contract is incrementally funded.

\(b\) Reimbursing costs. (1) For the purpose of reimbursing allowable
costs (except as provided in subparagraph (2) below, with respect to
pension, deferred profit sharing, and employee stock ownership plan
contributions), the term costs includes only-

\(I\) Those recorded costs that, at the time of the request for
reimbursement, the Contractor has paid by cash, check, or other form of
actual payment for items or services purchased directly for the
contract;

\(ii\) When the Contractor is not delinquent in paying costs of contract
performance in the ordinary course of business, costs incurred, but not
necessarily paid, for-

\(A\) Materials issued from the Contractor\'s inventory and placed in
the production process for use on the contract;

\(B\) Direct labor;

\(C\) Direct travel;

\(D\) Other direct in-house costs; and

\(E\) Properly allocable and allowable indirect costs, as shown in the
records maintained by the Contractor for purposes of obtaining
reimbursement under Government contracts; and

\(iii\) The amount of payments that have been paid to the Contractor\'s
subcontractors under similar cost standards.

\(2\) Contractor contributions to any pension or other post retirement
benefit, profit-sharing or employee stock ownership plan funds that are
paid quarterly or more often may be included in indirect costs for
payment purposes: Provided, that the Contractor pays the contribution to
the fund within 30 days after the close of the period covered. Payments
made 30 days or more after the close of a period shall not be included
until the Contractor actually makes the payment. Accrued costs for such
contributions that are paid less often than quarterly shall be excluded
from indirect costs for payment purposes until the Contractor actually
makes the payment.

\(3\) Notwithstanding the audit and adjustment of invoices or vouchers
under paragraph (g) below, allowable indirect costs under this contract
shall be obtained by applying indirect cost rates established in
accordance with paragraph (d) below.

\(4\) Any statements in specifications or other documents incorporated
in this contract by reference designating performance of services or
furnishing of materials at the Contractor\'s expense or at no cost to
the Government shall be disregarded for purposes of cost-reimbursement
under this clause.

\(c\) Small business concerns. A small business concern may be paid more
often than every 2 weeks and may invoice and be paid for recorded costs
for items or services purchased directly for the contract, even though
the concern has not yet paid for those items or services.

\(d\) Final indirect cost rates.

\(1\) Final annual indirect cost rates and the appropriate bases shall
be established for the period covered by the indirect cost rate
proposal.

\(2\) The Contractor shall, within 90 days after the expiration of each
of its fiscal years, or by a later date approved by the Contracting
Officer, submit to the cognizant Contracting Officer responsible for
negotiating its final indirect cost rates and, if required by agency
procedures, to the cognizant audit activity proposed final indirect cost
rates for that period and supporting cost data specifying the contract
and/or subcontract to which the rates apply. The proposed rates shall be
based on the Contractor\'s actual cost experience for that period. The
appropriate Government representative and Contractor shall establish the
final indirect cost rates as promptly as practical after receipt of the
Contractor\'s proposal.

\(3\) The Contractor and the appropriate Government representative shall
execute a written understanding setting forth the final indirect cost
rates. The understanding shall specify (i) the agreed-upon final annual
indirect cost rates, (ii) the bases to which the rates apply, (iii) the
periods for which the rates apply, (iv) any specific indirect cost items
treated as direct costs in the settlement, and (v) the affected contract
and/or subcontract, identifying any with advance agreements or special
terms and the applicable rates. The understanding shall not change any
monetary ceiling, contract obligation, or specific cost allowance or
disallowance provided for in this contract. The understanding is
incorporated into this contract upon execution.

\(4\) Failure by the parties to agree on a final annual indirect cost
rate shall be a dispute.

\(e\) Billing rates. Until final annual indirect cost rates are
established for any period, the FAA shall reimburse the Contractor at
billing rates established by the Contracting Officer or by an authorized
representative (the cognizant auditor), subject to adjustment when the
final rates are established. These billing rates-

\(1\) Shall be the anticipated final rates; and

\(2\) May be prospectively or retroactively revised by mutual agreement,
at either party\'s request, to prevent substantial overpayment or
underpayment.

\(f\) Quick-close-out procedures. When the Contractor and Contracting
Officer agree, the quick-close-out procedures may be used.

\(g\) Audit. At any time or times before final payment, the Contracting
Officer may have the Contractor\'s invoices or vouchers and statements
of cost audited. Any payment may be (1) reduced by amounts found by the
Contracting Officer not to constitute allowable costs or (2) adjusted
for prior overpayments or underpayments.

\(h\) Final payment. (1) The Contractor shall submit a completion
invoice or voucher, designated as such, promptly upon completion of the
work, but no later than one year (or longer, as the Contracting Officer
may approve in writing) from the completion date. Upon approval of that
invoice or voucher, and upon the Contractor\'s compliance with all terms
of this contract, the Government shall promptly pay any balance of
allowable costs and that part of the fee (if any) not previously paid.

\(2\) The Contractor shall pay to the FAA any refunds, rebates, credits,
or other amounts (including interest, if any) accruing to or received by
the Contractor or any assignee under this contract, to the extent that
those amounts are properly allocable to costs for which the Contractor
has been reimbursed by the FAA. Reasonable expenses incurred by the
Contractor for securing refunds, rebates, credits, or other amounts
shall be allowable costs if approved by the Contracting Officer. Before
final payment under this contract, the Contractor and each assignee
whose assignment is in effect at the time of final payment shall execute
and deliver-

\(i\) An assignment to the FAA, in form and substance satisfactory to
the Contracting Officer, of refunds, rebates, credits, or other amounts
(including interest, if any) properly allocable to costs for which the
Contractor has been reimbursed by the FAA under this contract; and

\(ii\) A release discharging the Government, its officers, agents, and
employees from all liabilities, obligations, and claims arising out of
or under this contract, except-

\(A\) Specified claims stated in exact amounts, or in estimated amounts
when the exact amounts are not known;

\(B\) Claims (including reasonable incidental expenses) based upon
liabilities of the Contractor to third parties arising out of the
performance of this contract; provided, that the claims are not known to
the Contractor on the date of the execution of the release, and that the
Contractor gives notice of the claims in writing to the Contracting
Officer within 6 years following the release date or notice of final
payment date, whichever is earlier; and

\(C\) Claims for reimbursement of costs, including reasonable incidental
expenses, incurred by the Contractor under the patent clauses of this
contract, excluding, however, any expenses arising from the
Contractor\'s indemnification of the FAA against patent liability.

(*End of clause*)

3.2.4-6 Fixed Fee

FIXED FEE (APRIL 1996)

\(a\) The FAA shall pay the Contractor for performing this contract the
fixed fee specified in the Schedule.

\(b\) Payment of the fixed fee shall be made as specified in the
Schedule; provided, that after payment of 85 percent of the fixed fee,
the Contracting Officer may withhold further payment of fee until a
reserve is set aside in an amount that the Contracting Officer considers
necessary to protect the FAA\'s interest. This reserve shall not exceed
15 percent of the total fixed fee or \$100,000, whichever is less.

(*End of clause*)

3.2.4.7 Fixed Fee-Construction

FIXED FEE-CONSTRUCTION (APRIL 1996)

\(a\) The FAA shall pay to the Contractor for performing this contract
the fixed fee specified in the Schedule.

\(b\) Payment of the fixed fee shall be made in installments based upon
the percentage of completion of the work as determined from estimates
submitted to and approved by the Contracting Officer, but subject to the
withholding provisions of paragraph (c) below.

\(c\) After the payment of 85 percent of the fixed fee, the Contracting
Officer may withhold further payment of fee until a reserve is set aside
in an amount that the Contracting Officer considers necessary to protect
the Government\'s interest. This reserve shall not exceed 15 percent of
the total fixed fee or \$100,000, whichever is less.

(*End of clause*)

3.2.4.8 Incentive Fee

INCENTIVE FEE (APRIL 1996)

\(a\) General. The FAA shall pay the Contractor for performing this
contract a fee determined as provided in this contract.

\(b\) Target cost and target fee. The target cost and target fee
specified in the "Schedule" are subject to adjustment if the contract is
modified in accordance with paragraph (d) below.

\(1\) Target cost, as used in this contract, means the estimated cost of
this contract as initially negotiated, adjusted in accordance with
paragraph (d) below.

\(2\) Target fee, as used in this contract, means the fee initially
negotiated on the assumption that this contract would be performed for a
cost equal to the estimated cost initially negotiated, adjusted in
accordance with paragraph (d) below.

\(c\) Withholding of payment. Normally, the FAA shall pay the fee to the
Contractor as specified in the Schedule. However, when the Contracting
Officer considers that performance or cost indicates that the Contractor
will not achieve target, the FAA shall pay on the basis of an
appropriate lesser fee. When the Contractor demonstrates that
performance or cost clearly indicates that the Contractor will earn a
fee significantly above the target fee, the Government may, at the sole
discretion of the Contracting Officer, pay on the basis of an
appropriate higher fee. After payment of 85 percent of the applicable
fee, the Contracting Officer may withhold further payment of fee until a
reserve is set aside in an amount that the Contracting Officer considers
necessary to protect the FAA\'s interest. This reserve shall not exceed
15 percent of the applicable fee or \$100,000, whichever is less.

\(d\) Equitable adjustments. When the work under this contract is
increased or decreased by a modification to this contract or when any
equitable adjustment in the target cost is authorized under any other
clause, equitable adjustments in the target cost, target fee, minimum
fee, and maximum fee, as appropriate, shall be stated in a supplemental
agreement to this contract.

\(e\) Fee payable. (1) The fee payable under this contract shall be the
target fee increased by \_\_\_\_\_\_\_\_\_\_\_ \[Contracting Officer
insert Contractor\'s participation\] cents for every dollar that the
total allowable cost is less than the target cost or decreased by
\_\_\_\_\_\_\_\_\_\_\_ \[Contracting Officer insert Contractor\'s
participation\] cents for every dollar that the total allowable cost
exceeds the target cost. In no event shall the fee be greater than
\_\_\_\_\_\_\_\_\_\_\_\_ \[Contracting Officer insert percentage\]
percent or less than \_\_\_\_\_\_\_\_\_\_\_\_\_ \[Contracting Officer
insert percentage\] percent of the target cost.

\(2\) The fee shall be subject to adjustment, to the extent provided in
paragraph (d) above, and within the minimum and maximum fee limitations
in subparagraph (1) above, when the total allowable cost is increased or
decreased as a consequence of (i) payments made under assignments or
(ii) claims excepted from the release as required by paragraph (h)(2) of
the "Allowable Cost and Payment" clause.

\(3\) If this contract is terminated in its entirety, the portion of the
target fee payable shall not be subject to an increase or decrease as
provided in this paragraph. The termination shall be accomplished in
accordance with other applicable clauses of this contract.

\(4\) For the purpose of fee adjustment, total allowable cost shall not
include allowable costs arising out of-

\(i\) Any of the causes covered by the "Excusable Delays" clause to the
extent that they are beyond the control and without the fault or
negligence of the Contractor or any subcontractor;

\(ii\) The taking effect, after negotiating the target cost, of a
statute, court decision, written ruling, or regulation that results in
the Contractor\'s being required to pay or bear the burden of any tax or
duty or rate increase in a tax or duty;

\(iii\) Any direct cost attributed to the Contractor\'s involvement in
litigation as required by the Contracting Officer pursuant to a clause
of this contract, including furnishing evidence and information
requested pursuant to the "Notice and Assistance Regarding Patent and
Copyright Infringement" clause;

\(iv\) The purchase and maintenance of additional insurance not in the
target cost and required by the Contracting Officer, or claims for
reimbursement for liabilities to third persons pursuant to the
"Insurance-Liability to Third Persons" clause;

\(v\) Any claim, loss, or damage resulting from a risk for which the
Contractor has been relieved of liability by the FAA Property clause; or

\(vi\) Any claim, loss, or damage resulting from a risk defined in the
contract as unusually hazardous or as a nuclear risk and against which
the FAA has expressly agreed to indemnify the Contractor.

\(5\) All other allowable costs are included in total allowable cost for
fee adjustment in accordance with this paragraph (e), unless otherwise
specifically provided in this contract.

\(f\) Contract modification. The total allowable cost and the adjusted
fee determined as provided in this clause shall be evidenced by a
modification to this contract signed by the Contractor and Contracting
Officer.

\(g\) Inconsistencies. In the event of any language inconsistencies
between this clause and provisioning documents or FAA options under this
contract, compensation for spare parts or other supplies and services
ordered under such documents shall be determined in accordance with this
clause.

(*End of clause*)

3.2.4-9 Cost Contract-No Fee

COST CONTRACT-NO FEE (APRIL 1996)

\(a\) The FAA shall not pay the Contractor a fee for performing this
contract.

\(b\) After payment of 80 percent of the total estimated cost shown in
the Schedule, the Contracting Officer may withhold further payment of
allowable cost until a reserve is set aside in an amount that the
Contracting Officer considers necessary to protect the FAA interest.
This reserve shall not exceed one percent of the total estimated cost
shown in the "Schedule" or \$100,000, whichever is less.

(*End of clause*)

3.2.4-10 Cost-Sharing Contract-No Fee

COST-SHARING CONTRACT-NO FEE (APRIL 1996)

\(a\) The FAA shall not pay to the Contractor a fee for performing this
contract.

\(b\) After paying 80 percent of the FAA\'s share of the total estimated
cost of performance shown in the Schedule, the Contracting Officer may
withhold further payment of allowable cost until a reserve is set aside
in an amount that the Contracting Officer considers necessary to protect
the Government\'s interest. This reserve shall not exceed one percent of
the FAA\'s share of the total estimated cost shown in the "Schedule" or
\$100,000, whichever is less.

(*End of clause*)

3.2.4-11 Allowable Cost and Payment-Facilities

ALLOWABLE COST AND PAYMENT-FACILITIES (APRIL 1996)

\(a\) General.

\(1\) For the performance of any work, duty, or obligation specified in
this contract to be at Government expense, the Government shall pay the
Contractor all allowable costs as determined by the Contracting Officer
in accordance with the contract terms and the FAA\'s contract cost
principles and procedures in effect on the contract date.

\(2\) Except as otherwise specifically provided in this contract, the
failure of this contract to provide for reimbursement does not preclude
the Contractor from including, as part of the price for cost under any
other Government contract or subcontract, an allocable portion of the
costs incurred for any work, duty, for obligation performed under this
contract, but not reimbursable under it.

\(b\) Invoicing. The Government shall make payments to the Contractor
when requested once each month. The Contractor may submit to an
authorized representative of the Contracting Officer, in such form and
reasonable detail as the representative may require, an invoice or
voucher supported by a statement of the claimed allowable cost for the
performance of this contract.

\(c\) Negotiated indirect costs. Notwithstanding the audit and
adjustment of invoices or vouchers under paragraph (f) below, allowable
indirect costs under this contract shall be obtained by applying final
indirect cost rates established as follows:

\(1\) Final annual indirect cost rates and the appropriate bases shall
be established for the period covered by the indirect cost rate
proposal.

\(2\) The Contractor shall, within 90 days after the expiration of each
of its fiscal years, or by a later date approved by the Contracting
Officer, submit to the Contracting Officer and to the cognizant audit
activity proposed final indirect cost rates for that period and
supporting cost and data specifying the contract and/or subcontract to
which the rates apply. The proposed rates shall be based on the
Contractor\'s actual cost experience for that period. The appropriate
Government representative and the Contractor shall establish the final
indirect cost rates as promptly as practical after receipt of the
contractor\'s proposal.

\(3\) The Contractor and the appropriate Government representative shall
execute a written understanding setting forth the final indirect cost
rates. The understanding shall specify (i) the agreed-upon final annual
indirect cost rates, (ii) the bases to which the rates apply, (iii) the
periods for which the rates apply, (iv) any specific indirect cost items
treated as direct costs in the settlement, and (v) the affected contract
and/or subcontract, identifying any with advance agreements or special
terms and the applicable rates. The understanding shall not change any
monetary ceiling, contract obligation, or specific cost allowance or
disallowance provided for in this contract. The understanding is
incorporated into this contract upon execution.

\(4\) Failure by the parties to agree on a final annual indirect cost
rate shall be a dispute within the meaning of the "Disputes" clause.

\(d\) Billing rates. Until final annual indirect cost rates are
established for any period, the Government shall reimburse the
Contractor at billing rates established by the Contracting Officer by an
authorized representative (the cognizant auditor), subject to adjustment
when the final rates are established. These billing rates\--

\(1\) Shall be the anticipated final rates; and

\(2\) May be prospectively or retroactively revised by mutual agreement,
at either party\'s request, to prevent substantial overpayment or
underpayment.

\(e\) Quick-close-out procedures. When the Contractor and Contracting
Officer agree, quick-close-out procedures may be used.

\(f\) Audit. At any time or times before final payment, the Contracting
Officer may have the Contractor\'s invoices or vouchers and statements
of cost audited. Any payment may be (1) reduced by amounts found by the
Contracting Officer not to constitute allowable costs for (2) adjusted
for prior overpayments or underpayments.

\(g\) Assignments and releases. The Contractor shall pay to the FAA any
refunds, rebates, credits, or other amounts (including interest, if any)
accruing to or received by the Contractor for any assignee under this
contract, to the extent that those amounts are properly allocable to
costs for which the Contractor has been reimbursed by the Government.
Reasonable expenses incurred by the Contractor for securing refunds,
rebates, credits, or other amounts shall be allowable costs if approved
by the Contracting Officer. Before final payment under this contract,
the Contractor and each assignee shall execute and deliver-

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

\(2\) A release discharging the FAA, its officers, agents, and employees
from all liabilities, obligations, and claims arising out of or under
this contract, except-

\(i\) Specified claims stated in exact amounts, or in estimated amounts
when the exact amounts are not known;

\(ii\) Claims (including reasonable incidental expenses) based upon
liabilities of the Contractor to third parties arising out of
performance of this contract; provided that the claims are not known to
the Contractor on the date of the execution of the release, and that the
Contractor gives notice of the claims in writing to the Contracting
Officer within 6 years following the release date or notice of final
payment date, whichever is earlier; and

\(iii\) Claims for reimbursement of costs, including related expenses,
incurred by the Contractor under the patent clauses of this contract,
excluding, however, any expenses arising from the Contractor\'s
indemnification of the Government against patent liability.

(*End of clause*)

Note: If the contract is for facilities acquisition, and the Contracting
Officer considers it appropriate, add the following paragraphs (g) and
(h) to the basic clause, and redesignate paragraph (g) of the basic
clause as paragraph (i):

\(g\) Withholding. After payment of 80 percent of the total estimated
cost shown in the Schedule, the Contracting Officer may withhold payment
of allowable costs until a reserve is set aside in an amount that the
Contracting Officer considers necessary to protect the Government\'s
interest. This reserve shall not exceed one percent of the total
estimated cost shown in the "Schedule" or \$100,000, whichever is less.

\(h\) Final Payment. The Contractor shall submit a completion invoice or
voucher, designated as such, no later than one year (or longer, as the
Contracting Officer may approve in writing) from the completion date.
Upon approval of the invoice or voucher, and upon the Contractor\'s
compliance with all terms of this contract, the FAA shall promptly pay
any balance of allowable costs not previously paid.

3.2.4-12 Allowable Cost and Payment-Facilities Use

ALLOWABLE COST AND PAYMENT-FACILITIES USE (APRIL 1996)

\(a\) For the performance of any work, duty, or obligations specified in
this contract to be at FAA expense, the FAA shall pay the Contractor all
allowable costs as determined by the Contracting Officer in accordance
with the contract terms and the FAA\'s contract cost principles in
effect on the contract date.

\(b\) Except as otherwise specifically provided in this contract, the
failure of this contract to provide for reimbursement does not preclude
the Contractor from including, as part of the price or cost under any
other Government contract or subcontract, an allocable portion of the
costs incurred for any work, duty, or obligation performed under this
contract, but not reimbursed under it.

(*End of clause*)

3.2.4-13 Predetermined Indirect Cost Rates

PREDETERMINED INDIRECT COST RATES (APRIL 1996)

\(a\) Notwithstanding the "Allowable Cost and Payment" clause of this
contract, the allowable indirect costs under this contract shall be
obtained by applying predetermined indirect cost rates to bases agreed
upon by the parties, as specified below.

\(b\) Not later than 90 days after the expiration of the Contractor\'s
fiscal year, the Contractor shall submit to the cognizant Contracting
Officer proposed predetermined indirect cost rates and supporting cost
data. The proposed rate shall be based on the Contractor\'s actual cost
experience during that fiscal year. Negotiations of predetermined
indirect cost rates shall begin as soon as practical after receipt of
the contractor\'s proposal.

\(c\) Allowability of costs and acceptability of cost allocation methods
shall be determined in accordance with the cost principles for
educational institutions in effect on the date of this contract.

\(d\) Predetermined rate agreements in effect on the date of this
contract shall be incorporated into the contract Schedule. The
Contracting Officer and Contractor shall negotiate rates for subsequent
periods and execute a written indirect cost rate agreement setting forth
the results. The agreement shall specify (1) the agreed-upon
predetermined indirect cost rates, (2) the bases to which the rates
apply, (3) the fiscal year (unless the parties agree to a different
period) for which the rates apply, and (4) the specific items treated as
direct costs or any changes in the items previously agreed to be direct
costs. The indirect cost rate agreement shall not change any monetary
ceiling, contract obligation, or specific cost allowance or disallowance
provided for in this contract. The agreement is incorporated into this
contract upon execution.

\(e\) Pending establishment of predetermined indirect cost rates for any
fiscal year (or other period agreed to by the parties), the Contractor
shall be reimbursed either at the rates fixed for the previous fiscal
year (or other period) or at billing rates acceptable to the Contracting
Officer, subject to appropriate adjustment when the final rates for that
period are established.

\(f\) Any failure by the parties to agree on any predetermined indirect
cost rates under this clause shall not be considered a dispute within
the meaning of the "Disputes" clause. If for any fiscal year (or other
period specified in the Schedule) the parties fail to agree to
predetermined indirect cost rates, the allowable indirect costs shall be
obtained by applying final indirect cost rates established in accordance
with the "Allowable Cost and Payment" clause.

\(g\) Allowable indirect costs for the period from the beginning of
performance until the end of the Contractor\'s fiscal year shall be
obtained using the predetermined indirect cost rates and the bases shown
in the Schedule.

(*End of clause*)

3.2.4-14 Incentive Price Revision-Firm Target

INCENTIVE PRICE REVISION-FIRM TARGET (APRIL 1996)

\(a\) General. The supplies or services identified in the "Schedule" as
Items \_\_\_\_\_\_ \[Contracting Officer insert "Schedule" line item
numbers\] are subject to price revision in accordance with this clause;
provided, that in no event shall the total final price of these items
exceed the ceiling price of \_\_\_\_\_ dollars (\$\_\_\_\_\_.\_\_). Any
supplies or services that are to be (1) ordered separately under, or
otherwise added to, this contract and (2) subject to price revision in
accordance with the terms of this clause shall be identified as such in
a modification to this contract.

\(b\) Definition. Costs, as used in this clause, means allowable costs
in accordance with the FAA's cost principles in effect on the date of
this contract.

\(c\) Data submission.

\(1\) Within \-\-\-- \[Contracting Officer insert number of days\] days
after the end of the month in which the Contractor has delivered the
last unit of supplies and completed the services specified by item
number in paragraph (a) above, the Contractor shall submit-

\(i\) A detailed statement of all costs incurred up to the end of that
month in performing all work under the items;

\(ii\) An estimate of costs of further performance, if any, that may be
necessary to complete performance of all work under the items;

\(iii\) A list of all residual inventory and an estimate of its value;
and

\(iv\) Any other relevant data that the Contracting Officer may
reasonably require.

\(2\) If the Contractor fails to submit the data required by
subparagraph (1) above within the time specified and it is later
determined that the Government has overpaid the Contractor, the
Contractor shall repay the excess to the Government immediately. Unless
repaid within 30 days after the end of the data submittal period, the
amount of the excess shall bear interest, computed from the date the
data were due to the date of repayment, at the rate established in
accordance with the "Interest" clause.

\(d\) Price revision. Upon the Contracting Officer\'s receipt of the
data required by paragraph (c) above, the Contracting Officer and the
Contractor shall promptly establish the total final price of the items
specified in (a) above by applying to final negotiated cost an
adjustment for profit or loss, as follows:

\(1\) On the basis of the information required by paragraph (c) above,
together with any other pertinent information, the parties shall
negotiate the total final cost incurred or to be incurred for supplies
delivered (or services performed) and accepted by the FAA and which are
subject to price revision under this clause.

\(2\) The total final price shall be established by applying to the
total final negotiated cost an adjustment for profit or loss, as
follows:

\(I\) If the total final negotiated cost is equal to the total target
cost, the adjustment is the total target profit.

\(ii\) If the total final negotiated cost is greater than the total
target cost, the adjustment is the total target profit, less
*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*\_ \[Contracting Officer insert
percent\] percent of the amount by which the total final negotiated cost
exceeds the total target cost.

\(iii\) If the final negotiated cost is less than the total target cost,
the adjustment is the total target profit plus \-- \[Contracting Officer
insert percent\] percent of the amount by which the total final
negotiated cost is less than the total target cost.

\(e\) Contract modification. The total final price of the items
specified in paragraph (a) above shall be evidenced by a modification to
this contract, signed by the Contractor and the Contracting Officer.
This price shall not be subject to revision, notwithstanding any changes
in the cost of performing the contract, except to the extent that-

\(1\) The parties may agree in writing, before the determination of
total final price, to exclude specific elements of cost from this price
and to a procedure for subsequent disposition of those elements; and

\(2\) Adjustments or credits are explicitly permitted or required by
this or any other clause in this contract.

\(f\) Adjusting billing prices.

\(1\) Pending execution of the contract modification (see paragraph (e)
above), the Contractor shall submit invoices or vouchers in accordance
with billing prices as provided in this paragraph. The billing prices
shall be the target prices shown in this contract.

\(2\) If at any time it appears from information provided by the
contractor under subparagraph (g)(2) below that the then-current billing
prices will be substantially greater than the estimated final prices,
the parties shall negotiate a reduction in the billing prices.
Similarly, the parties may negotiate an increase in billing prices by
any or all of the difference between the target prices and the ceiling
price, upon the Contractor\'s submission of factual data showing that
final cost under this contract will be substantially greater than the
target cost.

\(3\) Any billing price adjustment shall be reflected in a contract
modification and shall not affect the determination of the total final
price under paragraph (d) above. After the contract modification
establishing the total final price is executed, the total amount paid or
to be paid on all invoices or vouchers shall be adjusted to reflect the
total final price, and any resulting additional payments, refunds, or
credits shall be made promptly.

\(g\) Quarterly limitation on payments statement. This paragraph (g)
shall apply until final price revision under this contract has been
completed.

\(1\) Within 45 days after the end of each quarter of the Contractor\'s
fiscal year in which a delivery is first made (or services are first
performed) and accepted by the FAA under this contract, and for each
quarter thereafter, the Contractor shall submit to the contract
administration office (with a copy to the contracting office and the
cognizant contract auditor) a statement, cumulative from the beginning
of the contract, showing-

\(i\) The total contract price of all supplies delivered (or services
performed) and accepted by the FAA and for which final prices have been
established;

\(ii\) The total costs (estimated to the extent necessary) reasonably
incurred for, and properly allocable solely to, the supplies delivered
(or services performed) and accepted by the FAA and for which final
prices have not been established;

\(iii\) The portion of the total target profit (used in establishing the
initial contract price or agreed to for the purpose of this paragraph
(g)) that is in direct proportion to the supplies delivered (or services
performed) and accepted by the FAA and for which final prices have not
been established-increased or decreased in accordance with subparagraph
(d)(2) above, when the amount stated under subdivision (ii), immediately
above, differs from the aggregate target costs of the supplies or
services;

\(iv\) The total amount of all invoices or vouchers for supplies
delivered (or services performed) and accepted by the Government
(including amounts applied or to be applied to liquidate payments).

\(2\) Notwithstanding any provision of this contract authorizing greater
payments, if on any quarterly statement the amount under subdivision
(1)(iv) above exceeds the sum due the Contractor, as computed in
accordance with subdivisions (1)(i), (ii), and (iii) above, the
Contractor shall immediately refund or credit to the Government the
amount of this excess. The Contractor may, when appropriate, reduce this
refund or credit by the amount of any applicable tax credits due the
Contractor under 26 U.S.C. 1481 and by the amount of previous refunds or
credits effected under this clause. If any portion of the excess has
been applied to the liquidation of payments, then that portion may,
instead of being refunded, be added to the unliquidated payment account
consistent with the payments clause. The Contractor shall provide
complete details to support any claimed reductions in refunds.

\(3\) If the Contractor fails to submit the quarterly statement within
45 days after the end of each quarter and it is later determined that
the Government has overpaid the Contractor, the Contractor shall repay
the excess to the Government immediately. Unless repaid within 30 days
after the end of the statement submittal period, the amount of the
excess shall bear interest, computed from the date the quarterly
statement was due to the date of repayment, at the rate established in
accordance with the "Interest" clause.

\(h\) Subcontracts. No subcontract placed under this contract may
provide for payment on a cost-plus-a-percentage-of-cost basis. The
Contractor shall\--

\(1\) Insert in each price redetermination or incentive price revision
subcontract the substance of paragraph (g), above, and of this paragraph
(h), modified to omit mention of the FAA and to reflect the position of
the Contractor as purchaser and of the subcontractor as vendor, and to
omit that part of subparagraph (g)(2) above relating to tax credits; and

\(2\) Include in each cost-reimbursement subcontract a requirement that
each lower-tier price redetermination or incentive price revision
subcontract contain the substance of paragraph (g) above and of this
paragraph (h), modified as required by subparagraph (1) above.

\(i\) Disagreements. If the Contractor and the Contracting Officer fail
to agree upon the total final price within 60 days (or within such other
period as the Contracting Officer may specify) after the date on which
the data required by paragraph (c) above are to be submitted, the
Contracting Officer shall promptly issue a decision in accordance with
the "Disputes" clause.

\(j\) Termination. If this contract is terminated before the total final
price is established, prices of supplies or services subject to price
revision shall be established in accordance with this clause for (1)
completed supplies and services accepted by the FAA and (2) those
supplies and services not terminated under a partial termination. All
other elements of the termination shall be resolved in accordance with
other applicable clauses of this contract.

\(k\) Equitable adjustment under other clauses. If an equitable
adjustment in the contract price is made under any other clause of this
contract before the total final price is established, the adjustment
shall be made in the total target cost and may be made in the maximum
dollar limit on the total final price, the total target profit, or both.
If the adjustment is made after the total final price is established,
only the total final price shall be adjusted.

\(l\) Exclusion from target price and total final price. If any clause
of this contract provides that the contract price does not or will not
include an amount for a specific purpose, then neither any target price
nor the total final price includes or will include any amount for that
purpose.

\(m\) Separate reimbursement. If any clause of this contract expressly
provides that the cost of performance of an obligation shall be at FAA
expense, that expense shall not be included in any target price or in
the total final price, but shall be reimbursed separately.

\(n\) Taxes. As used in the "Federal, State, and Local Taxes" clause or
in any other clause that provides for certain taxes or duties to be
included in, or excluded from, the contract price, the term contract
price includes the total target price or, if it has been established,
the total final price. When any of these clauses requires that the
contract price be increased or decreased as a result of changes in the
obligation of the Contractor to pay or bear the burden of certain taxes
or duties, the increase or decrease shall be made in the total target
price or, if it has been established, in the total final price, so that
it will not affect the Contractor\'s profit or loss on this contract.

(*End of clause*)

ALTERNATE I

Provisioning and options. Parts, other supplies, or services that are to
be furnished under this contract on the basis of a provisioning document
or Government option shall be subject to price revision in accordance
with this clause. Any prices established for these parts, other
supplies, or services under a provisioning document or Government option
shall be treated as target prices. Target cost and profit covering these
parts, other supplies, or services may be established separately, in the
aggregate, or in any combination, as the parties may agree.

3.2.4-15 Incentive Price Revision-Successive Targets

INCENTIVE PRICE REVISION-SUCCESSIVE TARGETS (APRIL 1996)

\(a\) General. The supplies or services identified in the "Schedule" as
Items \_\_\_\_\_\_\_\_\_\_\_ \[Contracting Officer insert line item
numbers\] are subject to price revision in accordance with this clause;
provided, that in no event shall the total final price of these items
exceed the ceiling price of \_\_\_\_\_\_\_\_\_\_\_ dollars
(\$\_\_\_\_\_\_\_\_). The prices of these items shown in the "Schedule"
are the initial target prices, which include an initial target profit of
\_\_\_\_\_\_\_\_\_\_\_ \[Contracting Officer insert percent\] percent of
the initial target cost. Any supplies or services that are to be (1)
ordered separately under, or otherwise added to, this contract and (2)
subject to price revision in accordance with this clause shall be
identified as such in a modification to this contract.

\(b\) Definition. Costs, as used in this clause, means allowable costs
in accordance with the FAA\'s contract cost principles in effect on the
date of this contract.

\(c\) Submitting data for establishing the firm fixed price or a final
profit adjustment formula. (1) Within \_\_\_\_\_ \[Contracting Officer
insert number of days\] days after the end of the month in which the
Contractor has completed \_\_\_\_\_ \[see Note 1\], the Contractor shall
submit the following data:

\(i\) A proposed firm fixed price or total firm target price for
supplies delivered and to be delivered and services performed and to be
performed.

\(ii\) A detailed statement of all costs incurred in the performance of
this contract through the end of the month specified above with
sufficient supporting data to disclose unit costs and cost trends for-

\(A\) Supplies delivered and services performed; and

\(B\) Inventories of work in process and undelivered contract supplies
on hand (estimated to the extent necessary).

\(iii\) An estimate of costs of all supplies delivered and to be
delivered and all services performed and to be performed under this
contract, using the statement of costs incurred plus an estimate of
costs to complete performance, together with-

\(A\) Sufficient data to support the accuracy and reliability of the
estimate; and

\(B\) An explanation of the differences between this estimate and the
original estimate used to establish the initial target prices.

\(2\) The Contractor shall also submit, to the extent that it becomes
available before negotiations establishing the total firm price are
concluded-

\(i\) Supplemental statements of costs incurred after the end of the
month specified in subparagraph (1) above for-

\(A\) Supplies delivered and services performed; and

\(B\) Inventories of work in process and undelivered contract supplies
on hand (estimated to the extent necessary); and

\(ii\) Any other relevant data that the Contracting Officer may
reasonably require.

\(3\) If the Contractor fails to submit the data required by
subparagraphs (1) and (2) above within the time specified and it is
later determined that the FAA has overpaid the Contractor, the
Contractor shall repay the excess to the FAA immediately. Unless repaid
within 30 days after the end of the data submittal period, the amount of
the excess shall bear interest, computed from the date the data were due
to the date of repayment, at the rate established in accordance with the
"Interest" clause.

\(d\) Establishing firm fixed price or final profit adjustment formula.
Upon the Contracting Officer\'s receipt of the data required by
paragraph (c) above the Contracting Officer and the Contractor shall
promptly establish either a firm fixed price or a profit adjustment
formula for determining final profit, as follows:

\(1\) The parties shall negotiate a total firm target cost, based upon
the data submitted under paragraph (c) above.

\(2\) If the total firm target cost is more than the total initial
target cost, the total initial target profit shall be decreased. If the
total firm target cost is less than the total initial target cost, the
total initial target profit shall be increased. The initial target
profit shall be increased or decreased by \-\-\-- percent \[see Note 2\]
of the difference between the total initial target cost and the total
firm target cost. The resulting amount shall be the total firm target
profit; provided, that in no event shall the total firm target profit be
less than \_\_\_\_\_ percent or more than \_\_\_\_\_ percent
\[Contracting Officer insert percents\] of the total initial target
cost.

\(3\) If the total firm target cost plus the total firm target profit
represent a reasonable price for performing that part of the contract
subject to price revision under this clause, the parties may agree on a
firm fixed price, which shall be evidenced by a contract modification
signed by the Contractor and the Contracting Officer.

\(4\) Failure of the parties to agree to a firm fixed price shall not
constitute a dispute under the "Disputes" clause. If agreement is not
reached, or if establishment of a firm fixed price is inappropriate, the
Contractor and the Contracting Officer shall establish a profit
adjustment formula under which the total final price shall be
established by applying to the total final negotiated cost an adjustment
for profit or loss, determined as follows:

\(i\) If the total final negotiated cost is equal to the total firm
target cost, the adjustment is the total firm target profit.

\(ii\) If the total final negotiated cost is greater than the total firm
target cost, the adjustment is the total firm target profit, less \--
percent of the amount by which the total final negotiated cost exceeds
the total firm target cost.

\(iii\) If the total final negotiated cost is less than the total firm
target cost, the adjustment is the total firm target profit, plus \--
percent of the amount by which the total final negotiated cost is less
than the total firm target cost.

\(iv\) The total firm target cost, total firm target profit, and the
profit adjustment

formula for determining final profit shall be evidenced by a
modification to this contract signed by the Contractor and the
Contracting Officer.

\(e\) Submitting data for final price revision. Unless a firm fixed
price has been established in accordance with paragraph (d) above within
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \[Contracting Officer insert number of
days\] days after the end of the month in which the Contractor has
delivered the last unit of supplies and completed the services specified
by item number in paragraph (a) above, the Contractor shall submit -

\(1\) A detailed statement of all costs incurred up to the end of that
month in performing all work under the items;

\(2\) An estimate of costs of further performance, if any, that may be
necessary to complete performance of all work under the items;

\(3\) A list of all residual inventory and an estimate of its value; and

\(4\) Any other relevant data that the Contracting Officer may
reasonably require.

\(f\) Final price revision. Unless a firm fixed price has been agreed to
in accordance with paragraph (d) above, the Contractor and the
Contracting Officer shall, promptly after submission of the data
required by paragraph (e) above, establish the total final price, as
follows:

\(1\) On the basis of the information required by paragraph (e) above,
together with any other pertinent information, the parties shall
negotiate the total final cost incurred or to be incurred for the
supplies delivered (or services performed) and accepted by the
Government and which are subject to price revision under this clause.

\(2\) The total final price shall be established by applying to the
total final negotiated cost an adjustment for final profit or loss
determined as agreed upon under subparagraph (d)(4) above.

\(g\) Contract modification. The total final price of the items
specified in paragraph (a) above shall be evidenced by a modification to
this contract, signed by the Contractor and the Contracting Officer.
This price shall not be subject to revision, notwithstanding any changes
in the cost of performing the contract, except to the extent that-

\(1\) The parties may agree in writing, before the determination of
total final price, to exclude specific elements of cost from this price
and to a procedure for subsequent disposition of these elements; and

\(2\) Adjustments or credits are explicitly permitted or required by
this or any other clause in this contract.

\(h\) Adjustment of billing prices. (1) Pending execution of the
contract modification (see paragraph (e) above), the Contractor shall
submit invoices or vouchers in accordance with billing prices as
provided in this paragraph. The billing prices shall be the initial
target prices shown in this contract until firm target prices are
established under paragraph (d) above. When established, the firm target
prices shall be used as the billing prices.

\(2\) If at any time it appears from information provided by the
contractor under subparagraph (i)(1) below that the then-current billing
prices will be substantially greater than the estimated final prices,
the parties shall negotiate a reduction in the billing prices.
Similarly, the parties may negotiate an increase in billing prices by
any or all of the difference between the target prices and the ceiling
price, upon the Contractor\'s submission of factual data showing that
the final cost under this contract will be substantially greater than
the target cost.

\(3\) Any adjustment of billing prices shall be reflected in a contract
modification and shall not affect the determination of any price under
paragraph (d) or (f) above. After the contract modification establishing
the total final price is executed, the total amount paid or to be paid
on all invoices or vouchers shall be adjusted to reflect the total final
price, and any resulting additional payments, refunds, or credits shall
be made promptly.

\(i\) Quarterly limitation on payments statement. This paragraph (i)
shall apply until a firm fixed price or a total final price is
established under subparagraph (d)(3) or (f)(2).

\(1\) Within 45 days after the end of each quarter of the Contractor\'s
fiscal year in which a delivery is first made (or services are first
performed) and accepted by the FAA under this contract, and for each
quarter thereafter, the Contractor shall submit to the contract
administration office (with a copy to the contracting office and the
cognizant contract auditor) a statement, cumulative from the beginning
of the contract, showing-

\(i\) The total contract price of all supplies delivered (or services
performed) and accepted by the Government and for which final prices
have been established;

\(ii\) The total cost (estimated to the extent necessary) reasonably
incurred for, and properly allocable solely to, the supplies delivered
(or services performed) and accepted by the Government and for which
final prices have not been established;

\(iii\) The portion of the total interim profit (used in establishing
the initial contract price or agreed to for the purpose of this
paragraph (i)) that is in direct proportion to the supplies delivered
(or services performed) and accepted by the FAA and for which final
prices have not been established-increased or decreased in accordance
with subparagraph (d)(4) above when the amount stated under subdivision
(ii), immediately above, differs from the aggregate firm target costs of
the supplies or services; and

\(iv\) The total amount of all invoices or vouchers for supplies
delivered (or services performed) and accepted by the FAA (including
amounts applied or to be applied to liquidate payments).

\(2\) Notwithstanding any provision of this contract authorizing greater
payments, if on any quarterly statement the amount under subdivision
(1)(iv) above exceeds the sum due the Contractor, as computed in
accordance with subdivisions (1)(i), (ii), and (iii) above, the
Contractor shall immediately refund or credit to the Government the
amount of this excess. The Contractor may, when appropriate, reduce this
refund or credit by the amount of any applicable tax credits due the
Contractor under 26 U.S.C. 1481 and by the amount of previous refunds or
credits effected under this clause. If any portion of the excess has
been applied to the liquidation of payments, then that portion may,
instead of being refunded, be added to the unliquidated payment account
consistent with the payments clause. The Contractor shall provide
complete details to support any claimed reductions in refunds.

\(3\) If the Contractor fails to submit the quarterly statement within
45 days after the end of each quarter and it is later determined that
the FAA has overpaid the Contractor, the Contractor shall repay the
excess to the FAA immediately. Unless repaid within 30 days after the
end of the statement submittal period, the amount of the excess shall
bear interest, computed from the date the quarterly statement was due to
the date of repayment, at the rate established in accordance with the
"Interest" clause.

\(j\) Subcontracts. No subcontract placed under this contract may
provide for payment on a cost-plus-a-percentage-of-cost basis. The
Contractor shall-

\(1\) Insert in each price redetermination or incentive price revision
subcontract the substance of paragraph (i) above, and of this paragraph
(j), modified to omit mention of the FAA and to reflect the position of
the Contractor as purchaser and of the subcontractor as vendor, and to
omit that part of subparagraph (i)(2) above relating to tax credits; and

\(2\) Include in each cost-reimbursement subcontract a requirement that
each lower-tier price redetermination or incentive price revision
subcontract contain the substance of paragraph (i) above, and of this
paragraph (j), modified as required by subparagraph (j)(1), immediately
above.

\(k\) Disagreements. If the Contractor and the Contracting Officer fail
to agree upon (1) a total firm target cost and a final profit adjustment
formula or (2) a total final price, within 60 days (or within such other
period as the Contracting Officer may specify) after the date on which
the data required in paragraphs (c) and (e) above are to be submitted,
the Contracting Officer shall promptly issue a decision in accordance
with the "Contract Disputes" clause.

\(l\) Termination. If this contract is terminated before the total final
price is established, prices of supplies or services subject to price
revision shall be established in accordance with this clause for (1)
completed supplies and services accepted by the FAA and (2) those
supplies or services not terminated under a partial termination. All
other elements of the termination shall be resolved in accordance with
other applicable clauses of this contract.

\(m\) Equitable adjustments under other clauses. If an equitable
adjustment in the contract price is made under any other clause of this
contract before the total final price is established, the adjustment
shall be made in the total target cost and may be made in the maximum
dollar limit on the total final price, the total target profit, or both.
If the adjustment is made after the total final price is established,
only the total final price shall be adjusted.

\(n\) Exclusion from target price and total final price. If any clause
of this contract provides that the contract price does not or will not
include an amount for a specific purpose, then neither any target price
nor the total final price includes or will include any amount for that
purpose.

\(o\) Separate reimbursement. If any clause of this contract expressly
provides that the cost of performance of an obligation shall be at FAA
expense, that expense shall not be included in any target price or in
the total final price, but shall be reimbursed separately.

\(p\) Taxes. As used in the "Federal, State, and Local Taxes" clause or
in any other clause that provides for certain taxes or duties to be
included in, or excluded from, the contract price, the term contract
price includes the total target price or, if it has been established,
the total final price. When any of these clauses requires that the
contract price be increased or decreased as a result of changes in the
obligation of the Contractor to pay or bear the burden of certain taxes
or duties, the increase or decrease shall be made in the total target
price or, if it has been established, in the total final price, so that
it will not affect the Contractor\'s profit or loss on this contract.

(*End of clause*)

Note: (1) The degree of completion may be based on a percentage of
contract performance or any other reasonable basis.

\(2\) The language may be changed to describe a negotiated adjustment
pattern under which the extent of adjustment is not the same for all
levels of cost variation. If the contract calls for supplies or services
to be ordered under a provisioning document or Government option and the
prices are to be subject to the incentive price revision described in
the basic clause, add the following paragraph (q) to the basic clause:

\(q\) Provisioning and options. Parts, other supplies, or services that
are to be furnished under this contract on the basis of a provisioning
document or FAA option shall be subject to price revision in accordance
with this clause. Any prices established for these parts, other
supplies, or services under a provisioning document or FAA option shall
be treated as initial target prices, or target prices as agreed upon and
stipulated in the pricing document supporting the provisioning or added
items. Initial or firm target costs and profits and final prices
covering these parts, other supplies, or services may be established
separately, in the aggregate, or in any combination, as the parties may
agree.

3.2.4-16 Ordering

ORDERING (APRIL 1996)

\(a\) Any supplies and services to be furnished under this contract
shall be ordered by issuance of delivery orders or task orders by the
individuals or activities designated in the Schedule. Such orders may be
issued from \_\_\_\_\_ through \_\_\_\_\_ \[insert dates\].

\(b\) All delivery orders or task orders are subject to the terms and
conditions of this contract. In the event of conflict between a delivery
order or task order and this contract, the contract shall control.

\(c\) If mailed, a delivery order or task order is considered "issued"
when the FAA deposits the order in the mail. Orders may be issued
orally, by facsimile, or by electronic commerce methods only if
authorized in the Schedule.

(*End of clause*)

Include the following paragraph (d) in cost reimbursement indefinite
quantity contracts:

\(d\) The provisions of the clauses entitled \"Limitation of Costs\",
\"Limitation of Funds\", and \"Allowable Cost and Payment\" shall apply
to individual delivery orders or task orders.

3.2.4-17 Order Limitations

ORDER LIMITATIONS (APRIL 1996)

\(a\) Minimum order. When the FAA requires supplies or services covered
by this contract in an amount of less than \_\_\_\_\_\_ \[insert dollar
figure or quantity\], the FAA is not obligated to purchase, nor is the
Contractor obligated to furnish, those supplies or services under the
contract. If less than the amount specified in this paragraph is ordered
by the FAA, the Contractor shall not be entitled to an equitable
adjustment in the contract price.

\(b\) Maximum order. The Contractor is not obligated to honor-

\(1\) Any order for a single item in excess of \_\_\_\_\_\_ \[insert
dollar figure or quantity\];

\(2\) Any order for a combination of items in excess of \_\_\_\_\_\_
\[insert dollar figure or quantity\]; or

\(3\) A series of orders from the same ordering office within \_\_\_\_\_
days that together call for quantities exceeding the limitation in
subparagraph (1) or (2) above.

\(c\) If this is a requirements contract, the FAA is not required to
order a part of any one requirement from the Contractor if that
requirement exceeds the maximum-order limitations in paragraph (b)
above.

\(d\) Notwithstanding paragraphs (b) and (c) above, the Contractor shall
honor any order exceeding the maximum order limitations in paragraph
(b), unless that order (or orders) is returned to the ordering office
within \_\_\_\_\_ days after issuance, with written notice stating the
Contractor\'s intent not to ship the item (or items) called for and the
reasons. Upon receiving this notice, the Government may acquire the
supplies or services from another source.

(*End of clause*)

3.2.4-18 Definite Quantity

DEFINITE QUANTITY (APRIL 1996)

\(a\) This is a definite-quantity, indefinite-delivery contract for the
supplies or services specified, and effective for the period stated, in
the Schedule.

\(b\) The FAA shall order the quantity of supplies or services specified
in the Schedule, and the Contractor shall furnish them when ordered.
Delivery or performance shall be at locations designated in orders
issued in accordance with the "Ordering" clause and the "Schedule."

\(c\) Except for any limitations on quantities in the "Order
Limitations" clause or in the Schedule, there is no limit on the number
of orders that may be issued. The FAA may issue orders requiring
delivery to multiple destinations or performance at multiple locations.

\(d\) Any order issued during the effective period of this contract and
not completed within that time shall be completed by the Contractor
within the time specified in the order. The contract shall govern the
Contractor\'s and FAA\'s rights and obligations with respect to that
order to the same extent as if the order were completed during the
contract\'s effective period; provided, that the Contractor shall not be
required to make any deliveries under this contract after
\_\_\_\_\_\_\_\_\_\_\_ \[insert date\].

(*End of clause*)

3.2.4-19 Requirements

REQUIREMENTS (APRIL 1996)

\(a\) This is a requirements contract for the supplies or services
specified, and effective for the period stated, in the Schedule. The
quantities of supplies or services specified in the "Schedule" are
estimates only and are not purchased by this contract. Except as this
contract may otherwise provide, if the Government\'s requirements do not
result in orders in the quantities described as estimated or maximum in
the Schedule, that fact shall not constitute the basis for an equitable
price adjustment.

\(b\) Delivery or performance shall be made only as authorized by orders
issued in accordance with the "Ordering" clause. Subject to any
limitations in the "Delivery-Order Limitations" clause or elsewhere in
this contract, the Contractor shall furnish to the FAA all supplies or
services specified in the "Schedule" and called for by orders issued in
accordance with the "Ordering" clause. The FAA may issue orders
requiring delivery to multiple destinations or performance at multiple
locations.

\(c\) Except as this contract otherwise provides, the FAA shall order
from the Contractor all the supplies or services specified in the
"Schedule" that are required to be purchased by the Government activity
or activities specified in the "Schedule."

\(d\) The FAA is not required to purchase from the Contractor
requirements in excess of any limit on total orders under this contract.

\(e\) If the FAA urgently requires delivery of any quantity of an item
before the earliest date that delivery may be specified under this
contract, and if the Contractor will not accept an order providing for
the accelerated delivery, the FAA may acquire the urgently required
goods or services from another source.

\(f\) Any order issued during the effective period of this contract and
not completed within that period shall be completed by the Contractor
within the time specified in the order. The contract shall govern the
Contractor\'s and FAA\'s rights and obligations with respect to that
order to the same extent as if the order were completed during the
contract\'s effective period; provided, that the Contractor shall not be
required to make any deliveries under this contract after \-\-\--
\[insert date\].

(*End of clause*)

If the requirements contract is for nonpersonal services and related
supplies and covers estimated requirements that exceed a specific
Government activity\'s internal capability to produce or perform,
substitute the following paragraph (c) for paragraph (c) of the basic
clause:

\(c\) The estimated quantities are not the total requirements of the FAA
activity specified in the Schedule, but are estimates of requirements in
excess of the quantities that the activity may itself furnish within its
own capabilities. Except as this contract otherwise provides, the FAA
shall order from the Contractor all of that activity\'s requirements for
supplies and services specified in the "Schedule" that exceed the
quantities that the activity may itself furnish within its own
capabilities.

If the requirements contract includes subsistence for both FAA use and
resale in the same Schedule, and similar products may be acquired on a
brand-name basis, add the following paragraph (g) to the basic clause:

\(g\) The requirements referred to in this contract are for items to be
manufactured according to FAA specifications. Notwithstanding anything
to the contrary stated in the contract, the FAA may acquire similar
products by brand name from other sources for resale.

If the requirements contract involves a partial small business
set-aside, substitute the following paragraph (c) for paragraph (c) of
the basic clause:

\(c\) The FAA\'s requirements for each item or subitem of supplies or
services described in the "Schedule" are being purchased through one
non-set-aside contract and one set-aside contract. Therefore, the FAA
shall order from each Contractor approximately one-half of the total
supplies or services specified in the "Schedule" that are required to be
purchased by the specified FAA activity or activities. The FAA may
choose between the set-aside Contractor and the non-set-aside Contractor
in placing any particular order. However, the Government shall allocate
successive orders, in accordance with its delivery requirements, to
maintain as close a ratio as is reasonably practicable between the total
quantities ordered from the two Contractors.

If the contract includes subsistence for both FAA use and resale in the
same "Schedule" and similar products may be acquired on a brand-name
basis and the contract also involves a partial small business set-aside,
substitute the following paragraph (c) for paragraph (c) of the basic
clause and add the following paragraph (g) to the basic clause:

\(c\) The FAA\'s requirements for each item or subitem of supplies or
services described in the "Schedule" are being purchased through one
non-set-aside contract and one set-aside contract. Therefore, the FAA
shall order from each Contractor approximately one-half of the total
supplies or services specified in the "Schedule" that are required to be
purchased by the specified FAA activity or activities. The FAA may
choose between the set-aside Contractor and the non-set-aside Contractor
in placing any particular order. However, the FAA shall allocate
successive orders, in accordance with its delivery requirements, to
maintain as close a ratio as is reasonably practicable between the total
quantities ordered from the two Contractors.

\(g\) The requirements referred to in this contract are for items to be
manufactured according to the FAA specifications. Notwithstanding
anything to the contrary stated in the contract, the Government may
acquire similar products by brand name from other sources for resale.

3.2.4-20 Indefinite Quantity

INDEFINITE QUANTITY (APRIL 1996)

\(a\) This is an indefinite-quantity contract for the supplies or
services specified, and effective for the period stated, in the
Schedule. The quantities of supplies and services specified in the
"Schedule" are estimates only and are not purchased by this contract.

\(b\) Delivery or performance shall be made only as authorized by orders
issued in accordance with the "Ordering" clause. The Contractor shall
furnish to the FAA, when and if ordered, the supplies or services
specified in the "Schedule" up to and including the quantity designated
in the "Schedule" as the maximum. The FAA may order the quantity of
supplies or services designated in the "Schedule" as the minimum. If
less than the minimum amount is ordered by the FAA, the Contractor shall
not be entitled to an equitable adjustment in the contract price.

\(c\) Except for any limitations on quantities in the "Delivery-Order
Limitations" clause or in the Schedule, there is no limit on the number
of orders that may be issued. The FAA may issue orders requiring
delivery to multiple destinations or performance at multiple locations.

\(d\) Any order issued during the effective period of this contract and
not completed within that period shall be completed by the Contractor
within the time specified in the order. The contract shall govern the
Contractor\'s and Government\'s rights and obligations with respect to
that order to the same extent as if the order were completed during the
contract\'s effective period; provided, that the Contractor shall not be
required to make any deliveries under this contract after \_\_\_\_\_\_
\[insert date\].

(*End of clause*)

3.2.4-21 Execution and Commencement of Work

EXECUTION AND COMMENCEMENT OF WORK (APRIL 1996)

The Contractor shall indicate acceptance of this letter contract by
signing three copies of the contract and returning them to the
Contracting Officer not later than \_\_\_\_\_\_\_\_\_\_\_ \[insert
date\]. Upon acceptance by both parties, the Contractor shall proceed
with performance of the work, including purchase of necessary materials.

(*End of clause*)

3.2.4-22 Limitation of Government Liability

LIMITATION OF FAA LIABILITY (APRIL 1996)

\(a\) In performing this contract, the Contractor is not authorized to
make expenditures or incur obligations exceeding \_\_\_\_\_\_\_\_\_\_\_
dollars.

\(b\) The maximum amount for which the Government shall be liable if
this contract is terminated is \_\_\_\_\_\_\_\_\_\_\_ dollars.

(*End of clause*)

3.2.4-23 Contract Price Definitization

CONTRACT PRICE DEFINITIZATION

\(a\) A \_\_\_\_\_ \[insert the type of contract\] contract is
contemplated. The Contractor agrees to begin promptly negotiating with
the Contracting Officer the price and any price related terms of a
\_\_\_\_\_ \[ insert the type of contract\] contract. The Contractor
agrees to submit a \_\_\_\_\_ \[insert specific type of proposal (e.g.,
fixed-price or cost-and-fee)\] proposal and cost or pricing data
supporting its proposal.

\(b\) The schedule for negotiating the price of this contract is
\[insert target date for definitization of the contract price and dates
for submission of proposal, beginning of negotiations, and, if
appropriate, submission of make-or-buy and subcontracting plans and cost
or pricing data\]:

> \-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
>
> \-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
>
> \-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
>
> \-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

\(c\) If agreement on the contract price is not reached by the target
date in paragraph (b) above, or within any extension of it granted by
the Contracting Officer, the Contracting Officer may, with the approval
of the head of the contracting activity, determine a reasonable price or
fee, subject to Contractor appeal as provided in the "Contract Disputes"
clause. In any event, the Contractor shall proceed with completion of
the contract, subject only to the "Limitation of FAA Liability" clause.

\(1\) After the Contracting Officer\'s determination of price or fee,
the contract shall be governed by-

\(i\) All clauses required by the FAA Acquisition Management System on
the date of execution of this letter contract for either fixed-price or
cost-reimbursement contracts, as determined by the Contracting Officer
under this paragraph (c);

\(ii\) All clauses required by law as of the date of the Contracting
Officer\'s determination; and

\(iii\) Any other clauses, terms, and conditions mutually agreed upon.

\(2\) To the extent consistent with subparagraph (c)(1) above, all
clauses, terms, and conditions included in this letter contract shall
continue in effect, except those that by their nature apply only to a
letter contract.

\(d\) The definitive contract resulting from this letter contract will
include a total negotiated \_\_\_\_\_\_\_ \[insert the description of
the amount mutually agreed for the price ceiling, e.g. firm-fixed-price,
total estimated-cost-plus-fixed-fee, or other appropriate description\]
in no event to exceed \-\-\-- \[insert the mutually agreed amount of the
price ceiling\].

(*End of clause*)

3.2.4-24 Payments of Allowable Costs Before Definitization

PAYMENTS OF ALLOWABLE COSTS BEFORE DEFINITIZATION (APRIL 1996)

\(a\) Reimbursement rate. Pending the completion of the negotiation to
definitize the estimated cost and fee of this letter contract, the
Government shall promptly reimburse the Contractor for all allowable
costs under this contract at the following rates:

\(1\) One hundred percent of approved costs representing payments to
subcontractors under fixed-price subcontracts; provided, that the
Government\'s payments to the Contractor shall not exceed 80 percent of
the allowable costs of those subcontractors.

\(2\) One hundred percent of approved costs representing cost-
reimbursement subcontracts; provided, that the Government\'s payments to
the Contractor shall not exceed 85 percent of the allowable costs of
those subcontractors.

\(3\) Eighty-five percent of all other approved costs.

\(b\) Limitation of reimbursement. To determine the amounts payable to
the Contractor under this letter contract, the Contracting Officer shall
determine allowable costs in accordance with the applicable cost
principles in the FAA Acquisition Management System. The total
reimbursement made under this paragraph shall not exceed 85 percent of
the maximum amount of the Government\'s liability, as stated in this
contract.

\(c\) Invoicing. Payments shall be made promptly to the Contractor when
requested as work progresses, but (except for small business concerns)
not more often than every 2 weeks, in amounts approved by the
Contracting Officer. The Contractor may submit to an authorized
representative of the Contracting Officer, in such form and reasonable
detail as the representative may require, an invoice or voucher
supported by a statement of the claimed allowable cost incurred by the
Contractor in the performance of this contract.

\(d\) Allowable costs. For the purpose of determining allowable costs,
the term costs includes-

\(1\) Those recorded costs that result, at the time of the request for
reimbursement, from payment by cash, check, or other form of actual
payment for items or services purchased directly for the contract;

\(2\) When the Contractor is not delinquent in payment of costs of
contract performance in the ordinary course of business, costs incurred,
but not necessarily paid, for\--

\(i\) Materials issued from the Contractor\'s stores inventory and
placed in the production process for use on the contract;

\(ii\) Direct labor;

\(iii\) Direct travel;

\(iv\) Other direct in-house costs; and

\(v\) Properly allocable and allowable indirect costs as shown on the
records maintained by the Contractor for purposes of obtaining
reimbursement under Government contracts; and

\(3\) The amount of payments that have been paid to the Contractor\'s
subcontractors under similar cost standards.

\(e\) Small business concerns. A small business concern may receive more
frequent payments than every 2 weeks and may invoice and be paid for
recorded costs for items or services purchased directly for the
contract, even though it has not yet paid for such items or services.

\(f\) Audit. At any time before final payment, the Contracting Officer
may have the Contractor\'s invoices or vouchers and statements of costs
audited. Any payment may be (1) reduced by any amounts found by the
Contracting Officer not to constitute allowable costs or (2) adjusted
for overpayments or underpayments made on preceding invoices or
vouchers.

(*End of clause*)

3.2.4-25 Single or Multiple Awards

SINGLE OR MULTIPLE AWARDS (APRIL 1996)

The FAA may elect to award a single delivery order contract or task
order contract or to award multiple delivery order contracts or task
order contracts for the same or similar supplies or services to two or
more sources.

(*End of provision*)

3.2.4-26 Multiple Awards for Advisory and Assistance Services

MULTIPLE AWARDS FOR ADVISORY AND ASSISTANCE SERVICES (APRIL 1996)

The FAA intends to award multiple contracts for the same or similar
advisory and assistance services to two or more sources unless the FAA
determines, after evaluation of offers, that only one offeror is capable
of providing the services at the level of quality required.

(*End of provision*)

3.2.4-27 Limitation of Price and Contractor Obligations

LIMITATION OF PRICE AND CONTRACTOR OBLIGATIONS (APRIL 1996)

\(a\) Funds available for performance are described in the Schedule. The
amount of funds available at award is not considered sufficient for the
performance required for any program year other than the first program
year. When additional funds are available for the full requirements of
the next succeeding program year, the Contracting Officer shall, not
later than the date specified in the "Schedule" (unless a later date is
agreed to), so notify the Contractor in writing. The Contracting Officer
shall also modify the amount of funds described in the "Schedule" as
available for contract performance. This procedure shall apply for each
successive program year.

\(b\) The FAA is not obligated to the Contractor for any amount over
that described in the "Schedule" as available for contract performance.

\(c\) The Contractor is not obligated to incur costs for the performance
required for any program year after the first unless and until written
notification is received from the Contracting Officer of an increase in
availability of funds. If so notified, the Contractor\'s obligation
shall increase only to the extent contract performance is required for
the additional program year for which funds are made available.

\(d\) If this contract is terminated under the "Termination for
Convenience of the Government" clause, \'total contract price\' in that
clause means the amount available for performance of this contract, as
in paragraph (a) above, plus the amount established as the cancellation
ceiling. \'Work under the contract\' in that clause means the work under
program year requirements for which funds have been made available. If
the contract is terminated for default, the Government\'s rights under
this contract shall apply to the entire multi-year requirements.

\(e\) Notification to the Contractor of an increase or decrease in the
funds available for performance of this contract under another clause
(e.g., an "Option" or "Changes" clause) shall not constitute the
notification contemplated by paragraph (a) of this clause.

(*End of clause*)

3.2.4-28 Cancellation of Items

CANCELLATION OF ITEMS (APRIL 1996)

\(a\) "Cancellation," as used in this clause, means that the Government
is canceling its requirements for all items in program years subsequent
to that in which notice of cancellation is provided. Cancellation shall
occur, by the date or within the time period specified in the Schedule,
(unless a later date is agreed to) if the Contracting Officer (1)
notifies the Contractor that funds are not available for contract
performance for any subsequent program year or (2) fails to notify the
Contractor that funds are available for performance of the succeeding
program year requirement.

\(b\) Except for cancellation under this clause or termination under the
"Default" clause, any reduction by the Contracting Officer in the
requirements of this contract shall be considered a termination under
the "Termination for Convenience of the Government" clause.

\(c\) If cancellation under this clause occurs, the Contractor will be
paid a cancellation charge not over the cancellation ceiling specified
in the "Schedule" as applicable at the time of cancellation.

\(d\) The cancellation charge will cover only (1) costs (i) incurred by
the prime contractor and/or subcontractor, (ii) reasonably necessary for
performance of the contract, and (iii) that would have been equitably
amortized in the unit prices for the entire multi-year contract period
but, because of the cancellation, are not so amortized, and (2) a
reasonable profit on the costs.

\(e\) The cancellation charge shall be computed and the claim made for
it as if the claim were being made under the "Termination for
Convenience of the Government" clause of this contract. The Contractor
shall submit the contract dispute promptly but no later than 1 year from
the date (1) of notification of the nonavailability of funds, or (2)
specified in the "Schedule" by which notification of the availability of
additional funds for the next succeeding program year is required to be
issued, whichever is earlier, unless extensions in writing are granted
by the Contracting Officer.

\(f\) The Contractor\'s contract dispute may include\--

\(1\) Reasonable nonrecurring costs which are applicable to and normally
would have been amortized in all items to be furnished under the
multi-year requirements;

\(2\) Allocable portions of the costs of facilities acquired or
established for the conduct of the work, to the extent that it is
impracticable for the Contractor to use the facilities in its commercial
work and if the costs are not charged to the contract through overhead
or otherwise depreciated;

\(3\) Costs incurred for the assembly, training, and transportation to
and from the job site of a specialized work force; and

\(4\) Costs not amortized by the unit price solely because the
cancellation had precluded anticipated benefits of Contractor or
subcontractor learning.

\(g\) The contract dispute shall not include\--

\(1\) Labor, material, or other expenses incurred by the Contractor or
subcontractors for performance of the canceled work;

\(2\) Any cost already paid to the Contractor;

\(3\) Anticipated profit on the canceled work; or

\(4\) For service contracts, the remaining useful commercial life of
facilities. \'Useful commercial life\' means the commercial utility of
the facilities rather than their physical life with due consideration
given to such factors as location of facilities, their specialized
nature, and obsolescence.

\(h\) This contract may include an "Option" clause with the period for
exercising the option limited to the date in the contract for
notification that funds are available for the next succeeding program
year. If so, the Contractor agrees not to include in the price for
option quantities any costs of a startup or nonrecurring nature, that
have been fully provided for in the unit prices of the firm quantities
of the program years. The Contractor further agrees that the prices
offered for option quantities will reflect only those recurring costs,
and a reasonable profit necessary to furnish the additional option
quantities.

\(i\) Quantities added to the original contract through the "Option"
clause of this contract shall be included in the quantity canceled for
the purpose of computing allowable cancellation charges.

(*End of clause*)

Alternate I

Substitute the following paragraph (a) for paragraph (a) of the basic
clause, delete paragraph (b) of the basic clause, and redesignate the
remaining paragraphs accordingly:

CANCELLATION OF ITEMS

\(a\) As used herein, the term \'cancellation\' means that the FAA is
canceling, pursuant to this clause, its anticipated requirements for
items as set forth in the "Schedule" for all program years subsequent to
that in which notice of cancellation is provided. Such cancellation
shall occur if, by the date of within the time period specified in the
"Schedule" or such further time as may be agreed to, the Contracting
Officer (1) notifies the Contractor that funds will not be available for
contract performance for any subsequent program year or (2) fails to
notify the Contractor that funds will be available for performance of a
requirement for the succeeding program year. \'Cancellation\' shall also
be deemed to have occurred if, upon expiration of a final program year,
the Government has failed to order the specified items in quantities up
to the aggregate Best Estimated Quantity set forth in the Schedule.

\(b\) Following cancellation under this clause of any program year(s),
the Government shall not be obligated to issue nor the Contractor to
accept any further orders under this contract occurs, the Contractor
will be paid a cancellation charge not over the cancellation ceiling
specified in the "Schedule" as applicable at the time of cancellation.

*(End of clause)*

3.2.4-29 Evaluation Exclusive of Options

EVALUATION EXCLUSIVE OF OPTIONS (APRIL 1996)

The Government will evaluate offers for award purposes by including only
the price for the basic requirement; i.e., options will not be included
in the evaluation for award purposes.

*(End of provision)*

3.2.4-30 Evaluation of Options Exercised at Time of Contract Award.

EVALUATION OF OPTIONS EXERCISED AT

TIME OF CONTRACT AWARD (APRIL 1996)

Except when it is determined not to be in the Government\'s best
interests, the Government will evaluate the total price for the basic
requirement together with any option(s) exercised at the time of award.

*(End of provision)*

3.2.4-31 Evaluation of Options.

EVALUATION OF OPTIONS (APRIL 1996)

Except when it is determined not to be in the Government\'s best
interests, the Government will evaluate offers for award purposes by
adding the total price for all options to the total price for the basic
requirement. Evaluation of options will not obligate the Government to
exercise the option(s).

*(End of provision)*

3.2.4-32 Option for Increased Quantity.

OPTION FOR INCREASED QUANTITY (APRIL 1996)

The Government may increase the quantity of supplies called for in the
Schedule at the unit price specified. The Contracting Officer may
exercise the option by written notice to the Contractor within
\_\_\_\_\_ \[insert in the clause the period of time in which the
Contracting Officer has to exercise the option\]. Delivery of the added
items shall continue at the rate as the like items called for under the
contract, unless the parties otherwise agree.

*(End of clause)*

3.2.4-33 Option for Increased Quantity\--Separately Priced Line Item.

OPTION FOR INCREASED QUANTITY\--

SEPARATELY PRICED LINE ITEM (APRIL 1996)

The Government may require the delivery of the numbered line item,
identified in the Schedule as an option item, in the quantity and at the
price stated in the Schedule. The Contracting Officer may exercise the
option by written notice to the Contractor within \_\_\_\_\_ \[insert in
the clause the period of time in which the Contracting Officer has to
exercise the option\]. Delivery of added items shall continue at the
same rate that like items are called for under the contract, unless the
parties otherwise agree.

*(End of clause)*

3.2.4-34 Option to Extend Services.

OPTION TO EXTEND SERVICES (APRIL 1996)

The Government may require continued performance of any services within
the limits and at the rates specified in the contract. These rates may
be adjusted only as a result of revisions to prevailing labor rates
provided by the Secretary of Labor. The option provision may be
exercised more than once, but the total extension of performance
hereunder shall not exceed 6 months. The Contracting Officer may
exercise the option by written notice to the Contractor within the
period specified in the Schedule.

*(End of clause)*

3.2.4-35 Option to Extend the Term of the Contract.

OPTION TO EXTEND THE TERM OF THE CONTRACT (APRIL 1996)

\(a\) The Government may extend the term of this contract by written
notice to the Contractor within \_\_\_\_\_ \[insert in the clause the
period of time in which the Contracting Officer has to exercise the
option\]; provided, that the Government shall give the Contractor a
preliminary written notice of its intent to extend at least 60 days
before the contract expires. The preliminary notice does not commit the
Government to an extension.

\(b\) If the Government exercises this option, the extended contract
shall be considered to include this option provision.

\(c\) The total duration of this contract, including the exercise of any
options under this clause, shall not exceed \_\_\_ (months) \_\_\_\_
(years).

*(End of clause)*