CHAPTER 12. [CONTRACT ADMINISTRATION]{.underline}

12-1 [DEFINITIONS]{.underline}.

A. [Contract Administration]{.underline}. The actions taken with regard
to a contract (including simplified acquisitions) after it has been
awarded are collectively known as contract administration. The goal of
contract administration is to ensure that both the contractor and the
Government meet the terms of the contract. Contracting Officers are
responsible for ensuring that contracts are administered in accordance
with FAR Part 42.

B. [Monitoring]{.underline}. For the purposes of this Handbook, the
day-to-day oversight of the contractor's performance and compliance with
the terms of his/her contract is referred to as monitoring. The GTR and
any GTM(s) assigned to a contract are primarily responsible for
monitoring it.

12-2 [GENERAL DUTIES AND RESPONSIBILITIES OF THE CONTRACTING
TEAM]{.underline}. As with its award, successful completion of a
contract depends heavily upon a team effort by the program and
contracting offices (see also paragraph 5-2.C). The principal members'
duties include, but are not limited to, those listed below.

A. The [Contracting Officer]{.underline} is responsible for:

1\. Ensuring that the parties to the contract are informed of their
responsibilities;

2\. Notifying the contractor of the designation of the GTR/GTM(s) and
the extent of their authority;

3\. Negotiating and executing modifications to contracts;

4\. Monitoring contractor expenditures and costs (cost-reimbursement
contracts only). The Contracting Officer may delegate this
responsibility to the GTR;

5\. Providing the GTR with copies of all correspondence issued to the
contractor;

6\. Ensuring that work products are delivered in accordance with the
terms and conditions of the contract. The monitoring of deliverables is
usually delegated to the GTR;

7\. Consenting to the placement of subcontracts under cost-reimbursement
type contracts;

8\. Certifying payment of a contractor's final voucher
(cost-reimbursement contracts only) or any disputed invoices or
vouchers;

9\. Promptly resolving performance problems identified by the GTR or the
contractor;

10\. Making final decisions regarding protests and disputes (though
these may be appealed to higher authority);

11\. Negotiating settlements resulting from change orders, disputes,
terminations for convenience, etc.;

12\. Disallowing contractor costs, when warranted (cost-reimbursement
type contracts only);

13\. Maintaining the official contract file;

14\. Requesting audits; and,

15\. Performing administrative closeout of contracts, including
negotiation of the final settlement.

B. The [GTR]{.underline}[^1] is responsible for:

1\. Serving as the primary liaison between the contractor and the
Contracting Officer;

2\. Delegating duties and responsibilities to a GTM, when appropriate
(see paragraph 11-3 E.2);

3\. Ensuring consistency among multiple GTMs under a single contract
when providing guidance to the contractor and evaluating the
contractor's performance;

4\. Maintaining a complete working file for each contract (see section
12-4);

5\. Monitoring and evaluating the contractor's performance (see sections
12-5 and 12-15);

6\. Providing the Contracting Officer with copies of all his/her written
correspondence with the contractor;

7\. Informing the Contracting Officer of substantive oral communications
(e.g., telephone conversations) with the contractor and providing notes
and/or summaries of them;

8\. Inspecting and evaluating products (including reports and drafts) or
services, and making recommendations to the Contracting Officer
regarding their acceptability (see paragraph 12-5 B.7);

9\. Reviewing contractors' vouchers for reasonable­ness
(cost-reimbursement contracts only) and certifying for payment all
undisputed invoices for fixed-price contracts (see paragraph 12-6 B);

10\. Monitoring the contractor's use of key personnel (see section
12-7);

11\. Reviewing the qualifications of proposed subcontractors and the
appropriateness of subcontracting contract work, and making
recommendations to the Contracting Officer regarding consent to the
placement of subcontracts (see paragraph 12-8.A);

12\. Providing the contractor with, monitoring the use of, and reporting
on Government-furnished property (see section 12-9);

13\. Providing technical guidance and assistance to the contractor (see
section 12-11);

14\. Notifying the Contracting Officer immediately of:

a\. Any actual or potential contractor performance problem (see section
12-12);

b\. Any action or inaction by HUD personnel that may affect the
contractor's ability to perform; and,

c\. Any inappropriate action on the part of HUD personnel with regard to
the contract (e.g., any action which creates a conflict of interest on
the part of the contractor or causes the contractor to perform
inherently governmental functions; see paragraph 6-1.C and FAR Subpart
7.5). The GTR should concurrently notify the program office management
of any such action;

15\. Providing technical assistance, as requested, to the Contracting
Officer regarding disputes, settlements, litigation, patent and
copyright problems, final payment during closeout, etc;

16\. Providing timely reports on contractor performance to the
Contracting Officer and other interested parties (see section 12-15);
and,

17\. Assuring proper distribution of final products and other
information resulting from the contract.

C. The [GTM]{.underline} is responsible for:

1\. Serving as a technical advisor to the GTR; and,

2\. Performing any of the GTR's duties and responsibilities delegated to
him or her (see paragraph 11-3 E.2).

D. A [GTR or GTM]{.underline} may not provide any direction to the
contractor in those areas of responsibility assigned to another GTR or
GTM (i.e., provide potentially conflicting guidance).

12-3 [POST-AWARD DEBRIEFING AND ORIENTATION]{.underline}.

A. [Debriefing]{.underline}. Upon request, the Contracting Officer shall
promptly debrief unsuccessful offerors. All debriefings shall be in
accordance with FAR Subpart 15.5. As requested by the Contracting
Officer, the GTR shall assist in preparing responses to requests for
information (e.g., FOIA requests, debriefings; see also paragraph 5-7.T)
and participate in debriefings.

> B. [Post-Award Orientation]{.underline}. FAR Subpart 42.5 contains the
> principal guidance on post-award orientations.
>
> 1\. Post-award orientation helps to:
>
> a\. Ensure that the Government and the contractor share a common
> understanding of the contract's terms and of each other's
> responsibilities and lines of authority; and,
>
> b\. Identify and remedy potential problems (e.g., ambiguities). (Note:
> The Contracting Officer must make any needed changes to the contract
> identified during an orientation by a written modification (see FAR
> 42.503-2 and section 12-14).)
>
> 2\. The Contracting Officer is responsible for deciding the need for
> (see FAR 42.501) and the extent of any orientation. In deciding if an
> orientation is needed, the Contracting Officer shall consider the
> factors set forth at FAR 42.502 and consult the GTR and any other
> appropriate program office or technical staff.
>
> 3\. Post-award orientation may be used for task orders as well as new
> contract awards.

4\. Orientation may be made by letter or conference.

> a\. A post-award letter (see FAR 42.504) essentially identifies the
> designated Government representatives and highlights any contractual
> requirements that merit the contractor's particular attention. It is
> appropriate for simple and routine contracts. It may also be
> appropriate for contracts where the new contractor was the incumbent,
> and there have been no significant changes to the terms of the new
> contract.
>
> b\. A conference (see FAR 42.503) will include a much more detailed
> review of the contract and the roles and responsibilities of the
> parties. A conference may be held in person or via electronic media
> (e.g., telephone, video conferencing, etc.).

\(1\) The Contracting Officer shall ensure that the contractor is
notified of any requirement for the contractor's attendance at a
post-award conference. If known at the time of issuance, the conference
logistics and any specific requirements (e.g., personnel required to
attend) may be stated in the solicitation or request for task order
information. The Contracting Officer may include the requirement for
physical attendance or other participation (e.g., via phone) in
contracts and task orders, as he/she deems appropriate. The Contracting
Officer should consult the GTR regarding any requirement for mandatory
attendance by any contractor staff, including subcontractors.

> \(2\) The Contracting Officer is responsible for ensuring that an
> appropriate conference agenda is developed and provided to the
> participants before the conference. Subjects to be covered during a
> conference may include, but are not limited to:
>
> \(a\) Clarification of lines of authority and responsibilities (e.g.,
> difference between GTR and GTM duties);
>
> \(b\) Review and clarification of specifications or SOW, performance
> requirements, schedules and other contract terms and conditions;
>
> \(c\) Work planning;
>
> \(d\) Reporting requirements (e.g., types, content, receipt points,
> etc.);
>
> \(e\) The contractor's quality control measures;
>
> \(f\) Furnishing and control of Government property;
>
> \(g\) Anticipated or potential problem areas;
>
> \(h\) Billing and payment procedures, including any required breakout
> of vouchered costs;
>
> \(i\) Requirements of labor laws, including wage and hour monitoring,
> and reporting requirements; and,
>
> \(j\) Subcontracting goals and requirements and the use of the various
> types of small business subcontractors.
>
> \(3\) The number and type of participants will depend upon various
> factors including, but not limited to, the complexity of the contract
> effort, the particular requirements of the contract, the contractor's
> experience, and the type of contractor (e.g., small business).
>
> \(a\) Normally, HUD will be represented by:
>
> \(i\) The Contracting Officer or his/her designee (e.g., Contract
> Specialist assigned to administer the contract);
>
> \(ii\) The GTR and any GTM(s); and,
>
> \(iii\) Any other technical or specialized staff needed (e.g., IT,
> legal, etc.).
>
> \(b\) The contractor will be represented by:
>
> \(i\) The contract manager or project director;
>
> \(ii\) The individual designated by the contractor to oversee the
> contract (e.g., contract manager, project director);
>
> \(iii\) A representative of the contractor authorized to act on its
> behalf, unless the individual in paragraph (B) above has such
> authority;
>
> \(iv\) As appropriate, any contractor personnel (including
> subcontractor personnel and consultants) who are or will be designated
> as key in the "Key Personnel" clause of the contract; and,
>
> \(v\) Any other contractor or subcontractor personnel whose technical
> expertise is needed or desirable.
>
> \(c\) The Contracting Officer, or his/her designee, will chair and
> conduct the conference.
>
> \(4\) The Contracting Officer shall ensure that a conference report,
> as required by FAR 42.503-3, is prepared and placed in the official
> contract file.

12-4 [STANDARD GTR WORKING FILE]{.underline}. The GTR shall create and
maintain a working file for each contract and task order assigned to
him/her. The purpose of this file is to provide a history of the
technical aspects of monitoring the contract. (Note: The contracting
office maintains the official contract file; see also section 12-16.) It
ensures continuity of monitoring (e.g., smooth transition to a new GTR)
and ease of retrieval of information. The file should be logically
arranged to permit ready access to its contents.

A. [File Contents]{.underline}. The file should be logically arranged to
permit ready access to its contents. To the degree possible, the
contents of the file should be kept in electronic media (e.g., Word
documents, spreadsheets, electronic mail, etc.). This will facilitate
the exchange of information with the contracting personnel. The file
must contain copies of:

1\. The GTR/GTM appointment memorandum (see paragraph 11-3.D);

2\. The complete RCS (see section 4-2);

3\. The winning proposal and any revisions (see paragraphs 5-7.M and
5-7.N);

4\. The contractor's approved work plan, performance assessment (i.e.,
quality assurance) plan, etc., as applicable;

5\. The contract and all modifications to it;

6\. All deliverables (including technical progress reports) submitted by
the contractor. (Note: Not all deliverables can be placed physically in
the file. For those that cannot be, the working file should reference
their location.);

7\. All correspondence and notes or summaries of substantive oral
communications (e.g., telephone calls) with the contractor and other
correspondence relevant to the contract (e.g., internal Departmental
memoranda);

8\. Documentation regarding inspection and acceptance of deliverables
and recommendations on disposition of deliverables;

9\. Reports of GTR visits to and inspections of contractor or
subcontractor work sites;

10\. Periodic GTR reports on contract status made to program office
management, as applicable;

11\. Periodic GTR reports to the Contracting Officer on contractor
performance, as applicable;

12\. The distribution list for deliverables;

13\. A final assessment by the GTR of the contractor's performance
and/or acceptability of products;

14\. All vouchers submitted and a payment register showing any balance
of funds remaining (cost-reimbursement type contracts only); and,

15\. Documentation supporting all recommendations for Contracting
Officer administrative actions (e.g., disallowance of costs, issuance of
cure notices and termination, exercise of options, consent to
subcontract, etc.).

> B. [GTM Files]{.underline}. If any GTMs are assigned to the contract,
> they shall maintain files containing any of the items in paragraph A
> applicable to their assigned duties.

C. [Retention of GTR/GTM Files]{.underline}. Program offices are
responsible for developing procedures for the retention and retirement
of technical files and products. The GTR/GTM files must be retained at
either the work site or the Federal Records Center in accordance with
Records Disposition Schedule 3 in Handbook 2225.6.

12-5 [MONITORING CONTRACTOR PERFORMANCE]{.underline} (see also section
12-5). Within HUD, most monitoring of contractor performance is
delegated to the GTR.

A. [Purpose]{.underline}. The GTR monitors contractor performance to
ensure that:

1\. The contractor performs the services and/or delivers the products of
the type and quality that the contract requires;

2\. Performance is along the most efficient lines of effort;

3\. Performance and deliveries are timely;

4\. For cost-reimbursement type contracts, performance is within the
total estimated cost or available funds limitations; and,

5\. HUD will be able to promptly intervene when performance is
deficient.

B. [Monitoring Tools]{.underline}.

1\. [Contract]{.underline}. For all contract types, the principal source
of guidance for monitoring a contractor's performance is the contract
itself. For most contracts, the schedule and qualitative requirements
for the work are contained in the specifications or SOW. The GTR and
GTM(s) are expected to be fully knowledgeable of the technical
requirements of the contracts they monitor. (Note: When any other
monitoring tool conflicts with it, the contract prevails.)

2\. [Contractor's Proposal]{.underline}.

a\. [Technical]{.underline}. For negotiated contracts, the SOW may be
revised to include changes proposed and negotiated during the award
process (see also paragraph 5-7.Q). In rare cases, the successful
offeror's proposal, or portions of it, may be incorporated into the
contract. In such cases, the proposal supplements the technical
direction provided in the SOW or specifications, but may not differ
substantially from the final SOW or specifications in the contract. In
cases where the technical proposal is not incorporated into the
contract, the proposal may still be useful in determining if a
contractor is making best use of his/her resources by comparing actual
performance against his/her original plans. (Note: The information in
the technical proposal is not binding on the contractor unless it is
formally incorporated into the contract.)

b\. [Costs or Prices]{.underline}. The cost or pricing proposal will
show how the costs of performance were budgeted. While the cost or price
breakdown is not formally incorporated into the contract, it can serve
to measure the contractor's cost performance (i.e., how well he/she
manages the contract and controls the costs of performance).

3\. [Contractor's Work Plan and Schedule of Performance]{.underline}.

a\. Work plans may be used under both cost-reimbursement and fixed-price
type contracts. Normally, they are used for cost-reimbursement,
completion type (i.e., not repetitive or severable services) contracts
for professional, developmental, or advisory services (e.g., research,
studies, development of ADP software and systems, etc.). Under this type
of contract, the SOW does not provide all the detailed instruction
regarding the methods and scheduling of work under the contract. The
contractor is required to develop a plan and schedule for completing the
contract. (Note: Contracts of this type that exceed \$500,000 require
the contractor to use systematic project planning and progress
reporting; see paragraph 5-3.D and HUDAR Subpart 2442.11 for additional
guidance.)

b\. A work plan is a concise, specific, written description of how the
work under a contract will be accomplished. It supplements, but may not
change, the more general requirements of the SOW. It also serves to
explicitly demonstrate the contractor's and Government's mutual
understanding of the contract's requirements. The work plan itself
provides the GTR with his/her first opportunity to assess the
consistency of the contractor's efforts with the requirements of the
contract. It normally consists of two parts:

\(1\) A narrative that:

\(a\) Identifies the significant individual steps and tasks in the
contractor's approach to completing the contract and the period of time
needed to complete each one, expressed in terms of calendar dates. Some
contracts are divided into phases. This permits HUD to assess the
quality of the contractor's performance and the viability of the
contract itself at key decision points (particularly before beginning a
subsequent phase). This "phasing" helps prevent the contractor from
progressing too far into a contract that will not yield what HUD needs.
Phased contracts must require the contractor to report on the work
completed at the end of each phase. They also require the contractor to
submit or refine a plan for each phase before beginning it. Phases
subsequent to the initial phase may be acquired through the use of
options. Options permit HUD to stop work under the contract without
having to terminate it by not exercising the option for the next phase.
Typical reasons for not exercising include unsatisfactory contractor
performance and changes in HUD\'s needs to the degree that the contract
no longer meets them;

\(b\) Describes the staffing and other resources and their costs to be
allocated to each of the steps and tasks; and,

\(c\) Provides the rationale for project organization, staffing, and
other resources allocated to each step and task.

\(2\) A graphic depiction of:

\(a\) A schedule that shows, by reporting period, the start and
completion dates of the steps and tasks described in the narrative; and,

\(b\) The cumulative planned and budgeted costs for each scheduled step
and task for each reporting period over the life of the contract.

c\. The GTR shall review the work plan as soon as practicable once it
has been received. The GTR shall promptly obtain any revisions needed to
make the plan acceptable and approve it.

d\. The GTR shall provide a copy of the approved work plan to the
Contracting Officer for inclusion in the official contract file.

4\. [Quality Control and Quality Assurance Plans]{.underline}.

> a\. Under performance-based contracts (see section 6-2 and FAR Subpart
> 37.6), contractors must develop and use a quality control plan. These
> plans are for the contractor's use in monitoring his/her own
> performance (i.e. reports are not made to HUD showing progress or
> other compliance with the plans). HUD does not normally approve the
> plans. If the contractor's performance fails to meet the quality
> standards set forth in the contract, however, the GTR should obtain
> and review the contractor's quality control plan to determine if it
> contains deficiencies that may have contributed to the unacceptable
> quality. The GTR shall promptly report any defective plans to the
> Contracting Officer.
>
> b\. Quality assurance plans are the counterpart to quality control
> plans. These are developed by the program office and the Contracting
> Officer and used to monitor the contractor's quality of performance.
> The performance assessment plan is set forth in the solicitation and
> the resulting contract. The specific content of the plan may be
> changed during the contract negotiations.

5\. [Progress Reports]{.underline}. Progress reports are used when the
Government needs to assess the contractor's progress while the work is
being performed to ensure that the most efficient and cost-effective
methods are being used and/or that the contractor's approach is
consistent with the SOW (i.e., the contractor is "on the right track").
Progress reports may be required under cost-reimbursement and
fixed-price type contracts. Progress reports are always required when
the contract requires a work plan as described in paragraph 3.b above.
The reports provide the GTR with a snapshot of the technical and cost
status of the contract for the period covered by the report. Progress
reports may also serve to supplement the GTR's inspections of service
contracts, particularly when limitations on time, personnel, and travel
funds severely impair the GTR's ability to personally visit a
contractor's work site.

a\. [Contents]{.underline}. Progress reports normally include:

\(1\) A narrative description of the progress made during the reporting
period including:

\(a\) The current stage of completion (i.e., on, behind, or ahead of
schedule) for each tracked significant step or task;

\(b\) All actual or anticipated performance problems or other factors
(e.g., change in key personnel), their causes, and any net effect that
they will have on the completion of any contract work (e.g., delays,
increased costs, etc.);

\(c\) Any corrective action proposed and/or taken to remedy the
problems, etc. under (1)(b) above;

\(d\) Any changes needed in the contractor's methods and/or schedule of
work (including revised dates); and,

\(e\) The status of costs incurred, an explanation of significant over-
or under-expenditures for the work completed during the reporting
period, and their anticipated effect on the total cost or price of the
contract; and,

\(2\) A graphic depiction of:

\(a\) Actual versus planned progress (i.e., degree of completion of
planned work); and,

\(b\) Actual costs incurred versus planned and budgeted costs for the
reporting period. Costs vouchered for a reporting period should be
periodically compared with those reported to ensure consistency and
accuracy in reporting and vouchering.

b\. The [GTR]{.underline} is responsible for:

\(1\) Monitoring contractor compliance with the reporting requirements
of a contract;

\(2\) Advising the Contracting Officer and program office management of
the need for additional, or reduction in existing, reporting
requirements. The GTR must weigh the benefits of increased reporting
against its extra cost. The GTR must also assess the risks involved in
reducing any reporting requirements;

\(3\) Evaluating progress reports. The GTR must:

\(a\) Assess the content of the report;

\(b\) Seek clarification from the contractor and/or technical experts
within HUD, if needed, to ensure he or she understands the report; and.

\(c\) Identify any potential or actual performance problems revealed by
reports and take immediate appropriate action (e.g., notify the
Contracting Officer). Failure to read and accurately assess reports
promptly can weaken or entirely erode HUD's ability to obtain remedial
action from a contractor for deficient performance. For example, if a
timely report discloses deficient performance, but HUD fails to take
action within a reasonable period of time, the contractor may assume
that HUD condones his/her performance. The GTR may have caused an actual
change in the contract's requirements (i.e., a "constructive change,"
see paragraph 12-14);

\(4\) Verifying the accuracy of information contained in reports. The
GTR can ask for evidence that supports the reported progress (e.g.,
copies of drafts, texts, or designs prepared to date, or other
information that should be in existence if work is proceeding according
to plan). The GTR can also visit the contractor's site and interview
contractor staff and subcontractors to verify reported information; and,

\(5\) Advising the Contracting Officer and program office management
regarding continuation of the next phase (e.g., exercise of option) of a
phased contract (see paragraph 3.b above).

6\. [Vouchers and Invoices for Payment]{.underline} (all contract types;
see section 12-6.

7\. [Inspections]{.underline} (all contract types).

a\. The best way to determine the quality of the contractor's
performance is through an actual inspection of work or products. The GTR
is normally delegated the authority to conduct inspections on the
Contracting Officer's behalf in accordance with the "Inspection" clause
of the particular contract. The clause gives the GTR the right to
inspect and test the work performed or products made under the contract
at all stages of performance, wherever the work is being conducted
(i.e., at contractor and subcontractor sites). The clause does not,
however, permit the GTR to interfere with, or unreasonably delay, the
contractor's work. The GTR shall provide the Contracting Officer with a
copy of an inspection report promptly after completing the inspection.

b\. The period of time during which the Government must inspect and
accept items delivered ("deliverables") or services performed by a
contractor is the acceptance period. Unless the contract specifically
states otherwise, the acceptance period is seven calendar days. If the
program office requires longer periods (e.g., 14 days to review and
accept a draft evaluation report and 21 days to accept the final
report), the Contracting Officer must ensure that the contract specifies
those acceptance periods. The GTR must complete his/her inspection and
provide the Contracting Officer with his/her assessment and
recommendation regarding acceptance within the specified period. The GTR
must immediately notify the Contracting Officer if he/she will not be
able to complete the inspection within the stated period. The GTR may
not request a contractor to grant an extension of an acceptance period
(see also 12-6 A.4.b (2) for information on related Prompt Payment Act
requirements).

c\. Inspections may be routine, spot (i.e., unannounced; see various FAR
Inspection clauses referenced in FAR Subpart 46.3.), or a combination of
the two. The contract should specify any requirement for routine
inspections (e.g., set the frequency, dates, or occurrences that trigger
the inspections).

d\. The GTR must avoid taking or failing to take any action that may
result in unreasonable interference or delay. Such actions and inactions
include, but are not limited to:

\(1\) Failing to review deliverables or make inspections in a timely
manner;

\(2\) Denying or failing to obtain contractor access to HUD premises on
which contract work must be performed;

\(3\) Unnecessarily directing the contractor to stop work. (Note: Only
the Contracting Officer may issue a stop work order.);

\(4\) Failing to advise the Contracting Officer promptly on matters such
as:

\(a\) Approvals of work plans, particularly those that are required as a
condition precedent to proceeding with the contract work; and,

\(b\) Required HUD consents to subcontracts; and,

\(5\) Directing a contractor to perform work that is outside the scope
of the contract (see section 12-11).

12-6 [CONTRACTOR COSTS AND PAYMENTS]{.underline}

A. [Payments]{.underline}.

1\. [Requirements for Requesting Payment]{.underline}.

> a\. [Billing Format]{.underline}. Although most contracts require the
> submission of an invoice or voucher for payment, some contracts allow
> for payment to be made in other ways (e.g., directly from property
> sale proceeds, via letter of credit, etc.).

\(1\) Under fixed-price contracts, a commercial invoice is acceptable
for billing provided it includes all information required by FAR Subpart
32.9 to constitute a proper invoice.

\(2\) The SF-1034, "Public Voucher for Purchases and Services Other than
Personal," is used for payments under other contract types (e.g.,
reimbursement of incurred costs under cost-reimbursement type
contracts).

\(3\) The specific requirements for invoice content and submission will
be stated in a contract's payment clause.

b\. [Cost-reimbursement Contracts]{.underline} (see FAR Subpart 16.3).
Contractors are required to itemize their total request to the degree
needed to permit an evaluation of the claimed costs. The level of detail
in this breakout will vary by contract. The GTR and Contracting Officer
will decide (usually when preparing the RFP) the degree of detail that
will be needed on vouchers.

c\. [Labor-Hour and Time-and-Materials Contracts]{.underline} (see FAR
Subpart 16.6). The contractor must break out labor costs by the number
of hours billed for each labor category. Other costs, if allowed, must
be sufficiently itemized to permit the GTR to assess their
reasonableness.

d\. [Fixed-Price Contracts]{.underline} (see FAR Subpart 16.2). Invoices
must clearly identify the products and/or services for which payment is
requested and the price for each. Contractors may not invoice for
partial or progress payments (i.e., for pieces of work or interim
payment) unless the contract specifically authorizes them.

> e\. [Performance-Based Contracts]{.underline} (see FAR Subpart 37.6).
> Performance-based payments are contract-financing payments that are
> not for accepted items and, therefore, are not subject to the
> interest-penalty provisions of the Prompt Payment Act. They are
> treated like progress, not interim, payments as described at FAR
> Subpart 32.5. The contractor must indicate on the invoice the
> deliverable item or event for which payment is requested (see FAR
> Subpart 32.10 for additional information).
>
> 2\. [GTR Review]{.underline}. The GTR shall review all vouchers and
> invoices prior to their payment to verify that they should be paid.
> For all requests for which the GTR recommends payment, the GTR shall
> complete the form HUD-27045 or otherwise provide evidence of the
> review as directed by the Contracting Officer and the payment office.
> The payment office will not make payment on any request until the GTR
> provides it with such evidence of his/her review.

a\. [Cost-Reimbursement Contracts]{.underline}. The contractor requests
reimbursement of costs that he/she has incurred in the performance of
the contract. Unlike fixed-price contracts, the invoiced costs are not
associated with specific deliverables or priced services.

\(1\) The Government has the right to disallow (i.e., not pay) costs
that are determined to be unreasonable. Therefore, the purpose of the
GTR's review is to help determine if all claimed costs are reasonable.
To be considered reasonable, the costs must meet three tests:

\(a\) They are clearly associated with, and necessary for, work required
under the contract;

\(b\) They are what a prudent person would pay for the item or service.
This means that the GTR must determine that the amount is fair in light
of the market place, if one exists, or by using other standards (e.g.,
specified labor rates in the contract, amounts HUD paid for comparable
items in the recent past, the appropriateness of the labor mix used for
the work performed, etc; and,

\(c\) They are allowable under Part 31 of the FAR. GTRs are not expected
to know all the rules governing allowability of costs. The GTR shall
consult with the Contracting Officer regarding any costs that appear
questionable. The Contracting Officer will make a final determination of
allowability.

> \(2\) If the GTR cannot determine that the costs shown on an otherwise
> properly prepared voucher are fair and reasonable, he/she shall
> consult the Contract Specialist for assistance. As directed by the
> Contract Specialist, the GTR shall request additional information from
> the contractor if necessary. If the GTR cannot determine that costs
> are fair and reasonable because the voucher is too poorly prepared to
> decipher (e.g., voucher contains insufficient, information, arithmetic
> errors, illegible writing, etc.), the GTR should notify the contractor
> immediately and obtain a new, legible voucher. The GTR shall also
> notify the Contract Specialist that the voucher could not be paid and
> that a replacement voucher has been requested.

\(3\) The GTR shall determine if unreasonable costs are indicative of
performance problems (e.g., the contractor is using inefficient methods
or labor mix, etc.). If the GTR believes that to be the case, he/she
shall contact the contractor and provide guidance to help the contractor
remedy the situation. The GTR shall also inform the Contracting Officer
of both the problems and the proposed or actual solutions.

b\. [Labor-Hour and Time-and-Materials Contracts]{.underline}. The GTR
shall:

\(1\) Verify that the rates claimed for labor categories agree with
those specified in the contract. Rates for any billed labor that are not
specified in the contract must be reviewed for reasonableness;

\(2\) Review the number of hours billed for reasonableness; and,

\(3\) Review other claimed costs (e.g., materials, travel, etc.) as
required in paragraph a above.

c\. [Fixed-Price Contracts]{.underline}.

\(1\) The GTR shall verify that:

\(a\) The price(s) identified on an invoice correspond to the price(s)
specified in the contract; and,

\(b\) All deliverables and/or services included on the invoice have been
inspected and are acceptable.

\(2\) If the prices contained in the invoice are inaccurate or the
invoice contains discrepancies, the GTR shall notify the contractor and
consult the Contract Specialist for guidance (e.g., obtain a corrected
invoice from the contractor, correct and annotate the invoice). It is
critical that the contractor be notified immediately when an invoice
cannot be paid because of a discrepancy. Failure to do so may result in
HUD having to pay interest penalties under the Prompt Payment Act (see
paragraph 4.a below and HUD Handbook 1900.29).

> d\. [Performance-Based Contracts (other than cost-reimbursement type;
> see FAR 32.10)]{.underline}. The GTR shall verify that:

\(1\) The deliverable(s) or services shown on the invoice corresponds to
the schedule of deliverables or services; and,

\(2\) The contractor has performed adequately to warrant the payment.

3\. [Disputed Invoices]{.underline}.

a\. Whenever the amount of payment is in dispute, the GTR shall consult
the Contracting Officer for direction and provide the following
information:

\(1\) [Disallowed Costs]{.underline}. The GTR shall identify the
specific items of cost that are unreasonable and provide the Contracting
Officer with his/her rationale, including an estimate of what reasonable
costs should be; and,

\(2\) [Unacceptable Deliverables or Performance]{.underline}. The GTR
shall identify the unacceptable deliverable(s) and/or services for which
payment should be denied. The GTR shall describe what steps have been
taken to obtain correction.

b\. The GTR may [not]{.underline}:

\(1\) Disallow costs or withhold payments; or,

\(2\) Make any changes to a contractor's invoice or voucher without the
prior approval of the Contracting Officer.

4\. [Payment Processing]{.underline}. If the GTR determines that
vouchered costs are fair and reasonable, or invoiced prices should be
paid, the GTR shall recommend that payment be made.

a\. [Prompt Payment Requirements]{.underline}.

\(1\) [Applicability]{.underline}. The following payments are subject to
the requirements and interest penalties of the Prompt Payment Act:

\(a\) All payments under fixed-price contracts;

> \(b\) Final payments under all cost-reimbursement type contracts
> awarded before December 15, 2000; and,
>
> \(c\) All payments (interim and final) under cost-reimbursement
> service contracts awarded on or after December 15, 2000.
>
> \(2\) [Prompt Payment Requirements]{.underline}. The Prompt Payment
> clause requires that payment be made by the 30th day after the
> designated billing office receives a proper invoice from the
> contractor, or the 30th day after Government acceptance of supplies
> delivered or services performed, whichever is later. The Government
> pays interest if the 30-day deadline is not met. (Note: Interim
> vouchers under cost-reimbursement contracts awarded prior to December
> 15, 2000, are not subject to interest penalties. However, it is HUD
> policy that every effort be made to make payment within 30 days.) For
> purposes of computing interest on payments due, contracts shall state
> the number of days HUD has to inspect and accept deliverables (see
> 12-5 B.7.b). If no period is specified, the acceptance period is
> automatically seven calendar days (see FAR 32.904 for additional
> guidance).
>
> b\. [Specific Processing Instructions]{.underline}.
>
> \(1\) Specific procedures for processing payment of acceptable
> invoices are established by the OCPO and the applicable payment
> offices. Different payment offices will vary somewhat in their
> procedures. GTRs shall consult the cognizant Contracting Officer for
> specific instructions.

\(2\) Contracting Officers shall ensure that any special instructions
which the payment office may need to process a particular invoice or
class of invoices is included on the invoice and sent to the payment
office. All invoices for interim payments under cost-reimbursement
contracts awarded before December 15, 2000, shall be annotated with the
following: "Interim payment under contract awarded prior to 12/15/00.
Not subject to Prompt Payment Act."

B. [Incurrence of Costs Under Cost-reimbursement Contracts]{.underline}.

1\. [Limitation of Cost]{.underline} (see FAR Subpart 32.7).

a\. All cost-reimbursement type contracts must contain a "Limitation of
Cost" clause (see FAR Subpart 52.232-20). This clause expressly limits
HUD's obligation to reimburse the contractor to the "total estimated
cost" amount stated in the contract. The program office must make
appropri­ated funds available for the contract equal to the total
estimated cost. Because the actual cost of completion of this type of
contract may ultimately exceed the total estimated cost, the "Limitation
of Cost" clause also limits the contractor's liability. It states that
the contractor has no obligation to continue with the work once his/her
incurred costs reach the total estimated cost. Unless the contract is
modified to increase the amount of the total estimated cost, the
contractor must stop work at that point regardless of the state of
completion of the contract work. If the contractor continues to work,
he/she does so at his/her own risk. The GTR shall not direct a
contractor to work beyond the point where all costs have been incurred.

b\. The "Limitation of Cost" clause also requires the contractor to
notify the Contracting Officer, and provide a revised estimate of the
total cost of the contract, whenever the contractor has reason to
believe that:

\(1\) The costs he/she expects to incur in a specified upcoming period
(30 to 60 days) plus the costs already incurred (even if not billed)
will exceed a specified percentage of the total estimated cost stated in
the contract; or,

\(2\) The total costs of performance (exclusive of any fee) will exceed
or be substantially less than the total estimated cost stated in the
contract.

This notification is a useful tool for tracking the contractor's actual
cost incurrence (i.e., spending) against the planned costs of
performance (e.g., a serious problem might exist if a contractor had
incurred 75 percent of the total estimated costs at a point in the
contract where 50 percent of the total estimated costs were anticipated
to have been incurred).

2\. [Limitation of Funds]{.underline} (see FAR Subpart 32.7). Sometimes
it is not possible to fully fund the total estimated cost of a
cost-reimbursement contract at the time of award (e.g., the period of
performance will cross fiscal years and the program office decides to
use money from two fiscal year appropriations). An amount to cover a
specified portion of the contract is included at award and the remainder
is added later in one or more increments. These contracts are referred
to as incrementally funded. For these contracts, a Limitation of Funds
clause (FAR 52.232-22) is substituted for the Limitation of Cost clause.
The clauses are very similar. The significant difference is that under
the Limitation of Funds clause, the Government's obligation and the
contractor's liability are limited to the total amount of funds
available in the contract rather than the total estimated cost.

12-7 [CONTRACTOR USE OF KEY PERSONNEL]{.underline}.

A. [Designating Key Personnel]{.underline}. When successful completion
of the contract's requirements depends upon the contractor's use of
certain types of qualified key personnel (principally, contracts for
services of a professional, technical, or research and development
nature), HUD specifies the qualifications of key personnel in the
solicitation and the contract. The offeror (if pre-award) or contractor
(post-award) designates those individuals who will serve in key
positions. If HUD concurs with the use of the proposed individuals, they
are formally designated in the contract in the HUDAR clause at
2452.237-70, "Key Personnel" (see also HUDAR Part 2437). As appropriate,
the time on task or level of effort of key personnel should also be set
forth in the clause. The term "personnel" may include consultants and
subcontractor employees.

B. [Changes in Key Personnel]{.underline}.

1\. The contractor may not reduce the time or level of effort of key
personnel devoted to the contract effort or replace key personnel
without prior written consent of the Contracting Officer. The contractor
must notify the Contracting Officer in advance of making any reduction
or replacement. The notice must include a justification for the
reduction or replacement and the credentials for proposed substitutions.
In some cases, the Contracting Officer may ratify the reduction or
replacement of key personnel after the fact (e.g., personnel
resignation).

2\. The GTR shall assist the Contracting Officer in reviewing the
credentials of replacement personnel and in evaluating the impact to the
contract by proposed reductions or replacements. The GTR shall provide
such evaluation promptly to the Contracting Officer.

C. [Monitoring Use of Key Personnel]{.underline}. The GTR is responsible
for monitoring the contractor's use of key personnel. The GTR should
perform quality control checks of the contractor's use of key personnel.
The GTR may compare the projected use (as set forth in the contractor's
proposal, work plan or in the contract itself) against the actual use
reflected in progress reports and vouchers. The GTR is also expected to
keep in regular touch with the contractor's key personnel. Should there
be significant variation in use, the GTR must determine the cause and
notify the Contracting Officer.

12-8 [CONTRACTOR USE OF SUBCONTRACTORS AND CONSULTANTS]{.underline}.

A. [Consent to Subcontract]{.underline}. Under cost-reimbursement type
contracts, the Contracting Officer must "consent" (i.e., agree) to the
placement of certain types of subcontracts before the contractor may
enter into them (see also FAR Subpart 44.2). As requested, the GTR shall
instruct the Contracting Officer on the advisability of subcontracting
the work. Also as requested, the GTR shall advise the Contracting
Officer on the qualifications and ability of the proposed subcontractor
to perform the work and on the technical content of the subcontract. The
GTR shall consult the Contracting Officer whenever a contractor proposes
to subcontract any portion(s) of the contract.

B. [Consultants as Subcontractors]{.underline}. Consultants engaged by
contractors are considered subcontractors. Prior consent will be
required whenever the nature or dollar value of their contracts requires
it.

12-9 [GOVERNMENT PROPERTY]{.underline} (see also FAR Part 45 and HUD
Handbook 2200.1, Chapter 9).

A. The responsibility for providing and monitoring contractor use of
Government property is delegated to the GTR.

B. The GTR must:

1\. Know what property and information HUD has agreed to furnish the
contractor;

2\. Know when the property must be provided to the contractor. If no
date is specified in the contract, the GTR must consult the contractor
to determine when the contractor will need it to be able to meet the
contract requirements;

3\. Locate the property and see that arrangements are made to get it to
the contractor on time;

4\. Ensure that the property is in proper condition for use as intended.
The GTR shall notify the Contracting Officer if property needs repair or
replacement. As directed by the Contracting Officer, the GTR shall
arrange for the repair or replacement of defective property;

5\. Determine if any special instructions on the property's use are
needed, or if any limitations on its use exist. The GTR must provide the
contractor with such instruction and notify the contractor of any
limitations (e.g., copyrights);

6\. Assure that the contractor meets his/her custodial responsibilities
under the Government Property clause (see FAR Subpart 45.5). Such
responsibilities include conducting and maintaining an annual inventory
of property for the duration of the contract;

7\. Advise contractors and the Contracting Officer on the disposition of
the property when contracts have been completed;

8\. Annually, submit to the Contracting Officer an inventory of all
property originally provided to, or acquired by, contractors that was
determined to be surplus and subsequently was transferred to
non-Government entities. The inventory shall include the description,
quantity, acquisition cost and condition of each property item. (Note:
The Government Property clause requires contractors to keep an accurate,
current inventory of all Government-furnished property.) The Contracting
Officer will forward a copy of this report to the Chief of the Property
and Supply Branch within the Space Management Division in OAMS
(Headquarters) or the cognizant Field ARD, within 45 calendar days after
the end of the fiscal year.

12-10 [CONTRACTOR ACCESS TO HUD FACILITIES]{.underline}.

A. [Issuance and Control of Building Passes]{.underline}. HUD contracts
may require or allow contractor employees or subcontractors to work
within HUD office space. The GTR must ensure that every contractor
employee or subcontractor employee working on-site has, and properly
displays, any required identification and/or building pass needed to
gain access to the work site.

B. [Identification Badges and Building Passes]{.underline}. If
contractor employees working in HUD space are permitted to be issued
identification badges and/or building passes, the GTR shall arrange for
the issuance of temporary identifications or passes, in writing, through
the cognizant Administrative Officer.

C. [Clearance of Personnel]{.underline}. The Contracting Officer shall
ensure that the requirements for clearance of contractor personnel who
will work in HUD space are met (see HUDAR Subpart 2437.1 and the clause
at 2452.237-75).

D. [GTR Monitoring Responsibilities]{.underline}. The GTR shall:

1\. Maintain a list of building passes issued, by contract employee
name, Social Security number, and building pass expiration date. The
list shall also include the date that passes are returned to the
Administrative Officer (see D.3 below). This list shall be maintained in
the GTR file;

2\. Ensure that the contractor returns all building passes upon
expiration of the contract, when employment of the contract employee is
terminated, or when the employee no longer has a need for access to the
building;

3\. Ensure that all expired passes and passes of contractor employees
who have permanently left the HUD site are returned to the
Administrative Officer or other office as directed by the Administrative
Officer; and,

4\. Not approve any final invoice for payment until the contractor
returns all building passes.

12-11 [TECHNICAL GUIDANCE]{.underline}.

A. [Authority]{.underline}. The Government's authority to direct the
actions of the contractor is defined by the written terms of the
contract (i.e., the SOW and the contract clauses). Ideally, a contract
should include all the direction the contractor will need to
successfully perform it. This is not always feasible. Nevertheless, the
SOW, supplemented by any work plans, is the contractor's principal
source of technical direction. Given that the SOW in some contracts
(notably, performance-based service contracts, see section 6-2) permits
the contractor to develop many of his/her own methods, HUD may need to
advise the contractor. The goal of this advice should always be to guide
the contractor along the most efficient and cost-effective line of
effort and not to create new requirements for the contractor. Guidance
may include clarifying the requirements of the contract, suggesting
methods or approaches, providing historical information relative to the
work, or drawing the contractor's attention to specific aspects of the
requirements.

B. [Responsibility]{.underline}. The GTR is delegated responsibility to
provide technical guidance.

C. [Applicability]{.underline}. The term "technical guidance" is most
appropriately used in the context of cost-reimbursement type contracts
and all service contracts. The clause entitled "Conduct of Work and
Technical Guidance" (HUDAR 2452.237-73), which is required in all HUD
cost-reimbursement and service contracts, describes the nature of this
technical direction and the limits on its use.

D. [Within the Scope of the Contract]{.underline}. Technical guidance
must be within the scope of the contract (see also section12-11). GTRs
are strongly advised to always consult the text of a contract before
providing guidance that may have an impact on its terms. If the terms of
the contract are not clear, or need to be revised, the GTR should
promptly consult the Contracting Officer for advice and corrective
action. The GTR may not direct a contractor to take any action that will
change the:

1\. Price or total estimated cost (or cost limit). GTRs may not take any
action that creates, or that could logically be construed by a
contractor to create, a financial obligation on the part of the
Government (e.g., directing a contractor to perform additional work not
required by a contract). Some actions that do not immediately involve
the obligation of funds (e.g., accelerating delivery schedules,
directing a contractor to use more expensive labor, etc.) may later
result in a contractor demand for more payment and an increase in
contract price should the Contracting Officer determine to ratify the
action;

2\. The terms of the contract, unless the contract specifically
authorizes them to do so. Even actions that might appear innocuous
(e.g., relaxing a delivery due date for a few days) must be avoided.
They may serve to set precedents or otherwise erode the legal agreement
embodied in the contract. If the GTR believes the terms of a contract
need to be changed (and not all can be), the GTR must consult with the
cognizant contracting personnel. The terms that a GTR may not change
include:

a\. SOW or specifications;

b\. Number or description of deliverables and products;

c\. Delivery or schedule dates;

d\. Period of performance; or,

e\. Any administrative provisions of the contract (e.g., clauses).

E. [Direction of Contractor Personnel]{.underline}. GTRs shall not take
any action that creates an employee-employer relationship between them
and the contractor's employees or subcontractors (see paragraph 6-1.B).
Any concerns with contractor employee and subcontractor performance or
qualifications must be raised with a principal or designee of the
contractor.

F. [Written Guidance]{.underline}. Substantive technical guidance (i.e.,
that has a direct bearing on the requirements of the contract versus
simple clarification or corrections) shall be provided in writing with a
copy to the Contracting Officer. Any such guidance provided orally shall
be confirmed promptly in writing. The GTR shall also maintain a record
of technical guidance (including summaries of oral guidance) in the GTR
working file.

12-12 [CONTRACTOR PERFORMANCE PROBLEMS]{.underline}.

A. [Deficient Performance]{.underline}. A contractor's performance is
deficient when he/she fails to meet the terms of the contract.
Deficiency may be in quality of work or products, timeliness of
performance or delivery (including failure to make progress that
endangers contract completion), or failure to meet other requirements
(e.g., reporting). When an actual or potential deficiency exists, the
GTR shall:

1\. Contact the contractor and direct his/her attention to the
deficiency. The GTR should make every attempt to determine the full
nature of the deficiency and whether or not it was excusable (i.e.,
whether or not it was within the contractor's power to control it). This
often requires personal conversations with the contractor and key
personnel.

a\. If the contractor agrees that his/her performance is deficient
(i.e., does not dispute the Government's position) and no formal action
by the Contracting Officer is needed, the Contracting Officer may direct
the GTR to obtain the contractor's voluntary commitment to remedy the
deficiency.

b\. If the contractor disagrees that a deficiency exists, the GTR shall
make all reasonable efforts to determine the basis for the contractor's
position and advise the Contracting Officer on his/her findings;

2\. Promptly notify the Contracting Officer (and the program office if
the GTM is from a different office) and follow any direction he/she
provides;

3\. Advise the Contracting Officer, the program office, and when
authorized by the Contracting Officer, the contractor, on appropriate
corrective action;

4\. Make a written record of any informal (i.e., oral) communication
with the contractor. If it is necessary to reduce the communication to
writing, the GTR shall provide a copy of such communication to the
Contracting Officer; and,

5\. Verify that remedial action is taken. If the deficiency is not
remedied, the GTR shall promptly notify the Contracting Officer and
follow his/her direction.

B. [Types of Remedies]{.underline}. Depending on the facts of each case,
the Contracting Officer may take a variety of actions, including:

1\. Directing the contractor to accelerate the work by using additional
personnel or overtime. This action is subject to the availability of
funds to pay for any resulting increase in costs and the availability of
qualified personnel;

2\. Substituting alternative methods or resources (e.g., changing the
order of tasks, upgrading equipment). This action also may cause an
increase in contract costs and or delay in completion of the contract;

3\. Accepting late work or performance. If the program office can
tolerate the delay, the GTR may recommend to the Contracting Officer
that the contractor be allowed to deliver products or complete work late
in exchange for "consideration." (Note: "Consideration" means something
of equal value to the benefit the contractor derives from the extra time
or reduced quality. It may be a reduction in the contract price,
additional work for the original price, or a combination of the two. It
may not be something of value (e.g., extra work) that the contractor
contributed prior to the deficiency.) If the Contracting Officer
concurs, he/she shall issue a modification to change the contract period
of performance or delivery schedule;

4\. Issuing "cure notices" and "show cause notices." If the contractor
is in default (i.e., performance is unacceptable and inexcusable), *and*
there is no other recourse, the Contracting Officer will issue a cure
notice or a show cause letter. These two formal notices inform a
contractor of his/her specific delinquent performance that, if left
uncorrected, will result in a termination of the contract for default.
The notices provide the contractor with a specific, and usually short,
time period in which to correct the deficiencies. The Contracting
Officer should consult with the GTR to ensure that no other appropriate
remedy is available;

5\. Terminating the contract for default. (Note: A full description of
the use of terminations is found in FAR Part 49.)

> a\. When the Contracting Officer has determined to terminate a
> contract, the GTR shall provide the Contracting Officer with any
> documentation needed to support the termination. Documentation may
> include an assessment by the GTR that no other remedy should be
> pursued. If the Contracting Officer determines that the documentation
> is not adequate to support a termination for default, but agrees that
> the contractor's performance is unacceptable, he/she may pursue a
> termination for the convenience of the Government (see paragraph B.6
> below). The Contracting Officer should consult and coordinate with
> legal counsel when he/she intends to proceed with a termination for
> default.

b\. GTRs should consult the Contracting Officer whenever they have
questions regarding the use of terminations. A GTR must never threaten a
contractor with termination as a means to achieving corrective action;

6\. Terminating the Contract for the Convenience of the Government.

a\. HUD may terminate any contract (or part of a contract), at any time
during performance, and regardless of the contractor's acceptable
performance, *if* HUD determines that termination is in its best
interest. "Best interest" usually includes such situations as:

\(1\) The services or products are no longer needed (e.g., a change in
programmatic mission or rules has made the contract requirements
obsolete or even unallowable);

\(2\) A cost-reimbursement contract cannot be completed for the amount
of funds in the contract, no additional funding is available, and no
other remedy is possible; and,

\(3\) A contractor's performance is unacceptable, but there is
insufficient documentation to support a termination for default.

b\. The GTR shall advise the Contracting Officer immediately when
termination for convenience should be considered. This will permit the
Contracting Officer to have the required notice prepared and ready when
the termination is needed. This early action helps mitigate the costs to
the Government as the contractor is entitled to all costs incurred up to
the date of the formal termination by the Contracting Officer.

c\. Once a contract has been terminated for convenience, the contractor
may submit a proposal to the Contracting Officer for reimbursement of
his/her costs of terminating the contract (i.e., a "termination
settlement proposal"). The GTR shall advise the Contracting Officer
regarding any costs claimed by the contractor in his/her termination
settlement proposal. This may involve a technical analysis of proposed
costs (see paragraph 5-7.I). The Contracting Officer shall negotiate the
terms of the settlement and may request the aid of the GTR. The
Contracting Officer should consult and involve legal counsel when he/she
intends to proceed with a termination for default.

C. [Cost Overruns]{.underline}.

1\. [Definition]{.underline}. A cost overrun occurs when a contractor
incurs costs in excess of the total estimated costs or available funds
(in the case of incrementally funded contracts) of a cost-reimbursement
contract without proper authorization from the Contracting Officer.
(Note: Cost overruns may not occur under fixed-price contracts because
the contractor is responsible for completion of the contract regardless
of the actual costs he/she incurs.)

2\. [Contractor Responsibility]{.underline}. The contractor is required
to notify the Contracting Officer in writing whenever an overrun is
anticipated (see paragraph 12-5.B.5 and the clauses at FAR 52.232-20 and
52.232-22). Failure to make notification before incurring an overrun
puts the contractor at risk of liability for the overrun costs.

3\. [GTR Responsibilities]{.underline}. Whenever the GTR becomes aware
of an actual or potential overrun he/she shall:

a\. Not request or encourage the contractor to continue work. Such
action may legally obligate HUD to reimburse the contractor for
performing the unfunded work, despite any "Limitation of Cost" or
"Limitation of Funds" clause in the contract. This action would also
constitute an improper obligation, i.e., obligating the Government
without sufficient funds to back up the obligation (see also paragraph
1-4.J);

b\. Promptly notify the Contracting Officer and the program office;

c\. Assist the Contracting Officer and program office management in
determining one of the following courses of action:

\(1\) Increase the contract funding to permit completion of the work, if
applicable program funds are available;

\(2\) If possible, modify the contract to eliminate work and the need
for additional funding; or,

\(3\) Terminate the contract for the convenience of the Government. If
the overrun has occurred and the contractor failed to give the required
notice, the Government will not be obligated to reimburse the
contractor; and,

d\. If the program office decides to complete the contract and provide
additional funding, it must submit a RCS (see section 4-2) to modify the
contract to add the funds.

12-13 [CONTRACT DISPUTES AND APPEALS]{.underline}.

A. [Disputes]{.underline}. When the contractor and the Government
disagree over the terms of the contract and/or the amount due to the
contractor, they are said to be in dispute. All HUD contracts contain
the clause at FAR 52.233-1, "Disputes," which provides the means for
resolving these formal disagreements.

B. [Claims]{.underline}. Under the "Disputes" clause, contractors may
file a claim with HUD for money that they believe they are owed, or for
other contractual relief (e.g., change in contract terms, etc.).
Contractors may have up to six years to submit claims against the
Government. In general, the Contracting Officer must render a written
decision on the claim within 60 days after his/her receipt of a written
claim. The contractor may then appeal the decision to a judicial body
(e.g., HUD Board of Contract Appeals or U.S. Claims Courts) if he/she
disagrees with the Contracting Officer's decision. The "Disputes" clause
requires the contractor to proceed diligently with the performance of
the contract and in accordance with the Contracting Officer's decision
pending final resolution of the dispute. FAR Subpart 33.2 provides
detailed guidance on disputes and claims.

C. [GTR Assistance]{.underline}. As requested by the Contracting
Officer, the GTR shall provide the Contracting Officer with technical
assistance and documentation relative to the contract required for
resolution of a dispute.

> D. [Legal Consultation]{.underline}. The Contracting Officer shall
> consult and coordinate with legal counsel as needed when resolving
> disputes and claims.

12-14 [CONTRACT MODIFICATIONS]{.underline} (see also FAR Part 43).

A. [Definition]{.underline}. A contract modification is a written change
in the terms of a contract. During the life of a contract, it usually
becomes necessary to revise its terms. Such revisions may change the
requirements, formally resolve problems or effect actions provided for
by the terms of the contract (e.g., exercise an option).

B. [Responsibilities]{.underline}.

1\. Only Contracting Officers are authorized to modify contracts.

2\. The GTR's principal role is to advise the Contracting Officer on the
need for a modification, and at times, to develop, or oversee the
development of, the content of the modification.

C. [Initiating Modifications]{.underline}. The contractor, the GTR or
the Contracting Officer may identify the need for a modification.
Contractors often identify the need to the GTR, who in turn,
communicates it to the Contracting Officer (e.g., the contractor
proposes a better method for performing the work or discovers a mistake
in the technical requirements, etc.). Regardless of the type of
modification involved, close coordination between the GTR and the
Contracting Officer is essential. Any contractual issues should be
considered before submitting a request to change the technical
requirements of a contract. The GTR should consult contracting staff for
advice.

D. ["Within-Scope" vs. "Out-of-Scope" Changes]{.underline}. The scope of
a contract is defined by its terms. The scope has two basic parameters:
the technical description of the type and quality of the work the
contractor must perform (i.e., SOW or specifications); and, the specific
amount or quantity (or range of amounts or quantities) of work and/or
products the contractor must do and/or deliver (usually specified in
Section B of the contract).

1\. [Within-scope changes]{.underline} are either authorized by specific
terms of the contract (e.g., Changes, Government Property, Limitation of
Cost, Option, or Termination clauses) or a result of actions taken
pursuant to such terms (e.g., resolution of disputes, termination
settlements, change order equitable agreements). Modifications executing
within-scope changes are executed through unilateral or bilateral
modifications depending upon the circumstances.

2\. [Out-of-scope changes]{.underline}, often referred to as "cardinal
changes," would require the contractor to perform work that is
materially different, either in substance or magnitude, from that agreed
upon in the original contract. Such requirements should be met through
the award of a new contract. Cardinal changes are created by:

a\. Requiring a contractor to do work that was never intended by the
contract (e.g., ordering inspections of single family properties under a
contract for inspections of multifamily properties, ordering a
contractor to provide technical assistance to recipients of Public
Housing Drug Elimination grants under a contract for technical
assistance to recipients of Fair Housing grants); or,

b\. Requiring a contractor to increase the amount of work or products,
or duration of services under a contract beyond that which was
originally required (e.g., ordering 300 property inspections under a
contract that specified a maximum of 50).

3\. [Constructive Changes]{.underline}. The GTR may inadvertently create
a change to a contract by taking, or failing to take, an action (e.g.,
relaxing reporting or delivery requirements or due dates, requesting
deliverables not specified in the contract, etc.). Such actions may
constitute a constructive change to the contract if the contractor
alters his/her performance accordingly. If the action or inaction
results in an otherwise allowable change, the Contracting Officer has
the discretion to formally ratify the action through an appropriate
modification to the contract (see paragraph 1-4.J). If the Contracting
Officer does not ratify the action, the GTR could be held liable for the
cost of the action (see paragraph 11-5.B).

4\. [Contracting Officer's Determination]{.underline}. The Contracting
Officer shall make the final determination, in light of the facts of a
given case, if a proposed change is properly made through the Changes
clause, or if it constitutes a new procurement.

E. [Modification Types]{.underline} (see also FAR Part 43). There are
two general categories of modifications:

1\. [Bilateral]{.underline} (i.e., two party) modifications are
established by mutual agreement and signed by both the contractor and
Contracting Officer. Bilateral modifications are called "supplemental
agreements" because they go beyond the original requirements of the
contract. They are essentially additional contractual agreements within
a contract. They include:

a\. [Equitable Adjustments]{.underline} (in price or terms) negotiated
as a result of a change order;

b\. [Definitization of Letter Contracts]{.underline} (see FAR 16.603);

c\. [Other Mutual Agreements of the Parties to the
Contract]{.underline}. Examples include incorporating the terms of
negotiated partial termination settlement agreements, extending
performance periods, funding a cost overrun, etc.; and,

d\. [Terminations]{.underline} (see section 12-12).

2\. [Unilateral]{.underline} (i.e., one-party) modifications are signed
by the Contracting Officer only. They include:

a\. [Administrative]{.underline} (e.g., change the name of the GTR,
paying office address, etc.). These modifications do not alter the
substance of the contract's requirements;

b\. [Change Orders]{.underline}.

\(1\) [Definition]{.underline}. A change order directs the contractor to
make substantive changes in such areas as the description of the
services (e.g., SOW), drawings, designs, specifications, time of
performance, place of performance, place of delivery, or method of
shipping or packing. Every HUD contract contains a Changes clause that
specifies the changes that may be made through a change order. The exact
changes permitted will vary by contract type.

\(2\) [Changes Within Scope]{.underline}. All changes made under the
authority of the Changes clause must be within the general scope of the
contract. The Contracting Officer may require the GTR to explain or
justify how a proposed change is within the scope of the contract if it
is not clearly apparent.

\(3\) [Changes in Costs or Schedule]{.underline}. The GTR shall advise
the Contracting Officer on reasonableness of, and need for, any claimed
increase in costs ("equitable adjustments") and/or required additional
time of performance. The GTR shall also advise the Contracting Officer
on the reasonableness of proposed decreases in costs or prices resulting
from change orders that delete work.

\(4\) Whenever practicable (e.g., proposed changes are known to the
contractor and HUD well in advance of their implementation), contracting
personnel are encouraged to condense the change order process into one
modification action. Contracting personnel should contact the
contractor, discuss the proposed changes, and negotiate the terms of
equitable agreements before issuing the change order. This will help
eliminate the serial process of issuing the change order, then
negotiating the terms of the agreement and issuing a final bilateral
modification. A modification that includes both the change order and the
terms of the resulting equitable agreement must be a bilateral document;
and,

c\. [Other Changes Authorized by Contract Clauses]{.underline}. The most
common of such changes are:

\(1\) [Incremental Funding]{.underline} modifications to add funds to
incrementally funded cost-reimbursement contracts (see paragraph
12-6.B.2);

\(2\) [Options]{.underline} (see also FAR Subpart 17.2).

\(a\) [Notice of Intent to Exercise an Option]{.underline}. Contracts
containing options specify dates by which HUD must notify the contractor
of its intent to exercise each option. Should HUD fail to meet the date,
it loses its ability to unilaterally require the contractor to perform
the option as written (i.e., the contractor could insist upon
renegotiating the terms of the option). To avoid this extra work and
potential increase in price, the GTR must ensure that the Contracting
Officer is notified in writing of the program office's intent to
exercise an option well in advance of the due date (usually, 30 days).
The notice does not commit HUD to exercising the option. Therefore, the
program office can still change its mind up to the date that the option
is exercised. The notice should include a statement that:

\(i\) The program office continues to have a need for the services
and/or products included in the option; and,

\(ii\) The contractor is performing satisfactorily.

(Note: If the notice does not include the above statements, the RCS (see
section 4-2) must contain them.)

\(b\) Contracts may also specify a date by which an option must be
exercised. When that is the case, the RCS for an option must be
submitted to the contracting office with enough lead-time to permit
preparation and issuance of the modification before the effective date
of the option. Generally, this means submitting the RCS 30 days before
the effective date. No contract option may be exercised after the
contract has ended.

\(c\) The GTR shall keep a record of the due dates (e.g., tickler file)
for option notice requests and RCS submissions for each contract.

F. [Negotiating Modifications]{.underline}. Modifications may require
the negotiation of technical requirements and costs or prices before
they can be made final. Contracting Officers shall follow the guidance
set forth in section 5-7 regarding cost and price analysis,
pre-negotiation objectives, and negotiation documentation when
negotiating terms and costs or prices of modifications.

12-15 [EVALUATING AND REPORTING CONTRACTOR PERFORMANCE]{.underline} (see
also section 12-5).

> A. [General]{.underline}. The evaluation and reporting of a
> contractor's performance constitute one of the most critical tasks
> that the GTR performs. Performance is measured against the specific
> requirements of each contract. It is measured in both qualitative
> (i.e., how well work was performed) and quantitative (e.g.,
> timeliness) terms. Contractor performance reports enable the
> Contracting Officer to determine if contractual terms are being met
> and, if not, what action is required on his/her part. They provide
> program office management the information needed to determine if a
> contract is yielding what was required (and in some cases anticipated)
> and, if not, what effect it will have on program mission. Last,
> performance reports provide a record of the contractor's performance,
> which can be used in evaluations of the contractor for future contract
> awards. FAR Subpart 42.15 provides further guidance regarding
> contractor performance information. For the purposes of this section,
> the term contract includes task orders. (Note: Construction and
> architect/engineer contracts must be evaluated in accordance with FAR
> Part 36. Contractor performance under contracts awarded pursuant to
> FAR Subparts 8.6 and 8.7 may [not]{.underline} be evaluated.)
>
> B. [Reporting System]{.underline}.

1\. Evaluations of contractor performance shall be made using the
internet-based Contractor Performance System (CPS) maintained by the
National Institutes of Health (NIH) within the Department of Health and
Human Services. The CPS is a Government-wide database of contractor past
performance information. The CPS shall be used to initiate, develop,
review and finalize contractor past performance data.

2\. Each Contracting Officer and Contract Specialist is provided access
to CPS through a user ID and password. Higher level contracting
management will also have access to CPS to permit review at a level
above the Contracting Officer to consider disagreements between the
parties regarding the evaluation (see FAR 42.1503).

3\. GTRs may be provided access to CPS at the discretion of the HCA.

> 4\. Contractors should be strongly encouraged to obtain access to CPS.
> Contracting Officers shall notify contractors of the HUD's use of CPS
> and as requested direct them to self-register in CPS. Normally, this
> notice is made at the time of contract award.
>
> 5\. The Policy and Field Operations Division within the OCPO has
> overall responsible for CPS administration at HUD. Each FCO Director
> shall designate an Organization Administrator to manage CPS within the
> FCO.
>
> 6\. Detailed information and guidance on the use of the CPS is
> available at the CPS internet site:
>
> http://cps.od.nih.gov/
>
> C. [Frequency]{.underline}.
>
> 1\. [Final Evaluations]{.underline}. In accordance with FAR 42.1502, a
> final evaluation shall be made of each contract with a value greater
> than \$100,000. The GTR shall make a final evaluation of the
> contractor's performance once all work under a contract has been
> completed. The report shall cover the entire contract period.
>
> 2\. [Interim Evaluations]{.underline}.
>
> a\. In addition to the final evaluation required in paragraph 1 above,
> the following interim evaluations are mandatory:
>
> \(1\) Multi-year contracts (two or more years) shall be evaluated on
> an annual basis. For contracts with option periods, evaluations shall
> be completed at least 120 days in advance of the end of the contract
> period to permit timely consideration of contractor performance prior
> to the exercise of the following option.

\(2\) Contracts with a duration of less than two years shall be
evaluated at the mid-point and before the exercise of any option (as
required in paragraph a above).

> b\. Certain contracts (e.g., high dollar values and long duration such
> as HUD's Information Technology System (HITS), single-family marketing
> and management (M&M) services, multi-family property management) may
> warrant more frequent evaluations. In these instances, the level of
> frequency will be left to the discretion of the Contracting Officer.
> Contractor performance evaluations for major contracts will be subject
> to the review of the Contract Management Review Board (see paragraph
> H.2 below).

D. [Evaluation Content]{.underline}.

1\. [Format]{.underline}. All evaluations shall be completed using the
online automated CPS form.

2\. [Content]{.underline}. The evaluation shall accurately assess:

a\. The quality of the contractor's performance;

b\. The contractor's ability to control costs of performance
(cost-reimbursement contracts only);

> c\. The timeliness of performance; and,

d\. The contractor's business relations with HUD.

3\. As needed, the GTR may provide supplementary information to
specifically address items such as:

a\. Deficiencies and performance problems the resolution of which is
still pending;

b\. Other non-performance-related factors having an actual or potential
impact on performance (e.g., changes in key personnel, significant
subcontracting, etc.); and,

c\. The likelihood of successful completion or continued acceptable
performance.

4\. Evaluations must reflect the GTR's independent assessment of the
contractor's performance based upon factual information (e.g.,
inspections of services and products, progress reports submitted by the
contractor, on-site observations, etc.). The GTR must ensure that the
information reported by the contractor is accurate before incorporating
any of it into, or using it for the basis of, his/her evaluation.

> 5\. The GTR shall obtain contractor performance information from all
> GTMs assigned to the contract and any other relevant sources (e.g.,
> end users). A particular GTM's input may be limited to one or more of
> the evaluation criteria on the on the CPS evaluation form in
> accordance with the GTM's responsibilities and knowledge of the
> contractor's performance. The GTR shall resolve any disagreements with
> any GTM concerning past performance information before completing
> his/her evaluation. The GTR shall make the final decision regarding
> such disagreements.

E. [Evaluation Process]{.underline}.

1\. The Contract Specialist will originate the performance evaluation in
CPS. CPS will notify the GTR via email that the evaluation process has
been initiated.

> 2\. The GTR will either prepare the evaluation online or provide
> information to the contracting office so that it may complete the
> evaluation. If the GTR completes the evaluation, he/she shall notify
> the Contract Specialist when the evaluation has been completed. The
> notification may be sent from CPS if the GTR has been given access.
> Otherwise, the GTR shall send the evaluation to the Contract
> Specialist.

3\. The Contract Specialist shall review the evaluation and resolve any
disagreements concerning the GTR's evaluation and advise the Contracting
Officer when it is complete. The Contracting Officer may review the
evaluation at his/her discretion. Once all reviews are completed, the
contracting office shall notify the contractor that the evaluation is
available for review on the CPS internet site.

4\. The contractor shall be given a minimum of 30 days to provide
comments, rebuttals, or additional information concerning the
evaluation.

5\. As requested by the contracting office, the GTR and GTMs, if any,
shall promptly review comments, rebuttal, or additional information
provided by the contractor. The GTR shall advise the Contracting Officer
of his/her review results and provide the Contracting Officer with any
information needed to respond to the contractor's statements, rebuttal
or other information, and/or resolve any disagreement. The GTR shall
assist the Contracting Officer or higher level contracting official in
resolving disagreements (e.g., participate in meetings).

6\. All disagreements with the contractor concerning the evaluation
shall be resolved by a contracting official at least one level higher
than the Contracting Officer (e.g., OCPO Division Directors, FCO
Directors). The Contracting Officer shall ensure that the resolution of
all disagreements is adequately documented. Once resolution has
occurred, the Contracting Officer shall ensure that a final evaluation
is entered into CPS and the contractor is notified.

> F. [Coincidence with Program Reporting Requirements]{.underline}. Some
> HUD programs may require periodic assessments of contractor
> performance that are independent of any other reporting required by
> the Contracting Officer or program management. To the degree
> practicable, these assessments should be scheduled to provide maximum
> benefit to the evaluation of the contractor's performance made in
> accordance with this section 12-15.
>
> G. [Retention and Distribution of Performance-Related
> Information]{.underline}.

1\. Hard copies of performance evaluations, contractor responses, and
review comments shall be maintained in the official contract file.

> 2\. CPS will automatically archive all electronic evaluation
> information associated with a given contract three years after the
> contract expires,.

3\. If the GTR is not within the initiating program office, a copy of
his/her final assessment should be provided to that office.

4\. The Contracting Officer is responsible for ensuring that performance
evaluation information is protected from unauthorized disclosure in
accordance with FAR 42.1503. The Contracting Officer shall inform all
other parties having access to such information of the prohibition
against disclosure to other than authorized Government personnel or the
contractor.

H. [Other Performance Reviews]{.underline}.

1\. [Presentations to Departmental Management]{.underline}. At times it
may be necessary or advisable for the GTR and Contracting Officer to
meet with Departmental management on an ad hoc basis to review
contractor performance or progress (e.g., routine reporting methods
reveal the need for significant changes in the method or approach to the
work). Normally, management will call for such briefings. The GTR or
Contracting Officer may also request to make such a briefing. The GTR
will be responsible for reporting on technical issues. The Contract
Specialist or Contracting Officer will be responsible for reporting on
contractual issues.

> 2\. [CMRB Review]{.underline}. Interim contractor performance
> evaluations (see for major contracts will be subject to CMRB review
> (e.g., prior to exercise of options or finalizing significant
> modifications) in accordance with the current CMRB rules. The CMRB may
> require a presentation of the interim evaluation to the Board by the
> responsible Integrated Program Team (IPT) or members of it.

3\. [Reviews of Major Contracts]{.underline}. The HCA may select
individual major contracts for special review. Normally, these will be
large dollar value contracts (e.g., in excess of \$1,000,000) for
services of a complex or programmatically sensitive nature (e.g., pilot
testing of new program management or delivery approaches). These reviews
may be conducted before a forum of interested parties such as the
Contracting Officer and program office management. Their purpose is to
ensure that major contracted efforts receive appropriate management
attention. They also serve to create a forum in which program and
contract staff can focus on problems and agree on necessary corrective
action. The cognizant GTR and Contract Specialist shall be expected to
participate in the review by briefing the interested parties on the
current status of the contract.

4\. [Reports to Program Management]{.underline}.

> a\. The GTR shall provide reports as requested to the program office
> or offices having an interest in the contract (e.g., the initiating
> office and any end user offices). Program offices may establish the
> frequency and format of reports on a contract-by-contract basis to
> best meet their needs.
>
> b\. To avoid undue burden on the GTR, the content of these reports
> should be similar to that of the reports required under this section
> 12-15 and, whenever practicable, the reporting period for a given
> contract should coincide with the GTR's regular interim reporting to
> the Contracting Officer.

12-16 [CONTRACT CLOSEOUT]{.underline}. Closeout refers to the
administrative actions taken to retire a completed contract. A contract
is considered completed and ready for closeout once all work has been
finished, all deliverables (including reports) have been received and
accepted, or otherwise disposed of, and all financial matters (e.g.,
final payment) have been settled. Closeout begins with the GTR's
submission of the final performance evaluation to the Contracting
Officer.

A. [Closeout Documentation]{.underline}. The GTR shall provide to the
Contracting Officer all documentation related to the performance of the
contract that the GTR has not already provided during the course of the
contract. Documentation that does not appropriately belong in the
official contract file (e.g., notes of phone conversations, copies of
documents previously sent to the Contracting Officer, etc.) should not
be sent to the Contracting Officer. The Contracting Officer is
responsible for ensuring that all required documentation required for
close out of the contract is obtained from the GTR. The Contracting
Officer will specify the documentation he/she needs. Such documentation
may include:

1\. Final performance evaluation (see section12-15);

2\. Payment registers;

3\. Deliverables;

4\. Copies of reports, inspection results, and acceptability
determinations; and,

5\. Pre-decisional recommendations regarding payment, key personnel,
acceptance or rejection of deliverables, disputes, etc.

B. [Closeout]{.underline}. Once the Contracting Officer receives the
final performance evaluation, he/she shall promptly take all
administrative actions needed to close out the contract. These are
described at FAR 4.804-5. Additional detailed instruction is available
on the OCPO intranet site:

> http://hudweb.hud.gov/po/arc/arconect.htm

C. [Final Payment]{.underline}. Final payment shall be made promptly
once the Contracting Officer has determined that all contract
requirements have been met and that the final payment amount is proper.
The Contracting Officer must approve requests for final payments before
they are processed.

[^1]: Unless specifically excluded, the term GTR shall also mean GTM
    (see 11-2.B).