155 
(3) ADDITIONAL RECORDS NOT REQUIRED.—Paragraph (1) does not 
require a contractor or subcontractor to create or maintain a record 
that the contractor or subcontractor does not maintain in the ordinary 
course of business or pursuant to another law. 
(e) LIMITATION ON AUDITS RELATING TO INDIRECT COSTS.—An execu-
tive agency may not perform an audit of indirect costs under a contract, 
subcontract, or modification before or after entering into the contract, sub-
contract, or modification when the contracting officer determines that the 
objectives of the audit can reasonably be met by accepting the results of 
an audit that was conducted by another department or agency of the Fed-
eral Government within one year preceding the date of the contracting offi-
cer’s determination. 
(f) EXPIRATION OF AUTHORITY.—The authority of an executive agency 
under subsection (b) and the authority of the Comptroller General under 
subsection (d) shall expire 3 years after final payment under the contract 
or subcontract. 
(g) INAPPLICABILITY TO CERTAIN CONTRACTS.—This section does not 
apply to the following contracts: 
(1) Contracts for utility services at rates not exceeding those estab-
lished to apply uniformly to the public, plus any applicable reasonable 
connection charge. 
(2) A contract or subcontract that is not greater than the simplified 
acquisition threshold. 
(h) ELECTRONIC FORM ALLOWED.—This section does not preclude a con-
tractor from duplicating or storing original records in electronic form. 
(i) ORIGINAL RECORDS NOT REQUIRED.—An executive agency shall not 
require a contractor or subcontractor to provide original records in an audit 
carried out pursuant to this section if the contractor or subcontractor pro-
vides photographic or electronic images of the original records and meets 
the following requirements: 
(1) PRESERVATION PROCEDURES ESTABLISHED.—The contractor or 
subcontractor has established procedures to ensure that the imaging 
process preserves the integrity, reliability, and security of the original 
records. 
(2) INDEXING
SYSTEM
MAINTAINED.—The contractor or subcon-
tractor maintains an effective indexing system to permit timely and 
convenient access to the imaged records. 
(3) ORIGINAL
RECORDS
RETAINED.—The contractor or subcon-
tractor retains the original records for a minimum of one year after 
imaging to permit periodic validation of the imaging systems.
156 
§ 4707. Remission of liquidated damages 
When a contract made on behalf of the Federal Government by the head 
of a Federal agency, or by an authorized officer of the agency, includes a 
provision for liquidated damages for delay, the Secretary of the Treasury 
on recommendation of the head of the agency may remit any part of the 
damages as the Secretary of the Treasury believes is just and equitable. 
§ 4708. Payment of reimbursable indirect costs in cost-type 
research and development contracts with edu-
cational institutions 
A cost-type research and development contract (including a grant) with 
a university, college, or other educational institution may provide for pay-
ment of reimbursable indirect costs on the basis of predetermined fixed-per-
centage rates applied to the total of the reimbursable direct costs incurred 
or to an element of the total of the reimbursable direct costs incurred. 
§ 4709. Implementation of electronic commerce capability 
(a) ROLE OF HEAD OF EXECUTIVE AGENCY.—The head of each execu-
tive agency shall implement the electronic commerce capability required by 
section 2301 of this title. In implementing the capability, the head of an 
executive agency shall consult with the Administrator. 
(b) PROGRAM MANAGER.—The head of each executive agency shall des-
ignate a program manager to implement the electronic commerce capability 
for the agency. The program manager reports directly to an official at a 
level not lower than the senior procurement executive designated for the 
agency under section 1702(c) of this title. 
§ 4710. Limitations on tiering of subcontractors 
(a) DEFINITION.—In this section, the term ‘‘executive agency’’ has the 
same meaning given in section 133 of this title. 
(b) REGULATIONS.—For executive agencies other than the Department of 
Defense, the Federal Acquisition Regulation shall— 
(1) require contractors to minimize the excessive use of subcontrac-
tors, or of tiers of subcontractors, that add no or negligible value; and 
(2) ensure that neither a contractor nor a subcontractor receives in-
direct costs or profit on work performed by a lower-tier subcontractor 
to which the higher-tier contractor or subcontractor adds no or neg-
ligible value (but not to limit charges for indirect costs and profit based 
on the direct costs of managing lower-tier subcontracts). 
(c) COVERED CONTRACTS.—This section applies to any cost-reimburse-
ment type contract or task or delivery order in an amount greater than the 
simplified acquisition threshold (as defined by section 134 of this title).
157 
(d) RULE OF CONSTRUCTION.—Nothing in this section shall be construed 
as limiting the ability of the Department of Defense to implement more re-
strictive limitations on the tiering of subcontractors. 
(e) APPLICABILITY.—The Department of Defense shall continue to be 
subject to guidance on limitations on tiering of subcontractors issued by the 
Department of Defense pursuant to section 852 of the John Warner Na-
tional Defense Authorization Act for Fiscal Year 2007 (Public Law 109– 
364, 10 U.S.C. 2324 note). 
§ 4711. Linking of award and incentive fees to acquisition 
outcomes 
(a) DEFINITION.—In this section, the term ‘‘executive agency’’ has the 
same meaning given in section 133 of this title. 
(b) GUIDANCE FOR EXECUTIVE AGENCIES ON LINKING OF AWARD AND 
INCENTIVE FEES TO ACQUISITION OUTCOMES.—The Federal Acquisition 
Regulation shall provide executive agencies other than the Department of 
Defense with instructions, including definitions, on the appropriate use of 
award and incentive fees in Federal acquisition programs. 
(c) ELEMENTS.—The regulations under subsection (b) shall— 
(1) ensure that all new contracts using award fees link the fees to 
acquisition outcomes (which shall be defined in terms of program cost, 
schedule, and performance); 
(2) establish standards for identifying the appropriate level of offi-
cials authorized to approve the use of award and incentive fees in new 
contracts; 
(3) provide guidance on the circumstances in which contractor per-
formance may be judged to be ‘‘excellent’’ or ‘‘superior’’ and the per-
centage of the available award fee which contractors should be paid for 
the performance; 
(4) establish standards for determining the percentage of the avail-
able award fee, if any, which contractors should be paid for perform-
ance that is judged to be ‘‘acceptable’’, ‘‘average’’, ‘‘expected’’, ‘‘good’’, 
or ‘‘satisfactory’’; 
(5) ensure that no award fee may be paid for contractor performance 
that is judged to be below satisfactory performance or performance 
that does not meet the basic requirements of the contract; 
(6) provide specific direction on the circumstances, if any, in which 
it may be appropriate to roll over award fees that are not earned in 
one award fee period to a subsequent award fee period or periods; 
(7) ensure consistent use of guidelines and definitions relating to 
award and incentive fees across the Federal Government; 
(8) ensure that each executive agency—