EPA 100/1990.8
Contract
Administration

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                                TABLE OF CONTENTS - TEXT


       Chapter                    Title                                         Page*

       1             PURPOSE AND OVERVIEW

              1.1          Overview of Contract Administration                      5
              1.2          Purpose of Handbook                                    5
              1.3          Project Officer Certification  Program                     5
              1.4          Summary of Course Content                              8
                    CONTRACT ADMINISTRATION AND THE
                    AUTHORITY OF GOVERNMENT PERSONNEL

              2.1           Overview of Contract Administration                     35
              2.2          Definition of Contract                                  35
              2.3          Duties of the Parties                                   36
              2.4          Authority of Government Personnel                      37
              2.5          Acquisition Regulations                                 40
                    ELEMENTS AND TYPES OF CONTRACTS

              3.1           Major Contract Elements                               73
              3.2           Order of Precedence                                    74
              3.3           Types of Contracts                                     74
              3.4           Firm Fixed Price Contracts                             75
              3.5           Cost-Reimbursement Contracts                          77
              3.6           Time-and-Materials Contracts                          81
              3.7           Labor-Hour Contracts                                  82
              3.8           Indefinite Delivery/Indefinite Quantity Contracts          83
              3.9           Letter Contracts                                       84
              3.10         Major Procurement Classes                             84
                    CONTRACT FUNDING

              4.1           The Appropriations and Contract Funding Process         103
              4.2           Types of Appropriations                               103
              4.3           Bona Fide Need Rule                                   104
              4.4           Other Accounting Data                                 107
              4.5           Selecting Appropriations to Fund Contracts and           108
                           Distribution of Costs Among Source Appropriations
              4.6           Voucher Payment                                     110
              4.7           Incremental Funding                                   110
              4.8           Deobligation of Contract Funds                          110
              Appendix 4A  Comptroller General Decision on EPA Level of Effort       113
                           Contracts - Appropriation Availability
              Appendix 4B  Recertification of Funds                               120
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       Chapter                    Title                                      t  . iPage#

       5            STANDARDS OF CONDUCT

              5.1           Ethics for All Government Employee                    139
              5.2           Rules for Personnel who Deal with                      141
                           Contractors
              5.3           Post-Employment Restrictions                         144
              Appendix     Decisions and Rulings in  Brief - Conflicts of Interest      146
                    PLANNING AND PREPARATION

              6.1           The Importance of the Pre-Award Phase                 177
              6.2           Reading and Understanding the Contract                  177
              6.3           Schedule of Major Tasks and Deliverables                178
              6.4           Post-Award Orientation                               178
              6.5           Records, Logs, Reports and Files                       179
              Exhibit       Sample Contract Administration File Plan                181
                    ISSUANCE OF WORK AND RELATED CONSIDERATIONS

              7.1           Issuance of Work                                     223
              7.2           Estimating Hours and Level of Effort                    225
              7.3           Estimating Total Costs                                225
              7.4           Organizational Conflicts of Interest                     227
              7.5           Subcontracts, Consultants and Key Personnel             229
              7.6           Personal Services                                    231
              7.7           Use of Advisory and Assistance Services                 232
              7.8           Government Property                                234
              Appendix 7A   Use of Contractor Services                            237
              Appendix 7B   Use of Advisory and Assistance Services                 248a
       8            WORK PLANS AND COST PROPOSALS

              8.1           Workplan Components                                267
              8.2           Workplan  Review                                    267
              8.3           Authorizing Performance Before Signoff                 269
              Exhibits      Sample Task Directive and Task Plan                    270
                    REACHING CONSENSUS

              9.1           Meeting  Preparation                                  279
              9.2           Conducting the Meeting                                279
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        Chapter                    Title                                        Page*

        13          CONTRACT MODIFICATIONS (Cont.)

              13.5         Exercise of Options                                  436
              13.6         Cardinal Changes                                    437
              13.7         Increases in Scope                                   437
              13.8         Exceptions to Full and Open Competition                 438
              13.9         Constructive Changes                                439
              13.10        Ratifications                                        440
              13.11        Amendments to Work Assignments or Delivery Orders     441


        14          DISPUTES AND CLAIMS, TERMINATIONS AND CLOSEOUTS

              14.1         Contract Disputes Act of 1978                         455
              14.2         Contracting Officer's Final Decision                    455
              14.3         Board of Contract Appeals                             456
              14.4         Court of Claims                                     456
              14.5         Contract Termination                                457
              14.6         Termination for the Convenience of the                  457
                           Government
              14.7         Termination for Default                              458
              14.8         Cure Notice                                        460
              14.9         Termination                                        461
              14.10        Excusable Delays                                    461
              14.11        Waiver of Default                                   462
              14.12        Contract Closeout                                    464
              14.13        Closeout Procedures                                 464
              14.14        Project  Officer  Responsibilities                       465


        15          MISCELLANEOUS CONTRACT PROVISIONS AND SPECIAL CONTRACTS

              15.1         Patents and Data Rights                              475
              15.2         Peer and Administrative Review                       480
              15.3         Contractors' Working Files                           480
              15.4         Treatment of  Confidential Business Information          480
              15.5         Certification of a Drug-Free Environment              481
              15.6         Administration of Special Types of Contracts             482
              15.6         Contracts Subject to Specific Labor Laws                482
              15.7         Construction Contracts                               483
              15.8         Contracts with the Small Business                     484
                           Administration under the 8(a)  Program
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       Chapter                    Title

       10          TECHNICAL MONITORING OF CONTRACTS

              10.1         Technical Direction
              10.2        Technical Direction Under Superfund
              10.3        Prohibited Activities
              10.3        Technical Monitoring of Progress
              10.4        Assuring Timeliness and Quality
              10.5        Effective Communication with Contractors
              Appendix     FAR Inspection clauses
Page*
305
305
305
307
310
312
313
        11           FINANCIAL MANAGEMENT OF CONTRACTS

               1.1         Cost-Reimbursement Contracts                        351
               1.2         Time-and-Materials, Labor-Hour,  and                 353
                           Fixed-Rate for Services Contracts
               1.3         Financial Management Reviews                        355
               1.4         Cost Management - The Contractor's Job                355
               1.5         Voucher Certifications and Payments to Contractors      355
               1.6         Project Officer Responsibilities                       356
              11.7         Guidelines for Suspension or Disallowance              359
                           of Amounts Invoiced
              11.8         The Prompt Payment Act                             360
              11.9         Processing Payments                                 361
              11.10        Monitoring and Control of Government Property         362
              11.11        Disposal, Return or Transfer of  Government Property    365
              Appendix 11A FAR clauses:  Allowable Cost and Payment, Fixed         368
                           Fee, Incentive Fee
              Appendix 11B Sample Property  Form  1730-1                        371
       12           EVALUATING PERFORMANCE AND DEUVERABLES AND GIVING FEEDBACK

              12.1         Evaluating Contractor Performance                    391
              12.2        Giving Contractors Feedback on Performance            391
              12.3        Deficiencies  Discovered During Performance            392
              12.4        Acceptance or Rejection                              393
              12.5        Revocation of Acceptance                              394
              12.6        Periodic Formal Performance  Evaluations               395
              12.6        Cost-Plus-Award-Fee Contracts                       396
              Exhibits     Award Fee Rating Guidelines, Performance Observation   398
                          Reports, Report Summary for TAT contracts
       13           CONTRACT MODIFICATIONS

              13.1         Unilateral versus  Bilateral  Modifications
              13.2         The "Changes" Clause
              13.3         Supplemental Agreements
              13.4         Equitable Adjustments
433
434
435
435
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                        GLOSSARY OF ACRONYMS USED IN MANUAL
       AA           Assistant Administrator
       AG&G        Abatement Control and Compliance Appropriation
       ADOO        Administrative  Delivery Order Officer
       Blue Team    PCMD Quality Assurance Staff
       BOA         Basic Ordering  Agreement
       CBI          Confidential Business Information
       CERCLA      Comprehensive Emergency Response and Cleanup Act
       CFR         Code of Federal Regulations
       CMM         Contracts Management Manual
       CO           Contracting Officer
       CPAF        Cost Plus Award Fee
       CPFF        Cost Plus Fixed Fee
       DCN         Document Control Number
       DO           Delivery  Order
       DOL         Department of  Labor
       DOO         Delivery Order Officer
       DOPO        Delivery Order Project  Officer
       EPAAR       Environmental  Protection Agency Acquisition Regulations
       ERGS        Emergency Response Contracts
       FAR         Federal Acquisition Regulations
       FDO         Fee  Determination Official
       FMD-RTP    Financial Management Division, Research Triangle Park. NC
       FTE         Full Time Equivalent
       FY           Fiscal Year
       G&A         General and Adminstrative Costs
       GFP         Government Furnished  Property
       GSA         General Services Administration
       IBCA         Department of  Interior Board of Contract Appeals
       ID/IQ        Indefinite Delivery/Indefinite Quantity
       JOFOC       Justification for Other than Full and Open Competition
       LOE         Level of Effort
       OARM        Office of Administration and Resource Management
       CDC         Other Direct Costs
       OF           Official Form
       PCMD        Procurement and Contracts Management Division
       PEB         Performance Evaluation Board
       PO           Project  Officer
       POR         Performance Observation Report
       PR           Procurement Request/Order
       R&D         Research and Development
       RCRA        Resource Conservation and Recovery Act
       RFP         Request For Proposals
       S&E         Salary and Expense
       SBA         Small Business Adminstration
       SF           Standard Form
       SIRMO       Servicing Information Resources Management Officer
       SOW         Statement of Work
       T&M         Time and Materials
       TAT         Technical Assistance Team
       TDD         Technical Direction Directive
       TDM         Technical Direction Memorandum
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       TID         Technical Instruction  Directive
       WA         Work Assignment
       WAM        Work Assignment Manager
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 «t  ,4.
          UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                        WASHINGTON. DC  20460
 MEMORANDUM

 SUBJECT:   Contracting at EPA

 TO:        All Agency Personnel


      Since coining to EPA,  I  have been  continually impressed  with
 the  broad range of work that we perform.   It  follows  that  the
 expertise required to successfully perform such an assortment  of
 functions must be equally varied.   EPA is  fortunate to employ  a
 multi-talented workforce.  However,  we are still not  able  to do
 all  of  this work ourselves.   We must get help from the outside,
 specifically by way of contractor support.

 Contract  Management and Accountability

      Due  to the extent of  EPA's contracting,  it is critical  for
 us to effectively manage our contracts.  In recent years,  we have
 improved  considerably by focussing on  those individuals who
 perform the day-to-day contract management activities.  However,
 in a  very real sense,  we are all contract  managers.   Each  one  of
 us,  including myself and senior management, bears responsibility.

      Agency accountability begins  when we  make  a decision  to use
 contractor support.   And,  once we  accept a final product from  a
 contractor,  we become responsible  for  its  content and for  how  it
 may be  used in reaching Agency decisions.   To assure
 accountability at senior management  levels, I am requiring all
 EPA managers to include in their performance  standards a
 requirement emphasizing contracting  controls.   The Procurement
 and Contracts Management Division  (PCMD) has  the lead in
 developing this language.

 Prohibited Contracting

      With increasing frequency, I am  becoming  aware  of uses of
 contractor support  that leave us open  to criticism.   In many
 cases,  we have used contractors in areas of a policy  and
 decision-making nature that  should remain  under the sole
 authority of EPA.   Although  I am certain that key decisions  are
 being made internally by EPA managers, there  is often the
 appearance that contractors  make those decisions for  us.   This
 perception is highly damaging to EPA's credibility.   And,  it must
 be stopped.

      As a  result, I  am instituting measures to  maintain tighter
 control on the Agency's use  of contracting  support.   Attachment A
 to this memorandum  comprises a list  of activities  for which EPA
will  not  contract.   The prohibition  of these  activities will be

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                                -2-

 incorporated into all  future  contracts and current contractors
 will  be alerted to this  new policy.  These prohibitions also
 extend to Agency subcontractors.

 Sensitive Areas

      Attachment B is a list of  activities that often place the
 Agency in positions of vulnerability.  They are not activities
 from  which contractor  involvement is precluded but are ones
 wherein we must exercise great  control if we choose to contract
 for them.   Over the next months, PCMD will be issuing direction
 regarding contracting  for these types of activities.  As a
 minimum,  prior to procuring support in any of these areas,
 adequate control measures must  be established to
 ensure a final Agency  product that is unbiased and represents
 Agency thinking.

 Broadening Competition

      A high percentage of the tasks falling into the "sensitive"
 range are purchased by program  offices under broad management
 consultant contracts.  Having a limited number of contractors
 supporting us  in so many of these areas creates great potential
 for conflict of interest.  I  ask senior management to help
 alleviate this situation by breaking requirements into smaller
 portions.   Instead of  just one  contract, a program might be
 supported by two or three.  This would reduce the conflict of
 interest potential and provide  for more involvement of small and
 minority-owned businesses.

 Conclusion

      Within the near future,  I  will be issuing an EPA Executive
 Order which will  implement in greater detail the policies
 discussed  in this memorandum.   The use of contractor support at
 EPA is a very  practical  way to  meet our obligations.  However,
 each  of us is  responsible for this Agency's reputation and for
 the ideas  and  opinions we express on behalf of it.  Whenever a
 contract  is used,  we must ensure that we provide clear guidance
 to contractors on our  thoughts, ideas, and positions and that we
 scrutinize contractor  outputs to ensure they reflect this
 guidance.   I am confident that  each one of us will take ownership
 of this large  responsibility  and work to create an environment
 which  is conducive to  the accomplishment of ourjiany tasks
 through the judicious  use of  contractual suppoi
                                lliam K. Rei

Attachments

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                                                     Attachment A


             PROHIBITED CONTRACTING ACTIVITIES AT EPA

 1.  The actual preparation of Congressional testimony

 2.  The interviewing or hiring of  individuals for employment at
EPA

 3.  Developing and/or writing of Position Descriptions and
Performance Standards

 4.  The actual determination of Agency policy

 5.  Participating as a voting member on a Performance Evaluation
Board; participating in and/or attending Award Fee meetings

 6.  Preparing Award Fee letters, even under typing services
contracts

 7. • The actual preparation of Award Fee Plans

 8.  The preparation of documents on EPA letterhead other than
routine administrative correspondence

 9.  Reviewing vouchers and invoices for the purposes of
determining whether cost, hours, and work performed are
reasonable

10.  The development of Statements of Work, Work Assignments,
Technical Direction Documents, Delivery Orders, or any other work
issuance document under a contract that the contractor is
performing or may perform

11. On behalf of EPA, actually preparing responses to audit
reports from the Inspector General, General Accounting Office,  or
other auditing entities

12.  On behalf of EPA, actually preparing responses to
Congressional correspondence

13.  The actual preparation of responses to Freedom of
Information Act requests, other than routine,  non-judgmental
correspondence — in all cases,  EPA must sign it

14.  Any contract which authorizes a contractor to represent
itself as EPA to outside parties

15.  Conducting administrative hearings

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                               -2-
16.  Reviewing findings concerning the eligibility of EPA
employees for security clearances
17.  The actual preparation of an office's official budget
request

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                                                      Attachment B

               ACTIVITIES OF POTENTIAL VULNERABILITY

      The following activities very often require contractor
 involvement in programs that are dependent  upon contractor
 support to accomplish their mission.  These activities  may result
 in the improper use of contractors if internal  controls to ensure
 proper oversight have not been established.  They may also lead
 to the perception that inherent Government  functions  have  been
 assigned to contractors.  .Whenever contractors  are used to
 perform these tasks,  Agency employees must  play an active  role  in
 overseeing the effort and making all  final  decisions.   This
 requires close monitoring to ensure that final  outputs  reflect
 the Agency's positions,  thoughts,  and ideas.


  1.   Budget preparation support including workload modeling,
 fact-finding,  efficiency studies,  should-cost analyses,  etc.

  2.   Reorganization and planning support

  3.   Support services such as analyses,  feasibility studies, etc.
      to be used by EPA personnel in developing  policy

  4.   Regulation development support

  5.   Any support in the in-house evaluation of  another
contractor's performance

  6.   Involvement in strategic acquisition planning

  7.   Support on improving contract  management

  8.   Providing specialized expertise  in  the contractor  selection
process

  9.   Situations where contractors share  office  space with EPA
employees

10.   Providing specialized expertise  in  the development of
Statements of  Work, Work Assignments,  other contract-ordered
tasks

11.  Support in preparing responses to Freedom  of  Information Act
requests

12.  Any situation wherein a contractor has access to
Confidential Business  Information and/or any other sensitive
information

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                               -2-

13.  Any support involving EPA policy or regulatory
interpretation, such as staffing hotlines, attending conferences
on behalf of EPA, community relations efforts, conducting EPA
training courses

14.  Any situation where it can be assumed that the contractor is
EPA, without specifically identifying itself as a contractor

15.  Independently interpreting EPA'policies or regulations on
EPA's behalf to outside parties

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CONTRACT  ADMINISTRATION


      FOR PROJECT OFFICERS,
   WORK ASSIGNMENT  MANAGERS
   AND DELIVERY ORDER OFFICERS
    U.S. Environmental Protection Agency
Procurement and Contracts Management  Division
            November 1991

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                             FOREWORD

     We're pleased to take this opportunity to extend a warm
welcome to all EPA Project Officers, Work Assignment Managers,
Delivery Order Officers, and Delivery Order Project Officers to
this course in Contract Administration.  Your role as a contract
manager is a vital and critical one." To assist you in this
important capacity, the Office of Acquisition Management (OAM)
developed this training course and manual which we hope you will
find useful.

     Our Agency has received serious scrutiny on contract
management-related issues from Congressional oversight committees
and the general public.  The Office of Acquisition Management
wants to work with you in partnership and give you the assistance
you need to be an effective and responsible contract manager.
The training you are about to receive is designed to provide you
with an understanding of your professional responsibilities in
managing and administering the technical aspects of EPA
contracts.  It also provides you with some useful examples and
practical exercises which will enable you to become a more
effective manager of the contracts you oversee.

     We hope we have made this manual easy to read and use so
that you will turn to it from time to time as questions arise in
your role as a Project Officer, Work Assignment Manager, Delivery
Order Officer, and/or Delivery Order Project Officer.  If you
have comments or recommendations about either the course or the
handbook, please direct them to the Training and Certification
Branch staff (3802F) or to your Contracting Officer.

     Thank you for your participation and interest.  We hope you
enjoy the course.              /\           S\

                                        I   T
                                       V  •  \^
                                       Bailey, Director
                                        Acquisition Management
                                 rette L. BrownT Deputy Director
                             /Office of Acquisition Management

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                        CONTRACT ADMINISTRATION COURSE
                                    AGENDA
      DAY 1

      9:00-9:30        PURPOSE AND OVERVIEW - Chapter 1

      9:30-10:30       CONTRACT ADMINISTRATION AND THE
                       AUTHORITY OF GOVERNMENT PERSONNEL - Chapter 2

      10:30-10:45      Break

      10:45-11:30      ELEMENTS AND TYPES OF CONTRACTS - Chapter 3

      11:30-12:00      CONTRACT FUNDING - Chapter 4

      12:00-1:00       Lunch

      1:00-2:00        STANDARDS OF CONDUCT - Chapter 5

      2:00-2:30        PLANNING AND PREPARATION - Chapter 6

      2:30-2:45        Break

      2:45-4:00        ISSUANCE OF WORK - Chapter 7



      DAY 2

      9:00-9:15        ISSUANCE OF WORK

      9:15-10:15       WORK PLANS AND COST PROPOSALS - Chapter 8

      10:15-10:30      Break

      10:30-12:00      REACHING CONSENSUS - Chapter 9

      12:00-1:00       Lunch

      1:00-2:15        TECHNICAL MONITORING - Chapter 10

      2:15-2:30        Break

      2:30-4:00        FINANCIAL MONITORING - Chapter 11
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                        CONTRACT ADMINISTRATION COURSE
                                 AGENDA  (Cont.)
       DAY 3

       9:00-9:30         FINANCIAL MONITORING (Cont.)

       9:30-10:30        EVALUATING PERFORMANCE AND DEUVERABLES AND GIVING
                        FEEDBACK-Chapter 12

       10:30-10:45       Break

       10:30-12:00       CONTRACT MODIFICATIONS - Chapter 13

       12:00-1:00        Lunch

       1:00-2:00         DISPUTES, CLAIMS, TERMINATIONS AND CLOSEOUTS -
                        Chapter 14

       2:00-2:15         MISCELLANEOUS CONTRACT PROVISIONS AND SPECIAL CONTRACT
                        TYPES - Chapter 15

       2:15-2:30         Break

       2:30-4:00         EXAM AND COURSE EVALUATION
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Overview

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             PURPOSE
          AND OVERVIEW
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           PURPOSE OF COURSE

     Goal:  Prepare You As EPA Staff To Function
     Effectively As Contract Managers.

     1. Increase Knowledge Of Applicable Laws And
       Regulations So You Can Function Effectively
       Within Them And Avoid Personal Liability

     2. Raise Awareness Of Pertinent Issues, But
       Also Learn The Nuts And Bolts Of Contract
       Administration

     3. Improve Ability To Use Contractors To
       Accomplish The Agency's Mission, Without
       Squandering Its Resources
     IGNORANCE OF THE LAW IS NO EXCUSE!
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3EPA
                 Designation and Appointment of Project Officer/

                Work Assignment Manager/Delivery Order Officer
                              (For Other Than Small Purchases)

Note: This form is not a Contracting Officer warrant. Delivery Order Officers and Administrative Delivery
Order Officers require a warrant of Contracting Officer authority. Any request for a Delivery Order Officer
warrant must be accompanied by the additional information required in Chapter 8 of the Contracts Manage-
ment Manual.
la. Name of Nominee
c. Organization d. Mail Code
2. The nomination is for:
LJ Project Off icer
LJ Work Assignment Manager
LJ Delivery Order Officer
LJ Administrative Delivery Order Officer
LJ Delivery Order Protect Officer
b. Title
e Telephone f. Years of Contract Experience
3. The Nominee Has. yes
a. Completed the basic Project Officer Course LJ
b. Completed the Contract Administration Course LJ
c. Incorporated appropriate contract management r— i
criteria in position description and performance LJ
Standard (If criteria have not been incorporated.
they must be incorporated within 30 days of
appointment.)
d. If the nominee has not completed the basic Pro- LJ
iect Officer Course or the Contract Adminis-
tration Course, has a waiver or interim
certification been provided
tf the answer to items a. b. or c is "No. " or the
answer to item d is "No. " attach an explanation.!
No
n
n
n
1. Estimated Dollar Amount of Contract. Work Assignment, or Delivery Order
i. Nomination is for (Cheek one?
LJ a new contract, work assignment or delivery order entitled
LJ a change in the Project Officer. Work Assignment Manager, c
{it applicable, the worit assignment m>. /delivery order no. it
ir Delivery Order Officer on Contract MO






                                     Certification

     The undersigned nominee and requesting official certify that the designation of this
     nominee complies with the workload limitations and other requirements set forth in
     Chapter 7 of the Contracts Management Manual.
6a. Signature of Nominee
•. Signature of Requesting Official
(Dtvitiofi Oinctor or Higher)
i. Signature of Approval Official
fContracts Organiietion)
PCMD 9/89
b. Name and Title
b Name and Title
1-2
b. Date
c Date
c. Date
PA Form 1900-68 (6-86)
                                                                  Official Contract File Copy

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                                           Chapter 1
                                   PURPOSE AND OVERVIEW
              Why does EPA need a course on contract administration?  Because EPA spends
       well over 25% of its funds through the contracting process, and some EPA programs
       spend an even higher percentage. And because errors on the part of government
       personnel can be very costly, both to the government and to the individual staff member.
       Contract administration is every bit as important a function to government agencies like
       EPA as internal staff administration.   But it is far more complex.

       1.1  Purpose of Course

              The  purpose of this course is to prepare EPA staff involved in contract
       administration to function effectively  in their various roles as Project Officers,  Work
       Assignment Manager, Task  Managers, Delivery Order Officers, Administrative Delivery
       Order Officers, and Delivery  Order Project Officers.  The course is designed to enable
       EPA staff to: a) become knowledgeable of applicable  laws and regulations, so as to
       function effectively within  them and avoid personal liability; b) become aware of
       pertinent issues, as well as learn the nuts and bolts of contract administration, and c)
       become better able to use contractors to accomplish  EPA's mission, without squandering
       its  resources.

       1.2  Purpose of Handbook

              The  purpose of this handbook is to provide a ready reference for Project Officers,
       Work Assignment Managers, Delivery Order Officers, Administrative Delivery Order
       Officers and Delivery Order  Project Officers on the  basic principles of contract
       administration.  Any specific questions or problems under your contracts should be
       referred to your Contracting Officer.  Comments about this handbook or about the
       Project Officer training course in Contract Administration  should be submitted to the
       Procurement Policy staff of the Procurement and Contracts Management Division (PM-
       214F),   202/382-5024.

       1.3  Project  Officer  Certification  Program

               It is EPA policy that all  individuals serving  as Project  Officers, Work
       Assignment Managers, Delivery Order Officers and Delivery Order  Project Officers on
       Agency contracts fully understand their responsibilities and duties.  These  individuals
       are defined as follows:

              (1)  Project Officer.  The Project Officer (PO) is an Agency program official
                  who initiates a procurement action  for other than a small purchase,
                  evaluates contractor proposals, and/or,  in  the contract administration
                  phase, acts as the technical representative of  the Contracting Officer for
                  monitoring contract performance after award.  Some federal agencies use the
                  term COTR, or Contracting Officer's Technical Representative, to refer to the
                  project  officer.

              (2)  Work Assignment Manager.  The Work Assignment Manager (WAM) is an
                  Agency  program official who prepares written directives (known as work
                  assignments)  to contractors under cost-reimbursement level of effort (term
                  form) contracts.  The Work Assignment  Manager monitors  the contractor's
                  performance of such directives and works under the direction and control of
PCMD 9/89

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                  the Project Officer.  For large work assignments which are broken down into
                  individual tasks, Work Assignment Managers may also be responsible for
                  supervising one or more Task Managers responsible for oversight of one or
                  more Work Assignment tasks.

              (3)  Delivery Order Officer.  The Delivery Order Officer  (DOO) is an Agency
                  program official who monitors the performance of the delivery order after
                  its issuance.  The Delivery Order Officer may have  Contracting Officer
                  authority to issue orders to contractors under indefinite delivery/indefinite
                  quantity contracts, if he/she has a valid warrant.

              (4)  Administrative Delivery  Order Officer.  The ADOO  is an administrative
                  officer who has the  warrant authority to sign delivery orders but does not
                  actually monitor them.  The ADOO typically executes that signatory authority
                  on behalf  of multiple Delivery Order Project Officers.

              (5)  Delivery Order  Project  Officer.  This individual prepares delivery
                  orders  for review and issuance  by the Administrative Delivery Order Officer
                  or the Contracting Officer.  The Delivery Order Project Officer (DOPO)
                  monitors contractor  performance of the delivery order after its issuance.
                  The Delivery Order  Project  Officer does not require a warrant of Contracting
                  Officer authority.

              Chapter 7 of the EPA Contracts Management Manual specifies the required
       training, experience, and workload  limitations that must be met for an individual to
       serve in one of the above capacities. Program offices should become familiar with these
       requirements to help them identify individuals who qualify to hold these positions and
       any training needs  of others.  The referenced chapter also sets forth a requirement that
       employees'(position descriptions~^nd(per^rmance standards? include criteria on their
       pre-award and post-award contracting duties. Performance standards are to be
       prepared in accordance with applicable  Agency directives on the subject.

              To help promote an  understanding of the acquisition process and the principles' of
       contract management, the Procurement  and  Contracts Management Division (PCMD) has
       developed a Basic  Project Officer training course and a Contract Administration Course.
       These courses emphasize the responsibilities and duties during the pre-award and post-
       award phases of the procurement process.  Individuals must meet the attendance
       requirements of both courses in order to be certified as Project Officers.  Work
       Assignment Managers, Delivery Order  Officers, or Delivery Order Project Officers  are
       required to take only the  Contract Administration Course.

              The basic course is three and one-half days in length; the Contract
       Administration course is three days. To satisfy certification requirements, all course
       participants must demonstrate their  understanding of the course material by taking  a
       written examination on the final day  of each course. At the conclusion of each course, the
       Director,  PCMD,  will forward a  certificate of training to each  individual  who
       successfully completes the course.

              Delivery Order Officers  and Administrative Delivery Order Officers, in addition
       to the training and  other requirements covered herein,  must comply with the
       Contracting Officer  Warrant Program in  Chapter 8 of the Contracts Management Manual
       in order to be delegated Contracting Officer authority to obligate funds on behalf of the
       Government.
PCMD 0/89

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              This authority is Qfll delegated to those individuals designated as Delivery Order
       Project Officers, however, and the requirements of Chapter 8 of the Contracts
       Management Manual do not apply to them.

              The experience requirements and workload  limitations for Project Officers,
       Work Assignment Managers, Delivery  Order Officers, Administrative Delivery  Order
       Officers and Delivery Order Project Officers are discussed in Chapter 2.  For each level
       of experience, there is a limitation on the size of an individual contract or delivery
       order which may be monitored, as well as  a limitation on the total value of all contracts,
       work assignments or delivery orders which may be monitored at any one time.

              Assistant, Associate and Regional Administrators, General Counsel, the Inspector
       General, and Heads of Headquarters Staff Offices or  their designees are responsible for
       designating individuals who have completed the training program and fulfilled the other
       requirements of Contracts Management Manual Chapter 7 to serve as Project Officers,
       Work Assignment Managers, Delivery Order Officers and Delivery Order Project
       Officers.

              Various Officials of PCMD appoint Project Officers and Work Assignment
       Managers to administer contracts for EPA.  The appointments are made for employees
       selected by program offices to serve on individual contracts. Appointments will  be made
       in consultation with the  program office. For Project Officers,  the appointment authority
       is delegated to the Chief of the Contracting Office for contracts of $5,000,000 or more,
       and to the Sections Heads of the appropriate Contracting Office for contracts below
       $5,000,000.  For Work Assignment Managers  and  Delivery Order Project Officers,  the
       appointment authority is delegated to the Contracting  Officer.  The Chief of the
       Contracting Office  appoints  all Delivery Order  Officers and Administrative Delivery
       Order Officers for contracts.

              EPA Form 1900-65 (see page 4) must be used for the designation of all Project
       Officers, Work Assignment Managers,  Delivery Order Officers, Delivery Order Project
       Officers, and Administrative Delivery Order Officers. A separate  form is required for
       each individual contract, work assignment and delivery order.  Any change in the
       designation of individuals on a particular contract will require resubmission  of the form
       to the appropriate Contracting Office. The form should also be used to designate
       alternates in case the  Project Officer, etc. becomes unavailable.

              Certified  Project Officers, Work Assignment  Managers,  Delivery  Order Officers
       and Delivery Order  Project Officers who do not perform their  duties in a responsible.
       responsive, or acceptable manner, or who abuse their authority (such as failing to
       comply with the EPA Standards of Conduct in 40 CFR Part 3) may have their
       certification withdrawn by the Director, Procurement and Contracts Management
       Division.  The Director, PCMD, will coordinate the  withdrawal of any certification with
       the affected program office.  The Director,  PCMD, will provide the program office a copy
       of the documentation  supporting the withdrawal and the opportunity for comment prior
       to withdrawal.

              Individuals who have had their  Project Officer, Work Assignment Manager,
       Delivery Order Officer or Delivery Order  Project Officer certifications withdrawn may
       be recertified upon the written recommendation of their Assistant, Associate, or
       Regional Administrator, General Counsel, Inspector General, and Heads of Headquarters
       Staff Offices with approval by the Director,  PCMD. The recommendation  must contain
CMD 9/89

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       (1)  a brief description of the circumstances necessitating the certification withdrawal,
       (2)  steps being taken to remedy the deficiency, and (3) an action plan to ensure that the
       deficiency does not occur again. Recommendations for recertification must be routed to
       the Director, PCMD,  through the Chief of the Contracting Office.

       1.4  Summary of Course Content

              The basic Project Officer's Handbook covers in detail the subjects included in the
       3 and 1/2-day Project Officer's  course.  Basically, that course covers all aspects of the
       pre-award contracting process,  with particular emphasis on developing statements of
       work and technical evaluation criteria, and conducting  technical evaluations of offerers'
       proposals.  The 3-day course in Contract Administration covers the post-award phase,
       from award of the contract through contract closeout.  It also includes specific details of
       the responsibilities and duties of  Project Officers, Work Assignment Managers, Delivery
       Order Officers, and Delivery Order Project Officers.  The combination of the two
       training courses is designed to give EPA employees who are not contracting professionals
       a clearer understanding of the acquisition process and the knowledge to ensure that the '
       Agency receives the  best possible products or services for the money it spends.
PCMD 9/89

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    CONTRACT  ADMINISTRATION
      AND THE  AUTHORITY OF
      GOVERNMENT PERSONNEL
               2-0
•»CMD 9/89

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PCMD9/89                                                                                      10

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           CONTRACT ADMINISTRATION  PROCESS
                                                   PREPARE WORK
                                                    (WA OR DO)
                                                     RECOMMEND THE USE
                                                     OF SUBCONTRACTORS
                                                     AND CONSULTANTS
                                                                  3
  ASSIST IN CONTRACT
      CLOSEOUT  15
                               CONDUCT POST-
                                  AWARD
                                CONFERENCE    1
  EVALUATE
PERFORMANCE
  RECOMMEND
  EXERCISE OF
   OPTIONS 13
    RECOMMEND
     CONTRACT
    MODIFICATION
            12
                         CONTRACT
                      ADMINISTRATION
      REVIEW INVOICES/
    APPROVAL OF PAYMENT
                   11
          REVIEW
         FINANCIAL
          STATUS
                             MONITOR STATUS
                            OF HOURS & FUNDS
  ISSUE
TECHNICAL
DIRECTION
                                               MONrrORUSEOF
                                                GOVERNMENT
                                                  PROPERTY
                                                   REVIEW
                                                CONTRACTORS
                                                 TECHNICAL
                                                  PROGRESS
                                                          6
               REVIEW
                KEY
             PERSONNEL
              CHANGES  9
                                          ACCEPT/
                                          REJECT
                                          WORK OR
                                        DELIVERABLE
PCMD 9/89
                         2-1
                                                                      11

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      ELEMENTS OF A CONTRACT



        A Contract Is:


          1. An AGREEMENT


          2. Between COMPETENT PARTIES


          3. For A VALID CONSIDERATION


          4. To Accomplish A LAWFUL PURPOSE


          5. With TERMS CLEARLY SET FORTH


          6. In The FORM REQUIRED By Law
        A Contract Must Contain All Six Elements To
        Be Legal.
                   2-2
PCMD9/89                                        12

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         PARTIES TO A  CONTRACT
         1. Government

         2. Contractor

            a. An Individual

            b. A Partnership

            c. A Nonprofit Organization

            d. A Private Organization

            e. A State Or Local Government

            f.  A Joint Venture (2 Or More Legal Entities
              Jointly & Severally Responsible For
              Fulfilling The Contract Obligations)
PCMD9/89                  2-3                          13

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          DUTIES  OF  THE  PARTIES
     1. Government - Not To Unreasonably Interfere
        With Or Delay Contractor Performance, E.g., By:

           a) Failing to provide agreed-upon Government
             property
           b) Failing to provide necessary access to
             Government facilities
           c) Issuing faulty specifications or statements
             or work that result in Contractor delays
           d) Unreasonably delaying Government
             approvals or consent that Contractor
             requires to continue performance

     2. Contractor - To Proceed Diligently With Performance
        Unless:

           a) Excused by Government gross and material
             breach of contract or impossibiity of performance
           b) Suspended or stopped by Stop Work Order
             or Limitation of Cost or Funds clauses under
             cost reimbursement contract
PCMD9/89                                                V

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         DELEGATION OF AUTHORITY
                      [CONTRACT )
                      CONTRACTING
                        OFFICER
                       PROJECT/
                     DELIVERY ORDER
                        OFFICER
       REGIONAL
       PROJECT
       OFFICER
     SUPERFUND ONLY
                         WORK
                       ASSIGNMENT
                      MANAGER/DOPO
 SUPERFUND
 ON-SCENE
COORDINATOR
                         TASK
                        MANAGER
PCMD 9/89
                         2-5
                                                 15

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                                                                                            October 1990
                 PROCUREMENT AND CONTRACTS MANAGEMENT DIVISION (PCMD)
                                                       AA - OARM
                                                     -CHARtES-trGRIZZtE-
                                                         382-4600
                                                            I
                                                 OFFICE OF ADMINISTRATION
                                                JOHN C. CHAMBERUN. DIRECTOR 4754400
                                                WILLIAM FINISTER. DEPUTY DIRECTOR 4754400
        (CMSProj.
        Manager
        MB?
POUCY and MANAGEMENT
    SUPPORT STAFF
  Belle Davis 382-5024
IS3
                 475-7000
                         Pri
                            nrneffl
               nan

            John Oliver
            47M28B
                                         245-3759
••^^•B

art
Lewi

DIRECTOR
DAVID J. O'CONNOR
382-5020

1
SPECASST.
RonKovach
475-8176



1
SPECASST.
UfliQflMI HBiQflT
3824182


                                               CONTRACT MGT. DIV.
                                                     RTF, NC
                                              Douglas Richmond 629-3045
                                                CONTRACT MGT. DIV.
                                                     Cinn., OH
                                                 William Bailey 684-7735
                                            _L
                          ASSOCIATE DIRECTOR
                         for SUPERFUND/RCRA
                       PROCUREMENT OPERATIONS
                      Mark H. Walker, Acting 475-9458
                                                  ASSOCIATE DIRECTOR
                                                  for ADP PROCUREMENT
                                                  and CONTRACT SUPPORT
                                                    Don Hambric 382-5020
              RegtonalCO
                                                                                               PROCUREMENi
                                                                                                OPERATIONS
                                                                                                 BRANCH
                                                                                               Ton McEntsgart
                                                                                                 382-2364
                     RCRA7
                  ENFORCEMEN1
                    BRANCH
                   Bil WUfonQ
                   475-8577
                         COST REVIEW
                         and POUCY
                          BRANCH
                         Steve Leahy
                         475-9404
REMEDIAL
ACTION
BRANCH
EMERGENCY
 RESPONSE
 BRANCH
CONTRACTS MG1
                                                                                     Speoaized
                                                                                     Pfocuremen
                                                                                     Mot Section
 Management
   Section
Placement
 Section
                                                                                                    Admtnstratnfl
                                                                                                     Contracts
                                                  Financial
                                                  Analysis
                                                  Section

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                   AUTHORITY
      1.   Must  Be  Delegated
          E.g., Authority Of Superfund Delivery
          Order Officer To Sign Delivery Orders
          Up To Specified Limit (Delegated From
          Contracting Officer); Authority Of Work
          Assignment Manager (Delegated From
          Project Officer)

      2.   Must  Be  Actual  (Vs.  Apparant)
          Express Authority Of Contracting Officer
          To Sign Contracts To Obligate Government
          Up To Limits Expressed In CO's Written
          Warrant. (Government Is Not Bound If
          Person Acting Appears To Have Authority
          But In Fact Does Not, E.g., Where CO
          Obligates Funds In Excess Of Limits Of
          CO's Warrant.)
                           2-7
"CMD9/89                                                17

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                 ROLE OF  THE
          CONTRACTING  OFFICER


       The Contracting Officer Is The Only Person Who
       Has The Authority To:

       1. Sign A Contract

       2. Obligate Funds*

       3. Issue Work Assignments**

       4.  Modify ContracLTerms Or Conditions

       5. Terminate A Contract

       6. Accept Supplies And/Or Services**
       * Except  Delivery Order Officers  Who Have Been
       Issued  A Contracting Officer's Warrant, E.g.,
       Superfund On-Scene  Coordinator With Warrant
       Up  To $250,000
      **
   Unless Such Authority Has Been Delegated To
The Project Officer As  Is Stated In  The  Contract.
                          2-8                        18
PCMD 9/89                                               18

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      ROLE OF THE PROJECT OFFICER
     1 .  Monitor Overall  Contract Performance

     2.  Monitor Contract Administration By
        Work Assignment Managers Under Level
        Of Effort (LOE) Contracts

     3.  Review Technical & Financial Progress
        Reports

     4.  Provide Technical Direction

     5.  Monitor Use Of  Government Property

     6.  Certify  Vouchers
     7. Recommend Contract ModificationsATo
        The Contracting Officer

     8. Assist In Contract Closeout
      Note:    These Duties Concern Only Contract
             Administration.  The Project Officer
             Has Many Preaward Duties As Well.
                         2-9
PCMD9/89

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     ROLE OF THE WORK ASSIGNMENT MANAGER


    1.   Develop Statement Of Work And Level Of
        Effort (LOE)  Estimate For Specific Work
        Assignments Under Term Form Contracts

    2.   Monitor Performance On Work Assignments

    3.   Provide Technical Direction

    4.   Recommend Work Assignment Amendments
        To Project Officer

    5.   Review Relevant Portions Of Monthly
        Technical &  Financial Progress  Reports

    6.   Assist The Project Officer In Voucher
        Certification
                        2-1 0
PCMD 9/89                                             2C

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       ROLE OF THE DELIVERY.ORDER OFFICER
        1.    Develop Statement Of Work & Cost
             Estimate, & Determine Labor Categories
             For Delivery Orders Under Indefinite
             Delivery/Indefinite Quantity Contracts
             (Time-And-Material Contracts)

        2.    Issue Delivery Orders To Contractor
             (Within Limits Of Authority)

        3.    Provide Technical Direction

        4.    Monitor Performance On Delivery Orders

        5.    Review Monthly Technical & Financial
             Progress Reports

        6.    Issue Delivery Order Modifications (Within
             Limits Of Authority)

        7.    Recommend Contract Modifications To
             The Contracting Officer

        8.    Certify Vouchers
                           2-11
°CMD 9/89                                                  21

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      DELIVERY  ORDER OFFICER  DISTINCTIONS

      (Indefinite   Delivery/Indefinite  Quantity  Contracts)


      -  ADMINISTRATIVE DELIVERY ORDER OFFICERS

           Review & Issue Delivery Orders, But Do Not Monitor Performance

           Required To Have Limited Warrant Of Contracting Officer Authority
           (Because Obligating Funds)


      -  DELIVERY ORDER PROJECT OFFICERS

           Prepare Delivery Orders For Issuance By Administrative Delivery
           Order Officer Or Contracting Officer

           Monitor Contractor Performance

           Not Required To Have Contracting Officer Authority


      -  DELIVERY ORDER OFFICERS

           Issue Delivery Orders & Monitor Contractor Performance

           Required To Have Limited Warrant Of Contracting Officer
           Authority


      (Different Contracts Are Set Up In Different Ways. Some Use All Three
      Of The Above Functions, Some Use Two, And Some Use Just One.
      The Contract Terms & Conditions Should Be Consulted To
      Determine Who The "Players" Are.)
PCMD 9/89                      2-12
22

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       CONTRACTS MANAGEMENT MANUAT.
   ience
                                                       1900 CHG 9
                                                         10/19^90
                                              Workload Limi
                                         Cumulative  Dollar.
                                                    Amount*
      Less  than\2  years *
         Superfutai and ADP contracts	$50 Million
         All  othe\s contracts	  $25 Million
                        **
2 years and
   Superfund arid ADP contracts	 $20
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  OTHER  INDIVIDUALS INVOLVED
     CONTRACT  ADMINISTRATION
       1. The Contract Specialist/Administrator

       2. The Property Administrator

       3. The Accounting Technician

       4. The Cost Analyst/Auditor

       5. The Procurement Analyst (On PCMD's
         Review Team)
PCMD9/89               2-16

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       PROCUREMENT REGULATIONS*
   1.   FEDERAL ACQUISITION REGULATION  (FAR) -
       Title 48  CFR Chapter 1

       Governs All Executive Agencies In Their Acquisition
       Of Supplies And Services With Appropriated Funds


   2.   ENVIRONMENTAL PROTECTION AGENCY ACQUISITION
       REGULATIONS   (EPAAR)  - Title 48 CFR  Chapter 15

       Implements And Supplements The FAR For EPA
   3.   CONTRACTS MANAGEMENT MANUAL (CMM) -
       EPA  Directive 1900

       Sets Forth Additional EPA Policies And Procedures On
       Acquisition Matters Of Particular Interest To Program
       Officers And Acquisition Personnel
   4.   PCMD ACQUISITION HANDBOOK

       Supplements The Above Regulations On Subjects Of
       Primary Interest To Acquisition Personnel
       Obtainable from your Contracting Officer.
CMD 9/89                    2-17                             27

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                       Project Officer's Checklist
                      Contract Administration Review
                         Contract No.  	


    1•   .Monitor contractor performance to determine whether or  not
         the following conditions exist:

         a) technical performance is timely and of acceptable
            quality.

         b) technical progress is commensurate with incurred
            costs.

         c) costs incurred are in line with the negotiated
            elements  of cost or total  cost.


                                                         Yes  No   N/A

    A.    Technical  Monitoring

         1.  Is PO  receiving CO notification of timely,   	  	  	
             acceptable performance?

             a.  How  often?

             b.  What form?

         2.  How monitor scheduled deliveries?           	  	  	

         J.  Any schedule slippages?                     	  	  	

         4.  Is PO  furnishing CO timely notification
             for remedial action?                        	   	  	

         5.  Are Monthly Progress Reports reviewed for
             problems?                                   	   	  	

         6.  Are there any unresolved problems?          	   	  	

    B.    Cost Monitoring

         1.  What types of reports are received?         	   	  	

         2.  Are reports submitted IAW contract?         	     '   	

         3-  How monitor progress vs incurred cost
             and actual vs projected costs?              	   	  	

             - Any  independent logs/records maintained?  	   	  	

             - What indicators employees?                	   	  	
                                    2-18a
PCMD 9/89                                                                 28

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                                   -2-

                                                       Yea   No   N/A


          4-   How  monitor  possibility  of underruns/
              overruns?                                 	   	  	

          5>   What proactive  methods are taken  to
              prevent  problems?                         	   	  	

          6.   What action  (if necessary) will be taken
              to ensure  proper monitoring?              	   	  	


    2.  Assignment of work,  placement of delivery orders, and  issuance
        of directives to  contractors  are timely and within  the scope
        of the contract,  and are  sufficiently  detailed to promote
        meaningful performance.

                                                       Yea   No   N/A

    A.    Approved 1900-65's  in  file?                   	   	  	

    B.    Contractor knowledge of  authorized
          personnel?                                   	   	  	

    C.    Sufficient time  allowed  by PO for CO  to
          process  work properly?                       	   	  	

    D.    Any  verbal WAs/DOs  issued by FO/CO before
          work begins?                                 	   	  	
    E.   Within  scope  of  contract?

    P.   Sufficiently  detailed  SOW?

    G.   Are task  limits  (if  any) exceeded?

    H.   Are tasks  governmental in nature  or
         personal  services?

    I.   Are work"plans received for  each  task
         and monitored?

    J.   Proper  use of funding?
PCMD 9/89
                                   2-18b                                29

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                                    -3-
                                                        Yes   No   N/A
     K.   Independent costs estimates prepared?
     L.   Is PO/WA authority delineated?
     M.   Is PO/WA authority exceeded?
         Administrative actions are performed expeditiously with
         no programmatic impact and are adequately documented to
         establish clear "audit trails."
                                                        Yes   No   N/A
     A.   Is Project Officer certified?
     B.   Within workload limitations, according to
          Chapter 7, Contract Managment Manual?
     C.   Small Business
          - Is this an 8(a) contract?
          - Any claims?
     D.   Key Personnel
          1.  Did contract require prior approval/
              notification of Key Personnel changes?
          2.  Does contract file reflect appropriate
              documentation?
     E.   Property Administration
          1.  Any GPP/B/I/ or Data?
          2.  Any .post award changes?
     F.   Advance Agreements
          1.  Any negotiated
          2.  Contractor  compliance?
PCMD 9/89
                                   2-18c                                30

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                                -4-
                                                         Yes   No  N/A

       G.  Property Administration

           1. Any GFP/E/I/ or Data?                      	   	

           2. Any post award changes?                    	   	


       H.  Modifications

           (To be repeated, as necessary, for
            several mods)

           1.  Change Order f	
               a. SF 30 block 11  (or 13)
                  completed properly?

               b. Authorized by Changes Clause?

               c. Definitization  by Supplemental
                  Agreement in File?
           2.  Modification No.
               a. SF 30 block 11  (or 13)
                  completed properly?

               b. Authorization?

               c. Appropriate documentation.

               Administrative Change f	
               a. SF 30, Block 11  (or 13)
                  completed properly?

               b. Appropriate documentation?

               Options

               a. SF 30, Block 11  (or 13)
                  completed properly
PCMD9/89                           2-18d

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                                     -5-
     4.   Timely  follow-up/resolution is  performed  for audits and
          internal/external  reviews.
                                                         Yes   No   N/A
     A.   Any  cost  audit  reports  requiring  follow-up?    	   	  	
     B.   Internal  controls review?                      	   	  	
     C.   Status  of any prior  recommendations?           	   	  	

     5«   Contract actions concerning administrative  remedies
          are pursued  in a timely  and appropriate manner  with
          proper  documentation.
                                                         Yes   No   N/A
     A.   Post Award  Orientation
          1 .   Was it  conducted?                          	   	  	
          2.   Did CO  feel it was  necessary?             	   	  	
          3.   If  one  had  been  conducted,  would  it
               have  precluded subsequent  problems?        	   	  	
     B.   Insurance
          1 .   Have  any problems arisen?                  	  	  	
     C.   Termination/Claims
          1.   Any unresolved terminations/claims         	  	  	
          2.   Appropriate,  timely documents issued?     	  	  	
     D.   Warranties/Guarantees
          1.   Any warranties/guarantees?                 	  	  	
PCMD9/89
2-18e                                32

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                                    -6-
     6.  Organization conflicts of interest
     A.   Have any Was/DOs created any conflicts of
          interest?
     B.   Has PO notified CO of any possible conflicts?
     C.   Has contractor notified CO of any possible
          conflicts?
     D.   What remedies were effected?

     ?•   Miscellaneous Observations
                                                         Yes   No    N/A
PCMD9/89                              2-18f

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                                 EXHIBIT A

                  CONTRACT ADMINISTRATION AREAS OP REVIEW
I.    COST MONITORING

      A. Financial reports/vouchers
      B. Independent logs
      C. Overruns/underruns

II.   TECHNICAL PERFORMANCE MONITORING

      A. Technical reports
      B. Acceptability
      C. Timeliness
      D. Deliverables
      E. Unit 14 checklists

III.  PROPERTY ADMINISTRATION

      A. Approvals
      B. Documentation

IV.   SUBCONTRACTS/CONSULTANTS

      A. Copy of agreement
      B. Summary of prime/sub negotations
      C. Competition/sole source
                                                 D. ODC and travel ceilings
                                                 E. Labor mix/average hourly rate
                                                 F. Unit 14 checklists
                                                 D. Cost/price reasonableness
                                                 E. Approvals
                                                 F. Reports
V.    ISSUANCE OF WORK ASSIGNMENTS, DELIVERY ORDERS, OTHER DIRECTIVES
                                             D. Limits exceeded
                                             E. Amendments
                                             F. Issued by authorized person
                                             D. New scope
                                             E. Key personnel
                                             F  Documentation
          A. Timelines
          B. Within scope
          C. Work Plan approvals

     VI.   MODIFICATIONS

          A. Change orders
          B. Options
          C. Administrative modifications

     VII.  DISPUTES, CLAIMS, TERMINATIONS

          A. Disputes
          B. Claims
          C. Terminations

     VIII. OTHER
      A. Organizational conflicts of interest
      B. Improper business practices
      C. Security of confidential business information
      D. Follow-up/resolution of audits, other post-award reviews
      E. Project Officer workload limitations
PCMD 9/89
                                    2-18g
                                                                                34

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   Ct/utract
Fundamentals

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                                            Chapter 2
                    CONTRACT  ADMINISTRATION AND THE AUTHORITY OF
                                   GOVERNMENT PERSONNEL


              What is contract administration? Ask a variety of people and you will get a
        variety of answers.  Some might say it is the monitoring of contractor performance until
        the products or services which have been contracted for have been provided.  Others
        might  say it is the review of contractor reports,  the certification of vouchers, and the
        inspection and acceptance of all deliverables.  Still others might advise that it means
        whatever duties are required to get the best possible product within the time required.
        All of these people would be right.

        2.1  Overview of  Contract Administration

              Contract administration encompasses all  functions relating to a contract from the
        moment it is awarded until final payment has been made and the contract is closed out.
        Here at EPA,  some contract administration duties are delegated by Contracting Officers
        to program  office technical contract managers designated as Project Officers, Work
        Assignment Managers, Delivery  Order Officers, Administrative Delivery Order Officers,
        and Delivery Order Project Officers.  Because program contract managers are entrusted
        with much of the contractor oversight required, an understanding of the principles and
        duties involved in contract administration is essential.

              Effective contract administration requires direct  liaison  between the  Contracting
        Officer and the Project Officer or Delivery Order Officer during the entire life of a
        contract.  This team concept is critical to a  successful contract.  It is important to
        remember that the Contracting Officer has overall responsibility  for obtaining
        satisfactory contract performance. But with  close cooperation and an understanding of
        his or her duties,  the Project Officer or Delivery Order  Officer  can  help assure better
        results and  a more successful accomplishment of the program mission.

        2.2  Definition of a Contract

              What is a contract?  What is an agent? What is the  authority of the Contracting
        Officer?  What types of legal entities can contract with the Government?  Who has what
        authority?   What are the regulations governing the contracting  process?  It  is important
        to understand these terms in order to  properly administer a contract.

              The Federal Acquisition Regulations define a contract as "a mutually binding legal
        relationship obligating the seller to  furnish supplies or services  (including
        construction) and the buyer to  pay for them."  This basic definition is applicable to all
        types of contracts.  For a contract to be legally enforceable, it must contain the following
        essential elements.  It must  be: (1) An agreement (2) between competent parties (3)
        for a valid consideration (4) to accomplish a lawful purpose (5) with terms clearly set
        forth (6) in the form required by law.  If a contract does not meet these six tests, the
        relationship is not  a legal one.

              An agent is a person authorized to act for  another. The difference between an
        agent and an employee is that the employee performs some type of service for the
        employer while an agent is appointed to represent the employer in dealings  with third
        parties.  Contracting Officers  are agents for the United States Government and the
        Environmental  Protection Agency, while Project Officers are technical representatives
        of the  Contracting Officers -  not agents - who assist them in administering contracts.


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               Contracting Officers have authority to enter into, administer, or terminate
       contracts, and may bind the Government only to the extent of the authority delegated to
       them.  Contracting Officers are the only persons with the authority to enter into and sign
       contracts on behalf of the Government.  As agents of the Government, their acts bind the
       Government to third parties (contractors)  and also give the  Government rights against
       the third parties.  Contractors also use agents to carry out the contract and deal with the
       Government regarding its  administration and  modification.

              The other party with which a Government contract is  made may be any legal
       entity with  the capacity to contract. The various types are:

                     - An individual

                     - A partnership

                     - A nonprofit organization

                     - A private  corporation

                     - A State or local Government

                     - A joint venture (two  or more  legal  entities jointly and severally
                       responsible for fulfilling  the  contract obligations)

              Any one of these  entities could be an EPA contractor. The majority of EPA
       contracts are  held with private  corporations.

       2.3  Duties  of the Parties

              One party  to any  EPA contract will be the United States of America, the other will
       be the contractor.  The parties to a contract bind themselves to the provisions of that
       contract. Besides the specific written provisions, however, each party has one
       fundamental underlying duty common to government contracts.

              The Government has the basic duty not to unreasonably interfere with or delay
       the contractor in his or her performance of the contract.  The Project Officer is
       responsible for ensuring  that his or her actions do not violate this basic duty.  Any
       violation thereof constitutes a "breach of contract"  for which the contractor is legally
       entitled to recover  the amount of any damage caused him by the breach.  Generally, this
       is done through contract modification  adjusting the cost or price.

              The following actions are examples of those  which might unreasonably interfere
       with or delay  contract performance:

              (1)  Failure to provide, within the time required or in a condition suitable for
                  use, any Government property which the Government agreed to furnish;

              (2)  Failure to provide access  to Government premises on which work  must be
                  performed;

              (3)  Issuing faulty specifications or Statements of Work that result in  delaying
                  the contractor;  and
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              (4)  Unreasonably delaying Government approvals or consent that the contractor
                  must obtain in order to commence or continue performance under the
                  contract.

              Project Officers, Work Assignment Managers, and Delivery Order Officers must
       be certain that they are not delaying contract performance by such action or inaction.

              The contractor has the basic duty to proceed diligently with performance of the
       contract. This basic duty comes to an end only when the contract is completed or
       terminated.   (If termination  is only partial, the contractor must diligently proceed with
       the portion not terminated.)  Disagreements or disputes do not relieve the contractor of
       the duty to proceed during the appeal process.

              The contractor's basic duty to proceed may only be excused by sufficiently gross
       and material  breach of contract by the Government, or by impossibility of performance.
       Their duty to proceed may also be stopped or suspended by the Contracting Officer's
       issuance of a Stop Work Order or, under a cost reimbursement contract, by the
       Limitation of Cost or Limitation of Funds clauses when contract funds are depleted.

       2.4 Authority  of  Government  Personnel

              The Government is not bound by the actions of any unauthorized persons. Persons
       who commit the  Government, without the proper authority to do so, may be personally
       liable  to the other party to the contract.

              (1)  Actual  vs. Apparent Authority

                  A Contracting Officer is delegated  authority in writing, with a document
                  known as a warrant.  A warrant may contain limitations on the authority of
                  the individual, or it may be unlimited.  The warrant reflects the Contracting
                  Officer's  express, or actual, authority to obligate  the United States by
                  contract.

                  The law will not bind the United States in cases in which the person acting
                  appears to have  had the authority to act but in fact did not.

                  An example of such apparent authority would be a Contracting Officer
                  obligating funds  in excess of the limits of his or her warrant.  Another would
                  be a Project Officer directing the Contractor to make changes in the
                  performance of the technical requirements of the  Statement of Work of a
                  contract.

                  Apparent authority is not to be  taken lightly. Unless the Government ratifies
                  the action (see Chapter 13), the person  who acted without authorization may
                  be liable to the other party for any monies due.  Contractors have  a
                  responsibility to ensure that the person with whom they are dealing has the
                  proper authority, but the Government employee has a responsibility to act
                  within the limits  of the employee's own authority.
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              (2)  Role  of the  Contracting Officer.

                  The Contracting Officer is the only person who has the authority to:

                     1.  sign a contract

                     2.  obligate funds*

                     3.   issue  work assignments'*

                     4.  modify any contract terms or conditions

                     5.  terminate a contract

                     6.   accept supplies and/or services**

                     * except Delivery Order Officers who have been issued a Contracting
                     Officer's Warrant, such as Superfund On-Scene Coordinators with
                     warrants  up to $250,000.
                     ** unless such authority has been delegated to the Project Officer, as is
                     stated in the contract.

                  In the contract administration phase, the role of the Contracting Officer is to
                  monitor the contractor's progress (with the assistance of the Project
                  Officer),  ensure that the contract terms and conditions are being adhered to,
                  and make any necessary contract modifications.  The Contracting Officer must
                  also resolve all disputes that arise, request any necessary audits, negotiate
                  equitable adjustments, and, if necessary,  terminate the contract.  Project
                  Officers should use the Contracting Officer's knowledge and expertise
                  whenever questions arise, and  involve the Contracting Officer to the fullest
                  extent necessary.

              (3)  Role of the  Project  Officer, Work Assignment Manager,
                  Delivery  Order Officer, Administrative  Delivery  Order  Officer
                  and Delivery  Order Project Officer.

                     (a)  Project Officer.  The Project Officer's role  in contract  administra-
                         tion is one of monitoring contract performance from both a technical
                         and financial standpoint.  This monitoring is done in close
                         coordination with  the Contracting Officer.  The  Project Officer also
                         provides technical direction to the contractor, reviews and evaluates
                         contractor deliverables and performance, monitors  use  of
                         government property, certifies  monthly  vouchers for payment, and,
                         if necessary, recommends contract modifications to the  Contracting
                         Officer during the course of contract performance.  The  contract
                         closeout process also requires the involvement of the Project Officer.

                         For cost-reimbursement LOE contracts  or indefinite delivery/
                         indefinite quantity contracts,  the Project Officer also is responsible
                         for supervising the contract administration activities delegated to
                         Work Assignment Managers, Delivery Order Officers and Delivery
                         Order Project Officers.  See page  19 for a complete listing of Project
                         Officer  responsibilities.
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                     (b) Work Assignment Manager.  The Work Assignment Manager (WAM)
                         acts as the technical representative of the Contracting Officer on
                         specific work assignment(s) under cost reimbursement, term form
                         contracts, under the supervision of the contract Project Officer.  The
                         WAM typically develops work assignments, monitors performance
                         under these work assignments, provides technical direction, and
                         recommends any necessary modifications to the Project Officer.

                         Since the WAM most closely oversees the contractor's performance
                         for the particular work assignment, the WAM is also responsible for
                         reviewing those portions of the monthly technical  and financial
                         progress reports relevant to his or her work assignment, and for
                         assisting the  Project Officer in voucher certification.

                     (c)  Delivery  Order Officer. The Delivery Order Officer (DOO) performs
                         similar duties to the Project Officer under indefinite delivery/
                         indefinite quantity contracts.  The DOO also may have a Contracting
                         Officer's warrant to issue delivery orders and  obligate funds on
                         behalf of the Government.

                     (d)  Administrative Delivery Order  Officer.  The  Administrative
                         Delivery Order Officer  (ADOO) reviews  and issues delivery orders,
                         but does not monitor their performance, and is required  to have a
                         limited warrant of contracting authority. Performance monitoring is
                         the responsibility of the  Delivery Order Project Officer.

                     (e)  Delivery Order Project Officer.   The Delivery Order Project Officer
                         (DOPO)  performs similar duties to the Work Assignment Manager,
                         but under  indefinite delivery/indefinite quantity contracts.  The
                         DOPO monitors performance of delivery orders and recommends
                         modifications to the DOO.

                  The individuals listed above must take care that they act only within the
                  limits.of their authority.
              (4)  Experlence^and Workload  Limitations.   As noted in Chapter 1, for
                  each level of e5tpertence and each position, there is aljrnitation on the size of
                  an individual contracJbordelivery order whichrnaybe monitored, as well as
                  a limitation on the total vakieof all contractsTwork assignments or delivery
                  orders which may be monitorefcfca^ifnyione time.  The current limitations are
                  set forth on pages 23-25-r"~'AII suclvjimitations are subject to waiver by the
                  Director, PCMDr^AppNcation for waiverrrms^be made directly to PCMD.

              (5)  Offier  Government  Personnel.

                  Many other EPA employees are involved to varying extents in  the
                  administration of a contract. Some of these are summarized below:

                    (a) Contract  Specialist. This individual works under a Contracting
                        Officer, processes all contract documents, and generally performs the
                        same functions  without signatory authority.  Contract  Specialists
                        often work more closely on day to day,  routine issues with Project
                        Officers than does the  Contracting  Officer, who has the ultimate
PCMD 9/89                                       <                                               39

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                         responsibility for the contracting process and performance on many
                         contracts.

                     (b)  Property Administrator.  This is an EPA employee designated by the
                         Contracting  Officer  to administer property for contracts under which
                         Government property  is involved.  The Property Administrator is
                         responsible for evaluating the adequacy of the contractor's property
                         procedures,  and for keeping track of all Government property in the
                         possession of the contractor.  (See Chapters 7 and 11  for details).

                     (c)  Accounting Technician.  An accounting technician is the person in
                         the disbursing office who processes contractor's vouchers for
                         payment.  The accounting technician ensures that the Project Officer
                         has determined that the  payment request is commensurate with the
                         goods received or services performed before notifying the Treasury
                         Department to pay the contractor.

                     (d)  Cost Analyst/Auditor.   From time to time during contract perfor-
                         mance, major modifications require  the submission of a contractor's
                         cost proposal. A cost analyst and/or auditor is needed to analyze the
                         proposal, element by element, and provide recommendations to the
                         Contracting Officer.  This individual  often provides advice concerning
                         salary rates, indirect expenses, and consultant or subcontract costs,
                         and may,  if the contract is large enough, perform a purchasing
                         system review and a financial management review.

                     (e)  Procurement  Analyst.  A member of the Quality  Assurance staff of
                         PCMD ("the Blue Team") will review the contract administration
                         activities on all active contracts  over $5 million,  to determine if
                         appropriate and effective management techniques are being employed.
                         Files of both Contracting Officers and Project Officers and Delivery
                         Order Officers will be  reviewed for this purpose, and  a report will be
                         issued on the findings  of this review. See pages 28-34 for a sample
                         of the Project Officer's checklist used in such reviews, together with
                         a listing of contract administration  areas  of  review.

       2.5 \Acquisition  Regulations

    ^-	   Contracting personnel have a wide variety of regulations and policies to follow.
       EPA contracting personnel and others who deal with contracts are governed by all of the
       following:

              (1)  The Federal Acquisition Regulation (FAR) is a single common regulation
                  for  use by all executive  agencies in their acquisition of  supplies and services
                  with appropriated funds.

                  The FAR System was developed in accordance with the requirements of the
                  Office of Federal  Procurement Policy Act of 1974, as amended by Public Law
                  96-83. The FAR was issued within applicable laws under the joint
                  authorities of the Administrator of General  Services, the  Secretary of
                  Defense, and the Administrator for the National Aeronautics and Space
                  Administration, under the broad policy guidance of  the Administrator for
                  Federal Procurement Policy. The FAR is codified as Chapter 1 of Title 48 of
                  the Code of Federal Regulations with an effective date of April 1, 1984.

PCMD 9/89

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              (2)  The Environmental Protection Agency Acquisition Regulation (EPAAR)
                  implements the FAR where further implementation is needed for EPA and
                  supplements the FAR when coverage is needed for subject matter not covered
                  in the FAR. The EPAAR is codified as Chapter 15 within Title 48 of the Code
                  of Federal Regulations.  In addition. EPA has established acquisition policies
                  and procedures that are disseminated through the EPA Contracts Management
                  Manual and the Acquisition Handbook. The EPAAR generally is reserved for
                  those items implementing and supplementing the FAR and for policies and
                  procedures that affect the public.

              (3) The Contracts Management Manual (CMM)  in EPA Directive 1900 is
                  reserved for subjects of particular interest  to Project Officers and other
                  program personnel involved in the  acquisition process as well as acquisition
                  personnel.  It generally does not address contractual relationships.

              (4) The Acquisition Handbook is used  for subjects of primary interest to
                  acquisition personnel in addition to  those items already contained in the FAR
                  and EPAAR.

              Copies of the FAR and EPAAR can be purchased from the Government Printing
       Office. The CMM and Acquisition Handbook can be obtained from G-100 at Headquarters.
       Your contracting officer will also usually have a reference copy of these reguations or
       manuals, as does PCMD at 382-5024.
PCMD9/89                                       „                                              41

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       ELEMENTS AND TYPES

          OF CONTRACTS
               3'-0
PCMD9/89

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             MAJOR ELEMENTS
      OF GOVERNMENT  CONTRACTS

      1. ADMINISTRATIVE DETAILS
          Name/Address of Contractor, Names Of
          Contracting Officer, Project Officer, Contract
          Specialist, Address Of EPA Paying Office, Etc.

      2. CONTRACT PARAMETERS
          Contract Amount, Period Of Performance,
          Level Of Effort Or Minimums/Maximums,
          Options.

      3. WORK REQUIREMENTS
          Statement Of Work, Reporting Requirements,
          Personnel Qualifications, Other Technical
          Details.
      4.  STANDARD TERMS AND CONDITIONS
           Changes, Disputes, Terminations, Etc.
      5.  SPECIALIZED TERMS AND CONDITIONS
           Award Fee Plan, Key Personnel Lists,
           Subcontract Approvals, Etc.
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          ORDER OF PRECEDENCE

      If There Is Inconsistency In The Solicitation Or
      Contract, The Order Of Precedence For Resolving
      That Inconsistency Is As Follows:
            The Schedulek(Excluding Specification!)
         b. Representations And Instructions
         c. Contract Clauses
         d. Other Documents, Exhibits & Attachments
         e. The Specif ications
      NOTE: Specifications Contained In The Statement Of
      Work Receive Lowest Preference And Are Overriden
      By All Other Contract Terms And Conditions.
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      SIGNIFICANT  "BOILERPLATE"  CLAUSES
               1.  Limitation of Cosf
               2.  Limitation of Funds
               x
               3.  Level of Effort/Cost
                  Reimbursement Term
               4.  Work Assignments
               5.  Fixed Fee
               6.  Order of Precedence
               7.  Award Fee
               8.  Ordering By Designated
                  Ordering Officers
               9.  Fixed Rates For Services -
                  Indefinite Delivery/Indefinite Quantity
                  Contract
              10. Technical Direction
              11. Key Personnel
              12. Organizational Conflicts of Interest
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      SIGNIFICANT  "BOILERPLATE"  CLAUSES
      13.  Subcontracts
      14.  Monthly Progress Report - Cost-Type
      15.  Monthly Progress Report - Time & Materials
          Or Labor-Hour Or Indefinite Delivery/Indefinite
          Quantity Fixed Rate Services Contract
      16.  Option To Extend the Term of the Contract -
          Cost-Type Contract
      17.  Option For Increased Quantity - Cost-Type
          Contract
      18.  Inspection of Services - Cost-Reimbursement
      19.  Inspection of Research & Development -
          Cost-Reimbursement
      20.  Inspection - Time And Material & Labor-Hour
      21.  Changes - Cost-Reimbursement
      22.  Changes - Time-And-Materials or Labor-Hour
      23.  Notification of Changes
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                       3-4                            48

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•J.S EPA-NRMP: Recordkeeping Requir...for Acquisition Regulations (EPAAR)
http://intranet.epa.gov/ngispgm2/nrmp/drafis/rki/epaar.hhn
          CDA Unte
          C r.M En
•ratal FMedDiAgmcy
   National Records Management Program
        Drafts Page    Recordkeeping
                          U.S. ENVIRONMENTAL PROTECTION AGENCY
                     NATIONAL RECORDS MANAGEMENT PROGRAM (NRMP)


                Recordkeeping Requirements Project

                 for Acquisition Regulations (EPAAR)

                            48  CFR Chapters 1 &  15

                                   Draft of 1/14/97

      Purpose of the EPAAR

      To implement or supplement the Federal Acquisition Regulations (FAR)
      48 CFR Chapter 1. The FAR and EPAAR together form the Federal
      Acquisition Regulation System for the Environmental Protection Agency.
      This system establishes the codification and publication of uniform
      policies and procedures for acquisition by the EPA.

      Possible Phases of an EPAAR Contract

         1.  Pre-bid phase
         2.  Bid phase
                Contract negotiation and contract clauses
         3.  Contract Award phase
                Protests from unsuccessful bidders
         4.  Contract-in-Process phase
                Changes in the contract agreement
                Contract disputes
                Termination before contract expires
                Department of Interior Board of Contract Appeals              —™—"'~'1~1——^^^^^—
                Federal Court  action
         5.  Close/termination of contract phase

      Agency Personnel Recordkeeping Responsibilities

      The following officers and managers are responsible for maintaining a complete record set and for
      dispositioning documents as designated below:

      Responsible Contracting Officer (CO) - Responsible for maintaining the record copy of Requests for
      proposals (RFPs), successful bids and proposals, contract and modifications; copies of financial and
      payment documents; contract specifications, drawings or manuals incorporated into the contract by
      reference; performance evaluations, technical and financial progress reports, statements of work (SOWs)
      and level of effort (LOE) documents; project officer and contract monitor designations; notices to proceed,
      stop work or correct deficiencies; and related documents.
       The term Recordkeeping
       Requirements, as defined
       by the National Archives,
       are statements in statutes,
       regulations, or agency
       directives or other
       issuances specifying
       which records are to be
       created or received and
       maintained by agency
       personnel. (An example
       could be a procedures
       manual that may mention
       particular forms, reports,
       and correspondence that
       make up a case file.)
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       Project Office/(POX/Responsible for maintaining the supporting documentation of performance
       evaluations, technical and financial progress reports. Also responsible for invoices jtnd invoice approvals^
       when contract uses {work assignment managers/instead of Delivery Order Project Officers (DOPOs).

       Delivery Order Project Officers and Work Assignment Managers (DOPOs and WAMs) - Responsible for
       maintaining th^record copy of documents^used for dav-to-dav technical .direction of the delivery order or
       work assignment. Documents include work'plans and  schedules, amendments and/or modifications, draft
       deliverables submitted by the contractor, comments provided Jo the contract or other records of technical
       Birectioikcontract monitoring logs and communication records, cost estimates, meeting records and notes,
       evaluation forms, supporting documentation for statements ofwork (SOWs) and jevel of effort (LOE)
       documents, amendments and modifications. DOPOs maintain invoices and invoice approvals for delivery
       orders. (Sources: Records Disposition Schedule 202A - Contract Management Records, EPA Contracts
       Management Manual No. 1900 Chapter 7 pages 7-1, 7-3, EPAAR Manual No. 1901)

       EPAAR Recordkeeping Requirements (EPA records retention schedules should be consulted for specific
       guidelines.)

       A EPAAR file contains documentation used in the issuance or denial of a contract issued by EPA
       Headquarters or Regional offices. Within the EPAAR framework, many files and record systems will be
       created because there are  many levels of documentation. In general, an EPAAR file should include the
       following types of documents (Sources: PCMD pages 6-15-6-23, Records Disposition Schedule 202 A -
       Contract Management Records, EPA Contracts Management Manual No. 1900, EPAAR Manual No.
       1901):

          1. Basic Contract file
               a.  Copy of contract and all modifications
               b.  Copy of contractor's technical and cost  proposal (including resumes and labor rates)
               c.  Copy of specifications, drawings or manuals incorporated into the contract by reference
               d.  Listing of contractor submittal requirements
               e.  Listing of government-furnished property or services
               f.  Listing of all information, data or documents furnished to contractor
               g.  Copy of the pre-award survey, if conducted
               h.  Schedule of compliance reviews

          2. Project Officer and Contract Monitor Designation file
               a.  Copy of Project Officer Designation (EPA Form 1900-65)
               b.  Letters  of contract  monitor assignments with copy of transmittal letter furnished to the
                  Contractor
               c.  Listing of specialized contract administration functions delegated to the Project Officer or
                  Contract Monitor

          3. Internal Correspondence  file
               a.  Record of communications between the Project Officer and other support activities
               b.  Copies  of all correspondence between the Project Officer and the Contracting Officer
               c.  Copies  of all correspondence between the Project Officer and Contract Monitors and program
                  offices

          4. Contractor Correspondence file
               a.  Copy of all general correspondence related to the contract
               b.  Original of all contractor submittal of data and reports
               c.  Copy of notices to  proceed, stop work,  or correct deficiencies
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               d. Copy of all letters of approval pertaining to, for example: the contractor's quality control
                  program, changes in the Contractor key personnel, prospective employees, work schedules,
                  etc.

          5.  Technical Direction/Evaluation file
               a. Copy of all drafts submitted by Contractor
               b. Copy of all comments provided to Contractor on contractor submittal, or other records of
                  technical direction given
               c. Copy of government's contract monitoring logs and communication records, meeting records
                  and notes
               d. Copy of Contractor and deliverable evaluation forms, including CPAF performance event
                  forms

          6.  Payment file
               a. Information relative to discount provisions for prompt payment
               b. Copy of Contractor invoices
               c. Copies of Inspection reports
               d. Letters pertaining to invoice deductions or fee adjustments
               e. Back-up documentation for recommendation of Contractor payment or progress payment
               f. Copy of recommended suspensions or disallowances

          7.  Computerized or Manual Tracking Systems
                  These systems are generally used to track:
               1. Work assignments issued
               2. Deliverables and due dates
               3. Task or subtask completion
               4. Funds allocated and expended

       In addition, a EPAAR file should include the following types of documents:

       Contract Management Records - Contract records include all correspondence and related records pertaining
       to the award, administration, receipt, inspection and payment of any and all contracts, requisitions,
       purchase orders, leases, and bond and surety agreements to which EPA is  a party and which are maintained
       and used by the Agency or Contracting Officer for contract documentation and for performance and
       financial monitoring and oversight activities. All correspondence and related records pertaining to the
       requests for proposals (RFPs), successful bids and proposals, and procurement award (Source: EPA Series
       202A - Contract Management Records).

       Routine Procurement Files - Contains Agency procurement and supply records documenting the
       acquisition of goods and non-personal services. Documents include copies of purchase documents (e.g.,
       purchase requisitions, travel authorizations, training authorizations, contracts, etc.), specifications, bids,
       schedules of delivery, initiating requisitions, receipt, inspection, and payment. Related background
       material, such as computer printouts, and funding obligations.

       There are several types of routine procurement documents (Source EPA Series 03 6A - Routine
       Procurement Files):

          1.  Procurement or purchase organization copy, and related papers
               a. Transactions of more than $25,000 and all construction contracts exceeding $2,000.
               b. Transactions of $25,000 or less and construction contracts under $2,000.
          2.  Obligation copy
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          3. Other copies of records described above used by component elements of a procurement office for
            administrative purposes.
          4. Data submitted to the Federal Procurement Data System (FPDS).

       Unsuccessful Bids and Proposals - Contains unsuccessful bids and proposals and cancelled solicitations for
       contracts, requisitions,  purchase orders, leases, bond and surety agreements to which EPA is a party and
       which are maintained and used by the Agency for contract documentation. Includes (Source EPA Series
       275A - Unsuccessful Bids and Proposals):

          1. Unsuccessful bids and proposals (solicited and unsolicited), and
          2. Cancelled solicitations which were cancelled prior to award of contract.

       Recipient/Contractor Debarment and Suspension Records - Consists of documents relating to
       investigations of contractors and recipients for debarment or suspension from contracting with or receiving
       assistance from the Federal Government. Includes copies of Inspector General reports, attorney
       recommendations for actions, notifications to  respondents, respondents' submissions, hearing transcripts,
       briefs and motions, final determinations, and settlement agreements for debarment and suspension cases
       per 48 CFR Subpart 9.4 and 40 CFR Part 32, and other related documents. There are two types of files
       (Source: EPA 601A - Recipient/Contractor Debarment and Suspension Records):

          1. Case files, and
          2. Other records.

       Bid Protest Appeals - Consists of copies of notice of appeal, written memoranda of arguments, legal briefs
       (if any filed), transcripts of any hearings held, correspondence, and decision by the Regional
       Administrator. (Source 679A - Bid Protest Appeals)

       EPA Specific Requirements

            EPA Contract Administration PCMD 9/89 (October 1990)
            EPA Contracts Management Manual No.  1900
            EPAAR Manual  No. 1901
            48 CFR Chapter 1
            48 CFR Chapter 15
            48 CFR Subpart  9.4
            40 CFR Part 32

       Records Retention Schedules

       EPA series number and title with direct or indirect application to EPAAR documentation.

            003 A - Grants and Other Program Support Agreements
            036A - Routine Procurement Files
            OS5A - Integrated Contracts Management Systems (ICMS)
            125 A - Contracts for Office Equipment Services
            184A - Contract and Grant Reviews and Audits
            202A - Contract Management Records
            25 8 A - Final Deliverables and Reports
            274A - Unsuccessful Grant Applications
            275A - Unsuccessful Bids and Proposals
            572A - Contracts Information System (CIS)
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              601A - Recipient/Contractor Debarment and Suspension Records
              677 A - Information Law
              679 A - Bid Protest Appeals


                                            Recordkeepina Requirements Paae

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                                                                                                   Last Updated 7/29/97
                                                                                htlp-ffinlranel.epa.gov/nrmp/drafts/rkr/epaar.htm
5 of 5                                                                                                         4/27/98 3:24 PM

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          TYPES  OF CONTRACTS
          1.  Fixed Price
          2.  Cost Reimbursement (Cost, Cost-Plus-
             Fixed-Fee, Cost-Plus-Award-Fee)
          3.  Time-And-Materials
          4.  Labor Hour
          5.  Indefinite Delivery/Indefinite Quantity
          NOTE: Letter Contracts are preliminary
          contractual instruments which may be
          def initized as any of the above types.
PCMD9/89                                              49

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   CONTRACT
                   FEATURES
                                            APPLICABILITY
                                                       AbVAHrAflBS TO
                                                        CONTRACTOR
                                                                                                                  W
                                                                                                       CONTRACTOR
   FIRM
   FIXED
   PRICE
   (FFP)
 Govement  pays  fixed
 price  (established before
 award) which  is not
 subject to any  adjustment
 regardless of contractor's
 cost experience.
Used when:
1). There are reasonably
    definite design or
    performance
    specifications

         and

2). A fair and reasonable
    price can be
    established at the
    outset.
1). Potential for
    higher profit

2). Minimum government
    control

3). Fewer administra-
    tive cost
1). Greater assumption
    of financial and
    technical risks

2). Vigilance required
    to Initiate and
    substantiate change
    claims
   COST-PLUS-
   FIXED-FEE
   (CPFF)
Government pays allowable
cost plus a negotiated,
fixed  fee (profit).
Fixed  fee does not vary
with actual costs, but
may be adjusted for
changes In work to be
performed.  May be
completion or term form.
Used where performance
Is uncertain and accurate
cost estimates are
Impossible.
1). Low risk

2). Risk of loss of
    government proper-
    ty transferred
1). Maximum control by
    government

2). Lower fees because
    of lower risks.
   COST-PLUS-
   AWARD-FEE
Government pays allowable
cost plus base fee (does
not vary with perform-
ance) and all or part of
an award fee (based on
subjective government
evaluation of contractor's
performance). Evaluation
and payments of award fee
made periodically
(usually every 3-4 months)
during performance.
Used where a cost
reimbursement contract Is
appropriate and It is
Important that contractor
be provided motivation
for excellence In
contract performance
In areas such as
management, quality,
timeliness. Ingenuity,
and cost effectiveness.
Usually used for contracts
with a total value of
greater than $5 million.
1). Possibility of
    Increased fee

2). Reward for good
    management and
    good performance

3). Limited risk
1). Limit on fee
    (usually 10Z)

2). Complexity of
    negotiations

3). Increased burden
    to "prove" itself

4). Performance may
    be affected by
    government moni-
    toring/technical
    direction
   LABOR-HOUR
   AND TIME-
   AND-
    MATERIALS
   (L-H, T&M)
Government pays a fixed
rate for each hour of
direct labor worked by
contractor, up to a
negotiated celling on the
total price.  (Tlme-and-
materlals contracts also
provide for payments for
materials at cost).
Indirect costs and profit
are all Incorporated In
the fixed hourly rates.
  Used typically for
  engineering and design
  services, repair,
  maintenance or overhaul
  work, or in emergency
  situations.  Least
  preferred contract type.
  Must have appropriate
  government surveillance
  during performance.
1). Potential to
    maximize profits

2). Minimal risk
1). Constant gove
    surveillance.
                                                                         nt
   INDEFINITE
   DELIVERY/
   INDEFINITE
   QUANITY
   (ID/IQ)
Contract is somewhat
open-ended, i.e., does
not specify delivery or
performance terms.
Payments may be on a fixed
price, cost reimbursable,
fixed rate per item or
service, or a labor-hour
basis.  Orders are placed
against the contract
after award.  Indefinite
quantity contracts
provide for a "minimum"
and a "maximum" quantity.
  Used when the exact time
  and/or place of delivery
  Is not known at the time
  of contracting.  May be
  used for either supplies
  or services.
1). Guaranteed
    minimum quantity
    (unless govern-
    ment terminates
    contract).

2). Potential to
    maximize profits
    depending upon
    payment provi-
    sions.
PCMD 9/89
                                                       3-6
1). No control over
    scheduling of
    orders

2). No guarantee of
    orders beyond
    contract minimum.

3). Possible substan-
    tial amount of
    government
    surveillance,
    depending upon
    payment provisions

4). Requires high
    degree of manage-
    ment Involv«i0nt.

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     FIRM FIXED  PRICE CONTRACTS

    1.  Government Pays Fixed Price (Established Before
       Award) Which Is Not Subject To Adjustment
       Regardless Of Contractor's Cost Experience

    2.  Used When:
        - Reasonably Definite Design Or Performance
         Specifications
        - A Fair & Reasonable Price Can Be Established At
         The Outset

    3.  Advantages to Contractor:
        - Potential For Higher Contractor Profits
        - Minimum Government Control
        - Fewer Administrative Costs

    4.  Disadvantages to Contractor:
        - Greater Assumption Of Financial/Technical Risks
        - Vigilance Is Required To Initiate And Substantiate
         Change Claims

    5.  Advantages To Government:
        - Contractor Bears Risk Of Performance; Government's
          Risk Is Fixed And Limited

    6.  Disadvantages To Government:
        - No Right To Issue Technical Direction
PCMD 9/89                                                51

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  FAMILY  OF COST-TYPE CONTRACTS





         1. COST ONLY



         2. COST PLUS FIXED FEE*




         3. COST PLUS AWARD FEE*



         4. COST PLUS INCENTIVE FEE



         5. COST SHARING





          * Commonly Used At EPA
PCMD9/89 '               3-8                  52

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   COST-PLUS-FIXED-FEE   CONTRACTS

   1.  Government Pavs Reasonable. Allowable & Allocable
      Costs Plus A NegotiatedlFixed Fee (Profit). Fixed Fee
      Does Not Vary With Actual Costs, But MayBe Adjusted
      For Changes In Work To Be Performed.

   2.  Used When:
       - Performance Desired Can't Be Clearly Specified,
       And
       - Accurate Cost Estimates Are Impossible

   3.  Advantages to Contractor:
       - Lower Cost Risk (Best Efforts Only)
       - Reduced Liability For Government Property

   4.  Disadvantages to Contractor:
       - Maximum Involvement By Government
       - Lower Fee (Profit) Because Of Lower Risks

   5.  Advantages to Government:
       - Greater Flexibility, Greater Control

   6.  Disadvantages to Government:
       - Government Assumes Greater Risk
       - Greater Resources Required To Monitor Costs
       And Performance
                          3-9
PCMD9/89                                               53

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 COST-PLUS-AWARD-FEE  CONTRACTS

 1.  Government Pays Reasonable, Allowable & Allocable Cost
    Plus A Base Pee (0% to 3%) That Does Not Vary With
    Performance And An Award Fee Based On Subjective
    Government Evaluation Of Contractor's Performance.

 2.  Used When:
     - Cost-Reimbursement Contract Is Appropriate,
     - Important To Motivate Contractor To Excellence
     - Contract Value Usually Greater Than $5 Million

 3.  Advantages To Contractor:
     - Possibility Of Increased Fee
     - Reward For Good Management And Good Performance

 4.  Disadvantages To Contractor:
     - Complexity Of Negotiation
     - Increased Burden To "Prove" Itself
     - Award Fee May Be Affected By Government
      Monitoring/Technical Direction

 5.  Advantages To Government:
     - Ability To Reward Good Performance

 6.  Disadvantages To Government:
     - Evaluation Process Is Time-Consuming
                         3-10
PCMD 9/89                    O I U

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                  FORMS OF
          COST-REIMBURSEMENT
                 CONTRACTS
    1. COMPLETION FORM: Describes The Scope Of
      Work To Be Done As A Clearly Defined Task Or Job,
      With A Specific End Product Required.

      TERM FORM (LEVEL OF EFFORT): Describes The
      Scope Of Work To Be Done In General Terms And
      Obligates The Contractor To Devote A Specified
      Level Of Effort For A Stated Period Of Time. Specific
      Tasks Are Assigned ToThe Contractor Through
      Issuance Of Work Assignments.
                        3-11
PCMD9/89                                           55

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       TIME-AND-MATERIALS   AND
         LABOR-HOUR CONTRACTS

  1. Government Pays A Fixed Rate For Each Hour Of Direct
     Labor Worked By Contractor, Up To Negotiated Ceiling
     On The Total Price. (Time-And-Materials Contracts Also
     Provide For Payments For Materials At Cost.) Indirect
     Costs And Profit Are Included In The Fixed Hourly Rates.

  2. Used For Engineering And Design Services, Repair,
     Maintenance Or Overhaul Work, Or In Emergency
     Situations.

  3. Advantages To Contractor:
      - Potential To Maximize Profits
      - Minimal Risk

  4. Disadvantages To Contractor:
      - Constant Government Surveillance During
       Performance

  5. Advantages To Government:
      - Greater Flexibility And Control

  6. Disadvantages To Government:
      - Potentially High Cost To Government In Terms Of
       Cost And Government Surveillance Required
      - LEAST PREFERRED CONTRACT TYPE
                         1-12
PCMD 9/89

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      LABOR RATE  CALCULATION
    FOR LABOR-HOUR  CONTRACTS
   Basic Hourly Rate:  Ranges from $14 - $16
                   Category Average:  $15
   Fixed Loaded Rate = $32.40

LABOR
INDIRECT COSTS
Ǥ> 100%)
PROFIT
TOTAL
CATEGORY
AVERAGE
$15.00
$15.00
$ 2.40
$32.40
JOHN S.
$14.00
$14.00
$ 4.40
$32.40
SUET.
$16.00
$16.00
$ .40
$32.40
   With The Category Average, The Contractor Earns
   8% Profit.

   With John S., The Contractor Earns 15.7% Profit.

   With Sue T., The Contractor Earns Only 1.25%
   Profit.
PCMD 9/89
                      3-13
                                             57

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    INDEFINITE  DELIVERY/INDEFINITE
            QUANTITY  CONTRACTS
     1.  Orders Are Placed Against The Contract After
        Award. Orders Specify Time And Place Of
        Delivery And Quantity To Be Delivered.

     2.  Three Types:

        Definite Quantity - Definite Quantity Of Specified
           Supplies Or Services For A Fixed Period.

        Requirements - Filling All Requirements For
           Specific Supplies Or Services During
           Contract Period; Sets Maximum Limit; May
           Set Minimum.

        Indefinite Quantity - Indefinite Quantity Of
           Specified Supplies Or Services,  Providing
           For A "Minimum" And A "Maximum" Quantity.

     3.  Used When The Exact Time Or Place Of
        Delivery, Or Quantity Required, Is Not Known At
        Time Of Contract Award. May Be Used For
        Either Supplies Or Services.
PCMD 9/89

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   INDEFINITE  DELIVERY/INDEFINITE
      QUANTITY CONTRACTS  (Cont.)

      4. Advantages to Contractor:
          - Guaranteed Minimum Quantity
          - Potential To Maximize Profits

      5. Disadvantages to Contractor:
          - No Control Over Scheduling Of Orders
          - No Guarantee of Orders Beyond Contract
           Minimum
          - Possible Substantial Amount of Government
           Surveillence
          - Requires High Degree of Management
           Involvement

      6. Advantages To Government
          - Guarantees Government Ability to Purchase
           Within Contract Range (Minimum and Maximum
           Quantity)
          - Great Flexibility And Control Over Scheduling
           Of Orders

      7. Disadvantages To Government
          - Requires Government Purchase Of Minimum
           Quantity At Specified Price
          - Requires Substantial Amount of Government
           Surveillence


PCMD9/89                    3'14                  59

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                      rjb
  MAJOR EPA  PROCUREMENT CLASSES
      1.  Mission  Contracts
         Large, Multi-Year Contracts (Base Plus One
         Or More Option Years) With Broad Statements
         Of Work, Exercised By Issuing Work
         Assignments/Task Orders. Typically Are
         Term Level Of Effort (LOE) Contracts, But
         May Be Designed to Enable Issuing Of
         Fixed Price, Completion or Term Form
         Cost Plus Task Orders. Advantages Of
         Flexibility And Continuity.

      2.  Non-Mission  Contracts

         Contract Statement Of Work Specifies Desired
         Performance Without Further Clarification.
         May Be Any Type Of Contract.
      3.  Small   Purchase  Orders - f<$25.0001

         Method To Procure Products Or Services
         Valued At Less Than $2§|im Expedited
         Procurement Procedures.
PCMD 9/89                  3-15                         60

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          METHODS  OF DEFINITIZING
                    CONTRACTS


      1.   Work  Assignment
      Defines Work To Be Performed (Services/Products
      To Be Provided) By Contractor Under Broadly Defined
      Task In Mission Contract. Must Be Signed By Project
      Officer, Contracting Officer And Contractor.

      2.    Delivery  Order
      Specifies Products To Be Delivered By Contractor
      Under Time & Materials-Type Contracts (Basic
      Ordering Agreements). Must Be Signed By Delivery
      Order Officer (With Warrant) And Contractor.

      3.    Task/Technical   Directive

      Used To Definitize A Broad Work Assignment Or Delivery
      Order And/Or Give Technical Direction To Contractor.
      (Also Called TDM's, Or Technical Direction Memoran-
      dum; TID's, Or Technical Instruction Directive). May
      Take The Form Of A Formal Agreement Where Provisions
      Have Been Made For Contractor Signature.
PCMD 9/89                 3-16                          61

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SAMPLE
                          WORK  ASSIGNMENT ACTION  REQUEST
  CONTRACT NUMBER

  CONTRACTOR
                                       WORK ASSIGNMENT NO:

                                       AMENDMENT NUMBER
  WORK ASSIGNMENT TITLE:
  PURPOSE:
 COMMENTS:
[ ] Initiate Work Assignment
[ ] Approve Work Plan:
[  ]  Extend Completion Date to:
(  ]  Other: 	
[] Amend Work Assignment  () 3QW  () LOE
[ ] Amend Work Plan       () SOW  () LOE
                                                                             [ ]  Disapprove Plan
                                                                             [ ]  Closeout
   ESTIMATED LEVEL OF EFFORT (WA)
   APPROVED LEVEL OF EFFORT (WP)
   CUMULATIVE LEVEL OF EFFORT

        PERIOD OF PERFORMANCE:
                                          GOVT QOST ESTIMATE
                                          APPROVED AMOUNT _
                                          CUMULATIVE AMOUNT
                                     _* through
                                ('Date of Contracting Officer Signature unless otherwise specified)
                                      APPROVALS
 I have thoroughly reviewed the attached and find that (initial where appropriate):

   1.  The work assignment   (a) gives the contractor clear direction a.nd describes needed, useful
                            deliverables	
   2.  The work plan
                         (b) is essential to achieve our technical  goals
                         (c) is within the scope  of the contract   ____
           (a) has sufficient steps to achieve the  work goal* ,	
           (b)  proposes costs/labor hours that are reasonable end commensurate with the
               work  assignment 	.	
           (c) is  within the statement of work	
             (Signature)
                                 (Date)
                  (Ma.V Code)
(Phone #)
 Work Assignment Manager
 Project Officer
 Branch Chief/Section Chief
 Contracting Officer


  PCMD 9/89
                               3-17
                                                   63

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                    INSTRUCTIONS - WORK ASSIGNMENT ACTION REQUEST

   Be brief and follow Che format provided.  Always abide by the "Restrictions on the
   Work Assignment Manager/Project Officer" to "never give direction to the Contractor
   that will increase the level of effort or change the authorized Statement of Work."


   WORK ASSIGNMENT REQUEST FORM

   The Work Assignment Action is completed for all actions requiring Contracting
   Officer approval.  Contact the Project Officer for additional assistance.

   Work Assignment Manager (or Task Manager on his/her behalf) should complete the
   form.

      - Indicate the appropriate contract, work asslgnement and/or amendment numbers.

      - Assign a short, descriptive title.

      - Check the purpose(s) of the action; if it involves an amendment, Indicate
        whether it amends the scope of work (SOW), level of effort (LOE) or both.

      - Use the comments section to elaborate on "other" or clarify the purpose,
        or to indicate need for rapid processing, etc., If applicable.

      - If a Work Assignment;  indicate the estimated level of effort, government
        cost and period of performance (leave the first blank blank, and write
        the completion date in the second blank).

      - If a Work Plan;  fill in all estimates, both the estimated, approval and
        cumulative levels of effort and amounts.  The period of performance for
        an amendment is the original work assignment date through the desired
        completion date, which may or may not be the same as the original work
        assignment date.

      - Approvals;  The work assignment manager, project and contract officers
        are required to Initial l(a)-l(c) for work assignments, and 2(a)- 2(c) for
        work plans, and to sign, date, etc. the form.  The branch chief or section
        chief, whoever is appropriate, initials only l(a) and (b) or 2(a), as
        appropriate, and signs, dates, etc., the form, to Indicate their knowledge
        and approval.

      - Attach Work Assignment Statement of Work


   STATEMENT OF WORK

   A Statement of Work in the following format should accompany each request  for a
   Work Assignment or Amendment.  (See following page.)
PCMD 9/89                                  3-18
                                                                                     64

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                                  STATEMENT OF WORK
                     CONTRACT/WA/AMENDMENT NUMBERS:__
                                   CONTRACTOR NAME
    I.  Title:  Make  It  short, descriptive and  the same as on  the Request Form.

    2.  Estimated Period of Performance;   State It as the "Effective date of work
       assignment until (Insert required completion date)."   Performance normally
       cannot extend beyond  the effective contract option period which usually
       ends September 30.

    3.  EPA Work Assignment Manager;  Include the full name, address, room number,
       mail code and commercial and FTS telephone number of the person who will
       responsibly manage the work assignment  (WA).  This is  not to be confused
       with the EPA Project  Officer for the entire contract.

    4.  Background;  Briefly  summarize any history leading to  the need for this
       work, Indicate the purposes of the work, identify benefits, and include
       any other Information linking the work  to the Office of Emergency and
       Remedial Response.

    5.  Scope of Work;   Identify and number the tasks sequentially to be performed
       by the Contractor.  Specify the required completion date for each task and/or
       deliverable to be produced, and provide deliverable specifications, if any.
       Work requirements shall clearly establish the contractor's responsibility
       by using the explicit working:  "The Contractor shall...."  Work assignments
       will not be Issued based on poorly written work statements.

    6.  Schedule of Deliverables;  Normally In  a table, summarize the tasks required,
       deliverables to be produced, and expected delivery dates.  Tasks listed
       should match or be abbreviated forms of tasks titles in scope of work.

    7.  Special Reporting;  Contract Articles routinely require a work plan (Including
       QA), monthly progress, deliverable and  financial reports, and a final report
       for each work assignment.  Specify only special reports, quantities and
       addresses.  If there are no special reporting requirements, indicate "None".

    8.  General;   List if: (a) Confidential Business Information is disclosed to
       the Contractor; (b) The Contractor uses Government furnished equipment, date
       or facilities; (c) expert testimony is  expected; (d) release of information
       and results of the Contractor is restricted; (e) credentials for right-of-
       entry as required; and (f) other conditions necessary  for project performance.

   9.  Suggested Skills Mix and Level of Effort;  Identify EPA's best estimate of
       the professional (nonclerical) direct labor hours necessary to perform the
       requested work.  Break it down by labor category and then totaled.  Note
       any special qualifications needed, if any.
PCMD 9/89                                  3-19                                      65

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                              ORDER FOR SUPPLIES OR SERVICES
        IMPORTANT; Marie 41
i with contract snd/ar ordtr numbm.
L BATI Of ORDER

7. TOi CONTRACTOR (MOM, oddmi 4
n AccouNTiNa AN6 ApMoMIATIJ
>. CONTRACT" No. at mat

•. ORDER NO. 14. REQUISITION/REFERENCE NO.
•. SHIP TOi fCon*l>M* end tddrtm. ZIP Cod*)
SHIP VlAi
mt Of Cod*;
IN DATA

8. TYPE OF ORDER

nnm furnNn tnt foilowlMj on «w
tlom MOElftad on both ridoi of mil
•nwnod IMMS. If my. Mcludtat
era*. TM§ purcMH H nototliHd un



lonns *nd contf l-
ordar «nd on tM
donvorv it indl-
taut Mtnorlly of)

on !!«•' rovwtt, mn dMKvy ordor li wDMct to In-
untctlont conitlMd on tnft ild* only of wit form
•nd l« iwMd KMott to MM Mrms •MTeondltlOM of
tlM ADOVOl4MmiOBfOd OOntFBCt.
FKICE
K ACEOUNTINa M.O APPHOPHIATK*. DATA

U. fJOJf, POINT
13. PLACE OF INSPECTION ANO AifiRpf AM£K
1O. REQUISITIONINd C
FKICK
11. BUSINESS1 CLANS' 4PICATION
OTHER
Dl— 1 THAN
SMALL LJ SMALL
14. OOVERNMENT BA. NO.

DAOVAN-
TAGEO
IS. DELIVER TO F.O.B. POINT
ON OR BEFORE (D»l*t



to. OISCC

*!••»
D
WOMEN-
OWNED
IUNT TERMS


ITEM NO.
(A)

MUaiLLOtO
Ot&TittKTiONB
OH
mmvmiux
SUPPLIES OR SERVICES
(B)

11. SMIPPiriO POINT lit. O ROSS 5MIWI NO) WBIOMT
21. MAIL INVOICE TOi (fluted* Of CM*)
22. UNITED STATES OF AMERICA k.
8V (HIMIBKJ ^
QUANTITY
ORDERED
(Cl

2O. INVOICE
UNIT
(01

P^C'E
(El

NO.

AMOUNT
(F)



QUANTITY
ACCEPTED

17(H). TOT.
^ (Conf.
^ »Ma>
17(1).
^ GRAND
TOTAL
23. NAME rryptdj
TITLEi CONTRACTINO/OROERINQ OFFICER
       MSN 7S40-41-I
                         . MQI<
                                                  SOXT-101
                                              OPTIONAL FORM 347 (1O-MI
                                              PrawloMbyOSA
                                              PAR («• CFR) S1J13CO)
D9/89
                                              3-20
                                                        67

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                                      PURCHASE ORDER TERMS AND CONDITIONS
      52-252JL ..CLAUSES. INCOBEQRAI£D. -BY...BEEERENCE
    (Apr 84)>This contracr incorporates the following clauses by' ref-
    erence with the same force and effect as if they were given in full
    text."Upon request the' Coritracting OTficer will make their full text
    available:

      FEDERAL  ACQUISITION  REGULATION  (48 CFR CHAP-
      TER!) CLAUSES

      52.203- 1      Officiary Not to Benefit (Apr84)

     --52.203-3      Gratuities (Apr 84)

     »S£2Q3^      Covenant Against Contingent Fees (Apr 84)

      52.212-9      Variation m Quantity (Apr 84)
                   Hrr-trw preceding- ctaose^tte permissible varia-
                   tions ar» stated- >t> tha-schedule)

     'Sifc222-3>     Convict Labo*lApr'84)
52,22225'

52.222-36


52.222-40


52.222 41

52.225-3

52.232- 1

52.232-8


52.233-1

52.243-1
Affirmative Action for Handicapped  Worke
CApr84|

Service Contract  Act of  1965-Contracts  :
$2500 or  Less I Apr 84)

Service Contract Act of 1965 (Apr 84)

Buy American Act-Supplies (Apr 84)

Payments (Apr 84)

Discounts for Prompt Payment (Apr 84)
(With Alternate 1)

Disputes (Apr 84)

Changes - Fixed Price (Apr 84)
                   cgntracTWqf K
                   Overtime Compensation-General (Apr 84)
(Fixed Price) (Short Form) (Apr 84)
   NOTE.-lf desired, this order (or a copy, thereof) may be used by the Contractor as the Contractor's invoice, instead of a separate invoiOo.
   provJdadjhe following statement: (signed jndtlated) is on (or attached to) the order: "Payment is requested in the amount of $	
   Np_ojhe> Invoice, wij.l 6ji> submitted,.". .However, if the_Contractor. w«rtes.jQ submitan invoice^ theJpllQwing informatipn must.be prpvjdec
   contract number (If'any)-, order number, Item, number(s), description'of supplies'-or services, sizes, quantities, unit prices, and extends
   totals. Prepaid shipping costs will be Indicated as a separate item on the invoice. Where shipping costs exceed $10 (except for parcel post..
   the billing must be supported by a bill of lading or receipt. When several orders are invoicecTto. an ordering actnrttydurirtg.the same billing
   period, consolidated periodic billings are encouraged.

                                                     flECEfVING-RfEPORT                                             —

   Quantity *v-*he "Quantity-Accepted ' oolumn-on-the faceof-thn order nes-beenr-LJ-tmoeciedT  -LJ-accepted.- -LJ received-by-"me-an
   conforms to contract. Items listed below have been reacted for the reasons indicated.
SHIPMENT PARTIAL
NUMBER FINAL
TOTAL CONTAINERS


GROSS WEIGHT
DATE RECEIVED
RECEIVED AT
SIGNATURE
TITLE
OF AUTHORIZED U.S. COVT. REP.

(DATE

                                                   REPORT OF SEJECTIOiMS
ITEM NC











.



•'
„



SUPPLIES OR SZHVlCrS











_ ^ 	 	 _ _ ..





,

j . f
L'NIT




















Q-jaNTirv
REJECTEO




















REASON FOR REJECTION



















_.- 	 . ,--
PCMD 9/89
                                                         3-21
             OPTIONAL PdRM 347 BACK (10-a


                                  68

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                                  Sample
                            TASK  DIRECTIVE
  CONTRACTOR:
  CONTRACT NO:
  WORK ASSIGNMENT NO:
  TASK NO:
  DATE OF DIRECTIVE:
                              TD NO:
                              MAXIMUM HOURS
                              AUTHORIZED:	
                               ESTIMATED  COST:
                              DUE DATE:
  TASK TITLE:
  DESCRIPTION OF TASK:
 SPECIFIC TASK  ACTIVITIES/DELIVERABLES
   [ ]  ADDITIONAL SCOPE ATTACHED
                                        DEADLINES
 COMMENTS:
 AUTHORIZING:
   TASK MANAGER:
SIGNATURE
DATE
PHONE NO
   WORK ASSIGNMT  MGR:
   PROJECT OFFICER:
 RECEIVED BY:
               [ ]   Accepted  [ ] Rejected  [ ] Accepted With Exceptions (Attached)
    CONTRACTOR:
PCMD 9/89
                                       3-22
                                                         69

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                      INSTRUCTIONS FOR COMPLETING TASK DIRECTIVE

   Purpose

   The Task Directive Is used Co give technical direction to the contractor in
   the conduct of a task which has not been explicitly defined in the work
   assignment In terms of either the specific activlty(les) or approach
   desired, the deliverable(s) , the due date(s) and/or the level of effort.  It
   can also be used to further clarify the task articulated in the work assignment.

   Form Completion

   Be brief and follow the format provided.  Always abide by the "Restrictions on the
   Work Assignment Manager/Project Officer" to "never give direction to the
   Contractor that will increase the level of effort or change the authorized
   Statement of Work."

   1.  Complete all standard information in the top blocks.

       - Task Directive Number;  For any given task, the numbering should begin
         with the number 1, and be assigned chronologically by task.  (For purposes
         of computerized recordkeeping, the TD number should be a combination of
         the work assignment number, the task number, and the next available TD
         number associated with the task, beginning with the number 1, (e.g.,
         TD8-3-2 represents Work Assignment 8, Task 3, Task Directive #2.)  The
         TD number should be verified by the Work Assignment Manager.

       - Date of Directive;  Should be filled in by and be the date signed by the
         work assignment manager, unless project officer authorization is required,
         in which case it is completed by the project officer.

   2.  Task Title;  Should either match the title of the task in the work assignment,
       or if the work assignment task title is overly broad, be written as a
       short description of the specific task or activity desired.

   3.  Description of Task;  Give a general description of the overall task.

   4.  Specific Task Activitles/Dellverables;  State concisely the activities to
       be performed and resulting dellverables to be produced, numbered sequentially
       in the order of desired performance.  If there is Insufficient space,
       put an "X" in the "Additional Scope Attached" and continue on an attachment.

   5.  Deadlines;  Should be numbered to match the activities/deliverables and
       located parallel to the particular activity/deliverable.

   6.  Comments;  State any additional requirements, e.g., reporting, methodology.

   7.  Authorizing;  Must be signed by the task manager and work assignment
       manager for all tasks.  Project officer signature is required only when
       the task directive is used to exercise a broad "Other support" task in
       a work assignment.

   8.  Task directives must be signed and dated by the contractor.


                                           3-23
PCMD 9/89

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                               Instructions for Completing EPA Form 1900-8
                                           Procurement Request/Order
            This form is a 9-part interleaved set and is designed to be completed with an elite typewriter (12 pitch). The original   i
            office should complete all areas that apply. Shaded areas are reserved for Procurement use only. After completing me
            form, in accordance with the instructions below, retain the copy marked for "Originator" and send the others throuah
            required channels.
            hem:
            1 thru 6
            8 thru 11
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            14

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            26(a)

            26(b)
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            26
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Contract
Funding

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                                            Chapter 3
                            ELEMENTS AND TYPES OF CONTRACTS
               This chapter discusses the basic elements of government contracts, and then
        introduces the different types of contracts.  It is important to understand the difference
        between these types in order  to perform effective contract administration.  The various
        terms and conditions applicable to each contract type point to different Government
        responsibilities and different rights and obligations of both the contractor and the
        Government.

        3.1  Major Contract  Elements

               Contracts are comprised of several elements. The Statement of Work is only one
        of these, although it  is the one typically  most familiar to program staff since it is
        written by them. Project Officers, Work  Assignment Managers and Delivery Order
        Officers need to be familiar with all the elements, however, in order  to effectively
        manage their contracts.  Terms and conditions contained in other parts of the contract
        can have a major impact on contract management. EPA staff unfamiliar with these terms
        may be in for a rude surprise, since these terms  will override terms in the statement of
        work.

               The five major elements of a government contract include:

               1.  Administrative  Details. These include such items as the name and address
                  of the contractor, the names of  the contracting officer, project officer,
                  contract  specialist, the address of the EPA Paying Office, etc.

               2.  Contract  Parameters.  These include information such as the amount of
                  the contract, the period of  performance, the level of effort or  the minimum
                  and maximum amount of work that can be ordered, option periods and
                  amounts, etc.

               3.  Work Requirements.  This is the technical part of the contract most
                  familiar to program staff, and  includes  the statement of work, personnel
                  qualifications, and other technical details.

               4.  Standard  Terms and Conditions.  These are frequently termed the
                  contract  "Boilerplate" -- clauses that are routinely  included in government
                  contracts.  These clauses are typically drawn from the FAR or EPAAR
                  discussed in Chapter 2, and deal with such critical matters  as reporting
                  requirements, fees, technical  direction,  progress  reports, contract changes,
                  etc.  Many of these clauses are not written out in  full in each contract, but are
                  rather "incorporated by  reference."  That is, they are listed by title and
                  clause number in the contract. They are nonetheless a valid part of the
                  contract.

                  The standard clauses  used  will depend on the type of contract involved. A list
                  of some of the more significant of these clauses is included on page 47, and a
                  number of the clauses are quoted and discussed throughout the course.
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               5.  Specialized Terms and Conditions.  These terms are included above and
                  beyond standard terms and conditions to deal with matters peculiar to the
                  particular contract, e.g., the award fee plan, the list of key personnel,
                  subcontract approvals, etc.

               Project Officers should not assume that the contract  boilerplate is identical from
        contract to contract.  Changes in the FAR and EPAAR do occur periodically, and the
        specialized terms and conditions included are unique to that  particular contract.
        Although  Project Officers, Work Assignment  Managers, Delivery Order Officers and
        Delivery Order Project Officers generally take the time to familiarize themselves with
        the contract parameters and work requirements, it is critical  that they also be aware of
        the standard and specialized terms and conditions. These latter terms may govern in
        cases of inconsistency with the specifications included in the  statement of work, as
        described below.

        3.2  Order of Precedence

               The written terms of a contract govern, no matter what each party personally
        understands the agreement  to be. The^Contracting Officers the only person, outside the
        courts or the Boards of Contract AppealsTvfoo can or sFoyld  interpret a contracTofr—•
        "behalf of  the Government.  Project Officers,  Delivery urder Officers and other  program
        staff should always defer to the Contracting Officer when called upon to interpret the
        meaning of any contract provision.

               All EPA contracts include a clause entitled "Order of Precedence."  This means
        that,  in the event of any  inconsistency  within the contract provisions, the following
        portions, in order of precedence, will govern:

               (1)  the contract schedule (excluding the specifications);

               (2)  representations and other  instructions;

               (3)  contract clauses (standard and specialized terms and conditions);

               (4)  other documents, exhibits and attachments; and

               (5)  the specifications (in the statement of work).

               In other words, specifications contained in the statement of work  receive lowest
        preference and will be overridden by all other contract terms and conditions.

               If a contract provision can be  interpreted in more than one way, even after
        applying the order of precedence shown above, it is termed an "ambiguity."  Ambiguities
        are almost always resolved in favor of the contractor, since the Government drafted the
        document.

        3.3  Types  of  Contracts

               EPA uses a variety of different types of contracts.  Each type has its advantages
        and disadvantages, both for the government and the contractor. Some types are definitely
        preferable over others, but may need to be used because of some characteristic  of the
        work to be performed.  Hopefully for the technical contract manager, the contract type
        selected is well-matched to the work to  be performed.


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               EPA uses five basic contract types: the fixed price contract; the cost-
        reimbursement contract; time and materials contract; labor hour contract; and
        indefinite  delivery/indefinite quantity contract.

               A summary of the various contract types and their characteristics is found on
        page 50.
        3.4(^Firm  Fixed  Price  Contracts^
               The firm  fixed price contract provides for a price which is not subject to any
        adjustment, regardless of the contractor's cost experience during performance. In a
        firm fixed price contract, the specified price is paid to the contractor when the items
        called for by the contract have been delivered and accepted.   The statement of work or
        contract specifications define the products to be provided  or services to be performed.

               3.4.1. When  Used

               This type of contract is used only when a definitive design or performance
        specification or statement of work exists, and a fair and reasonable price can be
        established prior to award.  If major cost uncertainties are present, or definite
        specifications are not available, a fixed price contract may not be awarded.  Because the
        contractor assumes full cost responsibility  in a fixed-price arrangement, and because
        this type of contract  imposes a minimum administrative burden on both parties,  it is
        always the preferable type to use if conditions permit.

               Fixed  price arrangements are generally used for an entire contract.  However, it
        is possible to mix  types of delivery orders under an indefinite delivery/indefinite
        quantity contract.  Small purchases  (discussed late*1 ^>n paq° Rfi)  ara gon^'iy fi*oH
        price  contracts.    '

               3.4.2.  Issuance of Work

               The statement of work in the contract or the contract specifications govern the
        work.   The statement of work in the contract as originally written should be sufficiently
        specific that there is no need for technical direction from the Government.  Changes in
        the statement of work can only be made through formal amendment, giving tne contractor
        the opportunity to renegotiate the price.

               3.4.3.   Government  Responsibilities

               The Project Officer is responsible  for periodically evaluating the contractor's
        progress to assure that time deadlines are  met, and for inspecting the items to verify
        that the quality requirements have been adhered to.  The Government is entitled to
        receive exactly what the contract requires, and the standard "Inspection" clausa-teee
        page 297 ff) gives the Government the right to inspect all deliverables at any time..
        wjiether at source or at destination.  However, the clause also states that the Government
        cannot unnecessarily delay tne work by conducting inspections and tests.  The
        Government has no authority to provide technical direction under fixed price contracts;
        technical direction that can be  interpreted as Government interference can give the
        Contractor a contract claim.
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               The responsibility for acceptance belongs to the Contracting Officer, unless the
        contract delegates that authority, in writing, to the Project Officer.  (Most of EPA's
        contracts do delegate the authority for acceptance to the Project Officer, but it must be
        specifically  stated in the contract before the Project Officer can assume responsibility
        for that  function.)  Whoever performs this  function  must be thoroughly familiar with
        the specifications or Statement of Work.  Acceptance or rejection of all items must take
        place as soon as possible after delivery.  If a Project Officer has reason to reject any
        item, he or she should contact the Contracting Officer immediately so official notification
        to the contractor can be made  and corrective action can be taken. The contractor must
        correct  the  deficiency, or the Government has the right either to replace or correct the
        defective good or services and charge the contractor the cost, or to require delivery of
        the defective goods at a reduced price.  The Government also has the right to terminate
        the contract for default (see Chapter 14).

               Project Officers must ensure  that they expedite the handling  and certification_of
        contractor vouchers, since delays can strain the contractor's financial ability to
        perform, and can violate me provisions ot tne prompt Payment Act (see Chapter 11).

               The Government's obligation to make payment under fixed price contracts is
        expressed  in the standard "Payments" clause. Basically, this clause provides for
        payment of the price(s) stated in the contract for supplies delive.ced.and accepted, or for
        services rendered and accepted, upon the submission of proper invoices or vouchers.
        The clause  also provides for payment for accepted partial deliveries whfllUhe amount is
        at least  $1,000. or 50 percent of the total  contract price, whichever occurs first.

               It is also possible to make progress payments if the contract so provides.
        Progress payments are payments made  as work progresses under a contract in order to
        help the contractor finance performance of the work. These payments are based upon
        costs incurred or percentage of completion, and are made before actual completion or
        acceptance of the work.

               3.4.4.   Contractor  Responsibilities

               The contractor submits a bid to perform the work defined by the Government.
        Once that bid is accepted, the contractor's responsibility is to deliver the product or
        service at the bid price.  If the contractor underbids the work to be performed, the
        contractor must bear the loss. Fixed price contracts give the contractor a major
        incentive for efficient performance.

               3.4.5.   Advantages/Disadvantages for  Government

               The advantages of fixed price contracts to the Government are high. The
        contractor bears the risk of performance; the Government's risk is fixed and limited. If
        the contractor fails to deliver, the Government simply doesn't pay.  On the other  hand,
        the Government has no right to issue technical direction, and if the contractor is having
        problems, the. Government can't simply, intervene.  The Government can nonetheless use
        its inspection authority to inspect the product being produced and point out deficiencies
        or variance from the contract  specifications.

               Although the Government has no right to issue technical direction, it is
        nonetheless essential  to maintain some level of Government monitoring,  particularly if
        delivery  of the product or service by a particular deadline is critical  to the Government.
        Although the Government can reject the product or service that fails to meet
        specifications,  and  not pay  the contractor until the product  or service is correctly


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         delivered, it is preferable to get the product on time. The Government can not simply
         ignore oversight of its fixed price contracts.

                3.4.6.  Advantages/Disadvantages  for  Contractor

                Fixed price contracts have numerous advantages for the contractor.  If bid
         properly and managed efficiently, there is potential for higher contractor profits than
         the typical 7-10% range for cost reimbursement contracts.  If the Government accepts
         the contractor's bid of $20,000 and it actually only costs the contractor $15,000 to
         perform, the contractor nets a  25% profit.  On the other hand, the contractor assumes
         the risk of getting the work done for the price bid, and  if it costs  the contractor
         $22,000 to produce the product or service, the contractor loses money. There is a high
         cost of error for the contractor, particularly  if the contractor underestimates the
         technical difficulty of the work.

                Fixed price contracts also have the advantage of minimum government control and
         oversight, and involve fewer administrative costs for the contractor.  On the other hand,
         the contractor has to be vigilant  in initiating and substantiating change claims.  If, for
         example, the site conditions vary from those  specified or presumed in the contract, the
         contractor must ensure that a cost adjustment is made to account for  those differing
         conditions.

                3.4.7  Other Aspects

                As stated above, the fixed price of the contract or of a particular item in the
         contract is not subject to adjustment by reason of actual contractor costs.  The following
         situations  are examples of ones which might cause the price(s) to be adjusted:

                (1) defective workmanship or material;

                (2)  latent defects;

                (3)  defective  pricing data;

                (4)  assessment of liquidated damages;

                (5)   variations in quantity in excess of those permitted by the contract;

                (6)   partial  or complete  termination  of the contract.

                If any of these situations occurs, the Contracting Officer may have to modify the
         contract to reflect a change in  the firm fixed price.

     /   3.5 Cost-Reimbursement   Contracts

      	    Cost-reimbursement contracts are exactly what they state: the Government
         agrees  to  reimburse the contractor's cost of performance.

               3.5.1   Cost  Reimbursement Contract Types

               There are five (5)  different types of  fee (profit) structures which  are used with
         cost-reimbursement  contracts.  This include cost-only, cost plus  fixed fee. cost plus
         award fee, cost plus incentive fee, and cost sharing contracts. The three (3) described
         below are generally used at EPA:


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               (1) Cost Contract - With this type, the contractor receives no fee at all.
                    Generally, such contracts are awarded primarily to educational institutions
                    and other nonprofit organizations.  They may also be appropriate for
                    research and development work or for facilities contracts.

               (2) Cost-Plus-Fixed-Fee  (CPFF)  -  This is the most prevalent type  of
                    cost-reimbursement contract awarded in this Agency.  Under this
                    arrangement, the contractor is paid a negotiated fee that is fixed at the
                    inception of the contract. The  amount of fee does not vary with actual cost,
                    but stays fixed unless adjusted as a result of changes in the work to be
                    performed.

               (3) Cost-Plus-Award-Fee  (CPAF) - A CPAF contract provides  for a  fee
                    consisting of 1) a fixed base amount, and 2)  an award pool, the amount of
                    which awarded is based upon  a subjective, judgmental evaluation by the
                    Government of the contractor's performance. Areas such as quality,
                    timeliness, ingenuity, and cost effectiveness  are evaluated by EPA in
                    accordance with established criteria.  The amount of award fee to be paid is
                    decided at  stated intervals (usually every quarter or trimester) during
                    contract performance.  The overall objective is to motivate the contractor in
                    a positive way to improve poor performance  or to continue good
                    performance. This type of contract is considered for use when the expected
                    effort is anticipated to exceed $5 million and a cost-reimbursement contract
                    has been selected. However, it may be used for contracts of any dollar value.
                    Most Superfund cleanup contracts are CPAF contracts.

               3.5.2 Forms   of Cost-Reimbursement Contracts

               Cost-reimbursement contracts of any of the types listed above can be structured
        in one of two basic  forms:

          __   (1) The completion form is  one which describes the scope of work to be done as
                    a clearly defined task or job with a definite goal or target expressed and with
                    a specific end-product required.  This contract form normally requires the
                    contractor to complete and deliver the specified end-product (such as, a
                    final report of an analysis) as  a condition for payment of the entire fixed fee
                    established for completing the  work.  The contractor is expected to complete
                    the work within the negotiated  estimated cost.   However, in the event the
                    work cannot be completed within the estimated cost, the Government may
                    elect to continue the work provided it increases the estimated cost.  The
                    contractor then must complete the work at no additional fee.

          ^.   (2) The term form (level of effort)  contract is one which describes the scope  of
                   work to be done in general terms and which obligates the contractor to devote
                    a specified level of effort for a stated period of time. Under this form, the
                    fixed fee is payable at the end of the agreed-upon period of time provided the
                   contractor has exerted the  level of effort specified in the contract in
                   performing the work called for, and such performance is considered
                   satisfactory by the Government.  Extensions in  periods of performance or
                    requirements for additional levels of effort are new  acquisitions and involve
                    new fee and cost arrangements as well as adequate justification for other
                   than full and open competition  or sole source awards.


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               The completion form of contract, because of differences in obligation assumed by
        the contractor, is generally preferred over the term form.  Under a completion form
        contract, prospective contractors are reasonably expected to complete all of the work
        called for by the Statement of Work within the estimated cost.

               3.5.3.  When  Used

               The Contracting Officer will award a cost-reimbursement type contract when the
        estimate of total costs negotiated is believed to be reasonable under the circumstances,
        but because of the degree of uncertainties involved, a fixed-price arrangement is  not
        feasible.  In this situation, the Government assumes the risk, and pays the contractor the
        actual allowable costs incurred in the performance of the contract, up to  the estimate of
        total costs established at the time of negotiation. Beyond this amount, the contractor will
        not be reimbursed and is required to stop work unless additional funds are provided and
        continued work is authorized by the Contracting Officer. The contractor must have, or
        establish, an accounting system that is acceptable to the Agency before being awarded a
        cost-reimbursement contract.

               Cost-reimbursement  contracts are appropriate for research and development
        activities (such as development of computer systems)  where it is difficult if  not
        impossible to know in advance exactly what will need to be done, or how much it will cost
        to do it..

               3.5.4.  Issuance of Work

               Many EPA cost-reimbursement  term  form contracts are what are called "mission
        contracts" discussed later in this chapter on page  13,  and are very large, multi-year
        contracts involving numerous rather broadly defined tasks. The contract is  "definitized"
        by means of issuing specific work assignments, which are, in  turn, managed  by Work
        Assignment Managers.

               3.5.5   Government  Responsibilities

               The Government has major responsibility for definitizing the cost-
        reimbursement contract, as  well as for providing technical direction and oversight. The
        Government role in cost-reimbursement contracts requires a high degree of
        involvement, and continuous evaluation of the status of work in progress.

               The basic obligation  of the Government under a cost-reimbursement contract is
        to make payment to the contractor for the costs  incurred during performance, plus
        whatever amount of fee has been negotiated or awarded. The Contracting Officer must
        determine the  allowable costs in accordance with the principles set forth in FAR Part
        31.  Specific types of costs are unallowable in these regulations, such as interest  on
        borrowing, bad debts, entertainment, advertising costs unless  need arises under the
        contract, fines and penalties from violations of Federal, state or local laws, etc..

               Under  these principles, the Government also will pay the contractor only  if the
        costs claimed are reasonable and allocable. Reasonable costs are those of an amount and
        type that would be incurred by an ordinarily prudent business person in a competitive
        business, and must be consistent with  the contractor's  normal operating practices.
        Allocable  costs include  1) direct costs  or expenses incurred specifically for
        performance on that contract, and 2) a portion of indirect costs, which are expenses
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        which cannot be assigned directly to a specific contract but which benefit the contract
        indirectly.

               Under a CPFF Contract, the contractor is paid a portion of the fixed fee with each
        voucher until 85 percent of the fee has been paid. The remaining 15 percent of fee, or
        $100,000, whichever is less, is withheld  by the Agency until the final voucher is paid.
        This amount is also withheld from the base fee amount of a CPAF contract.

               3.5.5 Contractor  Responsibilities

               The  contractor  under  cost-reimbursement contracts is not required to provide a
        finished product meeting clearly defined specifications  in order to get paid.  The
        contractor is only required to use the contractor's "best efforts" to provide the desired
        performance.  With term-form contracts, if the contractor's best efforts do not  deliver
        the desired performance, the contractor is not penalized.  If fact, the contractor gets paid
        even if the work has to be redone.  In term-form contracts, the contractor's basic
        obligation is simply to deliver the  hours of work bid  up to the contract ceiling. The only
        time the  contractor doesn't get paid under cost reimbursement  contracts is if the
        government can prove  a clear case of fraud or deliberate ignoring of government
        technical direction.  That is why continuous government monitoring is so important, so
        that appropriate technical  direction can be given to  guide the contractor's efforts toward
        project completion.

               In completion-form contracts, however, the  contractor is expected to delivery
        the specified end-product within the estimated cost,  and failure to do so can  result in
        reduction of fee and completion of work at no additional fee.

               3.5.6.  Advantages/Disadvantages  for Government

               Cost-reimbursement contracts provide the Government the major advantages of
        flexibility and maximum control. The Government is not bound to a rigid set of
        specifications or tightly defined statement of work necessary in a fixed price contract.
        Rather, since the statement of work generally has such broad task areas, the Government
        can assign work as it needs it in the form of specific work assignments under the  broad
        tasks.  This permits the Government to adjust the contract work to meet its  needs as
        these needs become defined. In addition, the Government can modify the work assignment
        to redirect the  work.

               If the contract is an award-fee contract, the Government has the additional
        advantage of being able to reward good contractor performance, increasing the
        contractor's incentive to perform  at a higher level.

               There are, however, disadvantages.  The Government not only assumes all of the
        cost risks in cost-reimbursement  contracts, but there  are other disadvantages as well.
        A far greater administrative burden is placed upon the Government in a cost-
        reimbursement  arrangement.  Costs must be audited,  at a minimum, once before final
        payment, and a determination must be made that all  costs claimed are allowable,
        allocable, and reasonable. (See  Chapter 11 for further details.)

               Many times, individual vouchers  may be audited.  Frequent financial monitoring
        is also required. Administration  is even further complicated if Government properly is
        involved (see Chapter 11).   If the contract is  an award-fee contract, periodic contractor
        evaluations are required to administer the award fee process, which can be  time-
        consuming.


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                Further, there is less incentive afforded the contractor to control costs or to
         improve performance, unless the award fee form is used.  Because of these
         disadvantages, cost-reimbursement contracts should be used only when necessary and
         when conditions  warrant.

                3.5.6.  Advantages/Disadvantages  for  Contractor

                The cost-reimbursement contract has the advantage of sheltering the contractor
         from risk.  The contractor gets paid even if the contractor fails to complete the work
         within the  desired time frame or cost estimate.   In term-form contracts, the  contractor
         is paid  for time spent (best efforts), not for work completed or products delivered.  On
         the other hand, the contractor may have to settle  for a lower fee or profit as a result of
         the lower risks involved.  In addition, the administrative costs  (recordkeeping,
         reporting, etc.) associated with cost-reimbursement contracts are much  higher, and
         there is a great deal more government control and involvement.  The contractor must be
         able and willing to be responsive to changing government needs and technical direction.

                If the contract is an award-fee contract, the contractor has the possibility of
         earning a higher fee as a reward for good management and performance. However, the
         award fee  process subjects the contractor to periodic formal evaluation, imposing an
         increased burden on the contractor to "prove  itself". In addition, the award fee may be
         adversely affected by the quality of Government  monitoring and technical direction.  If
         Government staff only documents deficiences and failss to adequately document good
         performance in the performance appraisal process, the contractor may not obtain the
         award it deserves.

         3.6   Tlme-and-Materials  Contracts

                The time-and-materials (T&M) type of contract provides for the procurement of
         supplies or services on the basis of (1) direct labor hours at specified fixed hourly
         rates (rates include wages,  overhead, general and administrative expense, and profit),
         and (2) material at cost,  and, where appropriate,  material handling costs as a part of
         material costs. Material handling costs may include indirect costs not included in the
         labor rates, including general and administrative expense.  A variation on the time-and-
         materials contract is one where fixed rates for equipment are used as well as  fixed rates
         for labor.

                3.6.1 When Used

                This type  of contract is usually used in the procurement of (1) engineering and
         design  services,  (2) repair, maintenance, or overhaul work; and (3) work to be
         performed  in emergency situations (e.g., Superfund cleanups).

                Time and  materials contracts should be used only where it is not possible at the
         time of  placing the contract  to estimate  the extent  or duration of the work or to
         anticipate costs with any reasonable degree of accuracy.  Particular care should be
         exercised in the use of this type of contract since its nature does not encourage effective
         cost control. Thus, it is essential that a T&M contract be used only  where provision is
         made for adequate controls, including appropriate  surveillance by EPA personnel during
         performance to give reasonable assurance that inefficient or wasteful methods are not
         being used.
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               3.6.2.  Issuance of Work

               Work is generally ordered by an ordering officer in the form of a delivery order.
        (See Optional Form 347 on page 67.)

               3.6.3.  Government  Responsibilities

               The basic responsibility of the Government  is to pay the contractor for services
        rendered, up to the negotiated ceiling amount. Because there is absolutely no incentive
        for the contractor to control costs under this contract type, continuous Government
        surveillance is required to ensure that the services provided are being effectively and
        efficiently managed, and that materials provided are being provided at a reasonable cost.

               3.6.4.  Contractor  Responsibilities

               The contractor's prime responsibility is to deliver the  labor hours and materials
        ordered,  up to the specified ceiling amount.  The contractor does not guarantee its
        performance to  produce any particular end product.

               3.6.5. Advantages/Disadvantages for  Government

               Time and materials contracts are  useful because of the flexibility and control
        they offer. Work can be ordered when and as needed; changes within the scope are easily
        made to  adjust to changing situations. Only labor rates and the contract ceiling are fixed.

               On the other hand, time and materials contracts do not afford the contractor any
        positive profit incentive to control the cost of materials or to manage its labor force
        effectively.  Since it does not encourage effective cost control, it requires almost
        constant Government surveillance.  It should be used only after the Contracting Officer
        determines that  no other type  of contract will suitably serve.  It sometimes requires the
        daily acceptance of charges by Government personnel, who must monitor performance to
        ensure that charges are appropriate for the  work performed.

               3.6.6. Advantages/Disadvantages for  Contractor

               The T&M contract is advantageous from the contractor's point of view because of
        the minimal cost risk involved  and the potential to  maximize profits.  However, the
        contractor is subject to continuous government  surveillance during performance, and
        there are high administrative costs associated with  the government technical and
        financial monitoring.

        3.7 Labor-Hour   Contracts

               The labor-hour type of contract is very similar to the time-and-materials type
        of contract, except that materials will not be supplied.  The contractor is reimbursed
        strictly on the basis of hours worked at the fixed labor rates specified in the contract.
        Handout 3-9 on page 57  illustrates the problems potentially  associated with labor-hour
        (or time and  materials) contracts.  Since the contractor is reimbursed at a fixed rate for
        labor falling within a particular category,  the contractor has a  high incentive to  use
        lower-paid and thus less experienced employees on a particular job, since  the
        contractor's  profit margin on the lower-paid  employee may be substantially higher.
        This can work to the government's disadvantage.



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         3.8  Indefinite  Delivery/Indefinite  Quantity  Contracts

                One of the following indefinite delivery type contracts may be used for
         procurement where the exact time or place of delivery, or quantity to be delivered,  is
         not known at time of contracting.

                (1)  Definite Quantity  Contracts. This type of contract provides for a
                    definite quantity of specified supplies or for the performance of specified
                    services for a fixed period.  Deliveries or performance occur at designated
                    locations upon order by EPA.  This type of contract is particularly suitable
                    for  use where it is known in advance  that a definite quantity of supplies or
                    services will  be  required during  a specified period and is regularly
                    available or will be available after a short lead time.

                (2)  Requirements Contracts.   This  type of contract provides for filling all
                    actual purchase requirements  of specific supplies or services during a
                    contract period with deliveries  to be scheduled by the placement of orders to
                    the contractor. All Agency requirements for the supplies or services
                    covered by this type of contract  must be ordered from that contractor, and
                    cannot be procured through any other contracts.  (This  restriction does  not
                    apply to the  other two types of  indefinite delivery contracts.)

                    A realistic estimate of total quantity to be ordered throughout the contract
                    period is stated  for the information of prospective contractors. However,
                    the Government is not bound by the estimate set forth. The estimate may be
                    obtained from the records of previous requirements and consumption, or by
                    other means.  The contract states the maximum limit of the  contractor's
                    obligation to  deliver and appropriate  provisions limiting the Government's
                    obligation to order.  It may also  specify the maximum quantities which may
                    be ordered under each individual order during  a specified period of time.
                    Similarly, when small orders are anticipated, the contract may specify  the
                    minimum quantities to be ordered.  Funds are obligated by each order and not
                    by the contract itself.

                    A requirements contract may be used for procurement when it is impossible
                    to determine  in advance the precise quantities of  the supplies or services
                    that will be needed by EPA  during a definite period of time. Advantages to the
                    government of this type of  contract are:

                      (1)  flexibility with respect  to both quantities  and delivery scheduling;

                      (2)  supplies or services  need be ordered only after actual need has
                           materialized.

                    Generally, the requirements contract is appropriate for  use  when the item
                    or service is  commercially available and when a  recurring need is
                    anticipated.

                (3)  Indefinite Quantity Contracts.  The indefinite quantity type of contract
                    provides for the furnishing  of  an indefinite  quantity of specified supplies or
                    services, with deliveries to be scheduled by the placement of orders to the
                    contractor. The contract provides that the Government  will order  a stated
                    minimum quantity of the supplies or services  and that  the contractor will


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                    furnish the minimum and any additional quantities not exceeding a stated
                    maximum.  .

                    The maximum quantity (or amount expressed in dollars) should represent
                    the Government's best estimate of potential usage. In appropriate cases the
                    maximum may be raised during the contract period, if justification for
                    using other, than full and open  competition exists.  The minimum must be
                    more than a nominal quantity; yet it should not exceed the amount which is
                    fairly certain to be ordered. The common practice is for the first order to
                    be for the minimum quantity, and placed simultaneously with contract
                    award.  EPA Form  1900-8 (see  form on  page 71), Optional  Form 347 or
                    another form approved by EPA may be used in placing orders. Some
                    contracts of this type also  stipulate  minimum and maximum  quantities
                    applicable to each order.

               3.8.1.  When Used

               An indefinite quantity contract may  be used where it is impossible to determine
        in advance the precise quantities of the supplies  or services that will be needed by EPA
        during a definite period of time and it is not advisable for the Agency to commit itself for
        more than a minimum quantity.

               Traditionally, fixed-price or fixed-rate arrangements have been  used in
        indefinite quantity contracts.  In such cases the  solicitation provides for  fixed amounts
        per item specified, and evaluation of proposals for award is based on  respective  offerers'
        bid prices per item  times the maximum quantity.  Other forms of pricing arrangements
        may be used. These methods include:  (i)  fixed  loaded  labor rates  in the time-and-
        material or  labor-hour mode and (ii)  cost-reimbursement.

               3.8.2.  Issuance of  Work

               Work is ordered through  the issuance of delivery orders.

               3.8.3.  Advantages/Disadvantages for  Government

               If time-and-materials or  labor-hour pricing arrangements are used, the
        indefinite quantity contract has the same disadvantages as those types of contracts.
        Therefore, it is essential that adequate Government surveillance be performed at all
        times.

               There are, however, certain advantages  to the indefinite quantity  type which
        make it attractive to the government in some situations.  These are:

               (1)   discrete funding with each order;

               (2)   flexibility with respect to both quantities and delivery  scheduling;

               (3)  placing orders only as the need arises;

               (4)   flexibility in the types of pricing  arrangements selected for  use; and

               (5)   the Government's legal obligation is limited to contract  minimums and
                    delivery orders as issued.
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                3.8.4.  Advantages/Disadvantages for  Contractor

                These contracts have the advantage of guaranteeing that the Government will
         order a specified minimum quantity of product or services. They also provide the
         contractor with the potential of maximizing profits, particularly if time and material or
         labor-hour arrangements are used.

                The disadvantages from the contractor's standpoint are also major, however. The
         contractor has no control over the scheduling of orders, and must respond promptly
         when orders are placed.  The contractor must always "be prepared." In addition, there is
         no guarantee that the Government will order more than  the required minimum quantity.
         So the contractor has to stay prepared but may not be requested to deliver.  This can be
         costly, and it is hard for the contractor to plan effective resource allocation.  There is
         also  likely to be a high degree of Government surveillance, and the contracts require a
         high  degree of management involvement on the part of the contractor.

         3.9   Letter  Contracts

                A letter contract is  a written preliminary contract that authorizes the contractor
         to begin work immediately, before negotiations have been completed and a definitive
         contract awarded.  It is used only when the supplies or services are so urgently needed
         that the Government's interests demand that the contractor be  given a binding
         commitment to commence performance, e.g., in Superfund cleanups to procure
         emergency response services from local contractors.

                A letter contract must contain a maximum liability of the Government to cover
         the estimated amount necessary to cover the contractor's efforts before the contract is
         definitized (negotiated and converted to another  type of contract).  This liability must
         not exceed 50 percent of the estimated cost of the definitive contract.  Definitization of
         the contract must occur within 180 days after the date of the  letter contract or before
         completion of 40 percent of the work to be performed, whichever occurs first.

         3.10   Major  Procurement  Classes

                From the standpoint of contract administration and its  complexities, an
         alternative method of  categorizing contracts and technical monitoring requirements is to
         classify them as mission  contracts, non-mission contracts, and small purchase orders.
         This  classification is useful  because it distinguishes the relative  size and complexity of
         the contract, the number of individuals involved  in contract administration, and the
         scope of technical  review required.

                (1)  Mission  Contracts  are typically  large, multi-year contracts
                    characterized by broad statements of work.  Performance is obtained by the
                    issuance of individual work assignments (or  in the case of indefinite
                    delivery/indefinite quantity contracts, through the issuance of delivery
                    orders.)  That is. the contract  is "definitized" through the issuance of work
                    assignments or delivery orders. Page 63 is an example of a work
                    assignment action request used for issuing work assignments.  Page 67
                    illustrates a sample delivery order form.

                    Mission-type  contracts usually involve at least two administrative levels.
                    For example, LOE contracts are administered by a Project Officer, who


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                    typically delegates the preparation and monitoring of work assignments to
                    one or more Work Assignment Managers.  For indefinite delivery/indefinite
                    quantity contracts, the Delivery Order Officer or Administrative Delivery
                    Order Officer may delegate the preparation and monitoring of delivery
                    orders to one or more Delivery Order Project Officers.

                    Some Superfund contracts have yet a third method of definitizing work,
                    through the issuance of Technical Direction Memoranda (TDMs) or Technical
                    Instruction Directives (TIDs).  These are used to formalize the issuance of
                    technical direction where the work assignment or delivery order is broad
                    and requires further definition. A sample of a task directive is found on page
                    69.

                (2)  Small  Purchase  Orders are contracts used to procure products or
                    services valued at $25,000 or less.  Because of their scope and relative
                    simplicity  (most are fixed priced contracts), contract administration for
                    small purchase orders is similarly simple.  The Project  Officer usually is
                    the only program individual  involved, the  work is  usually relatively well-
                    defined and requires minimal oversight, and the period of performance  is
                    generally  short.

                (3)  Non-Mission or  All Other Contracts. The balance of EPA contracts
                    for the performance of work  valued in excess of $25.000 are typically
                    administratively simple, since they involve only one administrative layer,
                    the Project or Ordering  Officer. The Project/Ordering Officer handles all
                    contract administration functions delegated by the Contracting Officer,
                    regardless of contract type.
                                                                                                 86
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Contract
 Types

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         CONTRACT FUNDING
                4-0
PCMD9/89                               87

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  THE CONTRACT FUNDING PROCESS
 (Or, How We  Get And Spend Money!)
              CONGRESS
            APPROPRIATION
            APPORTIONMENT
             ALLOTMENT
             COMMITMENT
             OBLIGATION
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        APPROPRIATED  FUNDS
      LIMITS ESTABLISHED BY CONGRESS

 «/Time  Restrictions

     Limit  The Time  During Which Funds May
     Be  Obligated Or Expended

  Subject-Matter  Restrictions

     Limit  the Use To Which Funds Can Be
     Put For  Accomplishing  Specific  Purposes
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      THE LIFE  OF  AN  APPROPRIATION

   ANNUAL  APPROPRIATIONS  (6890200)
       May Be Obligated Only During The Fiscal Year
       Covered By the Appropriation Act. Unobligated/
       Funds Are Lost To The Agency. E.g., EPA's S&E
       Appropriation)

   MULTI-YEAR  APPROPRIATIONS  (689/00108)

       May Be Obligated During A Specified Period In
       Excess Of One Year, But May Not Be Obligated
       After The Life Of The Funding. (These Are Usually
       Two-Year Appropriations, E.g., EPA's R&D And
       AC&C Appropriations. R&D's Number Is 689/00107.)
       However, These Funds Must Be Recertified When
       Using A Prior Year Account Number.

     NO-YEAR  APPROPRIATIONS (68/20X8145)
                                  CS^/HW«9
       Are "On-Going" Funds And May Be Obligated
       Until The Appropriation Is Exhausted. Funds Not
       Obligated Remain With The Agency And Do Not
       Lapse Back To The Treasury. (E.g., EPA's Superfund
       Appropriation). However, These Funds Must Be
       Recertified When Using A Prior Year Account Number.
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          BONA FIDE  NEED  RULE
         DEFINITION

       A Fiscal  Year  Appropriation  May  Be
       Obligated Only To  Meet A Legitimate
       Or Bona Fide Need Arising In The Fiscal
       Year  For Which The  Appropriation Is
       Available.

       Issue:    This Rule Comes Into Play When
       You  Have End Of Year Funds  That  You
       Either  Must Obligate  Or Lose.
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            TYPES  OF  SERVICES
   1. SEVERABLE SERVICES:
      Performance Must Be A Bona Fide Need For The
      Time Period In Which It Occurs. Hours Of Service
      Can Only Be Charged To, And Consumed In, The
      Fiscal Year In Which The Need Arises.

      Deliverable Is Always A Service (Not A Product,
      Even When It Appears To Be A Product) For A
      Specified Time Period. Service Must Stop At The
      End Of The Fiscal Year, Regardless Of The Stage
      Of Project Completion. Option Years Exercised
      Must Spend Option Year Hours And Funds.

      Typical Examples Are All Term Form (Level Of Effort)
      Contracts, Some Labor-Hour And Time & Materials
      Contracts.
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          RULES FOR  SEVERABLE
           SERVICE CONTRACTS
     (All Term Form [LOE's], Some Labor/Hour, Time & Materials Contracts)
         1.  All Hours Within Contract Period (Base
            And Each Option) Must Be Ordered And
            Completed Within The Contract Period
            Charged.

         2.  Work Assignments Must End Concurrently
            With Expiration Of The Charged Contract
            Period. Uncompleted Or Further Efforts
            Must Be Issued Under New Work Assignments
            Charged To The Subsequent Contract
            Period (Fiscal Year Appropriation).

         3.  Contract Performance Periods Must Be
            Established Consistent With The Period
            Of The Appropriation Encumbered (Base
            And Each Option Year).

         4.  The Contract Base And Each Option Period
            Are Separate And Distinct.  Hours Not
            Ordered At The End Of Each Period Are Not
            Available For Use In Subsequent Contract
            Periods.  Can Transfer Unexpended Funds To
            Subsequent Period If Appropriation Extends.
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            TYPES  OF  SERVICES
   2. NONSEVERABLE  SERVICES:
      Performance Can Not Be Segmented. The Service
      Is Integral To Providing An End-Product. To
      Discontinue The Effort Based On Passage Of Time
      Alone Would Deny EPA The End Product Deliverable
      Which EPA Contracted For. The Bona Fide Need
      Arises At The Time The Product Is Ordered (I.e.,
      When Funds Are Obligated), Effort May Continue
      Regardless Of Fiscal Year Boundaries To Enable
      Completion Of The Product Deliverable.
        |., Completion-Type Contracts, Most Time &
      Material Contracts, Most Labor-Hour Contracts,
      Most ID/IQ Contracts.
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       RULES FOR NONSEVERABLE
           SERVICE  CONTRACTS
      (Fixed  Price Or Cost-Reimbursement Completion
                   Form Contracts)
  1.  Effort May Cross Fiscal Years. Prior Fiscal Year Funds
      May Be Used To Pay For Tasks Completed In
      Subsequent Fiscal Year, So Long As All Funds Were
      Obligated During Fiscal Year When Task Was Initiated.
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         ANNUAL APPROPRIATION
            EXAMPLE    (6810200
            (E.G., FY 91 SALARIES & EXPENSES)

     1. TERM FORM (LEVEL OF EFFORT): Must Obligate
       FY 91 Funds And Complete Performance In FY 1991,
       May Sometimes Deobligate Excess Funds &
       Reobligate To Other Contract That Can Complete
       Performance/Spend Funds During FY 1991.

     2. COMPLETION FORM: Must Obligate FY 91 Funds
        In FY 1991, But Performance May Extend Beyond
        FY1991. Excess Funds May Be Deobligated
       And Reobligated In FY 1991 Only.

     3. INDEFINITE QUANTITY: Nature Of Delivery Order
       Governs. If Work Statement Is Severable, Then
       Above Applies. If Nonseverable, Then #2 Above
       Applies. Delivery Orders Must Be Issued Within
       Specified Contract Period, But Normally Contract
       Terms Allow Performance To Go Beyond The
       Contract Period Of Performance.
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      MULTI-YEAR  APPROPRIATIONS
            EXAMPLE   (681/20108
             (E.G., A.C.&C.,  R&D Appropriations)

   1. TERM FORM (LEVEL OF EFFORT):  Must Obligate FY
     91/92 Funds In FY 1991, Unless The Comptroller Grants
      A Carryover Allowance (Re-Certification).  Funds Must
      Be Expended And Performance Completed By End
      Of FY92.

   2. COMPLETION FORM: Must Obligate FY 91/92 Funds
     In FY 1991 Unless The Comptoller Grants A Carryover
     Allowance, But Performance May Extend Into Later Years.
     Or Until End Product (Deliverable) Is Completed And
     Accepted.

   3. INDEFINITE QUANTITY:  Nature Of Delivery Order
     Governs. If Work Statement Is Severable, Then #1 Above
     Applies. If Nonseverable, Then #2 Above Applies. All
     Delivery Orders Must Be  Issued Within Specified Contract
     Period. Normally Contract Terms Allow Performance To
     Go Beyond The Contract Period Of Issuance.
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          NO-YEAR  APPROPRIATION
           EXAMPLE   (68/20X8145)
               (E.G.,  Superfund  Appropriation)

   1.  TERM FORM (LEVEL OF EFFORT): Must Obligate FY
      91 Account Funds In FY 1991, Unless Comptroller Grants
      Carryover Allowance (Recertification). Must Complete
      Performance Within Existing Contract Period, But
      Otherwise Is No Limitation On Year Of Expenditure. May
      Deobligate Excess Funds. Need To Recertify Funds From
      One Year To Next Due To EPA Policy.

   2.  COMPLETION FORM:  Must Obligate FY 91 Funds In
      FY1991 Unless Obtain Carryover  Allowance, But
      Performance May Extend Into Later Years. May
      Deobligate And Reobligate Excess Funds Subject To
      Need To Recertify.

   3.  INDEFINITE QUANTITY:  Nature Of Delivery Order
      Governs. If Work Statement Is Severable, Then #1 Above
      Applies. If Nonseverable, Then #2 Above Applies. All
      Delivery Orders Must Be Issued Within Specified Contract
      Period. Normally Contract Terms Allow Performance To
      Go Beyond The Contract Period Of Issuance.
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          INTRACTS FUNDED  FROM  MULTIPLE
                  APPROPRIATIONS
     The Director, Financial Management Division, Must
     Approve The Project Officer's Rationale For Allocating
     Costs Among Appropriations When:

     1. Any Proposed Contract Will Be Funded From More
       Than One Appropriation And Will Have Neither
       Delivery Orders Nor Work Assignments,
        OR
     2. Any Specific Work Assignment Or Delivery Order
       Will Be Funded From More Than One Appropriation.
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        Rationale Must State:

            - The Contract Number

            - The Work Assignment Or Delivery Order
             Number (If Applicable)

            - Each Appropriation Number

            - The Allocation Method Proposed

            - The Basis For Use Of Such Methodology

        The Director, FMD, Must Approve The Rationale
        Before The Contract Can Be Awarded Or The Work
        Assignment Or Delivery Order Can Be Issued.
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                                             Chapter 4
                                       CONTRACT FUNDING
               Contract funding is a complex issue which is fully understood by surprisingly
        few peopje. Rules apply as to which contracts can be incrementally funded.  This chapter
        will attempt to explore these issues with the intent of making them less complex for
        Project Officers and other  personnel outside the contracting and budgetary fields.  The
        rules on  contract funding are as applicable during contract administration as they are
        during the  pre-award phase of a contract.

        4.1  The Appropriations  and Contract Funding  Process

               Funding for EPA contracts  results from a Congressional appropriation.  Public
        funds may not be used for the acquisition of supplies and services without authorization
        from Congress. The Agency's proposed budget is presented to Congress well in advance of
        the fiscal year for which it  is proposed.  It is reviewed by both the House and the Senate,
        defended by Agency officials, and must be approved by both Appropriations Committees
        before it  is passed into law.

               EPA may spend its appropriated funds in line with its budget, and commit its
        funds to  carry out the budgeted projects, including contracts.  The particular program
        (e.g., Superfund) "commits" its funds  to specific contracts; PCMD contracting officers
        in turn have the authority  to "obligate" those committed funds through the signing of
        contracts on behalf of  EPA.

        4.2  Types of  Appropriations

               Congress establishes limits on the use of appropriated funds, which are either
        time  restrictions, subject-matter restrictions, or both.   Time restrictions  limit the
        time during which funds may be obligated or expended. Subject matter restrictions
        limit the  use to which  money can be put for accomplishing specific purposes, such as a
        program  or project.

               Annual appropriations (one-year funds) may be obligated only during the fiscal
        year covered by the Appropriation Act.  Thus, any unobligated funds are lost to the
        Agency.   Multiple-year appropriations, such as two-year appropriations, may be
        obligated within a specified period in excess of one year, but may not be obligated after
        the life of the funding. "No year" funds are "continuing" funds, under which obligations
        may be  made without time restrictions until the appropriation is exhausted.

               EPA currently  has  several appropriations against which contracts may be
        charged:

               (1)   Annual Appropriations. Funds appropriated under the Salaries and
                    Expenses (S&E) Appropriation currently last for only one year.  Funds not
                   obligated during the fiscal  year  revert back to the Treasury.  Contracts
                   typically charged to this appropriation are generally administrative in
                   nature, i.e., janitorial services,  landscaping services, or economic
                   consultants. The S&E appropriation number  for FY  91 is 6810200 (FY92
                   would be 6820200, etc.) and must appear on all procurements requests.
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               (2)  Multi-Year Appropriations.  Funds appropriated under the Abatement,
                   Control and Compliance (A.C&C) Appropriation are available for two years;
                   funds not obligated the first year are "carried over" into the second year.
                   The Office of the Comptroller issues "carryover" allowances the second year.
                   Carryover funds may also be reprogrammed (moved from one account to
                   another), subject to  the same restrictions as new authority. Contracts funded
                   under this appropriation are generally program-related,  i.e., contracts  to
                   perform laboratory analyses of water or hazardous waste materials,  or
                   contracts to perform  environmental impact studies. The  AC&C appropriation
                   number for  FY 91/92 is 681/20108; for FY 92/93 would  be 682/30108,
                   etc.  The number "68" is EPA's designated number.

               (3)  Research and Development (R&D)  Appropriation.  These funds are also
                   available for two years. The Office of Research and Development manages
                   most of this appropriation and issues a variety of research grants and
                   contracts under its aegis.  The  R&D appropriation number for FY 91/92 is
                   681/20107.  Other organizations may also have  two-year appropriations.

               (4)  No-Year Appropriations. The Superfund Appropriation  is a "no-year"
                   appropriation; the  funds are available until obligated and do not lapse back to
                   Treasury.  The majority of the Superfund appropriation is managed by the
                   Office of Solid Waste  and Emergency Response. Contracts are issued for a
                   variety of purposes, including laboratory analyses, cleanup of hazardous
                   waste, and construction of containment facilities.  The Superfund
                   appropriation number is 68-20X8145.   This number remains constant
                   throughout the life of the appropriation.

               (5)  Other. There are a  number of other appropriations  which are smaller than
                   those mentioned above, are specified for much narrower purposes, and are
                   usually managed by a single office, e.g., Building and Facilities funds for
                   construction  work.

        4.3 Bona  Fide Need Rule

               The general rule  for lawfully obligating a fiscal year appropriation is that the
        supplies or services are intended to serve a bona fide need of the fiscal year for which
        the appropriation was made.  This rule has particular application in  the contract
        administration phase, as  it may  limit the carryover of funding and hours into option
        periods in certain types of contracts.

               The main question to be  answered,  if the contract is for services, is whether the
        services can be classified as severable or non-severable. These terms, as they apply to
        the bona fide  need question, are defined as follows:

        <=^    (1)  Non-Severable  - a contract is  non-severable if the required  perfor-
                   mance is such that it cannot be segmented on the basis of time. The
                   performance  required focuses on completion of  the required work rather
                   than providing effort  over a period of time.c^jGenerally/non-severable
                   contracts tend to  involve non-repetitive  services or products where  there is
                   a definitive workscope which cannot be fragmented by time periods. A
                   completion form of cost-reimbursement contract is non-severable, e.g.,
                   providing registration services for  a specific event.  Fixed price contracts
                   are also generally non-severable.   (However, fixed price orders placed
                   under indefinite quantity/indefinite  delivery form contracts may be


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                    severable, as in the case of janitorial services.)- An example of non-
                    severable service contract would be a requirement for an economic analysis
                    of a specific industry affected by a proposed EPA regulation.

                    Under a non-severable contract, appropriations available for the year in
                    which the contract is executed may be used to fund the entire performance,
                    even though delivery or performance may continue into a later fiscal year in
                    which the appropriated funds are not available.  This is true because a bona
                    fide need exists during the fiscal year in which the  contract is awarded and
                    funds are available for obligation.

                (2) Severable - a contract is severable when  the required performance
                    reflects a direct relationship  to specific time period(s) and performance can
                    be identified only as a bona fide need for the time period in which it occurs.
                    Severable contracts tend to  involve repetitive or routine continuing
                    services, and are defined in terms of hours and not  end product. They tend to
                    have a general workscope. A general rule of thumb is:  If the contract
                    requires performance of services throughout a period of time rather than bv
                    a certain date, there is a good likelihood that it is severable. Severable
                    contracts continue over a time period as opposed to a single job arrangement.
                    Services provided under cost reimbursement, term form (LOE) contracts
                    are defined as severable.  An example of severable services is a contract
                    calling for general policy support in the area of CERCLA Enforcement where
                    work assignments are to be issued during contract performance which
                    describe specific tasks to be performed, such as gathering all EPA costs on a
                    particular hazardous waste site for recovery against the responsible party.

                    Under a severable contract, the period of the contract must be consistent
                    with the period for which the funds are available, and hours or services
                    must be expended during the period of availability.  In other words, a
                    contract for severable services funded with a 2-year appropriation can  have
                    a base period only as long as the  availability of the appropriation.  (See
                    paragraph (e), below for  an  example of this rule.)  Other restrictions
                    applicable to  severable service contracts,  including  term form, level-of-
                    effort contracts are listed below:

                       (a) Completion of  Existing Work. All hours available within a given
                           contract period of  performance must be used within that period or
                           they are lost.  Work assignments which task specific directions
                           and/or order hours of effort must be  issued and  completed within the
                           same contract period to be  construed as valid charges to the
                           appropriation of that  period.

                       (b) Issuance of New Work.  New work assignments to conclude efforts
                           initiated under work assignments from a previous contract period
                           (base period or an option period) must be issued so that funds and
                           hours available in  the new period are charged for the work
                           accomplished during that subsequent period.

                       (c) Options-  Performance beyond the contract base period may be
                           accomplished by the use of options.  The exercise of options originally
                           evaluated at the solicitation stage and priced in contracts is not
                           considered to be new procurement.  As such, follow-on work
                           assignments  for work begun in the previous contract period may


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                          begin with the issuance of a new work assignment concurrent with
                          the effective date of the option period. Cost-reimbursement term
                          contracts may include a provision stating that, when an option to
                          extend the contract term  is exercised, work assignments initiated in a
                          previous period but not completed are extended into the option period.

                          The provision must clearly state that hours performed and costs
                          incurred during the option period are charged to that option period.
                          Work assignments must have a specific completion date and if this
                          date extends into the option period, the work assignment must refer
                          to the provision discussed above. A modification may be issued by the
                          Contracting Officer to existing contracts to incorporate the provision.

                      (d)  Extensions of Performance Period.  Any extensions to the period of
                          performance of a term  form contract, i.e., to the base or any of the
                          option periods of performance, is by regulation defined as new
                          procurement. As such, extensions can only be accomplished through
                          full and open competition procedures or through one of the seven (7)
                          statutory exceptions to obtaining full and open competition.  Each
                          period of performance (base and each option) is separate and distinct
                          and these procedures apply separately for extensions to each period.
                          Work assignments for follow-on or new work may only be issued
                          upon approval and execution of the extension. These work
                          assignments may be issued concurrent with the effective date of any
                          such contract modification.

                      (e)  Period of Performance. To ensure that obligations in each contract
                          period of performance (base and each option) are proper, such
                          periods of performance must be established consistent with the
                          period of the appropriation(s). For  example, the base period of the
                          contract could extend from the date of award to the expiration date of a
                          two-year appropriation.  For a contract awarded October 1, 1985, or
                          thereafter against a two-year appropriation, (e.g.  FY 86/87).  the
                          base  period could extend until September 30, 1987.

                          A contract funded with the same appropriation and awarded on
                          December  15,1986 could also have a base period through September
                          30, 1987. Option periods beyond this base period may also be
                          established consistent with anticipated periods of future
                          appropriations.  However, considering pricing uncertainties beyond
                          three years in the future, good contract management would strongly
                          suggest that option periods beyond the base period be written for one
                          year at  a time.

                      (f)  Unexpended Funds: Audits. The contract base and each option period
                          of performance are separate and distinct.  Hours not ordered and
                          unexpended funds from expiring appropriations remaining at the end
                          of each period are not available for use in the subsequent contract
                          period.  Funds from expiring appropriations should be deobligated to
                          the extent  they exceed the Government's liability. To definitively
                          ascertain all actual allowable, allocable, and  reasonable  costs
                          requires a  final audit.  Contracting Officers could order audits and
                          close each year separately.  It is generally more efficient to only
                          order a single final audit after the conclusion of the last option


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                          period.  Normally, funds are deobligated only after settlement of the
                          final contract audit, but may be deobligated earlier, provided that
                          sufficient funds are left to provide for unforeseeable increases in cost
                          that may result, e.g., from the application of final  indirect cost rates.
                          (See Section 4.8, below, for a discussion of deobligation of contract
                          funds.)

                      (g)  No-Year  Appropriations.  Contract performance periods involving
                          appropriations with  indefinite obligation terms, commonly  referred
                          to as no-year funds or x-year appropriations, should be consistent
                          with sound program and contract management needs. Contract periods
                          (base and options) may be established for terms as long as these
                          needs dictate.  Generally,  contract periods of up to three years
                          approach the limit of sound contract management.  Periods for more
                          than three years must be approved by the Chief of  the Contracting
                          Office prior to issuance of the solicitation.

               Because of these restrictions on severable service contracts,  Project Officers are
        encouraged to develop definitive Statements of Work that can be priced as either cost-
        reimbursement completion  type or fixed-price completion contracts,  which, as they
        constitute non-severable services, may cross fiscal years and be charged to the year in
        which the contract is executed. See Appendix 4A on page 113ff for a  comptroller general
        decision and further discussion.

        4.4 Accounting  Data

               Contract obligations carry with them certain  accounting data which specifically
        identify them.  These are:

               (1) Appropriation number - As  described above, this number varies depending
                  whether the appropriation is annual, multi-year or no-year.   For example,
                  the annual S&E  appropriation number for FY88 was 6880200.

               (2) Account number - An account number  is a 10-digit alpha/numeric identi-
                  fication which classifies accounting data  by organizational structure and
                  program budget.

               (3) Document control number (DCN) - The  DCN is a 6-digit  serial number
                  uniquely assigned to each commitment, and is recorded with each obligation
                  made against that commitment.

               (4) Object Class - An object class is a code used to identify the kind of material
                  or  service to be obtained. It consists  of four digits and is divided into two
                  parts,  i.e., a major object class (first two digits)  and a sub-object class
                  (last two digits).

               (5) Amount - The amount of the obligation is to be shown in dollars and cents.

               Each EPA program office has an administrative staff member designated to assign
        and manage that office's funds. This individual records all commitments made and
        monitors the availability of program funds. This individual should be contacted to obtain
        the appropriate DCN number and verify all accounting data.
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        4.5  Selecting  Appropriations to Fund  Contracts and  Distribution  of  Costs
             Among Source Appropriations

               Each time a work assignment, delivery order or contract without work
        assignments or delivery orders is funded, the office originating the action must decide
        which appropriation or appropriations will be the source of funds for that contract
        action. Certain rules apply to the selection process and to the distribution of costs among
        appropriations if  more than one appropriation is used.

               a.  Selecting Appropriations.  Not all  EPA  appropriations are available to
        fund every type of contract action.  To find out which  appropriations are available to
        fund a given contract action, an office must first decide which object class should be
        assigned to the action. The Financial Management Division (Fiscal Policies and
        Procedures Branch) annually distributes an updated listing of  object classes and
        definitions. (The object class is entered as part of the accounting data on procurement
        requests.)  The office must then review the Budget Division's  (Budget Formulation and
        Control Branch)  listing of allowable object classes by appropriation to determine which
        appropriations are available to fund the particular contract action.  Before the
        procurement request is sent forward to PCMD, an office originating a contract action
        must ensure, through their senior budget officer, that only allowable appropriations are
        used.

               b.  Consistent Use of Appropriations. Generally, a single appropriation is
        chosen to  fund each work assignment, delivery order, or contract without work
        assignments or delivery orders. The General Accounting Office has issued an opinion to
        EPA on the continued use of that appropriation, once selected, to the exclusion of any
        other source of funds.  The basic rule, as stated in Resources Management Direction
        2510  (Planning and Budgeting), page 4-4 is:

               Where either of two appropriations may reasonably be construed as
               available  for expenditures not specifically mentioned  under  either
               appropriation, the determination of the agency  as to which of the two
               appropriations to use will not be questioned. However, once  the election
               has been made, the continued use of the appropriation selected to the
               exclusion of any other for the same purpose is required, in the absence of
               changes in the appropriation acts	

               Under this "pick and stick" rule, for example, EPA could not decide to fund a  work
        assignment from  the Research  and Development appropriation and then subsequently
        propose to place  additional funds on the same effort from the Abatement, Compliance and
        Control apppropriation.

               c.  Distributing Costs Among Appropriations. Where  a work assignment,
        delivery order or contract provides services  or other benefits to more than one
        program, the costs (both obligations and disbursements) of that contract action  may  be
        charged to more  than one  appropriation. For example, a contract work assignment for
        entry of Agency financial data  into the EPA finacial system provides services benefiting
        both the Superfund  program, which is funded from the Superfund appropriation, and
        other Agency programs funded from the Salaries and Expenses appropriation. Data entry
        for Superfund could possibly have been separated out, and individual work assignments
        issue for each. However, EPA  may combine the work under one work assignment, and
        fund it from both the "benefiting"  appropriations if it is in the interest of government
        efficiency and cost-effectiveness to do so.
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               This situation is distinguishable from the circumstances described above, where
        a single appropriation had to be selected to fund the action.  In the above case, the work
        was not divisible as to benefitting appropriation.

               If a work assignment, delivery order or contract benefits more than one
        appropriation, there are two options for charging costs to  the respective appropriations.
        The option chosen  for distributing the costs must be clearly stated as part of the
        procurement request.  The two approaches are:

               i.  Direct Charging.  If there is a practical, cost-effective way of determining
        which portion of services are being performed for each Program, the costs should be
        directly identified as such.  In the keypunching example, it may be feasible to separate
        Superfund processing  from other work and to record the hours of contractor staff doing
        work benefitting each.  Or for a work assignment to perform literature searches, the
        staff hours and computer user charges may be distinguishable as to the  Program being
        serviced.

               ii. Allocation Methodologies. If direct  charging is not feasible or not an accurate
        method of determining the costs to be charged to each source appropriation, the contract
        costs may be allocated to the appropriations.  However, before PCMD will approve a
        procurement using  an  allocation methodology, the Director  of EPA's Financial
        Management Division must approve the methodology.  To request approval, the
        originating office must  submit a copy of the procurement request and the statement of
        work to the Director, FMD, along with at least the following information:

               o  Explanation  of why direct charging of costs is not practical or would be less
                 accurate than allocation methods;

               o  Identification of the "statistic" proposed to be used to distribute the  costs
                 (e.g., the  ratio of Superfund transactions to total transactions  processed by the
                 keypunching  service, or ratio of Superfund FTEs to total FTEs in the office to
                 which a contractor  is providing services.);

               o  Explanation  of why the proposed ratio for distributing costs is the best
                 indicator of benefit to the respective programs served; and

               o  A statement indicating that the numerical ratios will be reviewed and
                 updated, and the contract charging adjusted accordingly, by the end of each
                 fiscal year. (See Contracts Management Manual Chapter 9 for additional
                 information.)

        A signature  block for the Director, FMD, must be included at the bottom of this
        information.

               Once the allocation methodology is approved,  the Project Officer is responsible
        for  ensuring that the calculations are properly done, that the numerical averages are
        updated as needed (e.g., as transaction ratios change), and that the costs are  properly
        allocated on  the Project Officer Invoice Approval form or on the contract voucher.

               Allocation methodologies have typically been used for support type contracts that
        benefit both the Superfund Program and the other programs of the Agency, whose
        intramural expenses have traditionally been funded from the Salaries and Expenses
        appropriation.
PCMD8/89                                         7                                             109

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              NOTE:  The requirement for FMD review of allocation methodologies applies only
       to use of more than one appropriation in the circumstances described above - it does
       NOT apply when more than one account under a SINGLE appropriation funds a contract
       action.

       4.6 Voucher  Payment.

              The Project Officer must provide on every invoice  approval the accounts (and
       amounts) against which invoiced costs are to be charged.  (See Chapter 11 for details.)

              The financial  management office cannot pay contractor billings unless the account
       numbers and amounts to be charged to each account are clearly stated on the Project
       Officer approval.  A Project Officer's failure to comply with these procedures will delay
       processing of payments and may result in an Agency violation of Prompt Payment Act
       requirements.

       4.7   Incremental Funding

              Incremental funding is defined as partial funding of a cost-reimbursement
       contract.  It is used in situations where program offices do not have the full amount of
       funds available at the time of contract execution, but expect to have it later in the
       contract period.

              This type  of funding can only  be used under cost-reimbursement  contracts.
       Under a fixed-price contract, the entire amount of the contract must be obligated at the
       time of contract award.   Indefinite delivery/indefinite quantity contracts  must obligate
       the entire contract minimum  at award; thereafter, each delivery order must be fully
       funded at the time of issuance.

              Under an incrementally-funded contract, a contractor is required to perform
       only until the amount funded has been expended, not up to the entire negotiated estimated
       cost.  For this reason, Project Officers must ensure that the amount of incremental
       funding made available is sufficient to keep the contractor working until the balance can
       be obligated.  If the Government fails to provide the full amount of funds needed to
       complete the work, the contractor  will cease to perform and is no longer liable for
       further work unless and until additional funding is made available.  Contracts will not be
       awarded on an incrementally-funded basis unless there is  a reasonable assurance that
       the entire estimated  cost will be provided before the incremental funding is exhausted.

       4.8  Deobligation of Contract  Funds

              Contract funds may only be deobligated by a Contracting  Officer and only in
       certain situations. These are:

              (1) Substitution of funding from one appropriation or account to another. In
                   this case, the deobligation takes place concurrently with the obligation of an
                   equal amount of funding  with different accounting or appropriation data.

              (2) Deobligation of unearned award fee after the  Fee Determination Official
                   awards the fee for a specific period.

              (3) Unexpended  funds from  expiring appropriations remaining at the end of each
PCMD9/89                                        g                                            110

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                   contract period.  (This is usually only done after an interim or final audit
                   has been performed, unless a mutual agreement has been executed between
                   the contractor and the Government to reduce the estimated cost for that
                   period. When excess funds are deobligated before a final audit, the
                   Contracting Officer must retain  a certain amount to cover possible
                   .ii..ii.i • Jiiiirr,  ..II!..  .:t' «• icyi '.•  •  "*-    '   'V ''j'1  -' * L **.'.. V J •?•>• ''V    .  >
                   adjustments for  indirect rate increases and other potential adjustments.)

               (4)  Settlement of an interim final audit on a  particular contract period.  This
                   must be executed by bilateral contract modification or, if agreement cannot
                   be reached,  by a final decision of the Contracting Officer.

               (5)  Termination  for  convenience of the  Government (total or partial) where the
                   remaining hours  or costs are not needed.  Settlement procedures require a
                   final  audit to determine the Government's actual liability.

               (6)  Termination for default where the work has not been  completed. All excess
                   funds for uncompleted work will be deobligated.  This may or may not
                   require a final audit,  depending upon the nature of the contract.  Funds
                   deolbigated as a  result of a default termination may also be used on a
                   successor contract which covers the same items or services.

               (7)  Equitable adjustment on certain change orders or supplemental agreements
                   which result  in a decrease to the contract  cost or price.

               (8)  Settlement of a final contract audit after the last option period has been
                   completed and all actual costs are known, and determined to be allowable,
                   allocable, and reasonable.  If agreement cannot be reached on the total final
                   cost, the  Contracting Office will issue a final decision, subject to the
                   "Disputes" clause of the contract (See Chapter 14).

               Deobligation of funds occurs through preparation of a purchase order similar to
        the one originally processed to obligate  the funds (including the appropriate accounting
        data described above) and indicating the amount of funds to be deobligated, as well as the
        reason for the deobligation.  See Appendix 4B on page 120 for a more detailed discussion
        of deobligation and recertification of funds.
PCMD9/89                                        «                                             111

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    xrr*
            UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                           WASHINGTON. D.C. 20460
                                    1986
                                                            OFFICE OF
                                                          ADMINISTRATION
                                                          AND RESOURCES
                                                          MANAGEMENT
       MEMORANDUM

       SUBJECT:  Comptroller General Decision on EPA Level of
                 Effort C<
FROM:


TO:
                          poi
                 Procurement
                 See Addressees
btor
tracts Management Division (PM-21
            Attached for your information is the subject decision.

       This decision confirms existing Procurement and Contracts

       Management Division policy on the issuance of work assignments

       under level of effort contracts.


       Attachment

       List of Addressees

       Rosemarie Nance (PM-214-F)
       William Wilfong (PM-214-F)
       Pam John (PM-214-F)
       Jack Zabretsky (PM-214-F)
       Don Hambric (PM-214)
       Douglas Richmond - RTP
       Richard Pohlkamp - CINN
       6 Regional Contract Specialists
       Policy 6 Quality Assurance Branch Staff
PCMD9/89
                                                                  113

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                                TMB COMPTPOUUBn GENERAL.

       DECISION (.[£n,S$].] O F THE UNITED  STATES

                                WASHINGTON.  O.C.  30948
                B-214597             DATE:  December 24, 1985

       MATTER OF:
                        EPA Level of Effort Contracts -
                        Appropriation Availability
       DIGEST:           rr                      J

              1.  The Environmental Protection Agency may not
                  issue a nonseverable work assignment under a
                  cost-reimbursement, level of effort, term  con-
                  tract where the effort furnished will extend
                  beyond the contract's initial period of perfor-
                  mance into an option period.  The  Federal
                  Acquisition Regulation requires that term con-
                  tracts be "for a specified level of effort for
                  a stated period of time."  Further,  issuance of
                  a work assignment which could not  be performed
                  until the next fiscal year would violate the
                  bona fide need rule.

              2.  The Environmental Protection Agency may not
                  modify a level of -effort contract  to
                  accommodate a non-severable task extending
                  beyond the original contract period of
                  performance.  Since the period of  performance
                  is an essential part of a level of effort
                  contract, any change in that term  would
                  substantially change the contract  such that  the
                  contract for which competition was held and  the
                  contract to be performed are essentially
                  different.  Accordingly, such a contract could
                  not be extended by contract modification.


        This is in response to a request from C. Morgan Kinghorn,
   Comptroller of the Environmental Protection Agency  (EPA),  for
   a decision regarding the propriety of issuing a  hypothetical
   nonseverable work assignment under a cost-reimbursement,
   level of effort, term contract, in which the effort  furnished
   will extend beyond the contract's initial period  of  perfor-
   mance.  EPA has also asked informally whether  it  may modify
   an existing level of effort contract to accommodate  a work
   assignment extending beyond the term of the original contract
   to be funded with appropriations available during the
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    3-214597
    initial  contract period.   Although  the contract described in
    EPA's  hypothetical also contains  options  to extend  the con-
    tract  for  additional periods  of performance, EPA  recognizes
    that performance under any options  would  be funded  with
    appropriations available during the fiscal year covered by the
    option period.  .EPA's second  question, however, is  whether a
    modification,  prior to option exercise, extending performance
    beyond the end of the fiscal  year during  which  the  original
    period of  performance takes place,  may encumber the funds of
    the expiring fiscal year.

        For the reasons set forth below, we  conclude that EPA may
    not issue  a work assignment extending beyond  the  term of a
    level  of effort contract, nor may it modify the term of an
    existing level of effort contract to accommodate  such a work
    assignment.

        Background;  EPA uses level  of effort, term  contracts  to
    perform  service-intensive type work, including,  for example,
    economic cost and benefit analyses  and  technical  analyses  of
    hazardous  waste regulations.   Typically,  EPA,  through its
    level  of effort term contracts,  purchases,  on a cost-
    reimbursement basis, a specified  quantity of  person-hours  (the
    level  of effort) for the contract's base  period and each
    option period.  The contract's estimated  cost is  established,
    based  upon a maximum number of hours set  forth in the con-
    tract.  EPA is obligated to order and  the contractor is  obli-
    gated  to furnish the specified level of effort within the  time
    period set forth in the contract.  The  contract provides  for a
    downward adjustment in the contractor's fees  if the contractor
    provides less than 90 percent of  the specified level of
    effort.   The contract's scope of work merely  sets forth  the
    broad  outlines of the type of work to be  performed.  During
    the term of the contract, EPA issues work assignments which
    draw on  the contract's specified quantity of  person-hours and
    require  the contractor to work on a specific task.

        EPA raises the following hypothetical situation:

              "Assume a level of effort, work assignment
        contract is awarded October 1, 1982, with a
        period of performance through September 30,
         1983.  The contract has an option for one addi-
        tional year running from October 1,  1983,
        through September 30, 1984.   Both the basic
        period of performance and the option year are
        for 10,000 professional hours  for each period.
        Assume that the contractor has provided 9,000
        hours as of September 25, 1983 and EPA issues  a
PCMD9/89                           - 2 -                            115

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   B-214597
        work assignment on September 26,  1983,  for
        1,000 hours.  The contractor will provide the
        bulk of hours in FY 1984.   The  work  assignment,
        when viewed alone, is for  nonseverable  ser-
        vices. "

   For purposes of our analysis of this hypothetical situation,
   we have assumed what EPA has implied but  not stated,  that  the
   contract is  being funded under  an appropriation  that  is
   available for obligation only through the end of  the  contract
   term.J/

        EPA asks two questions regarding this hypothetical  situ-
   ation.   The  first question is whether it  properly may issue
   the 1,000 hour work assignment  on September  26,  1983, recog-
   nizing  that  the contractor will provide the  bulk  of hours  in
   fiscal  year  1984.  The second question is whether  it  could
   modify  the terms of a level of  effort contract  to accommodate
   a work  assignment extending beyond the term  of  the  contract.

        Analysis;  We conclude that in  the hypothetical  situation
   posed by EPA, the issuance of a work assignment  which could
   not be  completed within the contract's initial  term of perfor-
   mance,  i.e., by September 30, 1983,  would have  violated both
   the Federal  Procurement Regulations  (FPR)2_/  and  the "bona
   fide need" rule, 31 U.S.C. S 1502(a).  As EPA concedes, EPA's
   level of effort contracts fall  squarely within  the  FPR defini-
   tion of "term contracts."  Section 1-3.405(e)(2)  of the FPR
   provide:

        "The Term form is one which describes the  scope
        of work to be done in general terms and which
        obligates the contractor to devote a specified
        level of effort for a stated period of  time for
        the conduct of research and development."
   V    Our assumption is based on statements in EPA's inquiry
   ~"    letter such as "so long as a nonseverable work assignment
        was issued during the period of availability of a
        particular appropriation * * *."  p.4.  We are aware that
        EPA generally receives appropriations which are available
        for 2 fiscal years, but the principles remain the same.

        The FPR,  rather than the Federal Acquisition Regulation
        (FAR), governed procurements by civilian agencies during
        the time  period specified in EPA's hypothetical ques-
        tions. However, the FAR has nearly identical provi-
        sions. See FAR 16.306(d)(2) and (4).
                                - 3 -
                                                                 116
:MD 9/89

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   B-214597
   The FPR further provides in section 1-3.405(e)(5):

        "In no event should the term form of contract
        be used unless the contractor is obligated by
        the contract to provide a specific level-of-
        effort within a definite period of time."
        (Emphasi s added.)

   Accordingly, to permit a contractor to provide a portion of
   the required 10,000 professional hours beyond the basic period
   of performance, i.e., after September 30, 1983, would be con-
   trary to the FPR requirement that such term contracts "provide
   a specific level of effort within a definite period of time."

        Further, the issuance of a work assignment which could
   not be completed within the contract's initial  term of perfor-
   mance would also violate the bona fide need rule.  The bona
   fide need rule requires that appropriations made available for
   obligation during a given fiscal year or years  may be obli-
   gated only to meet a legitimate need arising in that fiscal
   year (or years).  31 U.S.C. S 1502(a) (1982).   See, e.g.,
   38 Comp. Gen. 628 (1959).

        As a general rule, service contracts can extend beyond
   the duration of an appropriation period only when  the portion
   of the contract to be performed after the expiration of  the
   appropriation period is not severable from  the  portion
   performed during the prior period.  See 60  Comp. Gen. 219
   (1981).  In the EPA case, the level of effort contract  is, by
   definition, a severable services contract.   It  requires  the
   performance of a certain number of hours of work within  a
   specified time period rather  than requiring the completion
   of a series of work objectives.  Because  the original con-
   tract in EPA's hypothetical  is  for 10,000 hours of work  to
   be performed  in fiscal year  1983, funds obligated  under  the
   contract may not be expended  foj: work performed within  fiscal
   year 1984.  See B-183184, May'30, 1975.  The fact  that  a work
   assignment issued under the  contract  late  in the  fiscal  year
   might, by its nature, be considered nonseverable  if  this were
   what the FPR  (as well as the  FAR) call a  "completion"  form of
   term contract, does not change  the result  in this  case.  A
   completion contract would  require the ^contractor  to  complete
   and deliver a specified end  product—e.g.,  a final report.   As
   long as the end product  is  a  bona fide need of  the year in
   which it was ordered, the  funds could  remain obligated  until
   the end product was delivered.  See FPR  l-3.405(e)(1)  and
   FAR 16.302(d)(1).  In contrast, the EPA  hypothetical con-
   tract calls for 10,000 work hours before the end  of the fiscal
   year.  Performance of those  hours  in  the next fiscal year
   would not be  consistent with  the  requirements of  the con-
   tract.
                                                                  117
PCMD9/89                           - 4 -

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       The  second- question  raised  informally by EPA  is whether
  it  may modify the original  contract  to accommodate the
  completion  of a work  assignment, performance of which.will
  extend beyond the end of  the  contract period of performance.
  In  raising  this question, EPA says it recognizes that a
  modification  cannot be issued which  extends the term of  the
  contract  beyond the period  of availability of the  fiscal year
  appropriation to be charged.   Essentially, EPA  is  asking
  whether it  may amend  a level  of  effort contract near the end
  of  the fiscal year to provide for the performance  of a
  nonseverable  task,  performance of which will extend beyond the
  end of the  fiscal year.   As noted, EPA's modification would be
  for the purpose of funding  the modification with expiring
  appropriations.  Any  options  exercised, of course, would be
  funded with currently available  appropriations.

       The  determination of whether a  particular  modification
  should be treated as  a new  procurement is generally decided on
  a case-by-case basis.   For  example,  we have held that  if the
  contract  as changed is materially different from the contract
  for which the original competition was held, the new
  requirement should be procured competitively, unless a  non-
  competitive procurement is  justifiable.  57 Comp.  Gen.  285,
  286 (1976).

       The  essential characteristics of a  level of effort
  contract  are  the stated level of work and the term in  which
  that  work is  to be performed. Therefore, any change  in that
  structure —  particularly a change from  a specified  level  of
  effort for  a  fixed term to  the performance of specified,
  non-severable tasks — would  "substantially" change  the
  contract  such that "the contract for which competition was
  held  and  the  contract to  be performed ?re essentially
  different."  Accordingly, we  conclude that a modification  of
  the sort  suggested by EPA to  a level of  effort  contract could
  not be done by contract modification, but rather would require
  the execution of a new contract. This is because  EPA's
  suggested modification would  turn a  level of effort  contract
  into  a contract for one or  more  nonseverable tasks.

       In a memorandum  prepared by the EPA Office of General
  Counsel on  this issue before  it  was  submitted  to  us,  the sug-
  gestion was made- that use of  indefinite  quantity or  require-
  ments contracts would eliminate  the  end  of year problems
  encountered with level of effort term contracts.   We would
  agree that  the kind of services  explained  in EPA's hypothet-
  ical  question could be acquired  under such an  arrangement,
  provided  that the nature  of the  services themselves  is non-
  severable.  It appears that the  most satisfactory  form of  con-
  tract,  for  EPA's purposes,  may be  the completion  contract,
  described earlier as  requiring a specific end  product as a
                               - 5 -                              118
PCMD 9/89

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   B-214597
    condition  for payment of the full  fee and costs.   As a non-
    sevecable  contract,  performance could extend into a subsequent
    year  but be payable  from funds obligated at the time the con-
    tract was  executed.   See FAR 16.306(d)(1),(2),  and (3).
                                     Comptroller* General
                                     of the United States
PCMD 9/89
                                  - 6 -
                                                                   119

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                                                                  Attachment I
                                                                    rage i

                                     SS?  ! 2 !SS£

                                                                    '*•*•••-SS.'S1."
     MEMORANDUM
SUBJECT:  &e,flertif,ication of Tprfds
                                  /
                 ,,
                i^?, /-
     FROM:    ,-<. Morgan
          "*^  Compcr oiler  »

     TO:        Sea Attached Listing


         The purpose of this  aeaorandus is to stats the Office of  the Coortrollsr
     poiisj ani procedures for the deobligation and tecertif icatioa oc. excess
     funds  currently obligated on Agency contracts.  I aa offering  the following
     guidance to help clarify  the recartification process as it applies,  in.
     particular, to cost reimbursement tern, fora contracts.   The recertificaciou
     process has been the subject of auch discussion since the Office of  General
     Counsel decision applying the bona fide need principle to cast reiaburyeneat
     term contracts.   Definitive policy on the application of the bona. fide-
     need principle was issued by Seymour Greenstone on February LO, 1984.

     BACKGROUND

         The bona fide need principle is defined as an obligation  against as
     appropriation «hich is valid only if it relates to an actual need existing
     within the life  of an appropriation.  In order to obligate a fiscal year
     appropriation for payments to be made in a succeeding year, Che contract
     imposing the obligation muse not only have been made within the fiscal year
     to be  charged,  but the contract must have been made to meet a bona. fide
         ?£  tiat fiscsl y?ar.
    DE03LICATIOK AND RSCEtgglCATION POLICY

         You should use  the  following guidance to determine when recertificaeion
    is required.

    1.  Coat reimbursement term form contracts with option periods.  Excess
    funds (i.e. chose funds  obligated on the contract in excess of the work
    performed .or expected to be performed)  exist on the contract.

        a.  If the life  of the  appropriation obligated on the base contract will
    expire before the end of the option period, the excess funds are not available
    to fund the option period.   Recertification is not possible.
    TN8                               l3'3                                       120
PCMD9/89

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                                                                Attachment I
                                                                rage  t
     Examole:
     A cost reimbursement  tera  fora contract is co expire oa Sepceaber 30,
     1984.  The concracc.contains a one year opcion.  The funds obligated
     for che base year effort are froa the fiscal year 1983/1984 Abatement,
     Control and Compliance  appropriation.  Excess fiscal year 1983/1984
     funds are not available to fund  the  fiscal year 1985 option period.

     b.   If che life of Che  appropriation obligated on the base contract will
 cover the option period,  Che excess  funds nay be deobligaced froa the base
 period and may be used Co fund che option period effort.  If che reobligacioa
 occurs  during che current year allowance, no recertification is required.  If
 che reobligacion is planned for a ciae after che year of che current allowance,
 and reaains within che life of che appropriation, recertification is required.

     Example

     The cose reiaburseaenc  Cera fora concracc expires on Sepceaber 30,  1984.
     The concracc concains a one year opcion period.  The funds obligated
     for the base year efforc are from che fiscal year 1984/1985 Abaceaent,
     Control and Cocpliance  appropriation.  Excess fiscal year 195^/L9c;
     funds have been identified on che base contract.  The excess funds
     aay be reaoved (deobligaced) froa che base concract and used co
     fund che opcion period  (fiscal year  1985) if che opcion is exercised
     and che obligacion is made on or before Sepceaber 30, 1984 (I.e. before
     cbe end of che current  year allowance).  No recertification is necessary.
     The excess funds may  be reaoved  froa che base concracc and used  co
     fund che opcion period  after Sepceaber 30, 1984, only if che funds
     have been recertified.

 2.   Indefinite quaneiey - deliver? order fora contracts with option  periods.
 Excess  funds (i.e. funds  obligaced on a  delivery order  in excess of  che
 anticipated actual expenditures) exist oa a delivery order.

     a.   If che life of the  appropriation obligated on the delivery order
 will expire before the issuance of a new delivery order, the excess  funds
 are  not available to fund the  new delivery order.  Recertification is  not
 oossible.

     Examole:
    An indefinite  quantity contracs  has  a base ordering period of January 1,
    1984  to January  1.  1985.  A delivery order issued on January 1,  1984
    and funded with  fiscal year 1984 Salaries and Expenses funds is  found to
    have  excess  funds  available.  The funds aay not be reaoved froa the
    initial delivery order and  placed on a new delivery order -to be  issued
    after .September  30,  1984.   However,  funds aay be removed from the initial
    delivery order during the current year allowance and used elsewhere if
    action is taken  prior co October 1,  1984.

    b.  If the life  of  the appropriation obligated on the delivery order will
cover the time the new delivery order is placed, the excess funds on the initia
delivery  order may be  reobligated on a new delivery order (this assumes the
new delivery order is  nonseverable'or if severable, that the period of
performance of the delivery order is within the period of availability of
the appropriation).  If Che new delivery order is issued (under the base
                                 13-4                                     121

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                                                                     Attachment I
                                                                     r.uge j


      contract or a new option peeled) within the period of the eurreac year's
      allowance . no recertif icacton is necessary.  I! the aev delivery order is  to
      be  issued ia a period beyond the current year's allowance, recertification
      is  required.

          Example ;

          An indefinite quantity contract has a base ordering period of January  1,
          1984 eo January 1. 1982.  A delivery order issued on April I,  1984 and
          funded with no year Superfund monies is found to have excess  funds avail-
          able.  The excess funds may be removed from the delivery order  and placed
          on a delivery order issued on September 1, 1984.  NO recertif ication is
          necessary.  If excess funds are removed from the delivery order and
          placed on a delivery order issued on November 1, 1984 the funds first
          must be recertified.   The new obligation is beyond the initial  year's
          allowance.
      3.  Excess funds are identified on an Agency contract.  The excess &sds
      •ay be deobllgated from this contract and reobLigated on a new contract if
      the appropriation used to fund the original contract is still available.
      If the zev obligation occurs within the current year's allowance period,
      no recertif ication is required.  If the new obligation occurs after the
      current year's allowance has ended, recertif ication is required.

          Exaoole:
          A cost plus fixed fee contract is identified as having excess fiscal
          year 1984/1985 Abatement, Control and Compliance funds.  These funds
          were part of the fiscal year 1984 allowance.  These excess funds may
          be deobligated and reobllgated on a new contract without recertification
          if the new contract obligation occurs in fiscal year 1984.  Recertifi-
          cation is required for a new obligation in fiscal year 1983.

     RECERIIFICATION PROCEDURES

           Allowance Holder Responsibility - Where recertification of funds is
     necessary, ic is the responsibility of che allowance holder to initiate
     deobligating documents and forward to Procurement & Contracts Management
     Division for processing.   A written request for recertitication should
     also be seat to the Budget Division attaching a copy of the deobligating
     document.   The request should include a justification for the use of
     recertified funds.  In cases where recertification. is necessary, the
     allowance holder should not presume that the funds will be recertified.

           Procurement & Contracts Management Division (PCMD) Responsibility -
     PCMD will expedite processing of the deobligating document and forward
     it  to the .applicable servicing Finance Office.

           Financial Management Division - The Financial Management Division
     will record the deobllgations from PCMD immediately and include the
     amount of the deobligation as part of net recoveries in their monthly
     and  end-of-year report.


     TN8                                13.5
PCMD 9/89

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                                                                  Attachment  I
                                                                    fage 4

         Budget Division - The Budget Division will expedite requests fee
    recertification end respood as quickly as possible to reissue funds in
    ac Allowance.  la some cases, the Budget Division Bust first request
    that net  recovered funds be apportioned to EPA by the Office of Managesent
    and Budget (OMB).  Funds then can be recertified to the Allowance Holder
    la an Advice of Allowance.

         Please be aware that there is ao change to the existing procedure to
    have deobligated prior year funds recertified.  Current guidance caa be
    found ia Policy 4 Procedure Memorandum (PPM) *13, Recovery and Overrun of
    Prior Year Obligations.  According to Ageacy Policy as stated ia this PPM,
    there is ao guaraatee that deobligated funds will be recertified.  The
    issuance of recovered funds is subject to Ageacy priority needs at the
    discretion of the Administrator and Deputy Administrator.  If you have any
    questions concerning this memo, please contact"Rick Peterson (382-4212).

    Attachment
PCMD a'8^18

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      STANDARDS OF CONDUCT
PCMD9/89            5-0             12g

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cAu


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             in
                                       ETHICS PRETEST
                                                 (
                                                 >*.
D
Which of the following circumstances would EPA view as ethical employee behavior.
(Indicate yes/no/comments)
        1 .
        2.
   EPA employee accepts Christmas gift from EPA contractor who has been personal
   friend for 10 years and has been giving Christmas gifts during  that entire period
               otc  - rf   Er^  w-f
              be
   EPA employee speaking on behalf of EPA at professional meeting two hours from
   Washington accepts ride to meeting with other speaker from private company.
                                             '0{
       3.  EPA employee attends federal office automation trade show and
           items from vendors there:                   ~
              a) desk calendar;  .
              b) discountCcouporofor software worth $99.00;
              c) disk holder with vendor's name and address (worth $12.00
              d) pen with yejdor's name and address  (worth $4.99 retail);
              e) free buffet lunch.       ffj^t^JSsr ef arvu   fr^A. }
       4.
                                                                   the following
                                                                  tail);
   EPA employee in OSWER has received proposals from several companies in response
   to solicitation.  The lowest bidder presently has contract with OARM. OSWER
   employee calls project officer in OARM to inqurie if lowest bidder has been
   performing  satisfactory work and within  original contract budget.   Is project officer
   permitted to respond?
5. EPA employee receives unsoliciated proposal, but has no funds to fund proposal.
   One year later, EPA employee writes RFP for competitive procurement based on
   proposal submitted, and divulging the methods  proposed in the unsolicited proposal.
   Is this permissible?   Does the original submitter have a right to protest?
B. EPA employee receives invitations from EPA contractors to attend Christmas parties.
   To avoid any showing of partiality, EPA employee decides to attend all parties.
7.  EPA employee attends all-day briefing by EPA contractor at contractor's office.
   Contractor provides buffet lunch for all attendees, both public and private.
PCMD9/89
                   gp/j   *L/w?foc|ce5
          4-7
                                                                                     127

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        8.  EPA employee's husband has substantial private stock in EPA contractor company,
           representing 25% of husband's net worth; employee is husband's beneficiary.  EPA
           employee serves on technical review panel for major procurement, where EPA
           contractor has submitted proposal.
        9.  EPA employee receives and accepts invitation to speak on behalf of EPA at private
           conference at the Greenbriar funded by state government funds.  Invitation includes
           transportation, meal and lodging expenses and $200 honorarium.  Employee also
           attends separate reception and dinner for speakers sponsored by private company
           arranging the conference.
        10.  EPA employee is friend of local official running for reelection, and assists official
            in telephone poll on specific election issues totally unrelated to federal activities or
            issues.
        11.  EPA employee prepares competitive procurement RFP.  During the alloted response
            period, employee leaves EPA and joins firm that is bidding on the RFP, assists firm
            in preparing bid proposal, and appears as staff in the proposal.
        12.  EPA contract is due to expire and be recompeted.  Existing contractor requests EPA
            project officer for information regarding anticipated requirements and continuation
            work.  EPA project officer gives information to contractor.
            If a bribe if offered, the employee should not accept anything, but indicate a
            willingness to consider the offer, and then contact EPA's Office of Inspector General.
        14.  An EPA employee served on a technical evaluation panel for a contract award.  After
            he left EPA, he went to work for the contractor and was assigned to work as project
            manager for the contract he helped to award. A dispute arises over the meaning of a
            contract provision and the company's  management asks the former employee to
            prepare a written submission to EPA for signature of the company's president.
        15.   An employee is the treasurer of an environmental group which has applied to EPA
            for a grant.  The employee receives no pay for this activity.
                                                5-2
PCMD9/89                                       °  *                                          128

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16. Which of the following qualify as indicators of potential fraud: (Circle ones that are
    indicators)
    a.  Purchasing items and services from single source.
    b.  Selective release of information concerning requirements and pending purchases.
    c.  Providing mailing list of potential contractors to  contracting  officer for mailing
       out RFPs.
    d.  Defining statement of work and specifications to  fit products/capabilities of
        limited set of contractors.
    e.  Using statements of work,  specifications or sole source justifications developed
        by or in consultation with a specific contractor.
    f.  Splitting up requirements to fit within the small purchase requirements
       ($25,000).
    g.  Vague specifications.
    h.  When requested by a contractor to recommend possible subcontractors or experts
       with the desired  expertise, providing references  to several known individuals or
       groups.
    i.  Acceptance of a late bid (e.g., five minutes after deadline).
    j.  Wide variance between the technical rating given  the best proposal and all other
       proposals.
    k.  Bidders who are qualified and capable of performing fail to bid with no apparent
       reason, and relatively fewer than  normal bids are submitted.
    I.  Identical bid amounts on a  contract line item by two or more contractors.
    m. Contractor includes interest costs as part of contract costs to be reimbursed by
       the government.
    n.  Contractors submits progress payment request for work completed but not yet
       accepted by the government.
                                         5-3                                           129

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          STANDARDS  OF CONDUCT

    RULE: EMPLOYEE SHOULD AVOID ANY ACTIVITY
    OR SITUATION WHICH CREATES EVEN THE
    APPEARANCE OF IMPROPRIETY OR CONFLICT OF
    INTEREST.

    SUBRULES:

    1 . No Participation In Any Decision Where Employee
      Or Close Relative Has Financial Interest.  File Financial
      Statements Depending On Grade (If GS-13 Or Above,
      Although Some Divisions Require Lower Levels).

    2. No Representation Or Other Party In Court/Agency
      In Matter In Which U.S. Or D.C. Government Is Party
      Or Has Interest.

    3. No Outside Employment That Violates Law, Creates
      Conflict Of Interest, Or Involves EPA Project, Time,
      Property, Or Confidential  Information.

    4. No Gifts From Foreign Government Over $180; No
      Gifts From Private Parties Over $Mf Retail.
   5. No Payment Accepted For Official Appearance.
      (Can Accept Gifts For EPA Scholarship Fund Or
      Daycare Center.)  No Payment In Excess Of $2000
      For Private Outside Appearance.

PCMD9/89                    5-4                      130

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         STANDARDS  OF  CONDUCT  (CONT.)

    SUBRULES:

    6. No Outside Activities That Relate To Specific EPA
       Matters, Involve Government-Financed Trips, Approving
       Advertising, Imply Official EPA Support, Involve
       Personal Compensation For Work Performed As
       Government Employee.

    7. No Reimbursement For Official Travel Expenses
       Except From State/Local Governments Or 501(c)(3),
         d Not In Excess Of Government Travel Regulations.
    8. No Nonofficial Use Of Government Property Or Time.

    9. No Hatch Act-Restricted Activities.
   10.  General Standards Related To Not Using Public Office
       For Private Gain: Giving Preferential Treatment;
       Impeding Government Efficiency/Economy; Losing
       Independence/Impartiality of Action; Making Decision
       Outside Official Channels; Adversely Affecting
       Confidence Of Public In Government Integrity.
"WD9/89                      5"5

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             STANDARDS OF CONDUCT

  1. GRATUITIES: Solicitation Or Acceptance Of Gifts,
     Entertainment, Or Favors From A Contractor Is Expressly
     Prohibited. The Following Are Exceptions To This
     Rule:
    1.  Food Or Refreshments Of NOMINAL VALUE Only
       When Official  Business  Is Being Transacted During
       The Meal And  Only  When There Is  No Arrangement
       For  Separate  Billings.

    2.  Food Or  Refreshments At WIDELY ATTENDED  Gathering:
       Sponsored  By  Industrial, Technical  Or  Professional
       Organizations;

    3.  INCIDENTAL Transportation  From A  Private
       Organization  In  Connection  With  Official  Duties;

    4.  UNSOLICITED  Advertising Or  Promotional  Material
       Of NOMINAL Value  (Under $>0^ Retail), Such As Pens,
       Pads, Or Calendars; And    ^

    5.  Gifts From Family Or Friends  Only If It Is  Obvious
       That The  Personal  Relationship,  And  Not The  Business
       Relationship, Is The Reason  For Such Gifts.  Although
       The  Gift  May  Be  Acceptable, The Relationship In
       Itself  May  Be  a Conflict.
PCMD9/89                         ~                          132

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        STANDARDS OF CONDUCT (CONT.)

  2. PROTECTING CONFIDENTIAL BUSINESS
    INFORMATION:

    EPA Personnel Are Not Permitted To Divulge Any
    Information Considered By A Contractor To Be
    Confidential To Anyone Outside The Government Or
    Not Having A Need To Know (Including Other EPA
    Employees).

  3. MAINTAINING IMPARTIALITY:
    EPA Employees Must Treat All Firms With
    Objectivity And Equal Conduct. There Should Be
    No "Outside Socializing" With Contractor    ,  ,
    »«	•/ x-u/i. /.?  I  ,n u^v/i/«(  *v\ii a.4-  nj /O^LAJT Or
     personnel.
  4. DISCLOSURE OF PROCUREMENT INFORMATION:

    Project Officer And Other Technical Evaluation or Source
    Evaluation Board Members Must Maintain The Integrity
    Of The Competitive Process And The Independence Of
    Contractors' Proposals By Not Divulging Any
    Confidential Procurement Information Before, During Or
    After An Acquisition.
                         5-7
'ID 9/89                      a  '                       133

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         STANDARDS  OF  CONDUCT  (CONT.)

   5.  POST EMPLOYMENT RESTRICTIONS:

      No EPA Procurement Official May Solicit Or Accept
      Promise Of Future Employment Or Business
      Opportunity With Competing Contractor During
      Conduct Of Procurement (Eft. July 1989)

      After July 16,1989, No Procurement Official Or
      Reviewer Of The Award, Modification Or Extension Of
      Contract May Participate In Negotiations Or Advising
      On Negotiations On Behalf Of Contractor For 2
      Years From Date Of Agency Participation; Nor
      Work Personally And Substantially On Contract
      For Contractor For 2 Years From Date Of Agency
      Participation.

      Former Govt. Employees Permanently Barred From
      Representing Parties Other Than U.S. Govt. Before
      Federal Court Or Agency On Matters In Which They
      Were Personally And Substantially Involved At EPA;
      Barred For 2 Years Only If Official Responsibility
      For Matters But Not Actual Participation In Them.
PCMD9/89                     -                         134

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          STANDARDS  OF  CONDUCT (CONT.)

    5.  POST EMPLOYMENT RESTRICTIONS (Cont.):

       One-Year Prohibition Against Award Of Sole-Source
       Contract To Former Employee Or Employee's
       Firm If Employee Was Involved In Developing Or
       Negotiating Contract Proposal At EPA, or Would Be
       Involved In Management, Administration Or
       Performance Of Project At EPA.

       Former Senior Employees Restricted From Assisting
       Outside Party By Personal Presence Before Agency
       Regarding Matters Where Participated Personally And
       Substantially For 2 Years; Also Prohibited From
       Communicating With Intent To Influence EPA On
       Any Matter For 1 Year
       *Note: One-year suspension of implementation of
       these Procurement Integrity Act restrictions in effect
       beginning 12/1/89.
Dr!MD9/89                     °"J>                         135

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      PROCUREMENT OFFICIAL CERTIFICATE OF INTEGRITY

      The  undersigned  certifies  that:

      1.   He/she  is  familiar  with and  will comply with
      the  requirements of section 27(b) and  (e) of the
      Office of  Federal  Procurement  Policy  Act (41 U.S.C.
      423)  as implemented  in  section  3.104-3 of  the
      Federal  Acquisition Regulation  (copy  attached).

      2.   He/she will  not engage in any  conduct  prohibited
      by sections 27(a),  (b),  (c),  and (e)  of  the Act.

      3.   He/she  will report immediately to  the  Contracting
      Officer any information concerning a  violation  or
      possible  violation  of  sections  27(a), (b), (c), or
      (e) of the  Act.

      This  certification  concerns  a matter  within  the
      jurisdiction  of  an  Agency of the United  States  and
      the  making of  a  false, fictitious,  or  fraudulent
      certification may  render  the maker subject to
      prosecution under  Title 18, United  States Code,
      Section   1001.
       Name                            Date
       Title                            Organization
PCMD9/89                         5"10                            136

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      PROCUREMENT OFFICIAL EXIT CERTIFICATE

The  undersigned  certifies that:

He/she  understands  the  continuing obligation, during
the conduct of the procurement, not to disclose
proprietary  or  source selection  information  related
to the  procurement(s) on which  he/she  served as
a  procurement official.


This certification  concerns  a matter within the
jurisdiction  of  an  Agecy  of the United States and
the making of  a  falso,  fictitious,  or  fraudulent
certification may  render  the  maker subject to
prosecution under  Title  18, United States  Code,
Section  1001.
Name                           Date
                                                       137

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^ standard- of
      Conduct

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                                             Chapter 5
                                    STANDARDS OF CONDUCT


               Federal employees are responsible for the day-to-day management of the
        Government and its funds. As such, the taxpayers expect and are entitled to impeccable
        conduct on the part of Government personnel.  All official decisions must be free from
        any consideration  of personal self-interest or any type of favoritism.

               EPA employees should read and understand the requirements of 40 CFR Part 3,
        which sets forth the standards of conduct for personal  behavior.  In addition, a pamphlet
        entitled "U.S. Environmental Protection Agency Guidance on Ethics and Conflicts of
        Interest" is available and has  been distributed to all employees.  A more recent
        publication entitled "Ethics in a Nutshell" can be obtained by calling 475-8960.  These
        pamphlets summarize and explain the basic conflict of interest laws and EPA regulations.
        It is absolutely vital that the  restrictions  are understood, since  criminal  penalties may
        be imposed for any serious violations.

               In  1988, Congress passed the Federal Procurement Policy Act Amendments of
        1988,  Public  Law  100-679.   Section 6, entitled "Procurement  Integrity,"  prohibits
        competing contractors and government procurement officials from offering or accepting
        gratuities, soliciting or discussing postgovernment employment  during a procurement,
        or soliciting or disclosing proprietary or source selection information.  Interim
        implementing regulations went into effect on July 16,  1989.  A one-year suspension of
        the implementation of these regulations went into effect December 1, 1989.
        Nonetheless, they were in effect for several months and may take effect again in one
        year.  These regulations  and EPA guidance associated with them should therefore be
        reviewed and understood by EPA employees.

               The Designated Agency Ethics Official responsible for managing the EPA ethics
        program is EPA's Deputy General Counsel.  He is assisted by an Alternate Agency Ethics
        Official and by  Deputy Ethics  Officials in each program area or region.  These officials
        are responsible for advising their employees on the rules  of ethics, coordinating their
        advice with the Designated Agency Ethics Official, reviewing requests for approval of
        outside employment, and reviewing and maintaining confidential  statements of
        employment and financial interest. Deputy Ethics Officials are Assistant
        Administrators, Associate Administrators, Staff  Office Directors, Regional
        Administrators, Office Directors,  Laboratory Directors, and the  Inspector General.  If
        questions arise, employees should consult either their Deputy Ethics Official or the
        Designated Agency Ethics Official.

        5.1  Ethics  for all Government  Employees

               The following general standards are applicable to all EPA employees:

               (1) An  employee shall not participate in any decision, as a Government officer
                   or employee, on a matter in which he or she (or a close relative)  has a
                   financial interest.  This restriction applies to  rulemaking, policy matters,
                   adjudications, grants and contracts.  An employee must recuse him or herself
                   from all such matters even if it would create only the appearance of a
                   conflict of interest.  Certain types of financial  interest are  exempted from
                   the statute, and others may be waived by the Designated Agency Ethics
                   Official if it is deemed that the financial interest is not so substantial as to
                   affect the integrity of the employee's services.


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               (2)  Designated EPA employees must file confidential financial disclosure
                    statements in order to assist the Agency in preventing conflicts of interest on
                    the part of certain key employees in decision-making roles.  Generally, GS-
                    13's and above who exercise judgment in decisions relating to contracts,
                    grants,  or regulations which  might have economic impacts on those outside
                    the Government, are required to file such statements.  However, below the
                    level of GS-13,  employees  who serve as Project Officers, Contracting
                    Officers, On-Scene Coordinators, Inspectors, or Auditors will  also be
                    requested to file confidential financial disclosure statements.

               (3)  No employee may represent any outside party before a court or Government
                    agency in a matter in which the United States or the District of Columbia is a
                    party or has a direct interest.

               (4)  An employee's salary may not be supplemented by any source other than the
                    United States Government (except if contributed by a state, county, or
                    municipality) as  compensation for the employee's services as  a Government
                    official.

               (5)  An employee shall not engage in any outside employment which would violate
                    Federal or State law, give rise  to a real or apparent conflict of interest,
                    involve  work for an EPA project, or involve  the use of EPA time or property,
                    or any  information confidential to  EPA.

               (6)  Employees may not solicit,  accept, or retain gifts of over "minimal value"
                    (in excess of $180) tendered by any foreign government.  All gifts from
                    foreign  governments must be reported to the Office of International
                    Activities.  Gifts of more than minimal value may only be accepted if refusal
                    to accept would cause offense or embarrassment, and any such gifts must be
                    turned over to the Agency for disposal.

               (7)  No employee may accept payment for any official appearance, i.e., as an EPA
                    representative, unless that payment is accepted on behalf of and donated to
                    the EPA Scholarship Fund or Day Care Center.  If the appearance is clearly in
                    the  nature of private outside activity, honoraria are limited to $2,000 for
                    any one appearance.

               (8)  An employee who does any teaching, speaking, writing, or editing outside of
                    his EPA official duties is  restricted from all of the following  activities:

                      (a)  Instructing  people  on dealing with specific matters pending in EPA;

                      (b)  Pursuing any such activities in connection with trips  at Government
                           expense;

                      (c)   Approving  or disapproving of advertising;

                      (d)  Expressing  or implying  official EPA  support or approval of any work
                           or the opinions expressed; or

                      (e)   Accepting outside compensation for any work performed as a part of
                           Government duties.
PCMD9/89                                         o                                            140

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                   In addition, if an employee writes on a subject related to his or her official
                   duties, the written material must either omit any mention whatsoever of the
                   employee's connection with  EPA or include the following disclaimer:

                            "This (article, book, etc.) was (written/ edited)  by (name) in
                            (his/her) private capacity.  No official support or endorsement
                            by the Environmental Protection Agency is  intended or should be
                            inferred."

              (9)  Employees may not accept  any reimbursement for official travel expenses
                   from outside sources except state or local governments or organizations
                   listed under Section 501(c)(3) of the Internal Revenue Code.   Even from
                   these sources, the  amounts may not be greater than EPA would have provided
                   under the Travel Regulations.

              (10)  Employees may not use or allow the use of Government property or time
                    (including Government offices, equipment, or the services of subordinates)
                    for other than official  purposes.

              (11)  All employees are subject to the  restrictions on political  activity covered
                    in the Hatch Act.  In addition, employees may not use their official authority
                    to affect a federal election, promise any Government favors or rewards in
                    return for political activity, deprive anyone of Government employment or
                    benefits for refusal to make a political  contribution, solicit any such
                    contributions from federal  employees,  make a political contribution to
                    another federal employee, or solicit or receive political contributions on
                    Government premises.

              (12)  General standards which affect all EPA  employees prohibit any action
                    which might result in,  or create the appearance of:

                     (a)   Using public office for private gain;

                     (b)   Giving preferential treatment to any organization or person;

                     (c)  Impeding Government efficiency or economy;

                     (d)   Losing independence or impartiality of action;

                     (e)  Making a Government decision outside official channels; or

                     (0  Adversely affecting the confidence of the general public in the
                         integrity of  the Government.

       5.2  Rules for Personnel who  Deal  with  Contractors

              Government  employees who work with contractors have even further
       restrictions placed upon them due to the sensitivity of this work.  There must be no
       question of favoritism or any action which might compromise or appear to compromise
       the integrity of EPA's acquisition program. All Project Officers,  Work  Assignment
       Managers, and Delivery Order Officers,  as well as any other individuals who work with
       contractors, must observe the following restrictions in the conduct of their
       relationships with  EPA contractors:


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              (1) Gratuities

                   Solicitation or acceptance of gifts, entertainment, or favors from  a
                   contractor is expressly prohibited.  Exceptions include:

                     (a)  Food or refreshments of nominal value only when official  business is
                          being transacted during the meal and only when there  is no
                          arrangement for separate billing;

                     (b)  Food or refreshments at widely attended gatherings sponsored by
                          industrial, technical or professional organizations if the employee is
                          representing EPA;

                     (c)  Incidental transportation from a private organization  in connection
                          with official duties;

                     (d)  Unsolicited advertising or promotional material of nominal value
                          (under $10), such as pens, pads, or calendars; and

                     (e)  Gifts from family or friends only if it is obvious  that  the  personal
                          relationship, and not the business relationship, is the reason for such
                          gifts. Although the gift may be acceptable, the relationship in itself
                          may be a conflict.

                   Employees must use judgment and discretion even when using any of the
                   exceptions listed above. If the acceptance of such a nominal gift  or gratuity
                   would create even  the appearance of an impropriety or if the contractor
                   would expect to be rewarded through an employee's official EPA capacity, it
                   must be declined.

              (2)  Protection of Confidential  Business Information

                   EPA technical  personnel often are privy to information which contractors
                   consider to be  highly confidential. Examples of such confidential business
                   information  include: profit margins, indirect cost rates, number and kind of
                   employees, individual salary rates, or amount  of award fee earned.
                   Unauthorized disclosure of such  information is a violation of a contractor's
                   rights under the Freedom of Information Act, and could possibly place its
                   competitors in  a more advantageous position  on future requirements.
                   Therefore, care must be taken not to discuss anything  known about a
                   particular contractor to anyone (including other  EPA  employees) not having
                   a "need to know."  Even such  an innocent remarks as offering your personal
                   opinion of a contractor's performance on a particular  task could be
                   detrimental and is  unauthorized.

              (3)  Maintaining  Impartiality

                   It is very easy to become partial towards a firm who is  performing
                   exceptionally well and meeting your every need.  When you work very
                   closely on a day-to-day basis with contractor personnel, it is difficult to
                   maintain an objective opinion.   However, care  must be taken to keep the
                   relationship at arm's length.
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                    The Government and the contractor are separate parties to an agreement with
                    different responsibilities and different goals. Our goal  is to receive products
                    or services within a reasonable time period and at a reasonable cost, while
                    our responsibility is to provide technical  direction, enforce the terms and
                    conditions of the contract, and to make payment in return for products or
                    services.                      '      " '        '          '   '

                    The contractor, on the other hand, is trying  to make a profit and enhance his
                    reputation so he can continue to make profits in the future.  He is
                    responsible for adhering to the terms of the contract and delivering the
                    products or services.

                    Since the interests of the two parties are  so different, Government employees
                    must remain objective about a contractor's  performance. Government funds
                    must be spent wisely and efficiently, and it must not appear that Project
                    Officers, Work Assignment Managers or  Delivery Order Officers are losing
                    sight of their responsibilities and goals. Therefore, a distance must be
                    maintained,  and socializing with contractor personnel outside of official
                    duties is firmly discouraged.  Government employees' actions should be such
                    that a full public disclosure would not give rise to a  question of impropriety.
                    Project  Officers are  particularly susceptible to this possibility, and should
                    take great care that their conduct is proper.

                (4)  Disclosure  of Procurement Information

                    All information before award of any contract or contract modification is
                    considered to be highly confidential. Any unauthorized  disclosure of such
                    information could lead to one or more offerers' having a competitive
                    advantage over others, which could result in a bid protest and a ruling
                    against  the Agency.  The integrity of the  competitive  process  is entirely
                    dependent on the premise that all  firms are on an equal  footing. In the case of
                    a contract modification, the validity of a cost proposal is only  assured if the
                    contractor prepares it independently without benefit of Government
                    estimates, knowledge of the amount of funding available, or any
                    prenegotiation positions being considered  by EPA.

                    Project  Officers and  any other program personnel privy to such information
                    must ensure that they do not inadvertently let slip any advance or otherwise
                    confidential  procurement information  to  current contractors  or  other firms
                    who contact them, either before, during or  after contract award.  Penalties
                    associated with disclosure can be  severe.  Individual employees can be fined
                    up to $100,000, whether EPA or Contractor.  In addition, an Agency
                    employee who knowingly and willfully discloses or promises to disclose  any
                    proprietary or source selection information can  be subject to criminal
                    penalites up to five years of imprisonment.

                    If any questions arise, or there are areas of which program personnel are
                    not sure, direct all inquiries to your Contracting Officer.  It  is important to
                    have such information come directly from the Contracting Officer rather
                    than the Project Officer anyway, as this ensures that there is a control on
                    who receives what information.
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         5.3 Post-Employment  Restrictions

                All employees are subject to some type of conflict-of-interest restrictions after
         their EPA employment has ceased.  These restrictions were made more stringent by the
         July 1989 Procurement Integrity prohibitions.  The following is a brief summary of
         these restrictions:

                (1)  All former Government employees are permanently barred from
                    representing anyone other than  the United States before a Federal court or
                    agency with respect to contracts, grants or adjudications, or any other
                    matter involving  "specific parties",  in which  they ever participated
                    "personally and substantially" as Government employees.  Rulemaking is not
                    included.  Former employees are not barred from seeking competitive
                    contracts or working on contracts with the agency for which  they worked,
                    excepted as limited by (7) below.

                (2)  Former employees who, in their final year  of EPA employment, had official
                    responsibility for particular matters involving "specific parties" but did not
                    actually participate in them are prohibited  from representing outside
                    parties on such matters for a period of two  years.

                (3)  Former employees designated as "senior employees" are restricted from
                    assisting an outside party "by personal presence" in connection with
                    particular matters in which they ever participated  personally or
                    substantially for a period of  two years.  ("Senior employees" include
                    Assistant Administrators,  Office Directors,  Regional Administrators,  some
                    Directors of Staff Offices  reporting to the Administrator, and some Division
                    Directors.)

                (4)  Former employees who served in "senior employee" positions are
                    prohibited from any communication with EPA with intent to influence on any
                    matter, including rulemaking, regardless of whether the former employees
                    participated in the matter, for a period of one year.  Communications with
                    courts and Justice Department  attorneys in connection with cases involving
                    EPA are included in the restrictions.

                (5)  There is a one-year prohibition  against award of a sole source contract to a
                    former EPA employee or to a firm in which the former employee is an
                    officer or director if he or she was involved in developing or negotiating  the
                    contract proposal or will be involved in the management, administration, or
                    performance of the project.  However, there is no prohibition against the
                    award of a competitive contract involving a  former EPA employee, excepted
                    as limited by (7) below.

                (6)  Effectively  July 16, 1989, during the conduct of an Agency  procurement
                    of property or services, no Agency procurement official may knowingly
                    solicit or accept, directly or indirectly, any promise of future employment
                    or business opportunity from, or engage, directly  or indirectly, in  any
                    discussion  of future employment or business opportunity with, any officer,
                    employee, representative, agent, or consultant of any competing contractor.
                    The term "procurement official" includes any individual, whether an
                    employee or a contract consultant or advisor to EPA, who has participated
                    personally and substantially in the conduct of a procurement.  Once the
                    conduct of the procurement has ceased, however, the former procurement


PCMD9/89                                         6                                           144

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                  official is free to engage in such employment discussions although he or she
                  remains subject to the post employment prohibitions on participating in
                  procurement negotiations  and working on the contract for two years, and on
                  disclosure of proprietary  and source selection information.

              (7) No EPA official or employee who has participated personally and
                  substantially in the conduct of any EPA procurement or who has personally
                  reviewed the award, modification or extension of any contract for such
                  procurement shall a) participate in any manner, as an officer, employee,
                  agent, or representative of a competing contractor, in any negotiations
                  leading to the award, modification or extension of a contract for such
                  procurement or in any advising on negotiating strategies, or (b) participate
                  personally and substantially on behalf of the competing contractor in the
                  performance of such contract for a two-year period after such participation
                  or review.  Thus,  if  you personally and substantially  participated in a
                  procurement as a procurement official or personally  functioned as reviewer
                  of that  procurement after the effective date of July 16, 1989, you are
                  barred  from working personally and substantially on  the contract for  two
                  years from  the date of your participation. The two-year ban on providing
                  advice or information to a competing contractor does  not apply to providing
                  scientific, technical,  or other advice that is unrelated to negotiating
                  strategies.  Pages 136/7  present examples of procurement integrity
                  certificates to be signed by procurement officials, developed in response to
                  the procurement integrity  act amendments.

                  To participate "personally" means directly, and  includes the participation of
                  a subordinate when actually directed by the  supervisor in the matter.
                  "Substantial" participation means "significant"  participation, i.e., the
                  individual's  involvement must be of signficance  to the matter.  Individuals
                  may seek an Agency decision on  whether their participation has been so
                  personal and substantial  as to trigger these  prohibitions.

              As noted earlier, implementation of the Procurement Integrity Act Amendments
       of July 1989 has been suspended for a one-year period  effective December 1, 1989.
       Therefore several of these restrictions will not be in effect until the conclusion of that
       period.

              Appendix 5A contains an example of a conflict of interest situation where an
       offerer's  consultant gained in-depth knowledge of proposals while a government
       employee. A bid protest resulted in ultimate exclusion of the offerer's proposal.
       Apparent disclosure of that information was deemed to have given the offerer undue
       advantage over its competitors.
PCMD9/89                                        -7                                             145

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                                                                                          (Vol.  44)    1099
                                                             Decisions and  Rulings in Brief
      Bid Protests — AOP  Proevemeots — Specifica-
    ttons — Ao agency cannot reject a quotation for ADP
    equipment that  could  be reasonably interpreted as
    meeting its  needs, the General Services Administra-
    tion Board of Contract Appeals rules. The Army issued
    an  RFQ asking schedule contractors to quote prices
    for rental and maintenance of a "computer output on
    microfiche"  system.  The solicitation stated that the
    system must have an "in line duplicator and collator
    with a method  of preparing  the number  of  copies
    required from coding in  the master fiche." The pro-
    tester, which submitted the lowest  quote, offered to
    supply a system that could determine the number of
    copies required from machine readable bar coding on
    the  master  fiche. By  comparison,  only one  source
    produces a system that meets the government's needs
    precisely as described in  the solicitation.
      The rejection  of the low quote—for a system that
    met the agency's needs by a  different method—was
    tantamount  to making one company's design cntenon
    a minimum mandatory requirement. Administrative
    Judge Vincent LaBella points out. "Even if we could
    interpret the RFQ as requiring a system that reads
    coding in the master fiche. [the government) failed to
    provide the necessary justification  for the require-
    ment and failed  to obtain the approval required when
    goods are available from only one source listed on a
    GSA nonmandatory ADP schedule contract." Further-
    more, the requirement for coding in the master fiche
    appears only in  the RFQ's general  description of the
    desired system, the board observes, adding that man-
    datory requirements were listed elsewhere in the so-
    licitation. Moreover, the relevant  mandatory provi-
    sion appears as a functional rather than as a design
    requirement, the board notes. "It was reasonable for
    protester  to assume that  a functionally equivalent
    system  would be acceptable... ;why else would [the
    agency] have issued an RFQ permitting quotations on
    equivalent equipment?"
      Finally, rejection  of the low offer here is  a clear
    violation of the Competition in Contracting Act and
    implementing regulations, the board  declares. "We
    conclude that [the] acquisition in this case violated the
    requirement in FIRMR §201-32.206
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    PLANNING AND PREPARATION
BCMD9/89             *               147

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     RESPONSIBILITIES RELATED TO
     TERM FORM (LEVEL  OF EFFORT)
                  CONTRACTS
  1. PROJECT OFFICER ROLE:

    Oversee Issuance Of Work Assignments; Ensure That
    Work Assignments Fit Under Contract Statement Of Work

    Supervise Work Assignment Manager On The
    Administration Of Work Assignments But Otherwise
    Delegate Daily Work Assignment Management To
    Work Assignment Manager

    All Other Responsibilities As Usual, Including Financial
    Supervision

  2. WORK ASSIGNMENT MANAGER/DOPO ROLE:

    Draft And Manage Work Assignments; Prepare Technical
    Directives; Supervise Task Managers (If Applicable)

    'Review Monthly Progress Reports, Including Technical
    And Financial Reports

    Recommend Modifications, Extensions, Etc. To Project
    Officer
BCMD9/89

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       PREPARING  FOR CONTRACT
              ADMINISTRATION

   1. Read Your Contract.

   2. Evaluate The Statement Of Work.

      - Make A List Or Chart Of Tasks And Deliverables
      - Make A List Of The Government's Duties And
       Obligations.

   3. Set Up Contract Files And Record-Keeping Systems.

   4. Meet With The Contractor To Go Over Tasks And
     Ensure Understanding Of Contract, Work Assignment
     And/Or Delivery Order. Note, However, That Only The
     Contracting Officer Can "Interpret" Contract Terms.
                     6-2
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      STEP  1:   READ THE  CONTRACT


   1.  Obtain An Official Copy Of The Contract That Is The
      Result Of Final Signing And Includes Any Changes
      Made During Contract Negotiations.

   2.  Thoroughly Read The Contract Statement Of Work.

   3.  Familiarize Yourself With TheJ
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    STEP  2:   EVALUATE STATEMENT OF WORK


    1.   Make A List Or Chart Off Tasks And Deliverables.

    2.   Make A List Of Government's Duties And Obligations.

    3.   Review Schedule And Adequacy Of Reporting
        Requirements.
    4. (Jdentifyjkreas(fteeding Clarificatior) Or Modification
        (And If Contract Modification May Be Required).
    5. (fD^evelQ^roposeCModificatiQDS^CIarifications.
    6.   If WAM Or Delivery Order Officer, Discuss With
        Project Officer.

    7.   Discuss, As Pertinent, With Contracting Officer.
PCMD9/89                  6"4                           152

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    SCHEDULE OF TASKS AND DELIVERABLES
CONTRACT NO. 68-01-0001

CONTRACT:  John Doe Environmental, Inc.

DATE OF AWARD: 9/30/85

EXPIRATION DATE: 8/31/86
TASK/DELIVERABLE
  GOVT. TASK
  DUE  ACTUAL
          CONTRACTOR TASK
          DUE    ACTUAL
1.  DELIVER GOVT-FURNISHED DATA

2.  PROVIDE DRAFT REPORT

3.  REVIEW DRAFT REPORT AND
   PROVIDE COMMENTS TO
   CONTRACTOR

4.  PROVIDE FINAL REPORT ON
   CHEMICAL INDUSTRY
10/15/85
12/15/85
10/13/85
12/16/85
               11/30/85
                 11/30/85
               1/31/86
PCMD 9/89
                          6-5
                              153

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    SCHEDULE OF TASKS AND  DELIVERABLES
TASK/DELIVERABLE
1 . DEVELOP PROJECT WORKPLAN
2. REVIEW GOVT-FURNISHED DATA
3. PREPARE DRAFT REPORT
4. PROVIDE FINAL REPORT ON
CHEMICAL INDUSTRY
Status Reports
WEEKS AFTER AWARD
12345678 9 10| 1l|l2 13 14J15 16 17

^\
Z*\
^\ /I±
• •••••
/^\ Final Project Workplan (2 weeks)
X*X Review Government Data (6 weeks)
            Prepare preliminary  draft (8  weeks)



            Complete  draft (12  weeks)



            Complete final report (16 weeks)
PCMD9/89
                       6-6
154

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      CONTENT OF THE CONTRACT
          STATEMENT OF WORK
          1.  Background Information
          2.  Technical Considerations
          3.  Detailed Description Of Work
          4.  Specialized Reporting Requirements
          5.  Deliverables
          6.  Special Considerations
          NOTE: Categories Included May Vary With
          Contract Type, E.g., Depending On If It Is A
          Mission Or Non-Mission Contract.
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     STATEMENT OF  WORK TYPES


     1. LEVEL OF EFFORT TYPE

      Some Quantity Of Technical/Professional Effort

      No Specific End Result Can Be Forecast (E.g.,
      Basic Research)

      Statement Of Work Must Give An Indication Of The
      Projected Level Of Effort (E.g., 8000 Person Hours
      Of Effort To Determine The Effect Of XX On YY.

     2. COMPLETION TYPE (JOB OR TASK TYPE)

      Specific End Result Can Be Prescribed (E.g.,
      Product, New Method)

      Amount Of Effort Not Stated In Contract Statement
       Of Work
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          STATEMENT OF  WORK
           CHARACTERISTICS
     1.  BROAD STATEMENT OF WORK (Mission-Type)
        Provides Flexibility
        More Difficult To Price Accurately
        Often Leads To Cost Reimbursement Type Contract

     2.  NARROW STATEMENT OF WORK
        Closely Restricts Activity
        May Require Later Changes
        May Limit Innovation
        Provides Tighter Control
        May Lead To Firm Fixed Price Type Contract
     GOAL: TO STRIKE REASONABLE BALANCE
                     6-9
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                             STATEMENT OF WORK


     The contractor shall furnish the personnel, services, materials,
     and equipment required to assist the Policy Preparation Branch
     (PPB) and the Office of Environmental Programs (OEP), as well as
     other related elements of the Environmental Protection Agency   J
     (EPA) in developing and implementing policies, and regulations as   °7
     mandated by-statute.  Related activities in support of such rule
     making will also be involved.  Individual requirements under this
     contract will generally fall within, but not be limited to the
     following categories:

          A.   Technical Assistance for PEP Divisions and EPA Regions

               The contractor may be asked to summarize technical
          data from ongoing and past research efforts to allow PPB
          to determine requirements for new guidance and consistency
          with existing guidance.  The technical assistance will be
          directed at the Planning and Implementation Division as
          well as other offices within OEP and the 10 EPA regions.
          Technical assignments may be of a statistical, economic,
          health and/or engineering nature, and may involve
          consultation with Federal or State technical personnel.
          Such assignments will result from, or lead to, the develop-
          ment of specific technical guidance documents.

               Technical transfer may also be an integral portion
          of this effort to ensure that all the EPA regions remain
          abreast of technological development.  The technology
          transfer may take the form of conferences to bring
          together appropriate experts in the substantive areas
          including economics, human health, environmental  impacts,
          and exposure risks.  The contractor may be asked  to assist
          OEP by preparing agendas, audio visual aids, scheduling
          for those conferences, compiling digests of technical
          papers, presentation, and conference proceedings.  No more
          than five such meetings, normally to be held in Regional
          offices, are likely to be arranged each year.

          B.   System Development

               The contractor may be required to provide  or develop
          a variety of systems (manual or automated) to assist OEP
          in tracking, coordinating^_and monitoring the activities.
          poliTcTeSf correspondence, etc, in its area of responsi-
          bility"^Such assignments may  involve new software
          development, modification of existing programs  to meet
          current needs, or other tasks  as assigned by OEP.
                                 6-10
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                                     -2-
           C.    General Policy Support

                This effort provides for assistance to OEP staff in
           the development of technical policies,  strategies and plans
           for EPA environmental responsibilities.  The policies,
           strategies and plans will be consistent with existing
           statutes and regulations.  The contractor's duties will
           range from assisting OEP in coordinating with EPA offices
           as  well as outside agencies to preparing policy option
           papers for presentations to Agency management.

           D.    Other Tasks as Assigned

                The contractor shall be prepared to provide support
           as  specified in individual work assignments in any other
           areas as directed by EPA.
PCMD 9/B9
                                                                     159

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    STATEMENT OF WORK  PROBLEMS
  COMMON FAULTS

     Sentences Too Long And Unwieldy (Sentence Length
     Tends To Increase With Complexity Of Project, But The
     More Complex The Project, The More Important The
     Clarity Of The Statement Of Work)

     Use Of Bureaucratic Terms ('Trade11 Terminology Is Ok)

     Sentences Capable Of Several Interpretations
          (If two interpretations are possible, will be
          interpreted against the writer, e.g. the Govt)

     Failure To Use Terms Consistently When Discussing
     Same Thing

     Too Much Inclusion Of "How To Do It"; Discuss The
     ifWhat,fl Not The "How"
PCM09/89                                              161

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   STATEMENT OF WORK  PROBLEMS
                    (Cont.)

  USE OF COMPLEX AND UNCOMMON WORDS

    Tends To Increase If Writer Does Not Understand
    The Purpose Of The Effort

  EXCESSIVE VERBIAGE

    Increases Likelihood Of Ambiguity And Conflicting
    Terms

    Adds To Problems Of Various Persons Who Will Need
    To Understand Statement Of Work
       Technical persons (Govt and contractor), contracting
       officers, contractor administrative persons, attorneys,
       boards of review and courts

  EXCESSIVE USE OF PASSIVE VOICE
                     6-13
PCMD9/89                                            162

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  STEP 3:  SET UP FILES AND  RECORD SYSTEMS
       1. Basic Contract File



       2. File on PO and Contract Monitor Designation



       3. Internal Correspondence File



       4. Contractor Correspondence File



       5. Technical Direction/Evaluation File



       6. Payment File



       7. Computerized Or Manual Tracking Systems
-MD9/89                                               163

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           BASIC  CONTRACT  FILE

     1.  Copy Of Contract And All Modifications

     2.  Copy Of Contractor's Technical And Cost Proposal
        (Including Resumes & Labor Rates)*

     3.  Copy Of Specifications, Drawings Or Manuals
        Incorporated Into The Contract By Reference

     4.  Listing Of Contractor Submittal Requirements

     5.  Listing Of Government-Furnished Property Or
        Services

     6.  Listing Of All Information, Data Or Documents
        Furnished To Contractor

     7.  Copy Of The Pre-Award Survey, If Conducted

     8.  Schedule Of Compliance Reviews (sik

        'Highly Confidential
PCMD9/89                 6-15

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    FILE ON PROJECT OFFICER  AND CONTRACT
                   DESIGNATIONS


     1.  Copy Of PO Designation, Including Alternates
        (EPA Form 1900-65)

     2.  Copies Of Approved Work Assignment Manager
        And Delivery Order Officer Designations,
        Including Alternates (EPA Form 1900-65)

     3.  Listing of Contract Administration Functions
        Delegated to the PO, DO or WAM/DOPO
PCMD9/89                 6-16                        16S

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    INTERNAL CORRESPONDENCE  FILE
    1.  Record Of Communications Between PO And
       Other Support Activities

    2.  Copies Of All Correspondence Between The PO
       And The Contracting Officer

    3.  Copies Of Correspondence Between The PO And
       WAM/DOPO And Program Offices
                   6-17
PCMD9/89                                        «

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        CONTRACTOR  CORRESPONDENCE FILE
    1 .   Copy Of All General Correspondence Related To
        The Contract

    2.   Original Of All Contractor Submittals Of Data And
        Reports

    3.   Copy Of Notices To Proceed, Stop Work Orders
        Or Cure Notices
    4.   Copy Of All Letters Of Approval Pertaining To:
        Materials; The Contractor's Quality Control
        Program ; Changes In Contractor Key Personnel ;
        Prospective Employees; Work Schedules  (*w dU.
    5.  Copy Of Letters Between the Contracting Officer
       And The Contractor
PCMD9/89                  6-18                          16?

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     TECHNICAL  DIRECTION/EVALUATION  FILE

     1.  Copy Of All Drafts Submitted By Contractor

     2.  Copy Of All Comments Provided To Contractor
        On Contractor Submittals, Or Other Records
        Of Technical Direction Given

     3.  Copy Of Government's Contract Monitoring Logs
        And Communication Records, Meeting Records
        And Notes

     4.  Copy Of Contractor Evaluation Form And
        Deliverable  Review Form (See 12-3), Including
        CPAF Performance Event Forms
PCMD9/89                 6-19                          16

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     CONTRACTOR  COMMUNICATIONS RECORD
                  CONTRACT NO. 68-01-0001
            CONTRACT: John Doe Environmental, Inc.

 DATE/
 TIME      CONTACT     SUMMARY OF DISCUSSION/DECISIONS MADE
                       6-20
"CMD9/B9                                               169

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                   MEETING  RECORD
                   CONTRACT NO. 68-01-0001
             CONTRACT:  John Doe Environmental, Inc.
DATE/TIME:

ATTENDEES:

PURPOSE/DESCRIPTION:
DECISIONS MADE:
NEXT STEPS (EPA .CONTRACTOR) (Actions to Take. Issues to Resolve):
                        6-21
PCMD9/89

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                 PAYMENT FILE

    1.  Information Relative to Discount Provisions for
        Prompt Payment

    2.  Copy of Contractor Invoices And Record Of Date
        Received (Date Stamped)

    3.  Copies of Inspection Reports

    4.  Letters Pertaining to Invoice Clarifications,
        Deductions Or Fee Adjustments

    5.  Back-Up Documentation for Recommendation of
        Contractor Payment or Progress Payment

    6.  Copy of Recommended Suspensions Or
        Disallowances
PCMD9/89                  6-22                         171

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           TRACKING SYSTEMS


  MANUAL  OR  AUTOMATED SYSTEMS  TO TRACK

        1.   WAM Assigned

        2.   Work Assignments Issued And Workplans
            Received

        3.   Deliverables And Due Dates

        4.   Actual Task Or Subtask Completion

        5.   Funds Obligated And Expended By
            Account Number

        6.   Funds Allocated And Expended By
            Work Assignment

        7.   Hours Assigned And Expended
                    6-23
PCMD9/89                                         17!

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          SUGGESTED FILE PLAN FOR WORK
      ASSIGNMENT MANAGERS  AND DELIVERY
              ORDER PROJECT OFFICERS

     1.  Copy Of Work Assignment /Delivery Order, With
        All Modifications

     2.  Copy Of Approved Designation Of Work Assignment
        Manager/Delivery Order Project Officer And
        Alternates

     3.  Copy Of Contract And All Modifications

     4.  Contractor's Work Plan (Drafts & Final, With
        Evidence Of Government Approval Of Final)

     5.  Schedule Of All Tasks And Deliverables

     6.  Copies Of All  Deliverables With Related
        Correspondence (Approvals, Rejections, Comments
        On Draft)

     7.  Correspondence Relating To Subcontract Or
        Consultant Approvals
•-MD9/89                  6-24                        173

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           SUGGESTED  FILE  PLAN (Cont.)

     8.   Technical Progress Reports

     9.   Financial Progress Reports

     10.  Copy of Invoices (With Supporting Documentation)
         & Related Correspondence

     11.  Documentation and Forms Related to Government-
         Furnished Property

     12.  Records of Meetings and Phone Calls with
         Contractor

     13.  Miscellaneous Correspondence

     14.  Evaluation of Contractor's Performance
PCMD9/89                  6-25

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 STEP  4:   CONDUCT POST-AWARD  ORIENTATION
   This Should Include Review/Discussion Of:

   1.   The Statement Of Work (Including Schedule Of
       Major Tasks And All Deliverables)

   2.   Reporting Requirements

   3.   Special Contract Provisions (Key Personnel Clause,
       Subcontract Consent Clause, Etc.)

   4.   Procedures For Monitoring And Measuring Progress

   5.   Invoicing And Payment Procedures, Incl. Whom To
       Contact

   6.   The Key Players, Their Responsibilities And The
       Chain Of Command (Both Government & Contractor);
       Whom To Contact For What (E.g., Property Manager)

   7.   Logistics Of Operation And Communications
~MfV9'fi9
                      6-26                           175

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                                                                         "*" ^0

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                                           Chapter 6
                                PLANNING AND PREPARATION
              Before one can properly administer a contract, there are certain steps which are
       important to assuring  satisfactory contract performance and effective administration.
       Some of these begin before award of the contract, when the requirement is first  being
       defined. Others are to be performed immediately after award. All of these tasks are
       extremely essential if EPA is to receive the best possible products or services within the
       time  required.

       6.1  The Importance of the Pre-Award  Phase

              Effective contract administration is based upon the premise that the contract
       expresses the exact agreement of the parties. EPA's primary intention is to get what it
       is paying for at the level of quality desired by the program office.  But a contract is a
       legally enforceable agreement which is only as good as the language it contains.  In other
       words,  a contract  is interpreted to mean what it actually says, not what one or the other
       of the parties meant to say.

              It is  also of the utmost importance that the contractor have the necessary
       experience  and qualifications to perform the work called for by  the contract. If  the
       contractor proves  to be incapable of providing the desired quality, there is not much
       remedy afforded to EPA unless specific contract provisions have been breached.  This is
       often not the case, as excellence and quality are difficult to define.

              All of this  only serves to  underline  how important pre-awar.d planning is to the
       Government. Whoever originates the requirement, whether the Project Officer, Work
       Assignment  Manager,  Delivery Order Officer or Delivery Order Project Officer,  has a
       basic responsibility to ensure that the language in the RFP and the resultant contract
       will meet his or her needs.  Statements of Work must be clear and concise, and state
       exactly what the Government requires.  Evaluation criteria should be structured  so  as  to
       allow the selection of a highly qualified source.  Reports of Work and other deliverables
       should  be well-defined, with reasonable deadlines which will meet EPA's needs.

              In performing any of these pre-award planning tasks, Project Officers as well  as
       Contracting  Officers need to be aware of the particular requirements and any problems
       which are involved in  administering and monitoring the different types of  contracts.
       This awareness can help these personnel to be effective contract administrators  and
       reduce the time they need to spend in monitoring the contract.

       6.2  Reading and  Understanding  the  Contract

              After a contract has been awarded in EPA, what is the first thing the  Project
       Officer should do?  The answer is:  READ THE CONTRACT.

              Even if the Project Officer was responsible for drafting  the requirement in  the
       first place, the most important part of contract administration is to become  thoroughly
       familiar with the specific obligations of both the contractor and the Government. By
       reading the entire contract, the Project Officer  wilt be able to  monitor the contractor's
       progress more successfully as different stages of performance are reached. If questions
       arise, the Contracting  Officer will make time available to assist the Project  Officer in
       understanding the contract's terms and conditions.
WID9/89                                         1                                            177

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              One of the first things which should be examined is:  what are the obligations of
       the Government?  The contract may require EPA to provide  property or data to the
       contractor.  If the property or data is not provided on time, the contractor may have an
       excuse for delaying performance, and may even have a basis for a monetary claim against
       the Government. Project Officers must be very careful to guard against such potential
       delays caused by the Government, and should develop some type of schedule, coordinating
       with other EPA offices,  if appropriate,  for the timely fulfillment of  these obligations.

       6.3  Schedule  of Major Tasks and  Deliverables

              After reviewing the Government's obligations, the Project Officer should next
       make a list of each of the major tasks under the contract. (If the contract is a term
       form, or a fixed-rate, indefinite  quantity type, this function, as well as the
       determination of the Government's obligations, will be performed for each task by the
       Work Assignment Manager or Delivery Order Officer, with  oversight by the Project
       Officer.)  See pages 153-4  for sample schedules.

              The list of tasks  should include  all  associated deliverables,  reporting
       requirements, and deadlines, as well as any specific inspection  requirements and duties
       of the Government.  This list should be kept  up-to-date by the Project Officer, and used
       as a tool for monitoring progress and determining the extent of contract completion.

              In identifying the work the contractor is  legally obligated to perform, keep in
       mind that some documents describing the requirements may have been made a part of the
       contract  by a device called "incorporation by reference".  Requirements incorporated by
       reference are not written out  in full in the contract, but  are simply listed by title and
       FAR or other reference.  Examples of this are many clauses  required by the Federal
       Acquisition Regulations.  Clauses which are incorporated by reference are just as
       binding on the contractor as any other provision specifically written in full text in the
       contract.  EPA personnel and contractors should review these clauses (by reviewing the
       referenced clauses in, for example, the  FAR), to ensure their knowledge of the
       applicable  requirements.  Pages 47-8  list a number of the  more important clauses;
       these are discussed in more detail in later chapters,  e.g., in  Chapter 7, pages 187 ff.

       6.4  Post-Award  Orientation

              Once a review of the Government's and the contractor's obligations has been made,
       it is often useful to hold a post-award  orientation conference with the contractor.  This
       will help to ensure that all aspects of the contract requirements are  clear and that each
       party is certain  of its obligations.  Post-award orientation is a  useful tool  for
       contributing to good contractor performance by:

              - increasing the assurance that  the contractor understands everything the
                contract requires.

              - clarifying the roles of the Government personnel with whom the contractor
                will deal during the life of the  contract.

              - explaining the contract administration procedures  that will be used.

              Depending upon  the complexity of  the contract, the  format for post-award
       orientation may be relatively simple, such  as a  letter signed by the Contracting Officer,
       or a conference call with both the  Project Officer and Contracting  Officer  participating.
       Or, it might be more formal, with a meeting attended by contractor representatives and

PCMD9/89                                         ~                                             178

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        various EPA personnel involved in the administration of the contract.  Regardless of
        format, the following significant items should be covered:

               (1)  The Statement of Work (including major tasks and all deliverables);

               (2)  Reporting  Requirements;

               (3)  Special Contract Provisions (Key Personnel clause, Subcontract Consent
                   clause, etc.);

               (4)  Procedures for monitoring and measuring progress;

               (5)  Invoicing and  Payment Procedures;

               (6)  The Key Players,  Their Responsibilities and the Chain of Command

               (7)  The Logistics of Operation and Communications

               The conference should always be chaired by the Contracting Officer. The
        objective is to promote an understanding of the contract, and usually it is  necessary for
        the EPA personnel involved to  meet beforehand to develop the agenda and establish a
        coordinated position on all points. Preparing for the conference also presents an
        excellent opportunity to ensure that all  EPA personnel involved in the contract (Work
        Assignment Managers, Delivery Order Officers and Delivery Order Project Officers) are
        similarly  oriented.

               After the conference, it is a good idea to prepare a report covering  the items
        discussed, the understandings reached, and any further actions required, and distribute
        it to all attendees.

        6.5 Records,  Logs,  Reports  and Files

               The need to maintain proper records, logs, and reports cannot be emphasized
        enough.  The Project Officer's records are considered  part of the official contract
        documentation.  In event of a contract dispute,  these records may be subjected to
        examination by the Board of Contract Appeals  or by the Federal Courts. The Project
        Officer should immediately, upon his or her designation, set up a contract administration
        and suspense file for the contract.

               Documents concerning the contract must be contained in the Project Officer's
        official files.  This includes copies of the contract and  any modifications, all  related
        internal and external correspondence, copies  of all contractor deliverables, and  all
        financial and payment information. Exhibit  6-A is a sample file plan which may be used
        for this purpose. Sample  contractor communications records and meeting record forms
        are presented on pages 1 69-70.

               The sample plan may be changed to meet the specific requirements of the
        contract.  For example, it may be wise to set up a special file section if Government-
        furnished property  or special  equipment is involved in the contract. If the contract
        provides for award fee  payments, a section that specifically relates to this  area should be
        set up in the files.

               Work Assignment Managers, Delivery  Order Officers and Delivery Order Project
        Officers have similar recordkeeping  requirements, depending on the extent of their
-CMD9/89

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        delegated responsibilities.  (See pages181-2 for a suggested file plan.)  Failure to
        maintain such records reduces the government's ability to hold the contractor
        accountable for the contracted-for performance.
PCMD 9/89

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                          Sample Contract Administration
                                     File Plan
     Basic Contract File
         Copy of contract and all modifications thereto
         Copy  of  specifications, drawings,  or  manuals  incorporated  into  the
         contract by reference
         Listing of contractor submittal requirements
         Listing of Government-furnished property or services
         Listing of all information or documents furnished to the contractor
         Copy of the pre-award survey, if conducted
         Schedule of compliance reviews
     File on PO and Contract Monitor Designation
         Cojjy of PO designation
         Letters of contract monitor assignments with copy of transmittal letter
         furnished to the contractor   .
         Listing of specialized contract administration functions delegated to the
         PO or contract monitor
     Internal Correspondence File
         Record of communications between PO and other support activities
         In-house pre-performance checklist
         Copies of all correspondence between the PO and the Contracting Officer
         Copies of correspondence between  the PO  and contract  monitors and
         sponsoring activities
                                                                                  181
>CMD 9/89
                            Figure 4-A (page 1 of 2)

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        Contractor Correspondence File
            Copy of all general correspondence related to the contract
            Original of all contractor submittals of data and reports
            Copy of notice to proceed, stop work, or correct deficiencies
            Copy of all letters of approval pertaining to, for example:  materials; the
            contractor's  quality control  program;  prospective  employees;  work
            schedules, etc.
        Payment File
            Information relative  to discount provisions for prompt payment
            Copy of contractor invoices
            Copies of inspection  reports
            Letters pertaining to contract deductions or fee adjustments
            Back-up  documentation  for  recommendation- of contractor payment or
            progress payment.
                             Figure 4-A   (page  2  of 2)                           182
PCMD 9/89

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       ISSUANCE
       OF WORK
PCMD9/89         7"°      .   183

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               WORK  ASSIGNMENT  ISSUANCE  PROCESS
                                                                    TCI
   W All PREPARES
   PROCUREMENT
   PACKAGE, GETS
  FUNDS COMMITTED
 PROJECT OFFICER
  REVIEWS WA
   PACKAGE
                PROJECT OFFICER
                  FORWARDS
                 WA PACKAGE TO
                CONTRACT OFFICER
 /\   -
/  REOURES X*
S. CUkRFICATIONTAr
CONTRACT OFFICER
  BSUESWA
  REQUESTTO
  CONTRACTOR
                                                                                                 O
                                                                                                 o
   CONTRACTOR
   ACCEPTS WORK
   ASSIGNMENT
      I
  CONTRACTOR
PREPARES/SUBMITS
 WA WORK PLAN
A COST PROPOSAL
  WORK MAY BEGM&
   CONTINUE UP TO
  40 DAYS W/0 WORK-
   PLAN APPROVAL
  WAM. PO ft CO
 REVEWWORKPLAN
   AND COSTS
                                  WAM REVIEWS
                                 wrm CONTRACTOR
   WAM MITIATES
   -NOTICE OF
   APPROVALTO
  PROJECT OFFICER
PROJ. OFFICER
CONCURS ON
 NOTICE OF
 WORKPLAN
 APPROVAL
 THROUGH
 CONTRACT
 OFFICER TO
CONTRACTOR
                                                                                           10
CONTRACT OFFICER
   APPROVES
WORKPLAN & COST
   PROPOSAL
                                                                          o
                                                                          o
                                                                          o
                 12
 11
    CONTRACTOR
    PERFORMS
      WORK
    ASSIGNMENT
   CONTRACTOR
    PRODUCES
  DELIVERABLES.
  PERFORMS TASKS
oa
01
                 '13
                   CONTRACTOR
                  SUBMITS MONTHLY
                  'ROGRESS REPORTS
                   & VOUCHERS
                                 14
 WAM REVIEWS
 DELIVERABLES.
 PROGRESS RE-
PORTS. VOUCHERS
                                                                               16
 WAM APPROVES
 DELIVERABLES,
   REPORTS,
  VOUCHERS
                                                     I
  CONTRACTOR
   DEBRIEFS
WORK ASSIGNMENT
   MANAGER
                                                 ACCOUNTING
                                                PAYS VOUCHERS
                                                (IF PO APPROVES)

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       WORK  ASSIGNMENT  CLAUSE

     Specifies Required Work Assignment Elements, I.e.,
     Number, Estimate Of Required Labor Hours, Period
     Of Performance & Schedule Of Deliverables, And
     Description Of The Work.

     Requires Contractor To Sign Work Assignment
     To Acknowledge Receipt And Submit Work Plan
     To PO And CO.

     Requires Contractor To Stop Work If They Do Not
     Receive Work Plan Approval.

     Contractor Must Notify CO If Work Assignment
     Suggests Change To Contract Terms Or Conditions.
                         7-2
PCMD9/89                                            186

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                                                                         EPAAR Clause
                              VOBK ASSIGNMENTS (API 1984)

           (•)  The  Contractor shall perform work under this contract aa speci-
         fied in writtan work assignments laauad by tha Contracting Officer.

           (b)  Bach work assignment will include (1) a numerical  designation,
         (2) the estimate of required labor hours, (3) the period of performance
         and schedule  of dellverables. and (4) the description of the work.

           (e)  The  Contractor shall acknowledge receipt of each work assignment
         by returning  to the Contracting Officer a signed copy of the work
         assignment within  	 calendar days after  its  receipt.  The
         Contractor shall begin work immediately upon receipt of a work aaaign-
       '  ment.  Within	calendar days after receipt of a work assignment*
         the Contractor  ahall submit 	 copies of  a work plan to the Project
        Officer and 	 copies to the Contracting  Officer.  The work plan
         shall  include a detailed technical and staffing plan and a detailed
        coat estimate,  within 	 calendar days after  receipt of the work
        plan*  the  Contracting Officer will provide written approval or disap-
        proval of  it  to the Contractor.  Xf the Contractor has not received
        approval on a work plan within 	 calendar days after its submis-
         sion,  the Contractor shall stop work on that work assignment.  Also, if
         the Contracting Officer disapproves a work plan, the Contractor ahall
        stop work until the problem causing the disapproval is resolved.  In
        either case,  the Contractor shall resume work only when the Contracting
        Officer finally approves the work plan.

           (d) This clause does not change the requirements of the-'Level of
        Effort* elsuse, nor the notification requirements of either the
        •Limitation of Cost* or 'Limitation of Punds* clauses.

          (e) Work assignments shall not allow for any change to the terms or
        conditions of the contract.  Where any language  in the work assignment
        may suggest s change to the terms or conditions, the Contractor shall
        immediately notify toe Contracting Officer.
                                          7-3                                      187
PCMD9/89

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          DELIVERY  ORDER CLAUSE

       Specifies Individuals (Aside From Contracting
       Officer) Who Are Authorized Ordering Officials.

       Requires Use Of Optional Form 347 Or Other
       Agency Prescribed Form To Order Supplies
       Or Services.

       Requires Use Of Standard Form 30 If Amending

       Requires Contractor To Acknowledge Receipt And
       Submit Staffing Plan To Ordering Officer Within 10
       Days.

       If Contractor Considers Estimated Hours Or Completion
       Date Unreasonable, Must Notify Ordering Officer
       And Contracting Officer In Writing Within 10 Days

       Contractor Must Not Exceed Order Ceiling Price,
       And Contractor Must Notify CO If Contractor Believes
       Costs Will Exceed 85% Of Total Cost Within Next
       30 Days
PCMD9/89                   7-4                           188

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                                                                           EPAAR Clause
                  ORDERING—BY DESIGNATED ORDERIRC OPPZCEB8 (API 1984)

           (a) The Government will order any supplies and service*  to be
         furnished under this contract by issuing delivery orders on Optional
         Form 347, or any agency prescribed fora, from	through	  In
         addition co the Contracting Officer, the following individuals are
         authorized ordering officers.
           (b) A Standard Fora 30 will be the method of amending delivery orders.

           (c) The Contractor shall acknowledge receipt of each order and shall
         prepare and forward to the Ordering Officer within ten (10) calendar
         days the proposed staffing plan for accomplishing the assigned task
         within the period specified.

           (d) If the Contractor considers the estimated labor hours or
         specified work completion date to be unreasonable, he/she shall
         promptly notify the Ordering Officer and Contracting Officer in writing
         within 10 calendar days, stating why the estimated labor hours or
         specified completion date is considered unreasonable.

           (e) Each delivery order will have a ceiling price, which the
         Contractor may not exceed.  When the Contractor has reason to believe
         that the labor payment and support coats for the order, which will
         accrue in the next thirty (30) days, will bring total coat to over 83
         percent of the celling price specified In the order, the Contractor
         shall notify the Ordering Officer.

           (f) Paragraph* («>• «)• «nd (•> °* thl« clause apply only when
         services are being ordered.
r*CMD9/89                                     "                                        189

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     PREPARING  THE STATEMENT OF WORK
  FOR WORK ASSIGNMENTS/DELIVERY ORDERS

   1.   Determine Objectives Of The Work

   2.   Consider What The Govt Should Provide, E.g.,
       Furnish Or Make Available Background Reports

   3.   Prepare Outline, Insuring That All Needed Points
       Are Included; Arrange In Logical Sequence

   4.   One Person (If Feasible) Writes Draft Statement
       Of Work To Attain Good Flow Of Thoughts

       Edit Statement Of Work

         Eliminate excessive verbiage
         Check sentence lengths (mix of short/longer
           sentences; make it readable)
         Eliminate bureacratese
         Define any uncommon acronyms or technical
           terms at first point of use (or provide glossary)
         Stress use of active voice (E.g., dog bites On-
           Scene Coordinator vs. On-Scene Coordinator
           is bitten by dog)
PCMD9/89                  7-6                          19°

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    PREPARING  THE  STATEMENT OF WORK
                    (Cont.)


   6.  Pass Draft Version To Another Person For Review

   7.  Make Changes Based On The Review

   8.  Prepare In Final Form


   THROUGHOUT -- REMEMBER TO CONSIDER:

    - You Can't Reasonably Guard Against Every
      Conceivable Contingency

    - You Can Guard Against Some Performance
      Problems By:

      - Clearly specifying delivery dates

      - Including the means to evaluate whether contractor
       is delivering the quality of work required
*>CMD9/89                                             191

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  ELEMENTS OF  WORK  ASSIGNMENT

  1. PERIOD OF PERFORMANCE
     (Should last until final deliverable is due)
  2. LEVEL OF EFFORT
     (Estimated number of person-hours required to
     perform the assignment)
  3. STATEMENT OF WORK
    v Purpose Of Task/Background*
    ^/Detailed Task Description (Specific Tasks/Deliverables)*
     Required Additional Reports (W/ Desired Format)
    ^Schedule Of Tasks And Deliverables*
     Suggested Skill Mix
     Required Personnel Qualifications
     Provision Of Government-Furnished Data
     Special Requirements or Restrictions
        0/landatory Components (Others Should Be Included If Applicable)
   PROJECT MUST FALL WITHIN CONTRACT STATEMENT
   OF WORK!
PCMDMB                  7                           19!

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      LEVEL OF EFFORT  (LOE)/COST
    REIMBURSEMENT TERM  CONTRACT
       HOURS,
Not Dollars, Are What Are Counted And
       Allocated.

       Most LOE Contracts DO NOT Count Support
       Personnel Such As Company Management,
       Typists, And Clerical In Direct Labor.  However,
       Some Contracts May Deviate From This Method.

       Level Of Effort Does Include Subcontractor And
       Consultant Hours, As Well As Contractor Hours.

       Hours NoLUsed In Given Contract Period Are Lost^
        tnd Cannot Be Used In Later Period.     -x
              b«-  cfejL- £kl^5puU^L f  ftc- Qj^c\e^r\<^J))
.JCMD9/89                7.9                       193

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                                                                          EPAAR Clause
               LEVEL OP EFFORT—COST-REIMBURSEHEHT TEIN CONTRACT (APR 1984)

           (•) The  Contractor shall perfora all work and provide all required
         reports within the level of effort specified belov.  The Government
         hereby orders  	 direct labor hours for the base period, vhlch
         represents the Government's best estimate of the level of effort to
         fulfill these requirements.

           (b) Direct labor Includes personnel such as engineers, scientists,
         draftsmen,  technicians, statisticians, and programmers and not support
         personnel  such as company management, typists, and key punch operators
         even though such support personnel are normally treated as direct labor
         by the Contractor.  The level of effort  specified In paragraph (a)
         Includes Contractor, subcontractor, and  consultant labor hours.

           (c) If the Contractor provides less than 90 percent of the level of
         effort specified for the base period or  any optional period ordered, an
         equitable  downward adjustment of the fixed fee, if any, for that period
         will be made.  The Government may require the Contractor to provide
         additional effort up to 110 percent of the level of effort for any
         period until the estimated cost for that period has been reached.
         However, this additional effort shall not result in any Increase In the
         fixed fee,  if any.  If this is a cost-plus-incentive-fee (CPIF)
         contract,  the  term "fee" In this paragraph means "base fee and
         Incentive  fee."  If this Is a cost-plus-award-fee (CPAP) contract, the
         term "fee" In  this paragraph mean* "base fee and award fee."

           (d) If the level of effort specified to be ordered during a given
         base or option period is not ordered during that period, that level of
         effort may not be accumulated and ordered during a subsequent period.

           (e) These terms and conditions do not  supersede the  requirements of
         either the "Limitation of Cost" or "Limitation of Funds" clsuses.
                                           7-10                                     194
PCMD 9/89

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                    DEFINITION OF LABOR CLASSIFICATIONS
            Listed below are qualifications for each category of
       professional services the contractor must provide:

               (a)  Level IV;  Senior Professional (Management)t

            At least eight years of professional experience planning,
       conducting and" participating in short-term studies; the  design,
       review and evaluation of management and administrative systems;
       and the provision of management support.  At least  some of
       the experience must include scheduling work to meet completion
       dates, estimating manpower needs and reviewing project progress
       and making changesxin methodology where necessary.   This
       individual plans, conducts, and supervises projects of major
       significance, necessitating advanced knowledge and  the
       ability to originate and apply new and unique methods and
       procedures.  This person supplies technical advice  and counsel
       to other professionals and generally operates with  wide
       latitude for unreviewed action.  In addition, must  have at
       least a masters degree in business administration,  management,
       public administration, or related discipline unless the
       Experience/Qualification Substitutions clause is satisfied.

               (b)  Level III;  Mid Professional (Senior Analyst);

            At least three  years professional experience participating
       in short-term studies; the design, review and evaluation  of
       management and adminsitrative systems; and the provision  of
       information management policy support.  Individual  receives
       assignments associated with projects from the senior professional
       translating technical guidance received into usable data  applicable
       to the particular assignment.  Work assignments are varied and
       require some originality and ingenuity.  In addition, must
       have at least a masters degree in the social sciences, management,
       business administration, public administration, or  related
       discipline unless the Experience/Qualification Substitutions
       clause is satisfied.

               (c)  Level II;  Junior Professional (Analyst);

            Less than three  year» of experience in the areas listed
       above under "Mid Professional (Senior Analyst)."  Individual
       gathers and correlates basic data and performs routine analyses.
       Person works on less  complicated assignments where  little
       evaluation is required.  In addition, must have at  least  a
       bachelors degree in  the socic.1 sciences, management or business,
       unless the Experience/Qualifications Substitutions  clause is
       satisfied.
                                  7-11                              195
rCMD9/89

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      Experience/Qualification  Substitutions;


                  (a)   Any combination  of  additional  years of
      experience  in  the proposed  field  of  expertise plus  full  tine
      college  level  study  in  the  particular  field  totaling four  (4)
      years  will  be  an  acceptable substitute for a bachelors degree.

                  (b)   A bachelors degree  plus  any combination of
      additional  years  of  experience and graduate  level study  in the
      proposed field of expertise totaling two  (2) years  will  be an
      acceptable  substitute for masters degree.

                  (c)   Additional years of graduate level study  in
      an appropriate field will be considered equal to years of
      experience  on  a two-for-one basis.
PCMD9/89
                                   7-12                             196

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         WA86-K23S
                       DEFINITION  OF  LABOR CLASSIFICATIONS

     Offerers  shall  use the  following  labor  classifications  in
 preparing  their  technical and  cost proposals:


              PROFESSIONAL

               (1) Level 4 - Plansi conducts and  supervises  projects
 of  major significance/  necessitating  advanced  knowledge  and the
 ability to  originate  and apply new and  unique  methods  and
 procedures. Supplies  technical advice and counsel  to other
 professionals. Generally operates with  wide latitude for unreviewed
 action.

            Typical Title:  Project Leaderi  Chief Engineer
            Normal  Qualifications: Ph.D. Degree  or equivalent) and
            Experience:  10  years  or  more

               (2) Level 3 - Under general supervision  of project
 leader* plans* conducts and supervises  assignments normally
 involving smaller or  less important  projects.  Estimates and
 schedules work to meet completion dates.  Directs  assistance*
 reviews progress and  evaluates results; makes  changes  in methods*
 design or equipment
     where necessary.   Operates with  same latitude  for  unreviewed
 action or decision.

            Typical Title:  Project Engineer* Group Leader
            Normal  Qualifications: Masters  Degree  or equivalent!  and
            Experience:  6-12 years

               (3) Level 2 - Under supervision  of a senior or project
     leader* carries out assignments  associated with projects.
 Translates  technical  guidance  received  from supervisor into usable
 data applicable  to  the particular assignment coordinates the
 activities  of  juniors  or technicians.   Work assignments  are varied
 and  require some originality and  ingenuity.

              Typical  Title:  Engineer. Analyst
              Normal Qualifications:  B. S. Degree  or equivalent*  and
              Experience: 3-8 years

            (4)  Level  1 - Lowest  or  entering classification.  Works
 under close supervision of  senior or project leader.   Gathers and
 correlates  basic data  and performs  .-outine  analyses.   Works on less
 complicated assignments where  little evaluation  is required.

              Typical  Title:  Junior*  Associate
              Normal Qualifications:  B. S. Degree  or equivalent)  and
              Experience: 0-3 years
PCMD 9/89
                                   7-13                              197

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        WA86-K235
    Experience/Qualifications Substitutions

             (1) Any combination of additional years of experience
in the proposed field of expertise plus full time college level
study in the particular field totaling four (4) years will be an
acceptable substitute for a B. S.  Degree.

             (2) A B. S.  Degree plus any combination of additional
years of experience and graduate level study in the proposed field
of expertise totaling two (2) years mill be an acceptable substitute
    for a Masters Degree.

             (3) A B. S.  Degree plus any combination of additional
years of experience and graduate level study in the proposed field
of expertise totaling four (4) years or a Masters Degree plus two
(2) years of either additional experience or graduate  level study in
the proposed field of expertise mill be an acceptable  substitute for
a Ph. D.  Degree.

             (4) Additional years of graduate  level study in an
appropriate field will be considered equal to  years of experience on
a one-for-one  basis.

         TECHNICIAN

            (1) Level 3 - Performs nonroutine  and complex
assignments.  Works under general supervision of a scientist or
engineer.  Performs experiments or tests which  may require
nonstandard procedures and complex instrumentation.  Records*
computes and analyzes test data prepares test  reports.  May
supervise lower level technicians.
             Typical Title: Senior Technician Experience: 6 years or
more
            (2) Level 2 - Performs assignments that are normally
standardized.   Operates testing or processing equipment of moderate
complexity.   May construct components or subassemb1ies of prototype
models.   May troubleshoot malfunctioning equipment  and make  simple
repairs.   Extracts and processes  test data.

              Typical Title: Technician Experience: 2-6 years

            (3) Level 1 - Performs simple  and routine  tasks  or  tests
    under close supervision.  Records test data  and may prepare
simple charts or graphs.   Performs routine maintenance and may
install or set up test equipment.
Experience:
 Typical Title:
O-2 years
                            Junior Technicians!  Technician  Trainee
    Experience/Qualifications Substitutions

             (1) Any combination  of  additional  years  of  experience
in the proposed field of expertise plus  full  time  college  level
 PCMD 9/89
                                    7-14
                                                          198

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        WA86-K235


study in the particular field totaling four  (4) gears will be an
acceptable substitute for a B. S. Degree.

             (2) A 0. S.  Degree  plus ang combination of additional
•gears of experience  and graduate level study  in tf-.: proposed field
of expertise totaling two (2) years will be  an acceptable  substitute
    for a~Masters Degree.

             (3) A B. S.  Degree  plus1 any combination of additional
years of experience  and graduate level study  in the proposed field
of expertise totaling four (4)  years or a Masters Degree plus two
(2) years of either  additional  experience or  graduate  level study  in
the proposed field of expertise will be an acceptable  substitute for
a Ph. D.  Degree.

             (4) Additional years of graduate level study  in an
appropriate field will be considered equal to years of experience  on
a one-for-one  basis.
                                    7-15
 PCMD9/89                             '   ' a

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       FIXED  RATES  FOR SERVICES

    This Clause Sets Labor Rates For Personnel Classes
    For Duration Of Contract.

    Rates Stated Are To Cover All Expenses, Including
    Report Preparation, Salaries, Overhead, General
    And Administrative Expenses, And Profit.

    Contractor Must Maintain Time And Labor Distribution
    Records For all Employees Working Under The
    Contract.
PCMD9/89                7-16                          200

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                                                                          EPAAR Clause
                    FIXED RATES  FOR SERVICES—INDEFINITE DELIVERY/INDEFINITE
                                  QUANTITY CONTRACT  (APR 1984)

              The following fixed rates shall apply for payment purposes for the
            duration of the contract*

                                            Estimated
              Personnel         Skill      Direct Labor
            Classification      Level         Hours           Rate         Total
              The rate, or rates* set forth above cover all expenses, including
            report preparation, salaries, overhead, general and administrative
            expenses, and profit.

              The Contractor shall voucher for only the time of the personnel whose
            services are applied directly to the work called for in individual
            Delivery Orders and accepted by the EPA Project Officer.  The
            Government shall pay the Contractor for the life of a delivery order at
            rates in effect when the delivery order was Issued, even if performance
            under the delivery order crosses into another period.  The Contractor
            shall maintain time and labor distribution records for all employees
            who work under the contract.  These records must document time worked
            and work performed by each individual on all Delivery Orders.

                                        (End of clause)
/ID 9/89                                   7"17                                    201

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  ESTIMATING  WORK ASSIGNMENT
                  COSTS


 TO ESTIMATE TOTAL LABOR HOURS:

  1. Break Down Work Assignments Into Tasks

  2. Estimate Hours Required To Perform Each
    Task, By Labor Category

  3. Sum Total Hours, Across All Tasks, For
    Each Labor Category

  4. Sum Total Hours


  TO ESTIMATE TOTAL WORK ASSIGNMENT COSTS:

  5. Multiply Total Hours Times Average Loaded
    Hourly Rate For Contract (E.g., $50/hour)
                    7-18                        202
PCMD9/89

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      PROJECTED LABOR BUDGET

    DIRECT LABOR   Est.Hrs Rate      Est.Cost
      Prof. Level 3   10   X  20  =    $200
      Prof. Level 1    10   X  10  =    $100
      TOTAL DIRECT  20              $300
    LABOR OVERHEAD   RATE(%) BASE
      Fringe Benefits      33%* X 300 = $100
      Overhead          50%* X 400 = $200

      TOTAL LABOR OVERHEAD          $300
    TOTAL BURDENED LABOR            $600
    'Typical range = 33-45% for fringes; 40-100% for
    overhead
                      7-19
F ID 9/89                                        203

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 PROJECTED LABOR BUDGET + ODC'S
      WITH RATES LOADED W/ FRINGES & OVERHEAD
    DIRECT LABOR
       Prof. Level 3
       Prof. Level 1

      TOTAL DIRECT
Est. Mrs Rate    Est. Cost
  10  X 40  =  $400
  10  X 20  =   200
  20
$600
    OTHER DIRECT COSTS
      Travel
       Subcontractors (200 prof, hrs.)
       Computer Time*

       TOTAL ODC'S
               $180
               6000
                820
              $7000
    TOTAL DIRECT COST AND LABOR   $7600
    'Must Be Approved by OIRM Or SIRMO As Appropriate
PCMD 9/89
                   7-20

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   PROPOSED WORK ASSIGNMENT

                 BUDGET
     WITH RATES LOADED W/ FRINGES & OVERHEAD

   DIRECT LABOR    Est. Mrs Rate    Est.Cost
      Prof. Levels      10  X  40 =   $400
      Prof. Level!      10  X  20 =    200
     TOTAL DIRECT    20            $600

   OTHER DIRECT COSTS
     Travel                         $180
      Subcontractors (200 prof, hrs.)*     6000
      Computer Time                  820
      TOTAL ODC'S                 $7000


   TOTAL DIRECT COST AND LABOR    $7600


   GENERAL & ADMINISTRATION  (10%)  $760


   TOTAL ESTIMATED COST          $8360


   FEE (7%)                         $585


   TOTAL ESTIMATED COST + FEE     $8945

   Average Hourly Rate (Incl. ODC's) = $40.66
     (Total costs of $8945 divided by 220 hours of labor,
     i.e., 20 hrs.of direct labor + 200 subcontractor hours)
   * Separate Breakdown Should Be Provided
HD 9/89                   7-21

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        ESTIMATING  TOTAL COSTS

     1.  Calculate Total Hours Per Labor Category

     2.  Multiply Hours Per Labor Category Times
        Hourly Rate Per Category

     3.  Sum The Costs For All Categories = Total Labor
        Costs (Unloaded, I.e., No Fringes)

     4.  Multiply Labor Costs Times Fringe Benefit Rate
        (E g., 33%) = Total Labor Costs

     5.  Multiply Total Labor Costs Times Overhead Rate
        (E.g., 50%)

     6.  Add Other Direct Costs (E.g., Consultants,
        Subcontractors, Travel, Other Direct Such
       As Photocopy, Computer Time)

     7.  Multiply Sum Of Labor Costs + Other Direct
        Costs Times G&A (E.g., 10% For General &
       Administrative Costs) = Estimated Cost

     8.  Multiply Estimated Cost Times Fixed Fee (E.g.,
       7%) = Estimated Cost Plus Fixed Fee
                          7-22
PCMD 9/89                                               •"»*>

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          RESTRICTIONS  ON
       STATEMENTS OF WORK
 1.   Do NOT Include Any Internally Developed Cost
     Estimates

 2.   Do NOTDjrectjfte Contractor To Use Any Spec!
     Employee, Consultant Or Subcontractor
 3.   Do NOT Include Any Tasks Outside The Scope Of
     The Basic Contract

                                                u
                   7'23
:MD 9/89                                        207

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         OTHER CONSIDERATIONS IN
      PREPARING A WORK ASSIGNMENT/
            DELIVERY ORDER SOW
   1.  Existence Of Any Organizational Or Individual
      Conflicts Of Interest
   2.  Qualifications of Contractor Staff To Perform Task
      Or Need To Obtain Subcontractors/Consultants
      Consent
   3.  Key Personnel
   4.  Avoidance of Creating Personal Services Contract
   5.  Need For/Use Of Government Furnished Property
                    7-24
PCMD 9/89

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       ORGANIZATIONAL  CONFLICTS
                  OF INTEREST

   An Organizational Conflict Off Interest Exists When The
   Nature Off The Work To Be Performed Under A
   Government Contract May, Without Some Restriction On
   Future Activities,

        1.  Result In An Unfair Competitive Advantage To
           The Contractor

        2.  Impair The Contractor's Objectivity In Performing
           The Contract Work


   NOTE: It Is Similarly Important To Check The Existence
   Of Any Conflicts Of Interest, E.g., Ownership Of Stock
   In A Company To Be Regulated.
F  ID9/89                     7-25                      20g

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                                                                          EPAAR Clau
                         ORGANIZATIONAL CONFLICTS OP INTEREST
                                      (APR 1984)

          (a) The Contractor warrants that,  to the beat  of  the  Contractor'a
        knowledge and belief, there are  no relevant facts or circumstances
        which could give rise to an organisational conflict of  intereat, aa
        defined in PAR Subpart 9.S, or that the Contractor  has  disclosed all
        auch relevant information.

          (b) The Contractor agrees that if an actual or potential organiza-
        tional conflict of Intereat ia discovered after  award,  the Contractor
        will make a full disclosure in writing to the Contracting Officer.
        This disclosure shall include a deecriptlon of actlona  which the
        Contractor has taken or propoaes to take, after  consultation with  the
        Contracting Officer, to avoid, mitigate, or neutralise  the actual  or
        potential conflict.

          (c) Remedies - The EPA may terminate thla contract for convenience,
        in whole or in part, if it deems such termination necessary to avoid an
        organizational conflict of intereat.  If the Contractor was aware  of a
        potential organizational conflict of Intereat prior to award or die-
        covered an actual or potential conflict after award and did not
        disclose or misrepreeented relevant Information to the Contracting
        Officer, the Government may terminate the contract for default, debar
        the Contractor from Government contracting, or pursue euch other
        remedies aa may be permitted by law or this contract.

          (d) The Contractor further agrees to insert in any subcontract  or
        conaultant agreement herounder, provisions which shall conform substan-
        tially to the languag* of  thia clauae. including this paragraph (d).
PCMD9/89
                                           7-26                                    21°

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         SUBCONTRACTS REQUIRING
           GOVERNMENT CONSENT

  1.  For The Fabrication, Purchase, Rental, Installation Or
     Other Acquisition Of Special Test Equipment Valued
     At More Than $10,000 Or Of Any Items Of Industrial
     Facilities

  2.  That Have Experimental, Development Or Research
     Work As One Of Their Purposes

  3.  For Architect-Engineering Services

  4.  Cost-Reimbursement, Time-and-Materials Or Labor-
     Hour Type

  5.  Fixed Price Subcontracts That Exceed Either $25,000
     Or 5% Of The Total Estimated Cost Of The Prime Contract

     (These Consent Requirements Apply To All Prime
     Contracts Except Firm Fixed Price Contracts.)
                      7-27
-~MD9/89                                             211

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                                                                                        FAR Clause
                           SUBCONTRACTS (COST-REIMBURSEMENT AND
                           LETTER CONTRACTS) MUL 1985)
                             (•) -Subcontract." as used in this clause, includes but
                           is not  limited  to purchase orders, and  changes and
                           modifications to purchase orders. The Contractor shall
                           notify the Contracting Officer reasonably in advance of
                           entering into any subcontract if—
                               (I) The proposed subcontract  b of the coM-reim-
                             bunemeni, time-and-maierials. or labor-hour type;
                               (2) The proposed subcontract is fixed-price and
                             exceeds either $23.000 or S percent of the total esti-
                             mated cost of this contract;
                               (3) The proposed subcontract has experimental, de-
                             velopmental, or research  work as one of its purposes;
                             or
                               (4) This contract is not a facilities contract and the
                             proposed  subcontract provides  for the fabrication.
                             purchase,  rental, installation, or  other acquisition of
                             special test equipment valued in excess of S 10.000 or
                             of any items of facilities.
                             (b) (I) In  the case of a proposed subcontract that (i)
                           is of the cost-reimbursement,  time-and-materials. or
                           labor-hour type and is estimated  to exceed  SIO.OOO.
                           including  any  fee. (ii) is proposed  to exceed S 100.000.
                           or (iii) is one of a number of subcontracts with a single
                           subcontractor, under this contract, for the same or re-
                           lated supplies or services  that,  in the aggregate, are
                           expected to exceed S 100.000. the advance notification
                           required by paragraph (a) above shall include the infor-
                           mation specified in subparagraph (2) below.
                               (2) (i) A description of the supplies or services to
                             be subcontracted.
                                 (ii) Identification  of the type of subcontract to
                               be used.
                                 (iii) Identification of the proposed subcontractor
                               and an explanation of why and how the proposed
                               subcontractor was selected, including the
                                 (iv)  The  proposed subcontract price and  the
                               Contractor's cost or price analysis.
                                 (v) The subcontractor's current, complete,  and
                               accurate cost or pricing data and Certificate of
                               Current Cost or Pricing Data, if required by other
                               contract pro>iiioni
                                 (vi) The subcontractor's Disclosure Statement or
                               Certificate relating to Cost  Accounting Standards
                               when such data are required by other provoions of
                               this contract.
                                  (Continued on the next page)



PCMD 9/89                                          7-28

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SUBCONTRACTS - Continued
                •» ntfu •mium reflecting—
                          of the tubcontract
       (vii)A
         (A) The
       price
         (B) The ma* •gnficuit ooosiderttions con-
       trolling estsbhihment of initial or revised prices;
         (C) The rciion cost or pricing data were or
       were not required;
         (D) The extent, if any. to which the Contrac-
       tor did not rely on the subcontractor's coat or
       pricing data in determining the price objective
       and in negotiating the final price;
         (E) The extent to which it  was recogniied in
       the negotiation that the subcontractor's cost or
       pricing data  were  not  accurate, complete, or
       current; the action  taken by the Contractor and
       the subcontractor;  and  the effect  of any  such
       defective data on the total price negotiated;
         (F) The reasons  for any significant difference
       between the Contractor's price objective and the
       price negotiated; and
         (G) A  complete  explanation of the incentive
       fee or profit plan when incentives are used. The
       explanation shall identify each critical perform-
       ance element, management  decisions  used to
       quantify each' incentive element, reasons for the
       incentives, and a summary of all trade-off possi-
       bilities considered.
   (c) The Contractor shall obtain the Contracting Offi-
cer's written consent  before placing any subcontract
for which advance notification is requred under  para-
graph (a)  above. However, the Contracting Officer
may ratify in wnting any such subcontract. Ratification
shall constitute the consent of the Contracting Officer.
   (d)  If the Contractor has an approved purchasing
system and the subcontract is within the scope of such
approval, the  Contractor  may enter into the subcon-
tracts described,, in   subparagraphs  (aXO and  (aX2)
above without the consent of the Contracting Officer.
unless this contract is for  the acquisition of major sys-
tems, subsystems, or their components.
   (e) Even if the Contractor's purchasing system has
been approved,  the  Contractor shall obtain the  Con-
tracting Officer's  wifcten  consent before placing  sub-
contracts  that have  been  selected for special surveil-
lance and  identified  to the Schedule of this contract
   (f) Unless the consent or approval specifically pro-
vides otherwise, neither consent by the Contracting
Officer to any subcontract nor approval of the  Con-
tractor's purchasing system shall constitute a deterimin-
ation (I) of the  acceptability of any subcontract terms
w conditions.  (2) of the alienability of any cost under
Ms  contract, or (3) to relieve the Contractor of any
responsibility for performing this contract.
   (g) No subcontract placed under  this contract shall
irovide for payment on a coM-plus-a-percentafe-of-eost
JMBsf'^ind  any fee payable under cost-reimbursement
upt.subcontracts shall not exceed the fee limitations 9
                                                                               FAR  Clause
paragraph 13.903(4) of the Federal Acquisition Regula-
tion (FAR).
  (h) The Contractor shall give the Contracting Offi-
cer immediate written notice of any action or suit filed
and prompt  notice of any claim made against the Con-
tractor  by  any subcontractor  or vendor that, in the
opinion of the Contractor, may result in litigation relat-
ed in any way to this contract, with respect to which
the Contractor may be entitled  to reimbursement from
the Government
  (i) (1) The Contractor shall insert in  each price rede-
termination  or incentive  price revision  subcontract
under  this  contract  the substance  of the paragraph
"Quarterly  limitation on payments  statement" of the
clause at S2.2I6-S. Price Redetenninatton—Prospective.
52.216-6, Price Redetermination—Retroactive.  32.216-
16, Incentive Price Revision—Firm  Target or 32.216-
17. Incentive  Price  Revision—Successive  Targets, as
appropriate, modified  hi accordance  with the  para-
graph entitled  -Subcontracts'* of that clause.
    (2) Additionally, the Contractor  shall include in
  each cost-reimbursement subcontract under this con-
  tract a requirement that the subcontractor insert the
  substance  of the appropriate modified subparagraph
  referred to in subparagraph (I) above in each lower
  tier price  redetermination or  incentive price revision
  subcontract  under that subcontract.
  (j) To facilitate small business participation  in sub-
contracting, the Contractor agrees to provide progress
payments on subcontracts under this contract that are
'fixed-price subcontracts with small business concerns in
conformity with the standards  for customary progress
payments stated in FAR 32.302-1 and 32.304(0. as in
effect on the date of this  contract.  The  Contractor
further agrees  that the need for  such progress payments
will not be considered a handicap or adverse factor in
the award of subcontracts.
  (k) The Government reserves the right to review the
Contractor's purchasing system as  set  forth in  FAR
Subpart 44.3.
                                                                                            213
                                           -29

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                             SAMPLE


          \
          9 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                           WASHINGTON. D.C. 20460
       MEMORANDUM

       SUBJECT:   Subcontractor/Consultant  Approval  EPA  Contract No.

       FROM:      Work Assignment  Manager

       THRU:      Gary R.  Polvi, P.E./  Project  Officer
                 Officer  of Water Enforcement  and Permits  (EN-338)

       TO:        William  Bailey,  Contracting Officer
                 Contracts Management  Division,  Cine.,  OH


            Your approval is recommended  for the following subcontractor(s
       consultant(s), proposed  by 	 (Prime Contractor),  as
       identified below in the  subject work assignment  work plan:

       Work  Assignment/Amendment  No.:  	

       Work  Plan Title/Dated: 	
       List  of  Subcontractors/Consultants  Recommended for  Approval:
            I  make the following certifications  for  each subcontractor/
       consultant  identified in this  approval  requests:

       That  I  have reviewed the subject subcontractor/consultant  effort,
       from  both  technical and cost perspecties  and  (except as noted
       in the  attached work plan approval)  find  the  subcontractor/
       consultant^effort  necessary and reasonable to achieve the
       technical  objective of the subject  work assignment/work assignment
       amendment;

       That  the proposed  subcontractor(s)/consultant(s)  were selected
       independently  by the prime contractor;  and

       That  the efforts of the approved subcontractor(s)/consultant(s)
       are to  be  managed  and directed by the prime contractor.
PCMD9/89                                                               214
                                  7-30
              Date                        EPA Work Assignment Manager

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                                               ii
              KEY PERSONNEL
  UNDER THE PROVISIONS OF THE "KFV PFRSOMMFI
  CLAUSE, THE CONTRACTOR AGREES TO:
  1.  Assign To The Contract Work Certain Key Personnel;

  2.  Not Remove These Key Personnel From The Contract
     Work For A Certain Period Of Time (Generall\(9odays)
     Without The Consent Of The Contracting Off icerfAnd
  3.  Obtain The Government's Approval On Any Proposed
     Substitutions.
                                   U.S. EPA Headquarters Library
                        7.31            Mail code 3201
:MD 9/89                               1200 Pennsylvania Avenue N\fi/i 5
                                     Washington DC 20460

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                                                                          EPAAR Claui
                                    KEY  PESOHNEL  (APE 1984)

              (•)  The  Contractor  •hall aaaign  to  thia contract tht following key
            pcraoanal:
                                                                          .........
              (b)  During  tha  flrat  ninety (90)  daya of  performance, tha Contractor
            ahall  make  no aubatitutiona of kay  paraoanal  unlaaa  tha aubatitutlon la
            nacaaaitatad  by lllnaaa,  death, or.termination of employment.  Tha
            Contractor  ahall  notify tha Contracting Officar within IS calendar daya
            after  the occurrence of any of thaaa a vent a and provide tha intonation
            required by paragraph (c)- below. After the Initial  90-day period, the
            Contractor  ahall  eubmlt tha information required  by  paragraph  (c) to
            the Contracting Officer at laaat IS daya  prior to Baking any paraanent
            aubatitutiona.

              (c)  The Contractor ahall provide  a detailed explanation of the
            circumatancea neceaaitatlng the propoaed  aubatitutiona, complete
            reauaea for the propoaed aubatltutea, and any additional Information
            requeated by  the  Contracting Officer.  Propoaed aubatitutea ahould have
            comparable  quailflcationa to thoae  of the peraona being replaced.  The
            Contracting Officer will notify the Contractor within IS calendar daya
            after  receipt of  all required information of  tha  daclaioa on aubatitu-
            tiona.  Thia  clauaa will be modified to  reflect any  approved changaa of
            kay peraonnel.
                                           7-32                                    216
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           PERSONAL  SERVICES

  1.  A Personal Services Contract Results When The
     Government Assumes The Right To Instruct,
     Supervise Or Control A Contractor's Employee
     In How He/She Performs The Work.

  2.  It Is The Contractor's Right To Hire And Fire, To
     Assign And Organize The Work.

  3.  Project Officers, Work Assignment Managers And
     Delivery Order Officers Must Take Care Not To
     Create A Work Assignment That Creates A
     Personal Services Contract (Employee/Employee
     Relationship).
  PERSONAL SERVICE CONTRACTS ARE ILLEGAL!
                        7-33
*MD9/89                                            217

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  ADVISORY  &  ASSISTANCE  SERVICES

    1.   Services To Support Or Improve Agency Policy
        Development, Decision-making, Management,
        And Administration, Or To Support Or Improve
        Operation Of Management Systems, To Include:
         - Individual  Experts and Consultants
         - Studies, Analyses and  Evaluations
         -- Management and Professional Support Services
         - Engineering  and Technical Service

    2.   Procurement Requests For A&A Services Require:
         - Written  Justification  Of  Need  And Certification
           That Services Do Not Unnecessarily Duplicate
           Any Previously Performed  Work Or Services
         - Written  Approval By  Official At Level  Above
           Requesting  Office, Or  Higher  Level If  During
           4th  Quarter Of Fiscal Year Or Agency  Requires

    3.   Management Controls:

         - Work  Statements Are Specific, Complete  And
           Specify  Fixed Period Of Performance
         - Acquisition  Follows  Competition  In  Contracting
           Act  Requirements
         -- Disclosure  To Avoid  Conflict Of Interest
         -- Proper  Monitoring  And  Contract Administration
         - Written  Evaluation At Conclusion  To Assess
           Utility Of Deliverables  And Contractor
           Performance
                            7-34
PCMD7/90

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       CONTRACTS MANAGEMENT MANUAL                       1900 Change?
                                                         5/21/90  *
                    PROCUREMENT REQUEST RATIONALE  CHECKLIST
              (to be submitted with EPA Forms  1900-8  and  1900-8A)

       Item 1 The title of this procurement is 	
       Item 2 This procurement request package  contains  the following
           documents.  (Check all  applicable boxes  and attached
       documents as appropriate.)

       See Attachment jjf    Check     Description
                                     EPA Form 1900-8
                                     Procurement Abstract*
                                     Statement  or Scope  of  Work*
                                     Concise Technical Proposal
                                       Instructions*
                                     Competitive Technical  Evaluation
                                       Criteria*
                                     Justification  for Other Than Full
                                       and Open Competition (JOFOC)
                                     D&F to provide full and open
                                       competition  after exclusion of
                                       source (see  FAR 6.2)
                                     Justification  for Advisory and
                                       Assistance Services
                                     Justification  of Need  (Government-
                                       Furnished Property (GFP)/
                                       Equipment)*
                                     Quality Assurance (QA)  Review Form
                                     Recommended Sources List
                                     Reports Description
                                     Government-Furnished Property
                                     Description

       *   The PROJECT OFFICER'S  HANDBOOK provides guidance  for preparing
       these  documents.  Also, see Item 11.

       Item 3:   This procurement [   ] involves [  ]does not  involve
       advisory  and assistance services.  (If advisory and  assistance
       services  are involved, attach a  justification that provides a
       statement of the need  for the services and a certification that
       such services do not unnecessarily duplicate any  previously
       performed work or services) .   (See page  4 of Figure  2-2 for
       required  approvals)

       Item 4:   This procurement [   ] involves [  ]does not  involve legal
       analysis.   I have [  ] have not  [  ]discussed this procurement
      with the  Office of General  Course! which [   ]concurs  [  ]does not
      concur with proceeding with thij  procurement

                                  Figure 2-1
                                 Page 1  of 5
P~MD7/90                                "                                 217b

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    7-POINT JUSTIFICATION OF  NEED  FOR GFP
     1.   Identify The Specific Program And Project For
         Which The Property Is Required.

     2.   Identify The Type, Quantity And Estimated Cost
         (Including Any Transportation Or Installation Costs)
         Of Each Item Of Property Required.

     3.   Explain Why The Property Is Necessary For
         Contract Performance.

     4.   Explain Why It Is In The Interest Of The Government
         To Provide The Property Rather Than To Require The
         Contractor To Provide The Property At No Direct
         Cost To The Contract.

     5.   Identify The Location Of The Contractor's Facility
         At Which The Property Will Be Used, And The
         Contractor's Personnel Responsible For Acquisition
         And Management Of The Property.
                           7-35
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    7-POINT JUSTIFICATION OF  NEED FOR GFP
                       (Cont.)
   6.  For Property To Be Acquired By The Contractor
       At Government Expense, Include A Certification
       That No In-house Excess Property Is Available
       And Include The Concurrence Of The Local
       Property Office.

   7.  For Equipment To Be Acquired By The Contractor
       At Government Expense (E.g., Purchase Of Special
       Test Equipment), Include A Lease Vs. Purchase
       Analysis.
                         7-36
•109/89                                                219

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                                 CASE STUDY
                              THE CASE OF ODD
           On September 30,  1994,  a cost-reimbursement, term form
      contract was  awarded  to the Technically  Acceptable  Corporation
      (TAC) for the purpose of  collecting and analyzing data on the
      pesticide industry.   The level of effort provided in the contract  is
      20.000 hours.  The period of performance extends until  September
      30,  1996, and  there is fan option |to extend the period of  performance
      for an additional year, through September 30, 1997.  The  option
      contains an additional  10,000  LOE hours.

    ^—¥ou_a/e a WnrkAsfiiqnnr^nt Manap.gr, and you have a
    fTequiremenpfor TAylo study^he long  and short-term effects of the
      new .pesticide,  "ODD ,  on tifl Environment, when used on soybean
      plants.   There is some data in-house on the chemical composition of
      the  pesticide, which you will  furnish to  the contractor.  You expect
          to conduct jesearch on studies  which have already been done in
          area, as well as anap_propj]ate amount of testing.  At the end of
      the  effort, you  want a(fTnalrepoH>  It is  anticipated  that the work
      will  take about  2500 person-hours and  take about a year to
      complete.      '  '
         |  It  is now  January 30.  1996.1 The Project Officer advises you
      that,  to  date, twelve  work assignments have been issued  under the
      contract, totalling  approximately 17.000  hours.

           Prepare a Work Assignment package for submission to the
      Contracting Officer.  This must include a  Level of Effort,  a  Period of
      Performance, and a  Statement of Work.   Also (although this will not
      be issued to the contractor), prepare a Qsst_estimate for the project.
      On the  next page, some pertinent information about the contract is
      provided.
                                      7-37                               22°
PCMD9/89                               1*1

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                      CONTRACT  NO.  68-OX-1234

          CONTRACTOR:  TECHNICALLY  ACCEPTABLE  CORPORATION
                       //IA Main Street
                       Podunk,  USA   00000
BASE PERIOD:
  'TION YEAR  I:
  LEI ON YEAR  II
October  1,  1994 - September  30,  1996
October  I,  1996 - September  30,  1997
Oclubei  1,  1QQ7	Soptombci  30,  1Q90
  iSE PERIOD
  'TION YEAR  I
OPTION YEAR  II
         LEVEL OF EFFORT

          20,000 hours
          10,000 hours
          10,000 hours
 ESTIMATED COST
(plus fixed   fee)

 $1,304,084
 $  678,124
 $  705,249
LE.ILING ON  TRAVEL COSTS  (Per  Year)   $5,000
"FILING ON  ODC's (Per Year)           $7,500
ESTIMATED  AVERAGE RATE PER  HOUR
                (unloaded):
                (loaded):
 $22.45
 $60.66
 $65.20
                                                      (excludes  fee)
                                                      (with fixed  fee)
  SE PERIOD  LABOR CATEGORIES,  RATES, & PROPOSED HOURS
     PROJECT  MANAGER    $27.00
     SR.  ENGINEER/V.P.    30.00
     SR.  RESEARCHER       20.00
            RESEARCH ASSISTANT  14.50
            STAFF WRITER       18.00
            SOIL SPECIALIST      9.00
            SECRETARY          11.50
            CLERK-TYPIST        9.00
                           3600 hours
                            416 hours
                           8100 hours
                           1800 hours
                           5400 hours
                            684 hours
                           1600 hours
                            720 hours
        INDIRECT COST RATES:

            OVERHEAD & FRINGE  BENEFITS:
            GENERAL & ADMINISTRATIVE EXPENSE:
                            111% of DIRECT LABOR
                            18.5% OF TOTAL COSTS
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                                     7-38
                                                       221

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Issuance
of Work

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                                           Chapter 7
                    ISSUANCE OF WORK AND RELATED CONSIDERATIONS
              Probably the most time-consuming role of a Project Officer in relation to
       contract management is that of technical monitoring.   This is the area where the
       involvement of the  Project Officer, Work Assignment Manager, Delivery Order Officer
       or Delivery Order Project  Officer exerts the most influence over the actual work
       product the Agency will receive.  From the time the assignment is given to the contractor
       until the work is accepted by EPA, these individuals are responsible for assuring that
       the contractor understands the work requirements and performs in a manner to produce
       quality results within the  time required.

       7.1  Issuance of  Work

              Under a fixed price contract or a cost-reimbursement  completion form contract,
       the work requirements are clearly specified in the Statement of Work or  specifications.
       Under these  types of contracts, the Project Officer's role is primarily one of monitoring
       progress.  Many of EPA's contracts, however, contain broad statements of work, and are
       of a level of effort or fixed-rate indefinite delivery/indefinite quantity type,  where the
       actual assignments are specified in individual work assignments or delivery  orders.
       These individual efforts are usually assigned and monitored by EPA employees other than
       the Project Officer  (e.g., Work Assignment Managers under term form contracts and
       Delivery Order Officers and Delivery Order Project  Officers under  indefinite
       delivery/indefinite quantity contracts.)  The actual assignment of work varies
       considerably between the two types of contracts.

       Preparing Work Assignments Under Level of Effort Contracts

              Implementation of a work assignment begins  with  the Work Assignment
       Manager's preparation of the Work Assignment Request (see sample on page 63.) This
       request, along with  Form 1900-65 (see page 4) designating the Work Assignment
       Manager as manager of the proposed work assignment, and any other required
       justifications,  is forwarded to the Project Officer who reviews the  package for accuracy
       and acceptability. If no changes or clarifications are needed, the package is forwarded to
       the Contracting Officer for issuance to the  contractor.

              The Work Assignment requirements are specified  in the standard contract work
       assignment clause (see page 187), and consist of the following items:

              (1)  statement of work;

              (2)  period of performance and schedule of deliverables;

              (3)  an estimate of the level of effort.

              The statement of work has four mandatory components: a title, background and
       purpose of the task, detailed task description, and schedule of tasks and deliverables.
       This table summarizing the major tasks involved and expected  delivery dates is an
       extremely  useful tool  for summarizing work requirements and facilitating subsequent
       monitoring. (See samples on pages 153-54.)
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               In preparing the statement of work, the Work Assignment Manager must take
        care to keep the assignment within the general scope of work of the contract.
        Assignments must be specific in terms of end product(s) required, and the number and
        types of reports to be submitted.  Any other specific requirements involved may also be
        specified in the Work Assignment, e.g.,  the recommended skill mix, required personnel
        qualifications, or the provision of government-furnished data. NO SPECIFIC COST
        ESTIMATES ARE TO BE FORWARDED TO THE CONTRACTOR.  This gives away the
        Government's estimated cost, and guarantees that the contractor will propose at least
        that amount.  Only estimated level of effort in terms of projected hours may be
        communicated. NOR MAY EPA DIRECT THE CONTRACTOR TO USE ANY SPECIFIC
        EMPLOYEE, CONSULTANT OR SUBCONTRACTOR. The government is  limited to  specifying
        its requirements in terms of required skills  and qualifications.

               The Work Assignment should be complete.  That is, it should contain all the
        information the  contractor needs to begin working immediately and to prepare  a work
        plan, if required. Some suggestions for preparing statements of work  are presented on
        pages 190-1.

               The period of performance will generally be from the effective date  of the Work
        Assignment until the completion date specified. Performance cannot extend beyond the
        current contract base or option period. The level of effort specified will be based upon
        the estimated number of direct labor hours required to perform the task(s).

        Preparing Delivery Orders  Under Indefinite  Delivery/Indefinite Quantity Contracts

               Issuance of a delivery order depends upon how the contract is set up.  Under some
        contracts, only the Contracting Officer may issue orders.  Under others, individual
        program personnel are authorized to issue orders  up to a specified dollar limitation.
        Because delivery orders obligate funds, an employee must have a Contracting Officer's
        warrant to issue orders.

               If a Delivery Order Officer with a warrant is located in a program office, all
        Delivery Orders within his or her authority do not have to pass through the Contracting
        Officer before issuance to the contractor.  They must, however, first be reviewed by the
        EPA Project Officer responsible for  managing the  overall  effort under the  entire
        contract. Delivery Orders in excess of a Delivery Order Officer's delegated authority
        must be forwarded to the Contracting Officer for issuance.

               The content of delivery orders is governed by the standard contract clause on
        Ordering by Designated Ordering Officers (see page 189).  Delivery orders under most
        contracts are written on Optional Form 347, Order for Supplies or Services (see page
        67).   Most blocks on this form requiring completion are  self-explanatory.  The
        estimated number of hours in each labor category  must be listed in block 17,  with the
        associated fixed rate for each labor category.

               A ceiling price on total Other Direct Costs must also be provided, and the total of
        each of these entries (loaded direct labor plus ODS) will be computed  and set forth as the
        ceiling price on the entire order.  The delivery order Statement of Work must  be
        attached to the order. (See above section on Work Assignments for guidance on how to
        prepare a Statement of Work. See also pages 190-1.)

               A Procurement Request (EPA Form 1900-8, page 71) must be completed for the
        entire amount of the delivery order and forwarded to the Contracting Officer or Delivery
        Order Officer, unless the order is  within the contract minimum which was obligated at


PCMD 9/89                                        2                                           22

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        the time of contract award. The accounting and appropriation data from this commitment
        notice must also appear in block 9 of the delivery order, and must match the information
        exactly.

               If a Delivery Order Officer has a limit on his or her obligation authority which is
        less than the total of the delivery order, the entire order must be placed by the
        Contracting Officer, who is authorized to obligate the total amount of funds.  The delivery
        order and PR should be forwarded immediately to the Contracting Officer for issuance.

               The period of performance of a given delivery order may extend beyond the
        ordering period of  the contract, within the limits specified.  (This is unlike hours under
        term form contracts, which may not be carried over into subsequent periods). Orders
        for severable services (i.e., work assignments) are subject to the bona fide need
        principles discussed in Chapter 4, where the period of performance may not extend
        beyond the life of an appropriation. Orders for nonseverable services (e.g., fixed price
        contracts and delivery orders) are not restricted in this manner.  The final completion
        date for all the tasks under the order should be entered in block 15 of the OF347.

        7.2 Estimating Hours  and  Level of  Effort

               Estimating the hours for work assignments and delivery  orders is a significant
        part of preparing the work assignment or delivery order, and requires thoughtful effort
        on the part of the the EPA staff preparing the  estimate. The first step is to  define the
        levels of personnel required to perform the work.  Care must be taken to avoid the use of
        overly-qualified personnel, which could result in prematurely reaching  the contract
        cost ceiling amount.  Two  different ways of defining labor classifications, depending on
        the type of work being performed, are presented on pages 195ff.  Labor classifications
        must, however, be matched to the work to be performed.  Work assignment  managers and
        delivery order officers will be required to use those categories already listed in their
        particular contract.

               Once  the appropriate categories have been identified, EPA staff must estimate the
        total number  of hours required from each  labor class.  This  requires thinking through
        the proposed work  assignment tasks, and estimating the time required of each staff level
        for each task. These hours are then summed and indicated on the work assignment. The
        procedures to be followed  are summarized on pages 202ff.

               Direct labor hours generally do not include support personnel such as company
        management, typists and clerical personnel.  Level of effort does, however, include
        subcontractor and consultant hours along with contractor hours, which are  included as
        other direct costs (ODCs)  along with travel, computer  time, etc.

        7.3 Estimating Total  Contract  Costs

               Work  assignment managers and delivery order officers are not generally
        required to prepare work assignment or delivery order cost estimates.  They merely
        make an estimate of the total hours required.  Project  officers, however,  must be able
        both to estimate and monitor  contract costs, and compare invoiced costs against the
        original contract budget.

               For work assignments and delivery orders, an estimate of the total costs can be
        obtained  by multiplying total projected hours  times the average hourly rate for the
        contract,  e.g., 200 hours  times $60/hour results  in a cost estimate of $12,000  for  the
        work.  The average hourly rate used in this case incorporates  an  estimate of the average


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        OOCs (other direct costs), G&A (general and administrative costs, such as the
        contractor's finance and personnel staff),  and fee or profit (see pages 202ff).

               It is important for all EPA personnel, however, to understand how to estimate and
        evaluate contract budgets. This process is detailed below and in the contract itself, with
        examples on  pages 203-205.

               Direct Labor. A contract budget may have five basic elements: a) direct labor,
        b) labor overhead, c) other direct costs, d) general and administrative costs, and e) fee
        or profit. (Since different contractors use somewhat  different cost esimation systems,
        there may be some variance in the factors and how they are applied.)  Direct labor is
        very simply your  salary divided  by 2080 hours (assuming  40-hour work weeks), the
        number of hours in the standard government work year.  If your salary is $20,800,
        your hourly rate is thus $10.00 per hour, or $20,800 divided by 2080 hours.

               Labor Overhead.  Labor overhead is the second element. Labor overhead consists
        of two factors: fringe benefits, and overhead.  Your salary is only one part of your total
        compensation. You also get sick leave, annual leave, pension, and other such benefits
        generally called fringe benefits, or "fringes."  Fringe benefits generally range from 25-
        40% of direct labor, depending on the company involved and its fringe  benefit package.
        Assuming the company's fringe benefit  rate to be 35%, you therefore multiple the
        hourly labor rate times the company's  fringe  benefit rate, e.g.,  $10/hour X 35%
        fringes = $3.50.  Your hourly rate "loaded" with fringes is  thus  $13.50.

               Overhead includes the organization's costs of keeping you working.  It includes
        such costs as space rental, furniture and furnishings, supplies, business equipment,
        secretarial and clerical support staff, and other such costs. Overhead can vary widely,
        depending on how  expensively the organization is set up and  staffed. It can range from
        15% to  200% or more. The overhead rate  of a company will significantly affect how
        competitive it will be in bidding on government contracts.  Some companies  therefore
        have separate overhead rates for government work versus private work. (A contractor
        cannot charge the  government more than  it charges the private sector, although it  can
        charge less.)  Assuming  the company's  overhead rate to be 50%, you multiple  your
        hourly rate loaded  with fringes times the overhead rate to obtain total  labor overhead
        (e.g., $13.50 x  50% = $20.25).  Thus, if the salary you are receiving is $10.00 per
        hour, the actual cost of keeping you employed, including fringes and overhead, is actually
        $20.25,  or more than double what you  receive.  Your direct hourly cost, "loaded" with
        fringes and overhead, is known as your  "loaded hourly rate."  (See page 203 for a
        sample).

               Other Direct Costs.  ODCs include the cost of travel, special equipment required
        for the particular work to be performed (e.g.,  computer time  on  the special  network not
        ordinarily available or covered in overhead), subcontract  costs or the  cost of special
        consultants, etc. These direct costs are added  to the project labor costs and summed to
        obtain the total direct cost plus labor.

               General  and Administration. G&A is  the cost of the organization's management,
        e.g., EPA's administrator and  assistant administrators, or a company's president and
        officers, along with their  support staffs (legal, financial,  personnel, etc.).  This can
        range from 2-20% or so, and is multipled times the sum of the labor costs and  ODCs.
        Assuming that you are projected to require 100 hours of work at $20.25/hour, and
        ODCs are $200, then you would  multiple  the G&A rate of, say, 10% times $2225 (the
        sum of  $2025 + $200), to get $222.50 G&A, for a total amount of $2447.50.
PCMD 8/89

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                                                                                                •M-
               Fee.  Government contracts usually provide for a fee or profit.  The amount of fee
        charged is generally negotiated along with other contract terms when the contract is
        awarded.   Fees may range from 5 to 15% (up to 6% for architectural/engineering
        services; 15% for R&D; and 10% for all other, unless an exception is granted).  This
        fee is charged on top of all other costs. For example, if the fee were 7%, the above
        contract amount of $2557.50 would be multiplied by 7% to get the total contract costs,
        plus fee.  The result would be a fee of $171.33, for a total estimated price of $2728.83.
        Page 205 is a sample budget including calculation of all  costs, including fee.

        7.4   Consideration #1:   Organizational  Conflicts of Interest

               In preparing Statements of Work, EPA staff must take into account a number of
        additional factors so they can be appropriately managed or avoided. One of the most
        important factors to be considered is the existence of any organizational or individual
        conflicts  of interest.

               Organizational conflicts of interest are situations that occur from time to time
        with respect to EPA contracts.   It is always preferable to prevent such conflicts  from
        arising during contract  performance by identifying the possibilities during the  pre-
        award phase and taking steps at that time to avoid them.  However, sometimes conflicts of
        interest cannot be foreseen nor completely avoided prior to award and Project Officers
        need to be aware of what they are and what to do about them if such situations  do  arise
        during the  performance  of a contract.

        Definition

               The FAR defines an organizational conflict of interest as a situation that exists
        "when the nature of the  work to be performed under a proposed Government contract
        may, without some  restriction on future activities, (a)  result in  an unfair competitive
        advantage  to the contractor or  (b) impair the  contractor's objectivity in performing the
        contract work."  It is the latter situation which is of the most concern during  contract
        performance. (See text of EPAAR clause on page 210.)

               Any of a contractor's outside interests,  be they organizational,  financial,
        contractual, or of some other type, could affect its objectivity in performing  work for
        EPA. This is more likely to occur in contracts involving consultant or management
        support services, but the possibility exists in all contracts.   Regulations require that
        the Contracting Officer take immediate steps to avoid, neutralize, or mitigate  any actual,
        potential, or apparent conflict of interest once notified of its existence.  Project  Officers
        are required to notify their Contracting Officer immediately if they see  or suspect a
        situation where a contractor's outside interests are affecting its independent judgment in
        performing  work on an EPA contract, or if the appearance of such a conflict exists, even
        if the work performed by a contractor is not in fact biased or lacking in impartial
        judgment.

        What to Look For

               All EPA contracts over $10,000 contain a clause requiring the  contractor to
        disclose in writing  to the Contracting Officer any actual  or potential conflict of interest
        discovered after award of a contract.  Ideally, this would take care of all such situations
        and the Project Officer need not  be further concerned.  However, many times what may
        not be a conflict in the mind of the contractor could be a very significant problem in the
        opinion of the Agency, but if the  contractor does not notify EPA, the Contracting Officer
        is not aware of its existence. If the contractor is aware of such a  situation and fails to


PCIUID 9/89                                         5                                              227

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        notify the Contracting Officer, the contract may be terminated for default  (see Chapter
        14).  For these reasons, Project Officers must be "on the lookout"  at all times during
        contract performance for situations which might be classified as organizational conflicts
        of interest, and must notify the  Contracting Officer if a  potential one is discovered.  If
        any doubt exists, the Contracting Officer should be notified anyway, and he or she will
        obtain the opinion of legal counsel  before making  a determination as to whether or not an
        organizational conflict of  interest  exists.

               Project Officers should  subject all such situations to the following tests:

               (1)  Is the contractor being asked to perform work  which will  affect  an industry
                   of which it is a part, or from which it derives a substantial portion of its
                   income?

               (2)  Is the contractor performing an analysis for EPA that  it is also  performing
                   for a firm  which will be affected by the results of that analysis?

               (3)  Is the  contractor performing consulting services for an industry regulated
                   by EPA at the same time as it under contract to EPA for any work on the same
                   subject?

               (4)  Do the work results provided by a contractor appear to be lacking in
                   complete objectivity from any aspect?

               (5)  On any Superfund  contracts, can the contractor potentially be found liable
                   as a responsible party on any site for which it is being asked to perform
                 " work for EPA?

               (6)  Is there any possibility  that even the appearance of one of these situations
                   might undermine the credibility  of the work results in the eyes of the
                   general  public?

               If the  answers  to any of these questions is in the affirmative, an actual or
        potential conflict of interest probably does exist,  and the Contracting Officer must be
        notified immediately.

        Procedures in the Event of the Existence of an Organizational Conflict of  Interest

               As stated above, if a determination is made that an actual, potential, or apparent
        conflict of interest does exist, the  Contracting Officer must take immediate steps to
        avoid,  neutralize, or mitigate the situation.  This may take the form of a bilateral
        contract modification,  under which  the contractor  agrees to refrain from performing
        any  specific  outside work for a certain period of time, or is barred from specific future
        EPA work for a specified period.  Or, the Contracting Officer may  direct  the Project
        Officer not to assign a specific Work Assignment or Delivery Order to the contractor.

               If the conflict is significant and  the Contracting Officer is unable  to resolve or
        avoid it, the contract may have to  be terminated for the convenience of the Government,
        either in whole or in part, depending on the nature of the conflict.  Since  all  of these
        possibilities are less than desirable, it is far preferable to identify potential conflicts
        before award of the  contract, and  take  steps at that time to prevent all conflicts of
        interest from occurring during performance of the work.
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    7.5  Consideration #2:   Subcontracts,  Consultants and  Key  Personnel

           The quality of a contract, especially one for services, is only as good as the best
    personnel assigned to perform it.  Often, the contractor will supplement his own staff
    with the  services of consultants and sub-contractors, and will identify them,  as well as
    key personnel from his own staff, in his technical proposal in order to win the award.
    Certain policies govern the use of subcontractors, consultants, and key personnel and
    Government representatives who participate  in the contracting process need to be aware
    of them.  This section attempts to explain these key provisions.

    Consent  to Subcontract

           A sizeable portion  of many EPA contracts is performed by subcontractors.  This
    is often necessary for the  successful accomplishment of the program mission. The
    existence of subcontracts  allows the federal dollar to be spread out over many more
    firms than would be the case if prime contractors performed the total effort.   Other
    benefits  arise from the fact that the combined expertise of two or more firms may offer
    a better quality product or service to the Government than that of a single firm.  But,
    because  the Government  has no direct legal relationship with subcontractors, and
    because  it  is often risky to rely wholly on the prime contractor's assurance that
    subcontracted work will satisfy  all Government  requirements, there  are contractual
    controls  in  plade.

           The prime contractor  is selected in part  for its  management abilities, which
    includes  the right to manage the contract in every aspect.  The Government cannot direct
    the contractor to subcontract  any part of the  work.  The Government may also not, under
    any circumstances, direct the prime contractor to  subcontract with a specific firm.
    Even a suggestion of a particular firm or firms would be improper.  These decisions are
    entirely at  the discretion  of the prime contractor,  who has overall responsibility for
    contract  performance.  Nonetheless, in certain situations, the Contracting Officer must
    consent to the use of certain types of subcontracts.  (See pertinent FAR clause on page
    212.)

           Consent  to subcontract is not required under firm-fixed price contracts, as the
    Government's interest is presumably adequately  protected in this instance by the type of
    contract because of the fixed price.  However, under all other types of prime contracts
    used at EPA, the following types of subcontracts  require the consent of the Contracting
    Officer before the prime contractor may enter into  a subcontract agreement:

           (1)  subcontracts  of any type for the fabrication,  purchase, rental, installation,
               or other acquisition of special test equipment valued at more than $10,000
               or of any items of industrial facilities;

           (2)  subcontracts that have experimental, developmental, or research work as
               one of their purposes;

           (3)   subcontracts  for architect-engineer services;

           (4)   all  subcontracts which  are cost-reimbursement, time-and-materials or
               labor-hour types; and

           (5)  fixed-price  subcontracts that exceed either $25,000 or 5 percent of  the
               total estimated cost of the prime contract.
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               If the contractor's purchasing system has been reviewed and officially approved
        by the Government, the types of subcontracts listed in (4) and  (5) above do not require
        the Contracting Officer's consent.  Nonetheless, the contractor must still provide advance
        notification before entering into such subcontracts.  Page 214 presents a sample
        subcontractor/consultant approval memorandum which can be  used for transmitting the
        Work Assignment Manager or Project Officer's  request for approval to the EPA
        Contracting Officer.

               The Contracting Officer considers such factors as technical need for services,
        compliance with  the prime contract's requirements  for subcontracting with labor
        surplus area or small business concerns, adequacy of competition obtained,
        responsibility of the proposed subcontractor, proposed type of  subcontract, technical
        requirements proposed, and adequacy of cost or price analysis performed. The Project
        Officer will usually be requested to comment on the technical need for the supplies or
        services, the reasonableness of the subcontract estimate, the capabilities of the proposed
        subcontractor, and,  in the  case of a request to acquire property, the availability of the
        item within EPA.   Consent must be in the form of  a written modification to the contract
        or a letter to the  prime contractor, and must be signed by the Contracting Officer.

        Privity  of Contract Principle

               The Government's  only direct contractual  relationship is with the prime
        contractor; »hqr«?  fc nn snrh rftlat'Qnship between EPA and any  subcontractor at any tier
        (or as it is usually phrased, there is no "privity of contract" between the Government
        and its  subcontractors). What  this means is that EEA has no right to deal directly with a
        subcontractor on  any issue, and the subcontractor has no right to obtain a direct decision
        oT me contracting Officer and no right of appeal to the Board of  Contract Appeals.  It is
        the responsibility of the prime contractor  to arbitrate any disputes  between himself and
        his subcontractors.  The fact that the prime contract requires advance Government
        consent to a subcontract does not remove the subcontractor from the no-privity rule.

               By ignoring  rules  against communicating  directly with  subcontractors,
        Government personnel could actually create privity between EPA and its subcontractors.
        This means that a contractual relationship might be developed between these two parties,
        of which the prime contractor would not be a part.  In such an instance, the  prime could
        not be held liable for any default on the part of  the subcontractor, and the Agency might
        lose a substantial portion  of its contractual rights.  For this reason, Project Officers,
        Work Assignment Managers, and Delivery Order  Officers must be particularly careful to
        guard against such  activity.

               Because there is no privity of contract between EPA and any subcontractor, how
        does a Project Officer provide  technical direction and monitor performance when much
        of the work has been subcontracted? This is where the prime contractor's management
        services come in. All technical direction must be communicated to the subcontractor VIA
        THE PRIME CONTRACTOR.  It is critical that Project Officers understand this and  not
        attempt to contact subcontractors directly for the  purpose of giving direction.
        Similarly, the monitoring of technical performance and financial expenditures on the
        part of  subcontractors is done through the prime  contractor's progress reports, and any
        problems noted should be discussed with the prime contractor, who is responsible for
        total performance under the contract.  Particular attention should be paid to the
        performance of subcontractors, as there may be a tendency on  the part of the prime to
        devote less management attention to this portion of the work and thus allow slippages to
        occur.  But  if this does happen, the Project Officer should let the prime contractor know
        that he is not adequately managing the entire contract.


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    Consultant Approval

           Often in the performance of EPA contracts there is a need to bring in a consultant
    with a particular expertise to assist in some aspect of the work. Usually, the technical
    performance benefits greatly from such expertise.  However, hourly or daily rates
    charged by consultants are often prohibitive and may  not be commensurate with the
    technical benefits we might derive.  Therefore, when the  use of consultants is anticipated
    as a possiblity in cost-reimbursement and some indefinite quantity contracts, the
    Contracting Officer will insert a clause  in the contract requiring the contractor to obtain
    EPA approval before a consultant is used.

          The technical qualifications of the proposed consultant, the benefits to be derived
    from his or her use, the amount of usage, and the rate proposed, are all reviewed by EPA
    before approval is granted. A contract modification is  executed to approve the use of the
    consultant, and it will usually specify the fixed rate to be  charged and set a limit on the
    number of hours or days the consultant can be used.  This way, the Government is
    protected against excessive use of, and excessive charging by, expert consultants under
    cost-reimbursement and indefinite quantity type contracts.

          The same rules about directing consultant work as those  set forth above for
    subcontractors are  applicable.  In other words, EPA cannot direct the contractor to hire
    any consultants or influence the selection of such consultants in any way.  And, as with
    subcontractors, EPA has no privity of contract with any consultants used in the
    performance of its contracts.  The prime contractor is responsible for all aspects of
    performance.

    Key Personnel

          The qualifications of contractor personnel have a  direct effect on the quality of
    performance.  In many cases, the best way to assure  good quality of work performed is to
    assure that personnel with the necessary capabilities, qualifications, and  experience are
    assigned to the work effort.   This is particularly important for contracts  calling for
    creative  or conceptual development or analysis.  An offerer who proposes the best-
    qualified personnel to perform the work, and is selected on that basis, should use those
    personnel on the resultant contract to make his proposal  meaningful.  To ensure that this
    occurs, the Government usually includes a "Key Personnel" clause (see page 216).
    Under the provisions of this clause, the  contractor agrees:  1) to assign to the contract
    work certain key personnel, 2) not to remove these key  personnel from the contract
    work for a certain period of time (generally 90 days  unless specifically lengthened in
    the contract terms)  without the consent of the Contracting Officer, and 3) to obtain the
    Government's approval on any proposed substitutions.

          Through monitoring, the Project  Officer can  assure  that key  personnel  have not
    been removed or diverted from the contract work and that  their  level of effort  is as
    required for satisfactory contract performance.   Key personnel should be working in
    those capacities and for the level of effort that were indicated by the contractor.

    7.6  Consideration  #3:   Personal  Services

          A personal services contract results when the  government assumes the right to
    instruct,  supervise or control a contractor's employee in how that employee performs
    his or her work.  It is the contractor's right to hire and fire the  contractor's employees,
    and to assign and organize the contracted-for work.


' 9/89                                         9                                             231

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               In drafting statements of work for work assignments or delivery orders, Work
        Assignment Managers and Delivery Order Officers must take care to avoid creating a
        work assignment or delivery order that creates an employer/employee relationship
        between the government and the contractor's employee.  This is particularly a problem
        where the contractor's employees are working on-site with  EPA personnel, e.g., at
        Superfund sites. Personal services contracts are illegal, and must be avoided in all
        situations.

               The following elements should be reviewed to assess whether a contract is
        personal in nature:

               a.  Requires contractor performance on-site;
               b.  Government provides  principal tools and equipment;
               c.  Services are applied directly to the integral effort of EPA or an organizational
                  subpart to further its assigned function or mission;
               d.  Comparable services are performed in the same or similar agencies using
                  civil  service personnel;
               e.  The need for the type of service can reasonably be expected to last beyond one
                  year
               f.  The inherent nature of the service, or the manner in which it is provided,
                  reasonably requires, directly or indirectly, Government direction  or
                  supervision of contract employees in order to
                      (1) adequately protect the Government's interest;
                      (2) retain control  of the function  involved;  or
                      (3) retain full personal responsibilities for  the  function supported in a
                         duly authorized  Federal officer or employee. •

        All of these elements do not have to be present to have the contract deemed a personal
        services contract and thus illegal. The most important element to be avoided is the
        supervision of contractor employees by government personnel.  EPA has provided
        guidance on the Use of Contractor Services in the form of an EPA Order that should be
        read by all EPA personnel (see Appendix 7A).

        7.7  Consideration #4:   Use  of Advisory and Assistance Services

               In January, 1988, OMB  issued  Circular A-120 entitled "Guidelines for the Use
        of Advisory and Assistance Services," superceding a more  narrowly focused 1980
        circular  entitled "Guidelines for the Use of Consulting Services." (See Appendix 7B for
        the Guidelines and related Contracts Management Manual guidance.) Advisory and
        assistance services are services acquired from non-governmental sources by contract or
        by personnel  appointment to support or improve  agency policy development, decision-
        making, management, and administration, or to support or improve the operation of
        management  systems.  Such services may take the form of information, advice, opinions.
        alternatives, conclusions, recommendations, training, and direct assistance. The scope
        of the current circular includes:  a) individual experts and consultants (including
        advisory committee members); b) studies, analyses and evaluations; c) management and
        professional support services and d) engineering and technical services.  There are also
        numerous exclusions (see page 248g).

               Individuals preparing statements of work for contracts which may employ
        advisory and assistance services are now required to do the following:
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           (a)  Include with their procurement request the procurement request rationale
               checklist (see page 217b) indicating whether the procurement request
               involves advisory and assistance services, and if so, attaching a justification
               that provides a statement of the need for the services and a certification that
               such services do not unnecessarily duplicate any previously performed work
               or services. (The contracting officer is responsible for determining
               whether any requested contractual action,  regardless of dollar value,
               constitutes  advisory and assistance services, and that determination shall be
               final.  Procurement  requests for work assignments under already approved
               contracts do not require separate determination.)

           (b)  Obtain the  necessary approvals.  Obtain the approval, for a small purchase,
               of a program official at least one organizational level above the initiating
               office.  (For requirements received in the  fourth quarter of the year for
               approval during that fiscal year, however, approval at the second level above
               the initiating office must also be obtained.)

               For other than small purchases not in excess of $1,000,000, the  approval
               of a program official at the level of Associate, Assistant  or Regional
               Administrator, Inspector General or General Counsel, must be obtained.  If
               the procurement request exceeds  $1,000,000, approval is also required by
               the Assistant Administrator or equivalent at Headquarters, or the Regional
               Administrator.  All such requests must also be routed through the Director,
               PCMD.

           (c)  Ensure that their statements of work do not procure advisory and assistance
               services that would be:

               (1)  used in performing  work of a policy, decison-making, or managerial
                   nature  which is the direct responsibility  of agency officials;

               (2)  used to bypass or undermine personnel ceilings, pay limitations,  or
                   competitive  employment  procedures;

               (3)  awarded on a preferential basis to former government employees;

               (4)  used under  any circumstance specifically to aid in influencing or
                   enacting  legislation;

               (5) procured through grants and cooperative agreements; and

               (6)  obtained for professional or technical advice which is readily available
                   within the agency or another Federal agency, except when the contract  is
                   entered into pursuant to the procedures  and provisions of Circular A-
                   76  ("Performance of Commercial Activities")

           (d)  Ensure the institution  of the following management controls:

               (1) Work statements are specific, complete and specify a fixed period of
                   performance for the service to be provided;

               (2) Advisory and assistance service arrangements  are properly
                   administered and monitored to ensure that performance  is satisfactory;
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                   (3)  To the extent practicable, contracts for these services require a written
                        report.

        7.8   Consideration  #5:   Government  Property

               It is EPA's general policy that contractors should provide all resources necessary
        to perform  Agency contracts.  Nevertheless, situations do arise where it is in the best
        interest of  the Government to furnish certain property to the contractor.  When
        Government property is, or is proposed to be, in the hands of contractors, certain
        policies and procedures are applicable, and Project Officers need to be aware of them and
        make proper provision  in their work assignments.

        Justification of Need

               Whenever a Project Officer recommends property be provided to a contractor, a
        written justification of need must be submitted to the Contracting  Officer.  The
        justification must address the following points, and must  be signed and approved at the
        Division Director or equivalent level in the program office:

               (1)  Identify the specific program  and project for which the property is
                   required,  as well as the contract and the Work Assignment or Delivery Order
                   number.  Also identify the  EPA account number(s) that the item  is to be
                   charged against.

               (2)  Identify the type, quantity, and estimated cost (including any trans-
                   portation  or installation costs) of each item of property required.

               (3)  Explain why the property  is necessary for  contract performance.

               (4)  Explain why it is in  the interest of the Government to provide the  property
                   rather than to require the contractor to provide  the property at  no direct
                   cost to the contract.

               (5)  Identify the location of the contractor's facility  at which  the property will
                   be used,  and  the contractor's  personnel responsible for acquisition  and
                   management of the  property.


               (6)  For property to be acquired by the contractor at  Government expense,
                   include a  certification that no in-house or GSA excess property is available
                   and  include the concurrence of the local property office.

               (7)  For equipment to be acquired by the contractor at Government expense,
                   include a  lease vs. purchase analysis.

               This justification is required whether the property will be furnished at time of
        contract award or later, during performance.  (If the need arises after award, normally
        the Government must receive some consideration for the furnishing of property, which
        the Contracting  Officer will negotiate with the  contractor.) When the need to furnish
        Government property is known before award, all property to be furnished should be
        identified in the solicitation.
PCMD 7/90                                         12                                            23*

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         The Contracting Officer will review the justification and may or may not concur
  in the recommendation.  Of particular concern is whether or not the equipment is  special
  purpose or general purpose. It is against Government policy to furnish items of a
  general  purpose nature (such  as furniture, typewriters, etc.) rather than the
  contractor.

         If the Contracting Officer concurs in the decision to furnish Government
  property, it must be approved at an administrative level above the Contracting Officer.

         Government property furnished to a contractor must be listed in the contract.
  Otherwise, there is no authorization or record of the transaction.  It would be difficult to
  monitor its use and handling, and ensure its proper disposition after the contract has
  ended. Government property may not be provided to a contractor without being formally
  authorized through a contract.  Property may not be authorized in a work assignment or
  delivery order.

         Project Officers who want to recommend furnishing  Government property or the
  acquisition of contractor-acquired property to  subcontractors must follow  the same
  procedures used for dealing with a prime contractor.  The prime contractor is
  responsible for acquiring  any information about Government property  from the
  subcontractor and for reporting to the Property Administrator (see below).  The same
  procedures regarding property acquisition,  utilization, disposal, etc.  apply to the
  subcontractor as well.

         If property is furnished and/or acquired by a  subcontractor, it  is the
  responsibility of the prime contractor to  assure that the subcontractor operates
  according to all EPA regulations,  that the property is used only as authorized by the
  contract, and that it is adequately cared for and maintained.  Procedures necessary to
  assure the accomplishment of this responsibility should be  included in any  contractor's
  property control  system.

  Property Provided by the  Government Versus Property  Acquired by a Contractor

         Government property comes into the possession  of a contractor in one of two
  ways. Either the property is already owned by the Government and furnished to the
  contractor, or the contractor is authorized to acquire  the property at Government
  expense.  For several reasons, the  first  way is preferred.   First,  it is usually less costly
  to purchase it ourselves.  Second, the Agency's competitive  procurement procedures
  should result in  a better price than the contractor could obtain.  Finally, it could be
  perceived that program offices are attempting to bypass budget ceilings on equipment and
  other items by using contract funds to obtain the  property.   However, the Government
  could be liable for delaying  the contractor if we fail to meet scheduled delivery dates or
  the property is received by  the contractor in a condition unsuitable for use.

         Loans of Government property on a short-term basis should not be made to a
  contractor without the Contracting Officer's authorization.  If the need  exists for
  property to be loaned to a contractor, the Project Officer should immediately advise the
  Contracting Officer  in  writing with a copy to the Property Administrator (see below).
  Included in this memorandum should be a comprehensive Justification of Need to be
  considered in making the decision.
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        The Contract Property  Administrator

               A Property Administrator is an EPA employee designated by the Contracting
        Officer in the contract to act as his or her representative in certain matters concerning
        the management and control of Government property.

               Project Officers  should assure that both the Contracting Officer and Property
        Administrator are  always fully  informed on  all matters affecting  contract property
        administration.  Providing such information is vital due to the great variety of rules and
        regulations that affect the administration of Government property in the possession of
        contractors.

               Copies of all contracts are provided to the Property Administrator, who
        immediately forwards a  "Contractor's Guide for Control of Government Property" to each
        contractor.  When a review of a contract reveals authorization for the acquisition of
        property, decals to be affixed to  the property and a reporting form (EPA 1730-1,
        "Report of Nonexpendable Property Acquired by Contractor") are provided to the
        contractor to identify EPA property.  (See copy of form on page 350).

               A copy of EPA Form 1730-1 must also be attached to the contractor's invoice to
        support any  claim for reimbursement.  Government-furnished property is transferred
        from a program's  accountability after verification of receipt by the contractor. A final
        inventory must account  for all residual property, expendable and nonexpendable.

        Actions Involving  Other  Property Accountable Area Offices

               Property accountable areas are established throughout EPA to control
        Government-owned property. Each program office is an area within an accountable area
        of the Agency and all of the program's equipment is charged to that particular area.
        Therefore, when a determination is made by the Contracting Officer to provide
        Government  property to a contractor, the Project Officer must notify both the Property
        Administrator and the responsible program person, so that a transfer of reponsibility
        from EPA to the contractor may be processed.  No movement of equipment either to or
        from a contract may be  made without involvement of both of these individuals.

        Written  Property  Control  Procedures by Contractors

               Normal contract property  administration practice provides for the control of
        property by means of written procedures that communicate the organization's standards,
        techniques, and instructions to operational personnel. Immediately after the award of an
        initial contract, the Property Administrator will request  the name, title, address, and
        telephone number of the contractor's  representative for contract property
        administration.  Contractors with  large inventories of high dollar value equipment that
        is Government-furnished or contractor-acquired will be requested  to provide their
        property control system .policies and procedures to the Property Administrator for
        approval.

               In cases where a contractor has only a few employees, the need for written
        procedures will be evaluated by the Property Administrator.  If the control system is
        found to be inadequate, necessary corrective actions will be referred to the Contracting
        Officer.
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     is Government-furnished or contractor-acquired will be requested to provide their
     property control system policies and procedures to the Property Administrator for
     approval.

            In cases where a  contractor has only a few employees, the need for written
     procedures will be evaluated by the Property Administrator.  If the control system is
     found to be inadequate, necessary corrective actions will be referred  to the Contracting
     Officer.
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 •c-hRA I KANbMI I FAL
  CUAHIP (CATION NO.: '1900.1


  A***OVAI. OAT«:   10/31/85
                                   AOOMtnl
                      USE OF CONTRACTOR SERVICES
   1.  PURPOSE.  This Transmittal issues a new Order on the Use of
   Contractor Services.

   2.  EXPLANATION.  The Order will help employees  in avoiding
   personal services arrangements in  their contract activities.
   It provides further guidance  and clarification of material
   already covered in the Contracts Management Manual, Environ-
   mental Protection Agency Acquisition Regulation, and the
   Federal Acquisition Regulation.

   3.  FILING INSTRUCTIONS.  File the document  in numerical order;
   in a three-ring binder established for Agency directives.
                             Gary'M. Katz, orector
                             Management and Organization Division
  ORIGINATOR:
Procurement and  Contracts Management Division/Office o
Administration
  •FA
;MD 9/89
131*13
  742) MIPLACIS IPA FOHMB 131*1* AMD TMf FMIVIOUS IOITION O* 131*12.
                                                      237

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 EPA ORDER                                                            1900.1
                                                                     10/31/85

                             USE OF CCrrrSACTCR SERVICES


 1.  PURPOSE.   As more and more activities  require contractor support to be  furnished
 on-site at Governraent facilities, the question of whether these contracted  actions
 are personal  or nonpersonal in nature continues to arise.  The Government is
 normally required to obtain its employees  by hiring through personnel channels.
 Therefore, the procuronent of personal  services by contract is prohibited unless
 specifically  authorized by statute.  This  Order is designed to assist you in
 avoiding personal .services arrangements in your contract activities.

 2.  RESPONSIBILITIES.  Contracting Officers, Project Officers, Delivery Order
 Officers, and all other EPA personnel are  responsible for ensuring that personal
 services relationships between Government  and contractor employees are avoided.

 3.  DEFINITION.   Personal services contracts exist when the nature of the
 relationship  between the contractor and the Government can be characterized as
 an employe1.- oiployee relationship.  An  employer eiiuloyee relationship exists
 when either by the terns of the contract itself, or because of the manner in
 which the contract is managed, contractor  personnel are subject to the day-to-day
 supervision and control of Governnent personnel.

 4.  ASSESSING THE PERSONAL NATURE OF A  CONTRACT.  Wule one of  the most  important
 elements to be avoided in a contractual relationship is the supervision of
 contractor employees by Government personnel  (see  f. below),  the  Federal
 Acquisition Regulation (i'AR 37.104(d))  provides other descriptive elements which
 should be used as a guide in assessing  whether or  not a contract  is  personal in
 nature.  All  of these elements need not be present to have an improper personal
 services arrangement:

     a.  Performance on-site.

     b.  Principal tools and equipment  furnished by the Governnent.

     c.  Services are applied directly to the  integral effort  of the  Agency or an
 organizational subpart in furtherance  of assigned  function or mission.

     d.  Comparable services, meeting comparable needs, are performed in the  same
 or similar agencies using civil service personnel.

     e.  The need for the type of  service provided  can reasonably  be  exrected to
 last beyond one year.

     f.  The inherent nature of the service,  or the manner in which it is provided
 reasonably requires, directly or indirectly,  Government direction or supervision
 of contract employees in order to:

             (1)  Adequately protect the Government's interest;

             (2)  Retain control 3t  the function involved; or

             (3)  Retain full personal  responsibilities for the function supported
 in a duly authorized Federal officer or employee.


                                        1                                        239
PCMD 9/89

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     EPA OftXA                                                            1900.1
                                                                          10/31/85

                                 USE or cyraacTGR SERVICES
     5.  PRINCIPLES P2R MMCCDC A

         a.  The contracting officer is responsible for determining prior to award,
     that, the contract does not involve the procurement of personal services.  But,
     even though supervision by Government employees is not directly required by the
     terns of the contract, a personal services situation can develop through improper
     contract management.

         b.  Technical management generally relates to the nanner in which work
     direction is given.  Interchange of information of a technical nature is not
     prohibited.  In nanaging the contract, however, the following principles should
     be observed:

            (1)  Insofar as possible, let the contract define the job.  This can best
     be accomplished when the contract contains a definitive statement of work.

            (2)  When the job scope nust be changed, notify the contracting officer
     imnediately so that the appropriate contract changes nay be issued.

            (3)  When the job definition requires interpretation of the work descriptor*
     or other direction which is clearly within the project officer's authority, rake
     sure that such direction is issued from the Project Officer to the appropriate
     contractor contact person in the fora of a written technical directive.  Do not
     give any instructions to individual contractor enployees.

            (4)  Prepare memorandums for the record of all meetings, trips and
     telephone conversations relating to the contract.

            (5)  Ensure that all contractor and all EPA occupied space is readily
     identifiable.  Generally, on site contractor enployees are physically  located
     in separate areas from Government employees.   In isolated cases where  a general
     area must be occupied or used by both EPA and contractor enployees,  sane sort of
     physical separation, identification of space, and scheduling of equipment usage
     should be arranged.

            (6)  All requests for contractor  follow-up or touch-up services should be
     directed from the Project Officer to the contractor's project manager.  Likewise,
     contractor enployees must operate through the contractor's supervisor to obtain
     any information needed to complete the work product.

            (7)  Strictly avoid  situations  in which one EPA on-site contractor provid*
     support to another EPA on-site  contractor, except where the contract requires
     such support to be furnished  (e.g.,  janitorial services,  security services,
     etc.).

            (8)  Strictly avoid  Govemirent intervention with respect to hiring or
     firing of employees or assigning particular  enployees to  specific tasks.
PCMD 9/89                                                                           240

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     E>A CFDER                                                            1900.1
                                                                          10/31/35

                                 USE CF CSTTT?ACrca S;3VICZS


     6.  ACOITIONAL GUISANCS.

         a.  I have attached a comprehensive paper on the use of  contractor services
     which ues prepared by the U.S. Department of  the Navy (Attached).  This
     paper further illustrates proper use of contractor services.

         b.  As in any contract situation, you are encouraged to  contact your
     contracting officer for advice and Guidance as  required on a case-by-case basis.
                                            'John C. Qiamberlin
                                             Director
                                             Office of Administration
:MD 9/89                                                                            241

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   EPA ORDE.1          U.S.  Deoartrienc of the Maw                       1900.1
                                                                          Appendix
                "Guide for Msing Contractor Services'
    BasJ.ally, we do our -wor* in the Department of the Navy two ways: "in-house"
  with iniliury and civilian personnel, or  "out-of -house" by contract.  Which way
  it is done is a decision based on policy, practicality, and law.  Generally
 •speaking, it has been Government policy for  a number of years to perform
  cccmercial or industrial activities by  contract unless some compelling reason —
  such as military readiness, security, or  economy — warrants brinqing the job
  "in-house."  Which route to follow is the subject of other Office of Management
  and Budget, Department of Defense, and  Department of the Navy instructions, and
  is not ac issue here.  Our concern here is only that,  if a decision is made to
  let a contract involving services, we make  it properly, and use the services
  properly.

    The fundamentals are these.  It is perfectly proper  for  the Government to purchase
  by contract what may be described as a  finished product — a piece of hardware,
  a defined piece of research, or a report.  Unless Congress has  passed a specific
  statute to authorize something different, the Government may not contract* out  for
  the services of people who receive their  assignments  from Government personnel,
  work under the direct supervision of Government personnel, and whose relation-
  ship to the Governmer.t is thus no different from that of a Government employee.
  Where the Government wishes to procure services in this fashion,  it must* hire
             directly, in accordance with the Civil  Service Laws.
    A finished product versus personal services — these form the two ends of the
  spectrum.  The one may be procured by contract; the other may not.  In between
  arc situations where the Government does not want to hire people, yet the work
  it. r«eds to have performed is essentially just labor — cleaning, painting, or
  operating a radar station.  In  these situations, the Government may still obtain
  ti*.e work by contract, providing two conditions are met: (1) the Contract must
  ask for the finished product only, and  (2) the contract must be administered in
  such a way that control and supervision over the work and discretion of the
  techniques which will be used remain solely with the contractor.  In other words,
  if the Government wants a building painted, it defines the job, lets the
  contractor paint the building as  he sees fit, and  then accepts  it or rejects it
  solely on the basis of whether  the completed job meets the specifications.
  This would be a perfectly legal contract for a finished product.  On the other
  hand, if the contractual arrangement with  the painting contractor is such  that
  he is really only providing us  with painters whom  we direct  and and supervise
  as we would our own military or civilian employees,  then  the contract  would be
  for personal services  and would be  illegal.  In  that case,  the  Government
  would,  in effect, be  "hiring' ensloyees without  regard  to the Civil Service
  System.  That  it may  not do,  and  that is  the reason all  service contracts
  must provide for a clearly defined  task or job.

                 The Problem:

    A contract may  thus cross over  into the forbidden area either because of the
  way  it  is written or  because of the way it is administered.  The former should
  not occur very often.   AS7R.  Armed Services Procurement Regulations,  provides
  adequate guidance and procedures which, if faithfully pursued, will insure
   that every  contract for services is in fact legal on its face.   But even  the


                                        A-l
PCMD 9/89                                                                              243

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                                  U.S. Deoartr-.ent of the Naw
   best-written contracts can later be ruled  illegal  if they are not administered
   properly.  Good, intelligent contract administration is really the key to
   avoiding personal, services problems.

     In essence, a forbidden personal service contract results when the Government
   assumes the right to instruct,'supervise,  or control a contractor's employee
   in how ne performs his work. "It is one thing,  for example, to sit down in a
   restaurant, order a steak medium rare, and accept it or reject it when it
   arrives.  It is quite another to insure that it is cooked to satisfaction by
   going out to the kitchen, looking over the chef's shoulder, and telling nun hew
   to adjust the flame, when to turn the steak over, and how to season it.  When
   the Government exercises this sort of direct supervision and control over
   contract personnel, it is using then as if they were  its own civil service
   or military personnel.  Control such as this — however well-intentioned —
   renders the services personal and the contract illegal.

     Bow,.then, can personal services problems be avoided?  The answer must begin
   early with contract planning, because these problems are  far easier to prevent
   than to core.

                  Pre-.ontract Planning:

     In planning  the contract, the contracting officer must receive a great deal
   of willing cooperation from all hands —  technical personnel,  legal  personnel,
   and especially the users  — those with  the requirement for the proposed services.
   Under AS?R,  before the contracting  officer may enter into a service contract,
   he must make a. written determination  tr.at the  services are nonparsonal.  To do
   so, he must  rely almost completely upon the  users for the facts be needs, because
   only  they can  provide  them.  As the first step,  *herefore, the contracting
   officer must learn  the whole  story — all the  circumstance of what the services
   are to be and  how they will be  used.   In  view  of his responsibility for making
    the procurement, he  deserves  — and has every  right to receive — the users'
    fullest  assistance and candor.

      Second, the  users  must provide the contracting officer with a detailed
    description of the job they want dore. Since the contract must be coucned  in
    terms.of providing the Government with some sort of  finished product,  this  is
    the information that will be needed to draft proper  specifications,  task orders,
    or  work assignments.  Although it is the  job of the contracting personnel to
    red-jce this information to contract format, it is the job of  the users to
    explain precisely what work they want performed.

      Third, there must be a review of all the collateral circumstancps which micht
    have a bearing upon whether an illegal personal services contract has been
    created.  Although the key factor  is the degree  to which the Government exercises
    control and supervision over the performance  of  the contract, thi- Civil Service
    Ccnmission's opinion, as well as rulings of the  Comptroller Gen*»r.il, also look
    to related circ-jmstances which, by their very nature, go hand in hand with the
    exercise of Government control over  contract  performance.
PCMD 9/89
                                           A-2                                     244

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                                U.S. Ceoartrervt cf  the  Haw
    An example micht be a contract under which the contractor was provided with
  articles Jt Government properc/.  While it is not unusual for the Goverrjnent to
  furnish equipment or material for use in performing its contracts, what is
  furnisned is usually specialized or otherwise difficult for the contractor  to
  provide tor himself.  If, instead, the Government furnishes something ordinary
  like office equipment, drafting tables, or typing paper — the sorts of things
  any employer ordinarily provides his own employees — then, if unexplained, an
  inference may be drawn that the Government is treating the contractor's eaployees
  as its own.

    Similarly, our civilian employees or military personnel generally work on-site,
  whereas a contractor's employees usually do not.  Thus, providing the contractor
  with office space at a Government location night lend weight to an inference
  that his employees are, in effect, Government employees.  By the sane token, the
  work should be planned to avoid a mix of Government and contractor personnel
  so that they are not working side-by-side under similar conditions and
  supervision.  It should be cautioned, however, that a determination of personal
  services would still be found in cases where these personnel - although
  physically separated — were all performing the same work and  were otherwise
  interchangeable.  The sane would be  true where succeeding contracts with
  different firms included provisions  for orderly changeover of  key personnel,
  and the same contract employees were found doing  the same work at the same
  desk year after year.  And personal  services have even been  found,  in  incentive
  or award fee contracts, where the evaluation of contract performance was made,
  not upon the whole job, but rather upon the separate performance of
  individual contractor employees.

    Factors like these are  important because  each  such piece of circumstantial
  evidence may contribute  to  a  later conclusion  that the services concerned  are
  personal.  All of  them pertain  bo supervision  and control, and they are weighed
  according to  the extent of  their contributions to actual Government control over
  the contractor's personnel.   Taken  together and viewed objectively, they may
  give every practical appearance that contract employees are being treated as
  if they were actually Government employees.

    In  the planning  stage,  then,  requirements, technical, and contracting people
  should pursue  every effort toward eliminating as many such factors as they can.
  None of  them alone would necessarily be fatal to the contract's legality, and
  some of  them might indeed be absolutely necessary and, therefore, inevitable.
   It  is  important to realize, however, that these ancillary factors can be
  critical  to  the result and that they can be effectively provided  for only in
   advance.   If they are carefully considered during the planning staqe, and if
   there  are good reasons for1providing the contractor with  tools,  or  working
   space, or  doing anything else which might imply Government  supervision
   or  control,  then the contract can provide for them, and later be administered.
   in a manner  which will be proper and will not be susceptible to drawing
   an inference of personal services later on.

                    The Contract:

     The sort of planning described above should provide  the contracting officer
   and his staff with all they need to know about  the actual requirements,
   in order to reduce them  to clearly  defined work  statements.  They must*,


                                          A-3                                    24S
«D9/89

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                                 U.S. Degar-^-.enr of the Mavy
    then, in clear* understandable language,  set  forth exactly what the Govern-
    ment wants to have done.  They oust provide in the contract ail the soeci-
    fications or-instruction the ccntractar needs,  both  to  undertake and to
    ccxalete toe job.  This will insure that the  Goverr.-nent has the right to
    expect an acceptable end product without the  need for control over the way
    the contractor qoes about his work.

      It is not enough, however, to write something like "furnish such assistance
    as is or may be necessary to support the overall mission of  the activity,"
    or "update and revise 40 drawings in accordance with the oral instructions
    of the division supervisor or his duly authorized representative."  The
    contract, or the task orders or work assignments written under it, should
    adequately describe the job to be done so that further informal direction
    is unnecessary.  This, of course, does not mean that they cannot be formally
    modified or amended, if needed.

      Furthermore, the contract must avoid creating in the Government a specific
    or even an implicit power to hire or fire  the contractor's employees.   It
    is- always permissible to retain the authority to require security clearances
    or other legitimate and relevant adainistrative controls, but it must not
    go beyond that.  The contractor, for example, may be required to accommodate
    himself and his working hours  to our daily business routine if he is working
    on-base, whereas it would be  improper  to impose  such a schedule upon work
    he performed on his own premises.  And it  goes without saying that the
    contract must  not provide for  Government supervision or control over the
    contractor's staff.

      Nor will the inclusion of  artifical  procedures for contract administration
    rerove  the Government from  a situation of  supervision  and control if one
    actually exists.   It  is no  use,  for  example, to provide an elaborate
    organization  in the contract for the transmission of work assignments on a
    supervisory level  if,  in practice, it is to  be phoned  from a Government
    draftsman  to  his contractor counterpart.   And even where such conduits have
    actually been used  in contract administration, they have been viewed as
    mere camouflage where the alleged supervisors or technical  directors were
    so untrained  or unskilled as to be incapable of direction and were, at best,
    only figureheads.   It may be helpful for the contract to make it clear that
     the contractor is  providing management or judgment as well  as personnel,
     but only if that is truly the case.'  To repeat what was said earlier,  writing
     a legal contract is not the end of the road.  The heart of most personal
     services cases has been contract administration — what actually happened —
     not withstanding the niceties of the written contract  terns.

                    Contract Administration:

       What, then, are the pitfalls of contract  administration?  Essentially, the
     Government must keep "hands off"  the  contractor's employees during the course
     of contract operations, in order  to avoid sliding  into the area of suoervision
     and control.  Does that mean  that,  after  the contract is signed, there can be
     no further contact with the contractor or his  staft?   The answer to that  is
     obviously "No."  In  the course of almost  any contract performance, there  must
     be some dialogue between both sides.   Complete insulation  from on- another is
     as unnecessary as it is undesirable.

                                            A-4                                     246
PCMD 9/89

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                             U.S. Dcoartnent  of the Saw
        -.ermissicle rar.ge of dialogue between the Government's representatives
    anr*. the contractor's representatives Is whatever liaison and discussion or
    etplanation is necessary to carry out the traditional processes of contract
    administration.  We have inspectors and quality control personnel, for
    example, and their worn cannot be done in a vacuum.  It usually requires
    contract and communication to be useful, and this is entirely proper.
    And we usually assign personnel in a liaison capacity, not only for
    surveillance and to keep us apprised of progress, but also for a contact
    through whom the contractor can relay his questions or problems.  It is a
    rare contract that does not involve answering questions about the
    Government's specifications, and this, too, is a legitimate liaison function.

      IT addition, the Government  is generally concerned about the contractor's
    delivery schedule — whether he will have the work performed on tine.
    Accordingly, the contract milestones are important,  and insuring  that they
    are net may demand prodding and reminding of many shapes  and forms. ' Like
    the liaison and inspection mentioned above,  this can be done properly as
    well, because it does not involve  the exercise of supervision or  control
    over the individual employees.  In all proper administration functions.
    Government representatives do  not  dictate what or how  the contractor  is
    to perform,  The "what"  is set out in  the contractor's responsibility.
    In their contract administration roles,  our  personnel  should primarily
    be policing  the written terms  of  the contract and  assisting the contractor
    when necessary to  insure  that  the  Government receives  the job  it bargained
    for on  time.

      Contract administration begins  to run afoul when our representatives go
    beyond  the terms of  the contract.  .By telling the contractor what to do,
    they may be  subjecting  the Government to claims for changes.  That is
    another matter.  But by directing how to do it, they are .crossing the line
    into a personal  services situation.  Then they are beginning to exercise
    supervision  or control.  When the inspector, liaison officer, or any other
    Government  representative turns from surveillance to supervision, he begins
    to  use  the  contractor's employees as if they were Government employees,
    and  is  well  on the way to transforming the contract into one for personal
    services.  Often,  this arises from no more than a well-intentioned but
    overzealous  desire upon the part of responsible Government officials to
     achieve near perfection in the services obtained.  Such  overzealousness
    must be restrained.

       After all, it is the contractor's privilege to do the  job however  he  sees
     fit, so long as he'stays within the terms and conditions of  the contract.
     Unless the contract legitimately  provides otherwise,  it  is  not our  business
     whether he does the work with one computer  or  200  men, which  employees
     work on which assignments, or whether*they  work nights or  mornings, or
     whether they do task A before task B, or vice  versa.   It is the contractor's
     right to hire and fire, to assign and organize'the work  — in short, to run
°°MD9/89                                  A~^                                       247

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                                      O.S. Deparsaent of the Navy
      his own ccrccany.   The moment the  Government usurps that right and begins
      to tell his perscr.nel what, to do  next or how to do it, then it has  started
      down the slippery slope toward a  personal services situation.  This illustrates
      the rule for illegality, but it also nust be understood that the greater the
      .technical direction to the contractor, the greater the responsibility  for
      successful performance is assume  by the Government.  This situation is not
      desirable because it not only, compromises the Government's rights  to enforce-
      ment of the contract's provisions, but it also transforms an otherwise proper
      contract into an illegal one.

      Sometimes it is the actions of the contractor^himself which will cause the
      contract to cross over into the forbidden area.  By being overzealous in
      attempting to be responsive to the Navy organization with which he is working,
      the contractor may initiate contacts which result  in Government control or
      supervision over the work being performed.  In other words, where the con-
      tractor himself continually asks the Government  for direction on how to carry
      out the various .tasks required by the contract,  the Government may end up,  in
      effect, supervising the performance of  the work.  This  type  of situation must
      be guarded against.

        The contractor's employees should always be  looking only to  their own
      superiors for instructions, and they,  in turn, must look back  to the written
      terms of the contract.  This chain of  responsibility must exist throughout
      the performance of every contract, and it reenchasizes the need discussed
      earlier for giving meticulous attention to the contract work statements,
      task orders, or work assignments at the outset.   And it further underlines
      the need for assuring  that  the contract preparation is a genuinely coordinated
      effort by everyone involved — the users, technical staffs, contracting
      staffs, and lawyers — so that, with the input from them, all the  wor/k  to be
      performed  is so clearly and accurately spelled out there will be  neither need
      nor tenptation to slide into  the easy trap of supervising any stage of  the job.


                     Statutory  Exception:

        As was mentioned at the beginning, these rules of contracting must be
      followed in every service contract unless there is specific authority from
      Congress  to proceed  otherwise.   There may be situations  —  and they do arise
      from time to  time — when it is  desirable for the Government  to have precisely
      that sort of  supervision  and control which is generally  iraroper, and where
      the short duration of the work dictates against hiring eroloyees  under Civil
      Service.
PCMD9/89                                       A~6

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                            APPENDIX 7B
                     UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                                WASHINGTON. D.C.  20460
                                        NOV   3 1989
                                                                 OFFICE OF
                                                               ADMINISTRATION
                                                               AND RESOURCES
       MEMORANDUM                                               MANAGEMENT


       SUBJECT:   Approval Requirements for Contracts with Possible
                 Use of Advisory and Assistance Services
       FROM:  j  jDavid J. O'Connor, Director
                 Procurement and Contracts Mantig
                 (PM-214F)
       TO:   v     Associate Directors
                 PCMD Branch and Staff Chiefs
                 Douglas Richmond,  RTP
                 William Bailey, CINN
                 Richard Feldman, OGC
                 Regional Coordinator


            Chapter 2 of the Contracts Management Manual (CMM)
       requires special justification and approval for contracts
       involving consulting services (now referred to as advisory
       and  assistance services).  This memorandum reminds you of the
       need to obtain such approvals prior to contract award.

            The Procurement Request Rationale Checklist, submitted
       with EPA Form 1900-8, "Procurement Request/Order," contains a
       block indicating whether the proposed procurement involves
       advisory and assistance services.   Using OMB Circular A-120,
       "Guidelines for the Use of Advisory and Assistance Services,"
       dated January 4,  1988,  and the proposed contract's scope of
       work, Contracting Officers must review this block to determine
       if the  project officer's determination on the Checklist is
       correct.

            If the procurement involves possible use of advisory and
       assistance services,  a  justification must be prepared and
       special approvals obtained as prescribed in Chapter 2 of the
       CMM.  These approvals and justification are required at the
       time  the  Procurement Request/Order is submitted.  If after
       contract  award,  the Contracting Officer determines that
       advisory  and assistance services are involved and required
       approvals were not obtained,  justification and approval must
       be received before advisory  and assistance services can be
•DO 7/90                                                                2488

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                                    -2-

       ordcred.  Justification and approval of individual work
       assignments for use of advisory and assistance services are
       not required after approval at the contract level has been
       obtained.

            In coding information on the contract into the Federal
       Procurement Data System (FPDS) through the Contract Informa-
       tion System, the Contracting Officer should determine if the
       predominant use of the action being coded constitutes advisory
       and assistance services.  If so, a "Y" should be entered in
       the block marked Advisory/Assistance Services Award.  Otherwise
       an "N" should be entered.  This determination should be made
       independently for each action requiring data entry, both at
       the time the initial contract data is entered as well as for
       each funding action.

            Please contact Joe Nemargut on FTS 382-5019 if you need
       further information.
PCMD7/90

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    CONTRACTS MANAGEMENT MANUAL                       1900 CHG 7
                                                         5/21/90


    2.5  EQUIPMENT LEASE OR PURCHASE

         a.   The Contracting Officer will  perform  the necessary
    analysis  leading to a  decision  to  lease or  purchase  equipment
    considering comparative costs and other factors.  The Contracting
    Officer will be  assisted  by  the  Project  Officer  and  the
    cost/price analyst, as necessary, and shall document the analysis
    in the contract  file.   (See Chapter 5 for additional guidance on
    furnishing Government property to contractors.)

         b.   Guidance relative  to equipment  lease  vs.  purchase
    determinations is contained in the Federal Acquisition Regulation
    (FAR), Subpart 7.4.

    2.6  ADVISORY AND ASSISTANCE  SERVICES

         The management  and control of  contracts for  advisory  and
    assistance services  are addressed in  OMB Circular A-120  dated
    January 4, 1988.

         The Circular  defines advisory and  assistance services  as
    those services acquired from  non-governmental sources by contract
    or by personnel  appointment to  support or improve  agency policy
    development,  decision-making,  management,  and administration,  fir.
    to support or  improve  the  operation of management systems'.
    Attachment A contains the complete  definition from the Circular.
    The  Circular  excludes  ADP/Telecommunications  related  services
    that  are subject to  control  under  the Federal  Information
    Resources Management Regulation.

         After consultation with  the  Project Officer,  the Contracting
    Officer will  determine  if the  services requested are advisory and
    assistance services and are nohpersonal.

    2.7  PLANNING PURPOSE PROCUREMENT REQUESTS

         Planning Purpose  Procurement  Requests are  defined  in
    Chapter 1 of  this  Manual.  Such  actions shall  be  clearly marked
    on the  face  of the  EPA Form 1900-8  as  "PLANNING   PURPOSE
    PROCUREMENT REQUEST"   and shall contain  all  program and  other
    approvals that would  be  needed  if the action  were fully funded.
                                  2-3
ID 7/90
                                                                   248C

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  UJNl'KACl'b MANAljfcMbNT MANUAL

  768
                                                                        ATTACHMENT 1
                                                                          5/21/90
Federal  Register / Vol. 53. No. 7 / Tuesday. January 12.  1988 / Notices
  lo January 27.198A. for (he deadline by
  which the licensee may Tile a request for
  hearing with respect lo issuance of ihe
  amendment lo Ihe subject facility
  operating license. This is also the dale
  by which any person whose inleresl
  may be affected by this proceeding and
  who wishes to participate as a party in
  the proceeding must file a written
  petition for leave lo intervene.

    D«led m Beihesda. Maryland, ihis 7th Jjy
  of January 1988.

    For the Nuclear Regulatory Commisiinn.
  David L Meyer.
  Chief. Rulci and Procedure* Broach. 0/t it ion
  of Rule* and Record*. Office of
  Aiiniinitirvtion andRetfurees
  |FR Dec B»-S:0 Filed 1-11-88: 8.45 •m|
  •IU.IMO coec M*o-ei-y
  (Docket No. 50-31J)

  Sacramento Municipal Utility District;
  Consideration of Issuance of
  Amendment to Facility Operating
  License and Proposed No Significant
  Hazards Consideration, Determination,
  and Opportunity for Prior Hearing;
  Correction

    The United States Nuclear Regulatory
  Commission issued a notice in the
  Federal Register on December 28.1987
  (52 FR 48889) that it is considering
  issuance of an amendment to Facility
  Operating License No. DPR-54. Issued lo
  Sacramento Municipal Utility District
  for operation of the Rancho Seco
  Nuclear Generating Station located in
  Sacramento County. California. The
  date on page 48889 of the earlier notice
  Is changed from January 25.1988 lo
  January 27.1988. for Ihe deadline by
  which the licensee may file a request for
  hearing with respect to issuance of the
  amendment lo the subject facility
  operating license. This is also the dale
  by which any person whose Interest
  may be affected by this proceeding and
  who wishes to parlicpate as a party in
  Ihe proceeding must file a  written
  petition for leave lo intervene.

   Dated at Dclhcida. Maryland, thi* Tih day
  of January 1988.

   For ihe Nuclear Regulator)'  Commission.
  David L Meyer.
  Chief. Rule* and Procedure* Branch. Din's ion
 of Rule* and Record*. Office of
 Adminiilralfon end Re* ourcet Monofertrnl.
 |FR Dec 08-321 Filed I-I1-M: 8.45 am)
 B'UJNO COOf  MM-ei-U
                    OFFICE OF MANAGEMENT AND
                    BUDGET

                    Guidelines for the Use ol Consulting
                    Services

                    AGENCY: Office of Management and
                    Budget.
                    ACTION: Revision to Circular A-120.
                    "Guidelines for the Use of Consulting
                    Services".

                    SUMMARY: This notice revises OMB
                    Circular A-i:o. "Guidelines for the Use
                    of Consulting Services." dated April 14.
                    1980.
                     The revision is based on
                    recommendations of the Cabinet
                    Council on Management and
                    Administration which in 1984 conducted
                    a study in response to reports of abuses
                    of consulting services by Federal
                    departments and agencies.
                     The revision: (1) Expands Ihe
                    coverage of the circular (2) requires the
                    designation of a single official by each
                    agency lo be responsible and
                    accountable for assuring that the
                    provisions of (he circular are met (3)
                    mandates minimum controls for the
                    management and reporting of advisory
                    and assistance services: and (4) exempts
                    from the provisions of the circular all
                    activities carried out in accordance with
                    Circular A-78 (Revised) "Performance of
                    Commercial Activities."
                    EFFECTIVE DATE: These revisions lo
                    Circular A-120 are effective
                    immediately.
                    FOR FURTHER INFORMATION CONTACT:
                    Contact Ihe Office of Management and
                    Budget. Financial Management Division.
                    New Executive Office Building. 726
                    Jackson Place NW.. Room 10201.
                    Washington. DC 20503. (202) 395-6903.
                    SUPPLEMENTARY INFORMATION: Notice of
                    the proposed revision was published for
                    comment in the Federal Register on June
                    25.1987. (52 FR 23918). In response.
                    OMB received commenis from more
                    than 20 Federal agencies and private
                    organizations.
                     Following is a summary of the major
                   comments grouped by subject and a
                   response to each.
                     Comment: Since the Cabinet Council
                   Study, a number of new safeguards have
                   come into being. These include various
                   provisions of the Competition in
                   Contracting Act (Pub. L 98-369). the
                   establishment of competition advocates
                   in all Federal agencies, ihe issuance of
                   Circular A-123. and the annual reports
                   by agency inspectors general. Because
                   of these developments, the coverage of
                   the circular should not be expanded.
                    Rcfponse: The additional
                   management controls enacted since the
Cabinet Council study may be presumed
lo have diminished abuses in Ihe
procurement of advisory and assistance
serxiccs. However, there is not evidence
that abuses have been eliminated and
the types of activities covered by the
expanded coverage continue to be
inherently vulnerable. Further, the
expanded coverage of Ihe circular is
consistent with the coverage adopted by
the Department of Defense in 198C.
  Comment: A substantial paperwork
and management burden will be created
by applying the controls previously
required only for consulting services to
the much larger number of procurements
of advisory and assistance services.
  Response: First, in response to
commenis (as noted below) (he circular
has been revised to eliminate day to day
operational activities from its
requirements. Secondly, agencies may
find it useful to review their existing
controls and consider whether it is
desirable lo apply them in (heir entirely
to the newly covered activities. Some
agencies now utilize greater control than
Is required by the Federal Acquisition
Regulations (Subpart 37.2—Consultant
Services). These additional controls
need  riot be applied to all advisory and
assistance services if. in the judgment of
Ihe agency, il is not desirable.
  Comment: The requirement that Ihe
renewal of contracts entered into in
accordance with Circular A-76 be
subject to the provisions of the circular
would constitute a disincentive to the
initial use of the A-76 process.
  Response: Section 3 has been revised
lo exempt all activities reviewed in
accordance with Circular A-76.
  ComrenL- The proposed definition
includes a large  number of routine, day
lo day activities which had never been
Identified as subject to significant
abuses.
  Response: Section 1.6 of the
Exclusions has been revised to exclude
day-to-day operations of functions such
as building maintenance or ADP
operations. In Ihe same vein, section
5.A.(3)c has been revised to exclude-
training which maintains skills
necessary for normal operation*.
  Comment- The requirement that
procurements of advisory and
assistance services be reported lo the
Federal Procurement Data System solely
hy use of Ihe Individual Contract Action
Report (SF 279) ignores the existence of
accurate alternative reporting systems.
  Response: Section 9 of the circular.
Data Requirements, has been revised »o
thai the Office of Federal Procurement
Policy (OFPP) can allow agencies In use
alternative  reporting systems when
Appropriate.
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CONTRACTS MANAGEMENT MANUAL

                        Federal Register  /  Vol. 53.  No. 7 / Tuesday. January 12.  1988 / Notices
                                                                         769
      A sm&ll number of additional
    revisions were also made in order to
    clarify the text and correct technical
    inaccuracies.
    James C Miller III.
    Director.
    (Circular No. A-i:o|
    To Iht Heidi of Executive Departments and
    Establishments
    Sub/eel: Guidelines fur the use of Advisory
       and Assistance Services

      1. Purpose. This circular establishes
    policy, assigns responsibilities, and sets
    guidelines to be followed by executive
    branch agencies in determining and
    controlling the approprijie use of
    advisory and assistance services
    obtained from individuals and
    organizations. This circular supersedes
    OMB Circular No. A-120 "Guidelines for
    the Use of Consulting Services." da'.ed
    April 14.1980.
      2. Background. OMB Bulletin No. 78-
    11. Issued May 5.1978.  first required
    agencies to apply extra controls lo the
    procurement of consultant services.
    Circular A-120. dated April 14.1980.
    provided permanent guidance in lieu of
    the interim guidance provided by the
    Bulletin. A Model Control System for
    consulting services was issued on
    January IS. 1982. lo provide further
    guidance, which was non-mandatory.
      In 1984. the Cabinet Council on
    Management and Administration
    (CCMA) completed • study of consulting
    services lo estimate expenditures.
    review definitions and existing controls.
    and propose reforms. The study resulted
    from continuing reports, by GAO and
    other agencies, of problems in the way
    the Government manages and uses
    consulting services.
     This revision of Circular A-120 is
   being issued (1) to expand the covcr.ige
   of the circular. (2) lo mandate controls
   for the management and reporting of
   advisory and assistance services: and
   (3) to clarify the relationship  between
   Circular A-120 and OMB Circular No.
   A-78 (Revised) "Performance of
   Commercial Activities." issued August
   4.1983.
     3. Relationship to OMB Circular A-76.
   Activities  that are reviewed in
   accordance with the A-76 process are
   exempt from the provisions of this
   circular except that when the functions
   performed by the contractor meet (he
   definition of advisory and assistance
   services set forth in this circular, the
   contracting .-iclion must be reported in
   jccordance with Secliuns 8.A. and 9.A.
   below. When A-7G contracts  are
   •enewcd. they arc also exempt from the
   (revisions of flu's cirr.uliir.
   4. Coverage. The provisions of this
 circular apply to advisory and
 assistance services obtained by the
 following arrangements:
   A. Personnel appoinlmc.nl:
   B. Procurement contract: and
   C Advisory committee membership.
   S. Definition. Advisory and
 Assistance Services are those services
 acquired fron non-governmental sources
 by contract or by personnel appointment
 to support or improve agency policy
 development, decision-making.
 management, and administration, or to
 support or improve the operation of
 management systems. Such services
 may lake the form of inforrnalion.
 advice, opinions, alternatives.
 conclusions, recommendations, training.
 and direct assistance. Advisory and
 assistance services include consultant
 services provided by individuals, as
 defined in the Federal Personal Manual,
 Chapter 304.
   A. Advisory and assistance sen ices
 include activities having any of (he
 following characteristics:
   (1) Individual Experts and
 Consultants. Individual experts and
 consultants are persons possessing
 special, current knowledge or skill
 which may be combined with extensive
 operational experience. This enables
 them lo provide information, opinions.
 advice, or recommendations to enhance
 understanding of complex issues or to
 Improve the quality and timeliness of
 policy development or decision-making.
 These named individuals may either
 work independently or be assembled
 Into panels, commissions, or
 committees.
   (2) Studies. Analyses, and
 Evaluations.  Studies, analyses, and
 evaluations are organized, analytic
 assessments  needed to provide the
 insights necessary for understanding
 complex issues or improving policy
 development or decision-making. These
 analytic efforts result in formal.
 structured documents containing data  or
 leading lo conclusions and/or
 recommendations. This summary
 description is operationally defined by
 the following criteria:
   a. Objective: To enhance
 understanding of complex issues or lo
 improve the quality and timeliness of
 agency policy development or decision-
 making by providing new insights into.
 understanding of. alternative solutions
 lo. or recommendations on agency
 policy and program issues, through the
 application of fact finding, analysis, and
evaluation.
  b. Areiis of application: All subjects.
issues, nr problems involving policy
development  or decision-making in the
agency. 1'hcse may involve concepts.
 organizations, programs and other
 systems, and the application of such
 systems.
   c. Outputs: Outputs are formul.
 structured documents containing or
 leading lo conclusions and/or
 recommendations. Data busns. models.
 methodologies, and related software
 created in support of a study, analysis.
 or evaluation are lo be considered part
 of the overall sludy effort.
   d. Exclusions and exemptions: A
 complete list of exclusions and
 exemptions from the provisions of this
 circular is attached.
   (3) Management and Professional
 Support Services. Management and
 professional support services lake the
 form of advice, training, or direct
 assistance for organizations lo ensure
 more efficient or effective operations of
 managerial, adminslrative. or related  •
 systems. This summary description is
 operationally defined in terms of (he
 following criteria:
   a. Objective: To ensure more efficient
 or effective operation of management
 support or related systems by providing
 advice, training, or direct assistance
 associated with the design or opcru'.ion
 of such systems.
   b. Areas of application: Management
 support or related systems such as
 program management, project.
 monitoring and reporting, data
 collection, logistics managemenl.
 budgeting, accounting, auditing.
 personnel  management, paperwork
 management, records managemenl.
 space management, and public relations.
   c. Outputs: Services in the form of
 information, opinions, advice, training.
 or direct assistance thai lead to the
 improved design or operation of
 managerial, administrative, or  related
 systems. This does not include training
 which maintains skills necessary for
 normal operations. Written reports are
 normally incidental lo the performance
 of the service.
   d. Exclusions and exemptions: A
 complete list of exclusions and . •
 exemptions from the provisions of this
 circular is attached.
   (4] Engineering and Technical
 Services. Engineering and technical
 services (technical representatives) lake
 the form of advice, training, or  under
 unusual circumstances, direct assistance
 lo ensure more efficient or effective
 operation or maintenance of existing
 platforms, weapon systems, related
 systems, and associated software. All
engineering and technical services
provided prior lo final Government
acceptance of a complete "hardware
system" are part of Ihe normal
development, production, and
   D7/90
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  CONTRACTS MANAGEMENT MANUAL                                                   A1

 770-	           Federal  Register / Vol. S3. No. 7  /  Tuesday.  January 12. 1988  /  Notices
 procurement processes and do not full
.within the meaning of this category.
 Engineering and technical services
 prv\ Kicd after final Government
 accriflance of a complete hardware
 system are within the meaning of this
 category except where they are
 procured to increase the original design
 performance capabilities of existing or
 new systems or where they are integral
 lo !he operational support of a deployed
 system and have been formally
 reviewed and approved in the
 acquisition planning process.
   6. E\elutions. The attachment lists the
 Government programs and activities
 thiil are excluded from the provisions of
 this circular unless agencies decide lo
 Include them (see Section 8A below).
   7. Policy.
   A. When essential lo ihe mission of
 the agency, the proper use of advisory
 and assistance services is a legitimate
 wity lo:
   (1) Obtain outside points of view lo
 avo:d loo limited Judgment on
 significant issues:
   [2\ Obtain advice regarding
 developments in industry, university or
 foundation research:
   (3) Obtain the opinions, tpecial
 knowledge, or skills of noted experts
 whose national or international preside
 ccn contribute to the sources of
 Important projects:
   (4) Enhance Ihe understanding of. and
 develop alternative solutions lo.
 complex issues:
   (5) Support and improve the operation
 of organizations:
   (6) Ensure the more efficient or
 effective operation of managerial or
 hardware systems: and
   (7) Secure citizen advisory
 participation in developing or
 implementing Government programs
 that, by their n»!ure or by statutory
 provision, call for such participation.
   B. Advisory and assistance  services
 shitll not be:
   (1) Used in performing work of a
 policy, decision-making, or managerial
 nature which is the direct responsibility
 of agency officials:
.  (2) Used to b> pass or undermine
 personnel ceilings, pay limitations, or
 competitive employment procedures:
   (3) Awarded on a preferential basis to
 former Government employees:
  (4) Used under any circumstances
 specifically lo aid in influencing or
 enacting legislation:
  (5) Procured through grants  and
 cooperative agreements: and
  (0) Obtained for professional or
 technical advii:e which is rradily
 HViiiliible within the agency or another
 Feilrral agency, except uhc-n the
 contract is enlrrrd into pursuant lo the
PCMD 7/90
procedures and provisions of Circular
A-76.
  C No contracts for advisory and
assistance services may be continued
longer than five years without being
reviewed for continued compliance with
this circular.
  8. Management Controls.
  A. Each agency will assure that it
maintains an accounting or information
system which effectively monitors and
reports advisory and assistance service
aclivilcs.
  B. Each agency's management control
system for advisory and assistance
services shall at a minimum comply
with '.he Federal Acquisition Regulation.
Agencies are encouraged to apply the
same control system to other
procurements which In their judgment
require similar management attention.
notwithstanding the exclusion of those
functions or programs from the
provisions of this circular.
  C. Each agency will assure thai for all
advisory and assistance service
arrangements:
  (1) The elements of Ihe management
control system required by this circular
have been observed, and all
procurements under this circular are
administered in accordance with the
requirements of the Federal Acquisition
Regulation:
  (2) As prescribed by the Federal
Acquisition Regulation, written approval
of all advisory and assistance  services
arrangements will be required at a level
above the organization sponsoring the
activity. Additionally, written approval
for all advisory and assistance service
arrangements during the fourth fiscal
quarter will be requited at the  second
level or higher above the organization
sponsoring Ihe activity:
  (3) Every requirement is appropriate
and fuily justified in writing. Such
Justification will provide a statement of
need and will certify that such services
do not unnecessarily duplicate any
previously performed work or services:
  (4) Work statements are specific.
complete, and specify a fixed period of
performance for the service to  be
provided:
  (5) Acquisition of advisory and
assistance services conform to the
Competition in Contracting Act of 1984:
  (6) Appropriate disclosure is required
of. and warning provisions are given lo.
Ihe performcr(s) lo avoid conflict of
interest:
  (7) Advisory and assistance service
arrangements are properly administered
and monitored to ensure thai
performance is satisfactory:
  (8) The service is properly evaluated
at the conclusion of the arrangement lo
                                                         A-2-7
assess its utility to the agency and Ihe
performance of the contractor and
  (9) To the extent practicable.
contracts for these services require a
written report. Such reports typically
would document the services delivered
and may. in part, take Ihe form of
software packages.
  I). Delegations of Authority.
  (1) Each agency head shall designate
a single official reporting directly lo him
or her who shall be responsible and
accountable for assuring that (he
acquisition of advisory and assistance
services meets the provisions contained
in this circular. The single official shall
have minimum responsibility for ihe
procurement of such services.
  (2) Each agency will establish specific
levels of delegation of authority lo
approve  Ihe need for advisory and
assistance services based on the policy
and guidelines contained in this circular.
The senior official  shall review each
advisory and assistance sen-ices
request which exceeds an amount lo be
determined by the  agency.
  E. Policy and procedures governing
advisory committees and their
membership as well as the procurement
of advisory and assistance services are
contained in General Services
Administration regulations. 41 CFR Part
101-6.
  F. The Federal Personnel Manual.
Chapter 304. governs policy and
procedures regarding personnel
appointments.
  G. The Federal Acquisition Regulation
governs policy and procedures regarding
contracts.
  9. Data Requirements.
  A. Contracted advisory and
assistance services shall be reported lo
Ihe Federal Procurement Data System
(FPDS) in accordance with the
instructions in the FPDS Reporting
Manual.
  B. Contract actions of S2S.OOO or less
reported on the Summary Contract
Action Report (S25.000 or less) (SF 281)
are not covered by this reporting
requirement.
  C. The following data systems will
continue lo provide information on
advisory and assistance service
arrangements within the executive
branch:
  (1) Central Personnel Data File
(CPDF). operated by the Office of
Personnel Management,  provides data
on personnel appointments, segregating
advisors, c.xpcrls. and advisory
committee members.
  (2) The Federal Procurement Data
System (FPDS) provides  data on
contract arrangements that are
monitored l>y the rnandjjcmenl control
                                                                                                                    24oi

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  CONTRACTS MANAGEMENT MANUAL
                       Federal Register / Vol.  53.  No. 7 / Tuesday. January 12, 1908  /  Notices
                                                              ATTACHMENT!
                                                                 5/21/9Q771
  system required by Section 8 of this
  circular.
    (3) Advisory committee data is
  provided in accordance with Section 2
  of Executive Order No. 12024 lo fulfill
  the requirements of section 6(c) of the
  Federal Advisory Committee Act. as
  •mended (Pub. L 92-163. S U.S.C.. App.).
    10. Effective Dale. This circular is
  effective immediately.
    11. Inquiries. All questions or
  inquiries should  be submitted to the
  Office of Management Budget.
  Telephone number (202) 395-6903.
  lames C Miller III.
  Di.tctor.
  Exclutioiit
    L The following  activities are excluded
  from lh« purview ef Circular A-120.
    1. Activities thai are reviewed in
  accordance with ihe A-:6 process. (Such
  activities muit be reported in accordance
  with lections 8.A and 9.A.)
    2. Architectural and engineering services of
  construction and conilruclion management
  services.
    3. ADP/Te!eeommunicj:ions may be
  excluded ifiuch functions and related
  services arc controlled in accordance with 41
  CFR Part 201. the Federal Information
  Resource Management Regulations.
    4. Research on theoretical matSe.tiatirs and
  basic medical, biological, physical, social.
  psychological or other phenomena.
    S. Engineering studies related to specific
  physical or performance characteristics of
  existing or proposed systems.
    6. The day-to-day operation of facilities
  (e.g. ihe Johnson Space Center and related
  facilities) and functions (e.g- ADP operations.
  building maintenance, etc.).
    7. Covcrr.menl-owncd. contractor operated
  facilities (COCOs) (e 3.. Oak Ridge National
  Laboratory, the Holstan Army Ammunition
  Plant In Kingsport.  Tennessee). However, any
  contract for adv isory and assistance services
  other than the basic contract for operation
  and management of a COCO shall come
  under the provisions of this circular.
   8. Clinical medicine.
   9. Those support services of a mar.ageri.il
 or administrative nature performed as a
 simultaneous part of. and no.i-separable
 from, specific development, production, or
 Operational support activities. In this context.
 non-separable means thai the managerial or
 administrative systems in question (n.g.
 subcontractor monitoring or cor.fig-jraiinn
 control) cannot reasonably be operated by
 anyone other than the designer or p.ijilwvr of
 ihe end-item hardware.
   10. Contracts entered ir.io in furtherance of
 •lalulorily mandated advisory committees.
   11. Initial training, training aids, and
 technical documentation acquired as an
 Integral part of the lease or purihnsu of
 equipment.
   12. Routine maintenance of equiprirnl.
 routine iidminislr.itive srrvicrs (p g . rr.jil.
 reproduction, telephone), printing services.
 •nd direct adverliung (media) costs.
   13. Auctioneer*, realty-brokers, uppruiien.
 and surveyors.
   II. The following programs are excluded
 from Ihe purview of Circular A-13L
   1. The National Foreign Intelligence
 Program INFIP).
   I The General Defense Intelligence
 Program |CDIP).
   3. Tactical Intelligence .ind Related
 Activities (TIARA).
   4. Foreign Military Sales.

 |FK Doc 80-181 Filed 1-11-48: 8-45 am|
 •lumo cooc iiio-41-u
 DEPARTMENT OF TRANSPORTATION

 National Highway Traffic Safety
 Administration

 (Docket No. IP 87-12; Notice 21

 Grant of Petition for Determination of
 Inconsequential Noncompliance;
 General Motors Corp.

   This notice grants the petition by
 General Motors Corporation of Warren.
 Michigan, to be exempted from the
 notification anJ remedy requirements of
 the National Traffic and Motor Vehicle
 Sdfe.'y Act (15 U.S.C. 1381 et sco.) for an
 apparent noncompliance wiih 49 CFR
 371.101. Federal Motor Vehicle Safety
 Standard No. 101. "Controls and
 Displays." The basis of the grant is that
 ihe noncompliance is inconsequential as
 It relates to motor vehicle safely.
   Notice of the petition was published
 on October 6.198". and an opportunity
 afforded for comment (52 FR 37394).
   Standard No. 101 specifics individual
 Identifying symbols for the windshield
 washer control and the windshield
 washer and wiper combined control.
 General Motors Sas determined that a
 lota! of forty-eight 1987 Brigadier trucks
 were manufactured with an incorrect
 illuminated identification for the
 windshield washer control. The symbol
 for combined windshield washer and
 wiper was used instead of Ihe
 identifying symbol for windshield
 washer alone. General Motors supports
 it* petition with the following:
   1. "The washer control in question is
 properly identified on the control itself
 with the symbol specified in FMVSS 101.
The incorrect symbol usage is limited lo
an adjacent identification which is
present for purposes of meeting the
illumination requirement of KMVSS 101.
  2. The Owner's  Manual clearly
illustrates and describes the w.iihcr
control and its function.
   3. A driver will easily and readily
 recognize this control, especially the
 skilled professional driver of heavy duly
 commercial vehicles such as the
 Brigadier."
   No comments were received on the
 petition.
   Because the control itself bears the
 proper symbol. NlfTSA believes  that
 any confusion on the part of the driver is
 most likely lo occur when the  •
 headlamps are in use. and the incorrect
 identification illuminated. The
 instrument panels of the trucks in
 question are designed such  that the
 windshield washer control is adjacent to
 the windshield wiper control. The
 illuminated identification of the wiper
 control is correct, as is the symbol on
 the washer control itself, minimizing the
 possibility that the operator will
 activate the washer control in the belief
 that it is the wiper control. Accordingly.
 petitioner has met its burden of
 persuasion that the noncompliance
 herein described is inconsequential as it
 relates lo motor vehicle safely, and its
 petition is granted.

 (Sec lOi. Pub. L 83-492.88 S:al. 14:0 (IS
 U.S.C 141TJ: deleg.-ilior.s of aulhnri'y ul 49
 CFR I.JO and 4d CFR SOI.8)
   Issued an Jur.g.iry 0, 1983.
 Barry Felrice.
 .4 jMurSu.v .4 tiiai.iiftfciiir for Hxlemak lay.
 |FR Doc 88-J97 Filed 1-11-418:8:43 am)
 •MUMO COOC 4SIO-SS-H
 DEPARTMENT OF THE TREASURY

 Office of the Secretary

 List of Countries Requiring
 Cooperation With an International
 Boycott

  In order to comply with the mandate
 of section 999{a)(3J of the Internal
 Revenue Code of 1954. the Department
 of the Treasury is publishing a current
 list of countries which may require
 participation in. or cooperation with, an
 international boycott (wilhin ihe
 meaning of section 999(b)(3) of the
 Internal Revenue Code of 1954). The list
 is the same as Ihe prior quarterly list
published in ihe Federal Register.
  On ihe basis of the best information
currently available lo Ihe Department of
 the Treasury, the following countries
may require participation in. or
cooperation with, an international
boycott (within Ihe meaning of section
                                                  A-2-8
)7/90
                                                                        248g

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       CONTRACTS  MANAGEMENT MANUAL
                              1900 Change?
                              5/21/90
                     PROCUREMENT REQUEST RATIONALE CHECKLIST
               (to be submitted with EPA Forms 1900-8 and  1900-8A)

       Item  1  The title of this procurement is 	
       Item  2 This procurement request package contains the  following
           documents.   (Check all applicable boxes and attached
       documents as appropriate.)
       See Attachment f
Check
                              Description
                              EPA Form 1900-8
                              Procurement Abstract*
                              Statement or Scope of Work*
                              Concise Technical Proposal
                                Instructions*
                              Competitive Technical Evaluation
                                Criteria*
                              Justification  for Other Than Full
                                and Open Competition  (JOFOC)
                              D&F to provide full and open
                                competition  after exclusion of
                                source (see  FAR 6.2)
                              Justification  for Advisory and
                                Assistance Services
                              Justification  of Need  (Government-
                                Furnished Property  (GFP)/
                                Equipment)*
                              Quality Assurance (QA) Review Form
                              Recommended Sources List
                              Reports Description
                              Government-Furnished Property
                              Description

*  The PROJECT OFFICER'S HANDBOOK provides guidance for preparing
these documents.   Also, see Item 11.

Item 3:  This procurement  [   ]involves [  Jdoes not involve
advisory and assistance services.  (If advisory and assistance
services are involved, attach a justification that provides a
statement  of the  need  for  the services and a certification that
such services do  not unnecessarily duplicate any previously
performed  work or services).  (See page 4 of Figure 2-2 for
required approvals)

Item 4:  This procurement  [   ] involves [  ]does not involve legal
analysis.   I have (  ] have not [  ]discussed this procurement
with the Office of General Counsel which [   ]concurs  [  ]does not
concur with proceeding with this procurement

                           Figure  2-1
                           Page 1 of 5
PCMD 7/90
                                                                       241

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     CONTRACTS  MANAGEMENT MANUAL                       1900 CHG 7
                                                         5/21/90


                       PROCUREMENT REQUEST APPROVALS


     B.  Management Approvals

        The following  approvals  apply  to  all procurement  requests
     (P.R.'s),  except  PR's to add funds  to incrementally  funded
     contracts.   These approvals  are in addition to those listed in A
     above.


                  Item                     Approval

        1.  Procurement Requests for
            Advisory  and Assistance
            Services.

             (a)   Small Purchases          Program official at least
                                          one organizational level
                                          above the initiating office.

                                          When award is made during
                                          the fourth quarter, a
                                          program official at least
                                          two organizational levels
                                          above the initiating office.

             (b)  Other Than  Small          Program  official not below
                 Purchases not in Excess   the level of Associate,
                 of $1M                   Assistant or Regional
                                          Administrator, Inspector
                                          General, or General Counsel.

             (c)  Advisory and Assistance   If the procurement request
                 Services Exceeding $1M    exceeds $1M, in addition to
                                          the approvals in (b) above,
                                          approval is required by the
                                          Assistant Administrator for
                                          Administration and Resources
                                          Management.  (Assistant
                                          Administrator or Equivalent
                                          at HQ or the Regional
                                          Administrator in the Regions
                                          should make the request for
                                          approval).  Requests in this
                                          category must be routed
                                          through the Director,
                                          Procurement and Contracts
                                          Management Division.

                                 4 of 5
"07/90
                                                                     2481

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YOU'VE ISSUED YOUR WORK
    ASSIGNMENT, SO
      NOW WHAT?!
                         249

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      WORKPLAN  REQUIREMENTS
      Workplans Or Staffing Plans Must Be Submitted:

      - In Response To Initial Work Assignments/
        Deliver Orders

      - If There Is A Change In The Scope, Level
        Of Effort Or Period Of Performance Of An
        On-Going Assignment
•ID 9/89                    8 • 1                     251

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     COMPONENTS OF  A WORKPLAN

      1.   Statement Of The Project Goals (Purpose)

      2.   Detailed Technical Approach With Action
          Steps

      3.   Description Of Each Task/Deliverable With
          Schedule For Completion

      4.   Proposed Personnel

      5.   Areas Requiring Clarification/Suggested
          Modifications/Anticipated Problems

      6.   Proposed Format(s) For Special Progress
          Reports, If Required

      7.   Proposed Use Of Subcontractors, With
          Discussion Of How The Effort Will Be Managed
          By The Prime Contractor

      8.   Detailed Cost Proposal, Broken Down By
          Task And Subtask, Including Subcontractor
          Cost Breakdown
                          ft - 2
PCMD9/89                     °                        252

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WHAT TO  LOOK FOR  IN A WORKPLAN

 1.  Does Contractor Demonstrate Complete Understanding
    Of The Project (All Elements, Or Just One?)

 2.  Are The Proposed Milestones Appropriate/Too
    Generous/To
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   WHAT TO LOOK FOR IN A WORKPLAN (Cont.)

    7.  Cost Proposal:

       - Are The Hours And Rates Appropriate & Reasonable?

       • Is The Labor Mix Appropriate For The Work?

       - Are The Indirect Cost Rates Those Which Have Already
        Been Negotiated And Are Stated In The Contract?

       - Is The Subcontracted Portion Of The Effort
        Reasonable?

       - Is The Proposed Amount Of Travel Acceptable?

       - Did The Contractor Provide A Breakdown On ODC's?
        Is Each Component Reasonable?

       - Are Proposed Subs/Consultants Already Approved?

       - Will Approval Of The Workplan Require A Ceiling
        Increase Of Any Proposed Sub/Consultant?

       - Is Any GFP Involved, And Has It Been Authorized In
       The Contract?
PCMD 9/89                     8 ' 4

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                         STATEMENT OF WORK
                        WORK ASSIGNMENT //1 3


   BACKGROUND AND PURPOSE

        The Environmental Protection Agency (EPA) has a
   Congressional mandate to approve the use of all pesticides
   for commercial application.   It is critical to both the
   welfare of the U.S. population, as well as a healthy environment
   where natural plant life can flourish without harmful effects,
   that no pesticides be used which could harm either human life
   or environmental resources.

        EPA is thus charged with studying the effects of all
   pesticides proposed for use  before granting approval.  Last
   year, the pesticide "ODD" was used widely in both Japan and
   France and is gaining in popularity in other agricultural
   areas of the world.  In those countries, it appears to be
   effective as a deterrant against many plant-destroying Insects.
   However, Canada has rejected the widespread use of this
   chemical based upon its research and testing efforts which
   have shown a possible harmful effect from "ODD" on the soybean
   plant and its consumers.

       "ODD" has recently been  formally proposed to the U.S.
   Government for approval in this country.  The purpose of this
   work assignment is to compile all research and data which
   currently exist on "ODD" into a comprehensive summary document.
   The contractor shall also prepare a testing plan for EPA so
   the Agency or another party  can conduct its own study on the
   long and short-term effects  of this pesticide.  A further
   phase of the effort may follow in a future work assignment
   (if the option to extend the term of this contract is exercised),
   which will consist of the actual testing of "ODD" In accordance
   with the approved testing plan.  A detailed description of
   the tasks the contractor is  to perform follows, Including
   a schedule of reports and deliverables and their due dates.


   TASK I - CONDUCT LITERATURE  SEARCH

        The contractor shall review all existing data and research
   on the pesticide "ODD".  This shall include any documents
   produced in the United States as well as other countries
   where such research has been conducted.  The three foreign
   nations where the majority of known literature has been
   compiled are Japan, France and Canada; however, there may be
   other countries where data on "ODD" have been produced as
   well.  EPA has access to much of the Japanese research within
   its own library; copies of all such documents will be furnished
   to the contractor within fifteen (15) days after Issuance of
   this work assignment.


D9/B9                             8"5                               255

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           The contractor shall be responsible for obtaining all
      other documents which have been produced on the pesticide.


      TASK II - PREPARE COMPLETE SUMMARY OF ALL RESEARCH CONDUCTED
      ON "ODD"

          The contractor shall produce a comprehensive final report
      which will summarize all research and findings to date on the
      pesticide "ODD".  This document shall Include all decisions
      made by foreign governments on whether to allow use of "ODD"
      on the crops of that nation, and the basis for such decisions.
      The contractor shall also include recommendations to EPA,
      based solely on existing research, as to whether "ODD" should
      be approved for widespread, unrestricted use, restricted use
      on certain crops, or not at all at this time.


      TASK III - PREPARE TESTING PLAN

           The contractor shall propose a plan for testing the long
      and short-term effects of "ODD" on soybean plants.  (The
      actual testing is not to be conducted under this work assignment.
      The testing plan shall include the proposed extent of testing,
      a schedule for when it should be conducted, a detailed
      description of both the application and the way the effects
      of "ODD" will be determined, and an estimated cost for conducting
      the entire testing project.


      GENERAL

           The contractor shall furnish a copy of each section of
      the monthly technical and financial progress reports which
      relate to this work assignment directly to the Work Assignment
      Manager at the same time the reports are submitted to the
      Project Officer and the Contracting Officer.  In addition,
      the following additional financial information shall be
      submitted to the Work Assignment Manager on the same date:

           (1) A graph using a vertical axis for dollars and a
      horizontal axis for time increments that shows the actual and
      projected rate of expenditures against the total budget
      approved in the work plan, and

           (2) A cumulative incurred cost per direct labor hour average
      computation compared with the budgeted average cost per
      labor hour derived from the approved work plan.

           The contractor shall communicate by telephone with the
      Work Assignment Manager at least once per week (Friday
      afternoons, unless otherwise directed by the Work Assignment
      Manager) to discuss the progress made that week, any problems


PCMD 9/89                             ° ~ "                               2!

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      any obstacles  encountered,  and the complete status  of  all  on-
      going tasks.   In addition,  the contractor shall  meet  in  person
      wih the  Work  Assignment  Manager on a bi-monthly  basis  for  the
      same purpose.

           The contractor shall be prepared to submit  for inspection
      copies of all  work in progress at  any time as directed by
      the Work Assignment Manager.                               '

           The following is a  suggested  skills mix representing
      EPA's best estimate for  the performance of this  Work  Assignment.
      The contractor shall specify its proposed skills mix  with  the
      staffing plan  submitted  as  part of the required  work  plan.

           Program  Director (P-4)       300 hours
           Senior Researcher (P-3)      800 hours
           Research  Assistant  (P-2)     250 hours
           Staff Writer (P-2)            150 hours
                                       1500 - Estimated Level  of  Effort
PCMD9/89                             8"7                               257

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                           WORK.ASSIGNMENT #13
                    SCHEDULE OF TASKS AND DELIVERABLES
      TASKS/DELIVERABLES

      I.     PREPARE/SUBMIT WORK PLAN


      II.    RECEIVE GOVERNMENT-FURNISHED
            DATA

      III.   BEGIN LITERATURE SEARCH

      IV.    COMPLETE LITERATURE SEARCH

      V.     SUBMIT 1st DRAFT REPORT
            ON DATA COMPILATION

      VI.    RECEIVE EPA COMMENTS

      VII.   SUBMIT 2nd DRAFT REPORT ON
            DATA COMPILATION

      VIII.  RECEIVE EPA COMMENTS

      IX.    DELIVER FINAL SUMMARY DOCUMENT
            OF DATA COMPILATION TO EPA

      X.     SUBMIT DRAFT TESTING PLAN

      XI.    RECEIVE EPA COMMENTS

      XII.   SUBMIT FINAL TESTING PLAN
DUE DATE

15 days after Work
Assignment issuance
February 28

May 15

June 30


July 15

August 1


August 15

August 30


September  10

September  17

September  30
PCMD9/89
                                    8-8
                  258

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                            PROPOSED WORK PLAN FOR
                             WORK ASSIGNMENT //1 3


      PURPOSE

           This Project Workplan represents Technically Acceptable
      Corporation's (TAG) approach to performing the work described
      in EPA's Work Assignment //13 issued on February 1, 1996 under
      Contract 68-OX-1234.  The objective of this work assignment is
      to compile all research and data which currently exist on the
      pesticide "ODD" into a comprehensive summary document, to
      Include recommendations based on the research as to whether
      EPA should approve, disapprove, or approve for restricted use
      only, the pesticide.  In addition, the contractor shall prepare
      a testing plan for the conduct of a study of the long and
      short-term effects of this pesticide.


      TECHNICAL APPROACH

           Because EPA will be relying on the results of this research
      to make its preliminary decision on whether to approve "ODD" on
      a short-term basis for use in the United States, pending imple-
      mentation of a longer-term and thorough testing program before
      issuing final approval, TCC proposes that the methodological
      approach followed be extremely thorough.  The tasks TAG proposes
      are thus more detailed, and the hours allocated more extensive,
      to accomodate this more cautious approach.

           Since the health and environmental damage from preliminary
      approval of "ODD" could be so extensive, as a result of its
      use on-crops such as soybeans which have such broad exposure
      nationally, TAG believes this approach to be in the best interest
      of accomplishing EPA's health and environmental protection
      mandate.


      PROJECT TASKS/SCHEDULE AND DELIVERABLES

           This project will consist of three major tasks with numerous
      subtasks to be completed over a nine-month time period.  Exhibit
      1  summarizes these tasks, the timeframes for completion and
      deliverables to be submitted.  The activities which will be
      performed as part of each task are described below.


      Task 1  - Conduct Literature Search

           Subtask 1.1 - Development of Project Workplan

           The purpose of this subtask is to prepare 'and discuss the
           proposed project workplan with the EPA Task Manager and

PCMD 9/89                             8 " 9                               259

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9/89
     other EPA officials, as needed.  These meetings will be
     used to clarify and refine the scope of work, identify
     pertinent study issues and the availability of existing
     relevant documentation and finalize study schedule and
     deliverable dates.  A revised finalized project workplan
     will be submitted within 15 calendar days from issuance
     of the Work Assignment (February 15).

     Subtask 1.2 - Receive and Review Government-Furnished Data

     EPA will provide TAG copies of all documents in EPA's
     possession related to ODD by February 15.  TAG will review
     those documents to determine the extent and quality of
     data currently available and to determine data gaps.  TAG
     will then prepare preliminary summary of that data identifying
     the data gaps for preliminary discussion with EPA.  This
     preliminary review will assist EPA and TAG in determining
     the extent of additional research required.

     Subtask 1.3 - Conduct Literature Search

     TAG proposes to undertake an extensive literature search
     to identify all sources obtainable within the United States
     and other pertinent countries.  The following actions are
     anticipated :

         a.  Literature search conducted of the literature
             available at the U.S. Library of Congress, U.S.
             Department of Agriculture, and National Institute
             for Occupational Safety and Health.

         b.  Thorough review of all commercially available
             chemical data bases.

         c.  Written inquiries to the departments of agriculture
             and environmental agencies of the states, with
             telephone follow-up to ensure response, and review
             of all data obtained.

         d.  Written inquiries to all major U.S. Schools of
             Agriculture, with telephone follow-up and review
             of all data obtained.

         e.  Written Inquiries to the departments of agriculture
             and environmental agencies of all nations known to
             have used and/or studied DDD, with telephone follow-
             up and review of all data obtained.

     Where documents, studies or data are available only at the
     particular sites, TAG proposes to obtain copies where
     possible.  If a particularly rich source of data is located,
     however, and documents cannot be sent either because of
     pure volume or time restrictions, TAG proposes to conduct
     on-site research.  All sites to be visited will be approved
     in advance- by the EPA Prcj «8>t1 Of fleer , and it is proposed

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            that  the EPA Work  Assignment  Manager  be  a  member  of  the
            site  visit  team.

            Subtask  1.4 -  Conduct  Telephone  or  Site  Visit  Follow-Up

            It is often difficult  to  determine  the  quality of studies
            undertaken  from  the  written  literature,  because of  inadequate
            description of the study's methodology  in  the  written
            literature.  This  makes it very  difficult  to  assess  the
            quality  of  the resulting  data and  the true extent of the
            data  gaps.  Where  particularly important  findings are
            claimed, TAG therefore  proposes  to  conduct follow-up
            Inquiries,  by  phone  or  in  person,  to  determine the  quality
            of the data.

      Several deliverables  will be submitted  during  this  task  which
      are described as follows:

            a)  Revised workplan,  based  on interaction with EPA  staff.

            b)  Summary in the form of a  briefing to  be presented  to
               EPA, summarizing data  gaps Identified  after review of
               data provided  by EPA.

            c)  Summaries  of telephone interview  and  site  visit  data
               collected.


      Task  2 - Prepare Complete Summary  of  Research  Conducted  on  "ODD"

            Subtask  2.1 -  Prepare  Draft  Summary Report

            TAG will summarize the data  collected as  described  above
            into  a preliminary draft  for  submission  to EPA for
            technical review and comment.   TAG  will  similarly prepare
            a summary briefing for EPA management summarizing TAG's
            conclusions and  recommendations.

            Subtask  2.2 -  Prepare  Final  Report

            Based on feedback  obtained,  TAG  will  finalize  the report
            and briefing.

            Subtask  2.3 -  Present  Report  and Briefing  to  EPA  Management

           At a  mutually  agreed-upon  date as  proposed by  EPA,  TAG will
            present  a briefing on  its  conclusions and  recommendations
            to EPA management.

      Several deliverables will  be submitted  during  this  task  which
      are described as follows:

           a)  Draft summary  report  summarizing  research  and findings
               to date, indicating all  decisions made by  foreign

PCMD9/89                             8-11                              261

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             governments regarding use of ODD and the basis for those
             decisions, and Including TAG's recommendations, based
             on the research, as to whether ODD should be approved
             for any use In the United States.

         b)  Final summary report.

         c)  Summary briefing summarizing findings and recommendations,


    Task 3 - Prepare Testing Plan

         Subtask 3.1 - Prepare Draft Testing Plan

         During the research phase, TAG will collect Information
         regarding the testing methodologies used by states,
         universities, foreign governments and Independent researchers
         to study DDD's effects on health and the environment.
         TAG will review and evaluate the methodologies used and
         quality of the results obtained as part of preparing a
         plan for EPA to use In conducting its own research.
         Subtask 3.2 - Prepare Final Testing Plan

         TAG will meet with EPA officials to review
         any comments received, and incorporate the
         those meetings into the final testing plan,
                               and discuss
                               results of
    Two deliverables
    are described as
will be submitted
follows:
during this task which
         a)  Draft testing plan, Including the proposed extent of
             testing, a schedule for its conduct, a detailed
             description of the application and the way the effects
             of DDD will be determined, and an estimated cost for
             conducting the testing program.  Also included as an
             appendix will be a summary of testing methodologies
             used by other researchers, and an assessment of their
             results, strengths and weaknesses.

         b)  Final testing plan.
    PROPOSED STAFFING AND BUDGET

         Exhibit II identifies the proposed staffing and budget.
    Mr. Arnle Haig, Vice President of TAG, along with Mr. Jay Thelsman,
    the Project Manager, will be responsible for the overall progress
    of the project.  Day-to-day task management will be the
    responsibility of Mr. Louis Thomas, Senior Researcher.  Ms. Susan
    Ewing, research assistant, and Bernie Goodman, researcher,
    will conduct a major part of the research effort.  Dickie Nixon,
    TAC's pesticides expert, will provide technical advice and assistance
PCMD 9/89
                                   8-12
                                                 262

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      in reviewing technical findings and recommendations.   Resumes
      of all staff are attached.

           We estimate that the project  will require approximately
      2350 hours at a total labor cost of $46,600 to complete.
      The total  project cost is estimated at $142,858.95.


      ISSUES AND ANTICIPATED PROBLEMS

           To complete this project  within the timeframe proposed
      by EPA, EPA's provision of  technical documentation and
      comments according to its proposed timeframe will be  crucial.
      It Is also difficult  at this time, prior to Initiating research,
      to.know the precise scope of this  task or the responsiveness
      of foreign governments to our  Inquiries.  EPA assistance  in
      supporting research efforts will likely be significant in
      obtaining  cooperation of foreign government officials.
PCMD 9/89                             8-13                              2g3

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                                   EXHIBIT 1
                              WORK ASSIGNMENT #13
                       SCHEDULE OF TASKS AND DELIVERABLES
     TASKS/DELIVERABLES

     I.     PREPARE/SUBMIT FINAL WORK PLAN

     II.    RECEIVE  GOVERNMENT-FURNISHED
            DATA

     III.   PRESENT  BRIEFING TO EPA ON DATA GAPS

     IV.    BEGIN  LITERATURE SEARCH

     V.     COMPLETE LITERATURE SEARCH,
            DELIVER  INTERVIEW SUMMARIES

     VI.    SUBMIT 1st  DRAFT REPORT
            ON  DATA  COMPILATION

     VII.   RECEIVE  EPA COMMENTS

     VIII.  SUBMIT 2nd  DRAFT REPORT ON
            DATA COMPILATION

     IX.    RECEIVE  EPA COMMENTS

     X.     DELIVER  FINAL SUMMARY DOCUMENT
            OF  DATA  COMPILATION TO EPA,
            DELIVER  BRIEFING

     XI.    SUBMIT DRAFT  TESTING PLAN

     XII    RECEIVE  EPA COMMENTS

     XIII.  SUBMIT FINAL  TESTING PLAN,
            DELIVER  BRIEFING
DUE DATE

February IS

February 15


March 12

March 20

May 15


June 30


July 15

August 1


August 15

August 30



September 10

September 17

September 30
PCMD9/89
                                    8-14
                  264

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                                 EXHIBIT  II
                        PROPOSED STAFFING AND BUDGET
LABOR;
Title
Project Manager
Senior Engineer/VP
Senior Researcher
Research Assistant
Staff Writer
Secretary
Clerk-Typist
SUBTOTAL
OVERHEAD AND FRINGES (111%
OTHER DIRECT COSTS
Travel
Copying and Printing
Computer Time

Level Rate
P-4 $27.00
P-4 30.00
P-3 20.00
P-2 14.50
P-2 18.00
P-l 11.50
P-l 9.00

of Labor)





Hours
400
100
1000
400
300
100
50
2350






Total Cost
10,800.00
3,000.00
20,000.00
5,800.00
5,400.00
1,150.00
450.00
$46,600.00
51,726.00

11,000.00
1,800.00
500.00
                      SUBTOTAL                                  13,300.00

                      TOTAL DIRECT                           $111,626.00

      G&A  (18.5% of Total Direct)                              20,650.81

                      TOTAL COST (without fee)               $132,276.81

      FEE (8% of  Total Cost)                                    10,582.14

                      TOTAL COST INCLUDING FEE               $142.858.95
PCMD 9/89                              8-15                              265

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Workplans

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                                            Chapter 8
                             WORK PLANS AND COST PROPOSALS


               Most EPA contracts require the contractor to submit a work plan and/or cost
        proposal before commencing work.  The purpose of the work plan is to give the
        contractor the opportunity to lay out how the contractor proposes  to perform the work
        assigned, as well as the proposed cost.  This in turn permits EPA to ensure that the
        contractor appropriately understands the work to be performed, and to approve (or
        disapprove and amend) the proposed approach and costs for doing the work.  The process
        of obtaining consensus on the workplan can be a simple process, or entail numerous
        meetings and negotiation.

               Work plans typically are submitted in response to  initial work assignments and
        delivery orders.  They should also be amended whenever there is a change in scope, level
        of effort or period of performance of an  on-going assignment.

        8.1  Workplan Components

               A workplan should contain the following components:

               a)  a statement of project goals (the purpose of the assignment);

               b)  a detailed technical approach, with action steps;

               c)  a description of each task and deliverable, with  a schedule for completion;

               d)  proposed personnel;

               e)  indication of any areas  requiring clarification, suggested modifications,
                  and any anticipated problems;

               f)  proposed formats for any special  progress reports, if required;

               g)  any proposed use of subcontractors, as well as how they will be managed;

               h)  a detailed cost proposed, broken down by task,  including a subcontractor
                  breakdown.

               Not all workplans will contain every element.  However, effort put in at this
        stage to clarify the details of the work to be performed will pay off in avoided disputes
        and allegations of miscommunication at a later stage.  Workplans should nfll be simple
        restatements of the work assignment.

               When assignments are being given at the task level, e.g., with technical direction
        directives, submission of a task plan may be similarly appropriate.  See pages 271-73
        for a sample task directive and task plan.

        8.2  Workplan  Review

               Once the workplan  is submitted,  the Government has a certain period of time to
        review and approve it. The review  process should be thorough. The plan  should be
        compared, item for item, with the work assignment or statement of work.  Any
        discrepancies should be noted, as well as changes that should be made.


KCMD9/89                                        1                                           267

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               Since the work plan is being reviewed for the purpose of ensuring that the
        contractor's understanding of, and  approach for, accomplishing the effort is within the
        scope of the assignment, and that the proposed level of staffing and resources are
        appropriate, sufficient,  and reasonable for  performing the work, the reviewer must
        determine the acceptability of the contractor's understanding and approach.

               1.  Does the contractor demonstrate complete understanding of all the project
                  elements?

               2.  Is  the proposed approach for accomplishing the work reasonable and likely
                  to  achieve the government's objectives? Are there ways to do it more
                  efficiently or effectively?

               3.  Did the contractor make  any substantive changes in the work  to be performed,
                  or the sequence of performance, and are these changes acceptable?

               4.  Are the proposed milestones appropriate, too generous or too ambitious?
                  Will they meet the government's needs and deadlines?

               5.  Can  the effort be accomplished reasonably within the LOE available.  Is it too
                  high?

               6.  Is  the overall staffing plan appropriate and reasonable? Are the personnel
                  qualified, underqualified  or overqualified for the task?  Is the contractor
                  using people already familiar with the task or introducing new staff to  the
                  project who might need extra time to get up to  speed?

               7.  Has the contractor identified any questions or problems which need to be
                  resolved?

               8.  Is  there too  much subcontracting relative to the amount of prime contractor
                  time proposed? Can the contractor maintain adequate control over the
                  project?

                Cost proposals  should be reviewed with the same questions in mind, and looked at
        from both  a qualitative  and quantitative point of view.

               1.  Are the hours and rates appropriate and reasonable? (Rates which have
                  already been approved by the Government such as fringe, overhead,  G&A, and
                  fee should not be questioned.)

               2.  Is the labor mix appropriate for  the  work?

               3.  Are the indirect cost rates those which have already been negotiated and are
                  stated in the contract?

               4.  Is  the subcontracted portion of the effort reasonable?

               5.  Is the proposed amount of travel acceptable?

               6.  Did the contractor provide a breakdown of ODCs?  Is each component
                  reasonable?
PCMD 9/89                                        1                                             268

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               7. Are the proposed subcontractors and consultants already approved?

               8. Will approval of the workplan require a ceiling increase of any proposed
                  subcontractor or consultant?

               9. Is any government furnished property involved, and has it been authorized
                  in the contract?

         8.3  Authorizing  Performance  Before Signoff

               Sometimes the contractor is authorized to begin performance while the work plan
         is under development or review.  However, usually the contract will specify a point at
         which work  is to stop if work plan approval has not been received, or if the work plan is
         rejected.  Therefore, timely review of these documents is critical to ensure that the
         work is completed on time.  Delays on the part of the  Government can excuse a
         contractor, under the terms of the contract, from  continuing performance.
PCMD 9/69
                                                                                              269

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                                   Sample
                             TASK DIRECTIVE
  CONTRACTOR:
  CONTRACT NO:  68-03-58-33
  WORK ASSIGNMENT NO:
  TASK NO:    ,
     8
  DATE OF DIRECTIVE;  2/2/87
                               TD  NO:
                               MAXIMUM  HOURS
                               AUTHORIZED:	
                                                                       30
                                ESTIMATED COST:$3QOO.oo

                                DUE DATE:   2/16/87
 TASK TITLE:
  DESCRIPTION OF  TASK;  Review and cement on revisions in second draft of
  NCP and oreamble.
 SPECIFIC TASK ACTIVITIES/DELIVERABLES
 1.  Review second draft, determine consistency .of revisions
     with pertinent statutes  (CERCIA as amended) and with
     existing NCP and (preamble.  Prepare ccnrants sheet. _
          wit-h TTP& gfra      d-scuss issues raised by revisions
     and possible solutions in terms of further revision.
  3.  Prepare coments sheet with proposed language changes.
      (final draft)
   [ ]   ADDITIONAL SCOPE ATTACHED
 COMMENTS:
                                          DEADLINES
                                           2/10/87
                                           2/14/87
                                           2/16/87
 AUTHORIZING:
   TASK MANAGER:
SIGNATURE
DATE
   WORK ASSIGNMT MGR:
   PROJECT OFFICER:	
 RECEIVED BY:
PHONE NO
                [  ]  Accepted  [ ] Rejected  [  ] Accepted  With Exceptions (Atteched)
    CONTRACTOR:
PCMD 9/89
                                       n -16
                                                          270

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                                     Sample


                         TASK PLAN FOR TASK DIRECTIVE  #8-1-2
                               (Review of  NCP  Draft  //2)
                               CONTRACT NO. 68-03-5833
                                Technics Incorporated


   PURPOSE

        This Task Plan represents  Technics Incorporated's  approach  to performing
   the work described In EPA's Task Directive  91  Issued on February  2,  1987.
   The objective of the task Is to review and  comment  on revisions  Incorporated
   Into the second draft of the National Contingency Plan  and  preamble, based
   on comments received from work  group members and  other  Internal  and  external
   reviewers, and propose further  revisions as pertinent In light of the statutory
   requirements of CERCLA,  Its Amendments  and  the existing NCP.


   TASK APPROACH

        This task Involves  comparing the revisions made and Incorporated Into  the
   second  draft of the National Contingency Plan  with  the  language  and  requirements
   of CERCLA and Its  amendments, and the existing NCP. If any Inconsistency Is
   Identified, Technics will note  those discrepancies  on its comments sheet for
   discussion with EPA staff, including the apparent seriousness of  the discrepancies
   no ted.

        After discussion with EPA  staff, Technics will propose additional  language
   changes to resolve any discrepancies, or prepare, in its comments, a Justification
   for the discrepancy as represented  by EPA's decision to maintain the proposed
   language.

        Exhibit 1 below summarizes these activities, dellverables and due  dates.


                                      EXHIBIT  1
  	SCHEDULE OF ACTIVITIES/DELIVERABLES/DUE DATES	


  Activlty                                 Deliverable          Due Date

   1.   Review second  draft, conduct        Comments  sheet         2/10/87
       research as needed to determine
       consistency of revisions with
       CERCLA and its amendments
       and with existing NCP and preamble.
       Prepare comments.

  2.  Meet with EPA  staff  to discuss                             2/14/87
      questions raised/inconsistencies
       found as result of revisions,
      and possible solutions

  3.  Draft proposed language changes,     Comments sheet w/      2/16/87
       Incorporate into comments sheet      language changes



PCMD9/89                                                                           271

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PROPOSED STAFFING AND BUDGET

     Proposed staff for the task Include:

       Program Manager (P-A)        Rob Lockett     5 hours
       Management Analyst (P-3)     June Lilly     15 hours
       Program Analyst (P-2)        Roger Lite     10 hours

               TOTAL                               30 hours

Technics estimates that the project will require approximately 30 hours at a
total labor cost of $3,000.  There are no anticipated direct costs.
SPECIAL REPORTING AND COORDINATION

None


ISSUES AND ANTICIPATED PROBLEMS

None
                                       R 18                                        272
PCMD9/89                               8'1B

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Negotiations

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          REACHING CONSENSUS
         This Chapter Is Reserved Until Further Notice
PCMD9/89                9"°                   273

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       TECHNICAL  DIRECTION
PCMD 9/89             10-0               281

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           TECHNICAL  DIRECTION
     This Clause Permits The Project Officer To Provide
     Technical Direction In The Form Of:
        Direction That Assists Contractor To Accomplish
        Statement Of Work,
        Comments On And Approval Of Reports And
        Other Deliverables.
     Technical Direction Must Not:
         Institute Additional Work Outside Contract Scope
         Constitute A Contract Change
         Increase Or Decrease Estimated Cost Of Contract
         Alter Period Of Performance
         Change Other Express Terms And Conditions

     Project Officer Must Issue Direction IN WRITING, Or
     Must CONFIRM Verbal Direction IN WRITING
     WITHIN FIVE CALENDAR DAYS
PCMD 9/89                 10-1                          283

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                  U.S. ENVIRONMENTAL PROTECTIOH ACBMCT

                                                                  EPAAR Clause
 1552.237-71  Technical Direction.

   As prescribed in  1537.110,  insert the  following contract  clause in
 cost-reimbursement contracts.

 H.li  TECHNICAL DIRECTION  (EPAAR 1552.237-71) (APR 1984)

   (a)  The Project Officer will provide  technical  direction on contract
 performance.  Technical direction includess

   (1)  Direction to  the Contractor which  assists  him  in accomplishing
 the  Statement of Work.

   (2) Comments on  and  approval of reports or other deliverables.

   (b)  Technical direction must  be within  the contract  Statement of
 Work^   The  Project  Officer  does  not  have  the   authority  to  issue
 technical  direction which (1)  institutes  additional work  outside the
 scope  of  the  contract}  (2)  constitutes  a change  as  defined in the
 "Changes"  clausei  (3)  causes an  increase or decrease  in the estimated
 cost of the  contract} (4)  alters  the  period of  performance} or (5)
changes any of the other express terms or conditions of the contract.
  (c)  Technical direction  will  be issued  in writing  by  the Project
Officer or  confirmed by him  in writing  within five  (5)  calendar days
after verbal issuance.

                            (End of clause)
                                                         U.S. EPA Headquarters Library
                                                               Mail code 3201
                                                         1200 Pennsylvania Avenue NW
                                                            Washington DC 20460

               ACQUISITION HANDBOOK Volume II   Page 130

                                     10-2                                   284

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    TECHNICAL  DIRECTION  GUIDELINES
     1. Refrain From Discussing Or Divulging To The
       Contractor Any Information Relevant To A Work
       Assignment Or Delivery Order Prior To Issuance.

     2. Never Authorize Work To Begin Before Issuance
       Of A Work Assignment Or Delivery Order.

     3. Do Not Give Direction Which Will Affect The Terms
       And Conditions, Cost/Price, Delivery Or Performance
       Schedule Or Level Of Effort Of The Contract.

     4. Do Not Direct The Contractor To Perform Services
       Which Are "Inherently Governmental" In Nature
       (E. g., Making Policy).

     5. BEWARE OF CREATING AN EMPLOYER/EMPLOYEE
       RELATIONSHIP (Personal  Services).
PCMD9/89                     10-3                     285

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                                              EXHIBIT  V-2(2)
       1A. Cost Cantor:
      ia Aeeoum No.:
                     TAT ZONE II CONTRACT
                    CONTRACT NO. 68-01-7369
            TECHNICAL DIRECTION DOCUMENT (TDD)
                ECOLOGY AND ENVIRONMENT. INC.
                                                                                 2. No.:
                                                                                   T
      3A. Priority
         Q Medium
         D
      38, Kay EPA Contact:

      Noma:
    4 A. Estimate of
       Tool Hour*:

       Tool Com:
   48. Orartima Approved:
SA. EPA sit* Nam*:
                       SB. SSID No.:
             5C Chy/Cownty/SUM:
                       tSourcaof
                          8CERCLA
                          311
                          UST
   7. Completion Om:
                                            D No  QPickiio
      9. Typt of Activity:
                      CWA-311
                    C6RCLA
                         ASSPgCIPIBDABOVl
                 gSPCC
                 On.Se
                 Sttit
                 RomoMl Pundod
                 Romonl PRP (AO/COI
                 Oil-Sin Monitoring
                i SpOBOl PlOJOA
                                                              TITLE III
                                                              UST
                                                              PEMA
QuoUty
     10. GwMral Tnk DMcrlptton;
     12. Spoenle EltmmtK
                                                                                       11.0«iradR«port
                                                                                           UnorRtpon
                                                                                       IX
     14. AuthorUing OPO:
                                                                 15.0m:
                                                  (SioMtuni)
     16. RaeiiMd by:
                C Acetpwd with Exaptiom (Attach**)
                                          17. Data:
                                               (TATLSignatura)
                                                                                                   T007O37
          11  wmin
       SIMM a  OHM
OPOCoev
TATLCoov
IPMCOOV
                                                       V-23
                      COCaov
                      OPO Or
                                      MTATU
PCMD 9/89
                                           10-4
                                                                                             286

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                                                 OSWER Directive 9242.4-01A

                                                 EXHIBIT  V-2(l)
                                                                    September 1987
             1.COSTCINTBR:
                              TAT - CONTRACT 68-01 -7367
                        TECHNICAL DIRECTION DOCUMENT (TDD)
                              OHM EMERGENCY RESPONSE AND
                                SPILL PREVENTION PROGRAM

                                   ROY F. WESTON INC.
                                                                                           2. NO:
                                                                                           2A. TVP1:
            3. PRIORITY:
                                4. SOURCE Of FUNDS:
              I
HIGH 111

MIOIUM 121

LOW 131
CERCLAI1I
31112)
usrai
MMAMt
                                                   S, EM SITED:
SA. EMSfTENMC:
S. COMPLETION OATI:





7. OVERTIMEAPPROVE*


 Qv«
                                                                         S. REFERENCE INFO:
VU  I   I NO
ATTACMIO
            •. OININAL TASK OlSCNimON:
            •A, OT1MATIOCOST: S
                                                                               UTIMATtO HOURS:
            id metric ILIMINTS:
                                                                               11. INTERIM MAOUNIS:
            20. OUINCO MS KMT FORM:
                                                 FORMAL REPORT
                                            a
                                                                      LITTER REPORT
                                                                                          FORMAL BRIEF
                                                                 a
            3. COMMENTS:
             4. AUTHORIZING OFO:
                                                                                       IS. DATE:
            •, RECSIVBO BY:

                   ll ACCEPTED    |   | ACCEFTEO WITH EXCEPTIONS
                                                  |   1 REJECTED
                                                                                       17. DATE:
                                          (TATI. SIONATUHC)
                       *  n m T i  n  i  1111  1111  111	11  111 111  111  i

                                                         V-22
PCMD9/89
                                                 10-5
                                                                                 287

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             PERSONAL  SERVICES
    1.  A Personal Services Contract Results When
       The Government Assumes The Right To Instruct,
       Supervise Or Control A Contractor's Employee
       In How He/She Performs The Work.

    2.  It Is The Contractor's Right To Hire And Fire,
       To Assign And Organize The Work.

    3.  Project Officers, Work Assignment Managers
       And Delivery Order Officers Must Take Care
       MnKTn CrOcc Tho I Sno Frpm Surveillance To
       Supervision. Tell The Contractor "What" And
       Not "How".
    PERSONAL SERVICE CONTRACTS ARE ILLEGAL!
        (Employer/Employee Relationships)
                         10-6
PCMD 9/89                                             288

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                  PRECAUTIONS
           GOVT PERSONNEL MUST TAKE
             WITH SUBCONTRACTORS


    1.  NEVER plrecLThat Any Portion Of Work
       Should Be Performed By Subcontractor
       Rather Than Prime  Contractor.

    2.  NEVER Direct Prime To  Subcontract With
       A Specific Firm.

    3.  NEVER  Consent To A Subcontract. Only
       The Contracting Officer  Can Give Consent.

    4.  NEVER Provide Technical Direction To A
       Subcontractor - There Is No Privity Of
       Contract.
PCMD 9/89                    10-7                   289

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            PRIVITY OF CONTRACT
    There Is NO DIRECT CONTRACTUAL
    RELATIONSHIP,  I.e., No "Privity Of Contract"
    Between EPA And Any Subcontractor.
                                         "
    Because There Is No "Privity Of Contract,
    EPA May Not Deal Directly With Its
    Subcontractors On Contractual Issues.
    Subcontractors Also Have No Right To Obtain
    A Direct Decision Of The Contracting Officer
    And No Right Of Appeal To The Board Of
    Contract  Appeals.^ — zpft u^ C^ .  **
'CMD 9/89
10-8                    290

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       EFFECTIVE WAYS TO MONITOR
       THE CONTRACTOR'S PROGRESS
    1.  Inspection Of Work (At Work Sitg, If
       Possible)

    2.  Telephone Communications^ U^

    3.  Meetings With Contractor  Personnel
    4. Comparison Of Progress With Work Plan
       Schedule Of Tasks And Deliverables

    5. Review Of Progress Reports

    6. Review Of Financial Management Reports

    7. Review of Deliverables

    8. Evaluation Of Contractor Performance
                      10-9
PCMD 9/89                  i w »                  291

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          INSPECTION OF SERVICES
    Contractor Must Provide And Maintain Inspection
    System Acceptable To Government Covering
    Contracted  For  Services.

    Government Has Right To Inspect And Test All
    Services To Extent Practicable At All  Times  And
    All Places During Contract Term.  Inspection
    Should Not Unduly Delay Work.

    If Services Do Not Conform With Contract
    Requirements, Government  May Require
    Reperformance For No Additional Fee.  If Defects
    Cannot Be Corrected  Through Reperformance,
    Government May 1) Reduce  Fee, 2) Require
    Contractor To Ensure Correct Future  Performance,

    If Contractor Fails To Take  Necessary Action,
    Government May 1) Reduce Fee By Amount
    Necessary To Get Services  Performed Elsewhere
    Or 2)  Terminate The Contract.
PCMD 9/89                    10-10                   2g2

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                                                                                    FAR Clause
                                  INSPECTION OF SERVICES-COST.

                             (•) Definition.  -Services." as used in this clause, in-
                           cludes  services performed, workmanship, and material
                           furnished or used in performing services.
                             (b) The Contractor shall provide and maintain an
                           inspection system acceptable to the Government cover-
                           ing the services under this contract Complete records
                           of all  inspection work performed by  the Contractor
                           shall be maintained and made available to the Govern-
                           ment during  contract performance and for as long
                           afterwards as the contract requires.
                             (c) The Government has the right to inspect and test
                           all services called for by  the contract, to the  extent
                           practicable at all places and times during the term of
                           the contract- The Government shall  perform inspec-
                           tions and tests in a manner that will not unduly delay
                           the work.
                             (d) If any of the services performed do not conform
                           with contract requirements, the Government may re-
                           quire the Contractor to perform the services again in
                           conformity with contract requirements, for no addition-
                           al fee.  When the defects in services cannot be correct-
                           ed by reperformance, the Government may (1) require
                           the Contractor to take necessary action to ensure that
                           future performance conforms to contract requirements
                           and (2) reduce any fee payable under the contract to
                           reflect  the reduced  value  of  the services performed.
                             (e) If the Contractor faOs to promptly perform the

                           future  performance  in  conformity  with contract re-
                           quirements, the Government may (1) by  contract or
                           otherwise, perform the services and  reduce any fee
                           payable by an amount that is  equitable  under the cir-
                                      or (2) terminate the contract for default
                                                  10-11                                         293
PCMD 9/89

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   INSPECTION-TIME  &  MATERIALS

       Contractor Must Provide And Maintain Inspection
       SystenLAcceptable To Government.

       Government Has Right To Inspect And Test All
       Materials Furnished & Services Performed To
       Extent Practicable. Government May Inspect
       Plant Of Contractor Or Subcontractor.

       Government Shall Accept Or Reject Services
       And Materials At Place Of Delivery Promptly, And
       They Are Presumed Accepted 60 Days After
       Delivery Unless Accepted Earlier.

       If Services Or Materials Do Not Conform With
       Contract Requirements, Government May Require
       Replacement Or Correction During Contract Term
       Or Within Six Months Thereafter, With Fee For
       Profit Deducted From Costs.

       Contractor's Failure To Perform Resulting From
       Contractor Fraud, Lack Of Good Faith, Or Willful
       Misconduct Of Management, Or By Contractor's
       Employee Where Contractor's Management Has
       Reasonable Grounds To Believe The Employee Is
       Habitually Careless Or Unqualified, Shall Be Cor-
       rected  By Contractor At No Cost To The Govt.

PCMD9/89                 . _ „ _                          294

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      INSPECTION-TIME-AND-MATERIAL AND
               LABOR-HOUR (JAN 1986)
     (a) Definitions. "Contractor's managerial personnel,"
   as used in this clause, mum any of the Contractor's
   directors, officers, mangers, superintendents, or equiv-
   dent representatives who have supervision or direction
   of-
       (1) AU or substantially all of the Contractor's busi-
    (2) All or substantially all of the Contractor's oper-
  ation at any one plant or separate location at which
  the contract is being performed; or
    (3) A separate and complete major industrial oper-
  ation connected with the performance of this con-
  tract
  "Materials,"  as  used  in  this  clause, includes data
when the contract does not include the Warranty of
Data clause.
  (b) The Contractor shall provide and maintain an
inspection system acceptable to the Government cover-
ing the material, fabricating methods, work, and serv-
ices under this contract. Complete records of all in-
spection work  performed  by the Contractor shall be
maintained and made available  to  the Government
during contract performance and for as long afterwards
as the contract requires.
  (c) The Government has the right to inspect and test
all  materials  furnished and services  performed under
this contract, to the extent practicable at all places and
times, including the period of performance,  and in any
event before acceptance. The Government may also
inspect  the plant or plants of the Contractor or any
subcontractor engaged in  contract performance.  The
Government  shall  perform inspections and tests in a
manner that will not unduly delay the work.
  (d) If the Government performs inspection or test on
the premises  of the Contractor or a subcontractor, the
Contractor shall furnish and shall require subcontrac-
tors to furnish all reasonable facilities and ushtance for
the safe and  convenient performance of these duties.
  (e)  Unless  otherwise  specified in the contract, the
Government  shall accept or reject services and materi-
als  at the place of denVery as promptly as  practicable
after delivery, and they  shall be  presumed accepted 60
days after the date of delivery, nnlrai  accepted earlier.
  (0 At any time dorin( contract performance, but not
later than 6  months (or such other -lane  as may be
specified in the contract) after acceptance of the serv-
ices or materials last delivered under this contract, the
Government  may require the Contractor to replace or
correct  services or materials that at tune of delivery
failed to meet contract requirements. Except as other-
wise specified in paragraph (h) below, the  cost of re-
placement or correction shall be determined under the
Payments Under Time-and-Materials and Labor-Hour
Contracts clause, but the "hourly rate" for labor hours
incurred in the replacement or correction shall be reduced
                               FAR  Clause


to exclude that portion of the rate attributable to profit.
The Contractor shall not tender for acceptance materials
and services required to be replaced or corrected without
disclosing the former requirement for replacement or cor-
rection, and, when required, shall disclose the corrective
action taken.
  (g) (I) If the Contractor fails to proceed with reason-
able promptness to perform  required replacement or
correction, and if the replacement or correction can be
performed within the ceiling price (or the ceiling price
as  increased  by  the  Government), the  Government

      (i) By contract  or otherwise, perform the  re-
    placement or correction,  charge to the Contractor
    any increased cost,  or deduct such increased cost
    from any amounts paid or due under this contract;
    or
      (ii) Terminate this contract for default.
    (2) Failure to agree to  the amount  of increased
  cost to be charged to the Contractor shad be a dis-
  pute.
  (h) Notwithstanding paragraphs (0 and  (f) above,
the Government may at any time require the Contrac-
tor to remedy by correction or replacement without
cost to the Government, any failure by the  Contractor
to comply with the requirements of this contract, if the
/allure is due to (1) fraud, lack of good faith, or willful
misconduct on the part  of the Contractor's  managerial
personnel or (2)  the conduct of one or  more of  the
Contractor's  employees  selected or retained  by  the
•Contractor after  any of the  Contractor's  managerial
personnel has reasonable grounds to believe that  the
employee is habitually careless or unqualified.
  (i) This clause applies hi the same manner and to the
same extent to corrected or replacement materials or
services as to materials and  services originally deliv-
ered under thk contract
  (j)  The  Contractor has no obligation or  liability
under this contract to correct or replace  materials and
services that at time of delivery do not meet contract
requirements, except as provided in this clause or as
may be otherwise specified in the contract.
  (k) Unless otherwise specified in the  contract,  the
                                                         Contractor's obligation to correct or replace Govern-
                                                         ment-furnished  property shall  be  governed  by the
                                                         clause pertaining to Government property.
PCMD 9/89
                                                    10-13
                                                                                                     295

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        CONTRACTOR COMMUNICATIONS RECORD
                    CONTRACT  NO. 68-01-0001
            CONTRACT:     John Doe Environmental, Inc.

  DATE/                        SUMMARY OF DISCUSSION/
  TIME	CONTACT	DECISIONS MADE	

  1/2/87      Rider       Deliverable #2 will be two days late, due to bad
                        weather.  Agreed to accept delay.

  1/4/87      Samual     Requested decision on number of users and
                        categories.  Informed that 3 user groups
                        (programmer w/ total access; desk officers w/ data
                        entry & all reports access; program offices w/
                        program-only access to  reading/printing program
                        reports.
FCMD 9/89                          10-14                         296

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                     MEETING RECORD
                     CONTRACT NO. 68-01-0001
               CONTRACT:  John Doe Environmental, Inc.
 DATE/TIME:  7/10/89  1:00 - 3:00

 ATTENDEES: Lewis, Andrews, Macintosh

 PURPOSE/DESCRIPTION: Met to discuss scope of Subtask #3 study to
      be conducted.
 DECISIONS MADE:

 1. Begin study in July. Complete design by February 1.

 2. Set up meeting to discuss design possibilities.
 NEXT STEPS (EPA .CONTRACTOR) (Actions to Take, Issues to Resolve):
 EPA: Obtain list of people to attend meeting on study design, and
      possible agency experts.

 Contractor: Prepare outline of study design, by December 15.
PCMD 9/89                         10-15                           29?

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                                                                            EPAAR Clause
                     NONTRLY PROGRESS  REPORT—COST-TYPE CONTRACT (APR 1984)

               The Contractor shall furnish 	 copies of a combined monthly
             technical and financial progress report briefly stating the progress
             •ade, including the percentage of the project completed during the
             reporting period.  If work is ordered using work assignments include
             the percentage of work ordered and completed during the reporting
             period.  Specific discussions shall include difficulties encountered
             and remedial action taken during the reporting period and anticipated
             activity during the subsequent reporting period.  In addition, the
             report shall specify contract financial status as follows:

               (a) For term form contracts, provide:

               (1) Cumulative costs and direct labor hours expended from the
             effective date of the contract through the last day of the current
             reporting month.  Include a cumulative Incurred cost per direct labor
             hour average computation and compare the result to the cumulative
             average coat per direct labor, hour derived from the estimated coat of
             the contract.

               (2) Actual costs and direct labor hours expended during the current
             reporting month.

               (3) Estimated costs and direct labor hours to be expended during the
             next reporting period.

               (4) Actual costs and direct labor-hours incurred for each work
             assignment issued and estimates of costs and man hours required to
             complete each work assignment.

               (b) For completion form contracts, provide a graph using a vertical
             axis for dollars sad s horlsontal axis for time increments that shows
             the actual and projected rate of expenditures against the total
             estimated cost of th« contract.

               (c) Tmis submission does not change the notification requirements of
             the limitation of Cost" or "Limitation of Funds" clauaes requiring
             separate written notice to the Contracting Officer.

               (d) The reports shall be submitted to the following addressees on or
             before the 	 of each month following the first complete calendar
             month of the contract.  Distribute  reports as follows:

               No. of Copies                              Addresses
                                                       Project Officer
                                                       Contracting Officer
PCMD9/89                                   10-16                                   298

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                                                                             EPAAR  Clause
                   MONTHLY  PROGRESS  REPORT-  ..ME AND MATERIALS OR LABOR HOUR, OR
                INDEFINITE DELIVERY-INDEFINITE QUANTITY FIXED RATE  SERVICES CONTRACT
                                             (APR 1984)

                 The  Contractor shall furnish  	 copies of a combined monthly
               technical  and financial progress  report  briefly stating  the  progress
               made,  Including the  percentage  of the project completed  during the
               reporting  period.  If  the  contract is an indefinite delivery/indefinite
               quantity type, include the percentage of the work ordered and completed
               during the reporting period.  Specific discussions shall Include
               difficulties  encountered and remedial action taken during the reporting
               period and anticipated activity during the subsequent  reporting
               period.  In addition,  the  report  shall specify contract  financial
               status by:

                 (a)  Cumulative costs and labor  hours expended from the effective date
               of the contract through the last  day of  the current reporting month.
                 (b)  Actual  costs and labor hours expended during the current
               reporting  month.

                 (c)  Estimated costs  and  labor hours to be expended during  the next
               reporting  period.

                 (d)  For  indefinite quantity contracts, actual costs  and direct labor
               hours  Incurred for each delivery  order Issued and estimates  of costs
               and man hours required to  complete each  delivery order.

                 (e)  The  reports shall be submitted to  the following  addressees on or
               before the 	 of  each month  following the first complete  calendar
               month  of the  contract.  Distribute reports as  follows:

                 No.  of Copies                              Addressee
                                                        Project  Officer
                                                        Contracting  Officer
                                           (End of clause)
PCMD 9/89                                    10-17                                  299

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   A GOOD PROGRESS REPORT  WILL:

     1.  Give The Complete Status Of All Project
         Elements, Avoiding Boilerplate Repetition Of
         Work Plan.

     2.  Highlight The Contractor's Major Accom-
         plishments During The Month.

     3.  Point Out Any Problems Or Obstacles
         Encountered.

     4.  Discuss The Key Personnel On The Assignment
         And What They Did On The Project During The
         Month.

     5.  Discuss Any Changes (If Applicable) To The
         Key Personnel.

     6.  Discuss Work To Be Performed/Completed
         During The Next Month, Including Any Deli-
         verables With Their Anticipated Delivery Dates.

     7.  Compare The Level Of Effort Expended To
         Date With That Proposed And Agreed To In
         The Work Plan.

     8.  Estimate The Level Of Effort Required To
         Complete The Project.
                          10-18
'CMD 9/89                                              300

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          PROGRESS REPORT OUTLINE
              EPA CONTRACT # 00-00-0000
                 Work Assignment #00
   TECHNICAL

    I.   Percent of Work Ordered and Completed

    II.  Progress  Made  During  The Period

    III.  Specific Problems Encountered/Remedial
        Action  Taken

    IV.  Anticipated Activities and  Deliverables  For
        Next Reporting  Period

    V.  Changes  Made/Anticipated (Personnel,
        Schedule,  etc.)
PCMD 9/89                     10-19                    301

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      PROGRESS REPORT OUTLINE (Cont.)
              EPA CONTRACT # 00-00-0000
                 Work Assignment #00

    FINANCIAL

    I.   Workhours Proposed Vs. Actual Vs.
        Estimated to Completion

    II.   Funds Budgeted Vs.  Actual (Period Vs.
        Cumulative) Vs.  Estimated To  Completion
        (By Task) And Variance

    III.  Average  Cost Per  Hour

    IV.  Summary of Travel (Budgeted  Vs. Actual),
        Description of Trips

    V.   Summary of ODC's (Budgeted  Vs.  Actual),
        Description  &  Breakdown

    VI.  Subcontract  Costs (By Subcontractor--
        Budgeted Vs. Actual)
>CMD 9/89                     10-20                    302

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      SUGGESTED ELEMENTS FOR SUCCESSFUL
       COMMUNICATION WITH  CONTRACTORS
        1.  Have Frequent Communications.

        2.  Get Proposed Changes To Due Dates In
           Writing.

        3.  Get Copy Of Table Of Contents Before A
           Deliverable Is Completed.

        4.  Bring Proper Levels Of Personnel Into
           Discussions.

        5.  Formally Amend Work Assignment Whenever
           Changes Occur.

        6.  Call One Day Ahead Of Time To Confirm
           Meeting Agenda, Times, Places, Number
           Of Attendees, Etc., Or To Confirm Delivery
           Requirements.
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                                           Chapter 10
                                   TECHNICAL MONITORING
              The technical monitoring role of a Project Officer, Work Assignment Manager, or
        Delivery Order Officer is crucial in assuring that the contractor understands the work
        requirements and performs in a manner to produce quality results within the time
        required.  Once the work assignment has been issued, and the work plan submitted and
        approved, it is up to these individuals to monitor the contractor's performance to ensure
        that EPA  obtains the agreed-upon  performance.

        10.1  Technical  Direction

              Throughout the period of performance, a Project Officer, Work Assignment
        Manager, and/or Delivery Order Officer will often need to communicate with the
        contractor for the purpose of directing the effort to  ensure that the desired results are
        achieved.  This  is not usually the  situation in fixed-price contracts, because the
        requirements should have been clearly  laid out in the contract itself. In fact, technical
        personnel must  be careful not to provide technical direction unless the contract contains
        a clause  permitting them  to do so. Providing inappropriate technical direction which
        diverts or delays the contractor can give the contractor a cause of action against the
        government.  However, in cost-reimbursement and many indefinite  delivery contracts,
        the Technical Direction clause 1552.237-71 (see page 284) will  be present,  and
        allows (and in fact mandates) technical personnel to communicate with the contractor
        regarding  the work effort.

              Technical direction is  made a responsibility of the Project Officer (or her/her
        designees) by the Technical Direction clause.  It specifies that the Project Officer "wjll
        give technical direction on contract performance,"  including  (1) direction to the
        Contractor which assists the Contractor in accomplishing the Statement of Work, and
        (2) comments on and approval of reports or other  deliverables.

               Technical direction should always be reduced to writing, with a copy to the
        Contracting Officer (plus one to the Project Officer, if the direction is given by a WAM
        or DOPO). If the technical direction was issued orally, the Technical Direction clause
        mandates that it be reduced to writing within 5 calendar days.

        10.2  Technical  Direction  Under Superfund

              Superfund contracts have formalized the provision of technical direction by
        setting up special forms called, depending on the contract involved, Technical Direction
        Memoranda (TDMs), Technical Instruction Directives  (TIDs), or  Technical Direction
        Directives (TDDs). There are filled out on-site and permit immediate and formalized
        documentation of the direction given.  The contractor is frequently requested to sign the
        form to indicate  the contractor's acknowledgment of the direction given.  Sample forms
        are included on  pages 286-7.

        10.3  Prohibited  Activities

              While there are  many  types of direction which are authorized for technical
        personnel, the following activities  are prohibited:
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               - Formally or informally discussing or divulging any information relevant to a
                Work Assignment or Delivery Order prior to its  issuance with the contractor
                or any potential subcontractors or consultants.

               -  Making changes or issuing orders which will affect the terms and conditions of
                the contract.

                Only the Contracting Officer can direct a change  to any terms or conditions of a
                contract, work assignment, or delivery order.  (See Chapter 13 on  Contract
                Modifications.) A contractor who is advised of a change without the signature of
                the Contracting Officer is required  to notify the  Contracting Officer
                immediately and identify any adjustments to the cost or delivery schedule
                which are affected by the change.  The contractor is prohibited from proceeding
                with the change  unless formal approval is given by the Contracting Officer.
                Project Officers,  Work Assignment Managers or Delivery Order Officers who
                direct unauthorized changes  to a contract may be relieved of their authority by
                the Director, PCMD, and may be held personally liable for any increase in
                costs.

               -  Giving technical direction that will increase costs and/or the level of effort
                and/or change the technical approach of the contract, work assignment, or
                delivery order. (This can constitute a constructive change, which is discussed
                in Chapter 13 on Contract Modifications.  Such changes should be formalized as
                amendments to the Work Assignment or Delivery Order, also discussed in
                Chapter 13.)

               •  Authorizing services or work to begin before issuance of the work assignment
                or delivery order.

               -  Directing the  contractor to perform  services which are  "inherently Govern-
                mental" in nature, e.g.,  drafting policy.

               -  Creating a personal conflict-of-interest situation such as working as a part-
                time consultant in  the technical field  relating to the contract or  approving
                situations which may create an organizational conflict-of-interest.

               -  Directing or requesting  the contractor to perform services which create an
                employer/employee or personal services relationship.   (See EPA Directive
                1900.1 "USE OF CONTRACTOR SERVICES" at end of Ch. 7. on page 237, and page
                231  on personal services contracts).

               - Providing technical direction to  a  subcontractor, since there is  no privity  of
                contract or direct contractual relationship with the subcontract.  All  technical
                direction should  be given  directly to the prime contractor, unless the contract
                otherwise authorizes (e.g., some Superfund contracts).

               Technical personnel do not have the authority to bind the Government to an
        express (i.e., written) contract for additional services or  supplies beyond what the
        contract provides.  However, they could so mislead a contractor that the Government
        could be bound to pay the contractor's costs for services rendered on the theory that the
        Government should pay for benefits it receives.  Case law indicates that the Government
        could hold the individual who gave the technical direction liable  for any additional costs
        incurred by the contractor in such a situation.  The utmost in caution is therefore
        required.


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        10.4  Technical  Monitoring  of Progress

               Under every contract, there is a need to keep abreast of the progress of the
        contractor's performance to assure satisfactory completion of the effort.  EPA relies on
        Project Officers, Work Assignment Managers, and/or Delivery Order Officers to carry
        out this very critical  function of contract monitoring.

               Project Officers cannot assume that all contractor personnel are familiar with
        the terms of the contract.  While some personnel may become familiar with the
        Statement of Work through involvement in preparation of the proposal, they may not
        always be the people who are assigned to  work under the contract.  When they are
        actually working on the contract, they may have subordinates who are not as familiar
        with the contract terms.  On long jobs, personnel turnover may make this problem
        worse.

               In cases where all contractor personnel are familiar  with the Statement of Work,
        there is sometimes a temptation to cut a corner or to provide what appears to be just as
        good as what was called for in the contract, but isn't. Under the stress of time, items
        may "fall  through the cracks."  Specific characteristics or elements may be overlooked
        in  both the work effort and progress  reports.

               Accordingly,  it cannot be assumed that the contract effort will be performed
        exactly as required.  Government personnel must actively oversee  the work effort and
        monitor the contractor's performance with the objective of assuring that such
        performance meets the requirements  of the contract.

               History has shown  that when the Project Officer, Work Assignment Manager or
        Delivery Order Officer does not or cannot devote adequate time to determining what is
        actually being done under the contract, the results can be disastrous.  The Project
        Officer is the "eyes and ears" of the Contracting Officer,  and, as such, must be aware of
        the responsibility of assuring that the work performed is exactly in accordance  with the
        minimum terms of  the contract.

               There are several  methods by which technical personnel can monitor progress
        under a contract:

               (1)  Monitoring by Inspection

                   Inspection clauses in the contract  (see pages 293ff and 313ff for examples)
                   give the Government the right to inspect and test the work performed under
                   the contract.  This right is standard under Government contracts; it  is
                   derived from the concept that  the Government has the  right to determine if
                   the goods or services offered are what was ordered.  This right can be
                   exercised at any stage and place of work performance.  Inspection of the
                   contractor's work may involve  the use of spot checks, scheduled inspections,
                   random  sampling, user reports, and  periodic review of the contractor's
                   quality assurance and control  programs.

                   The need for inspection will vary from case to case and is dependent upon the
                   type of contract, the nature of the work being performed,  the contractor's
                   past performance history, and the criticality of the work performance.  If,
                   for example, a contractor has an outstanding quality assurance program and
                   performance levels, the amount of monitoring may be reduced.


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                   The decision of whether or not to use inspection as the main tool for
                   monitoring performance is dependent upon many factors, including:  type of
                   work, type  of contract, place of performance,  and feasibility of performing
                   inspections. As previously discussed,  production of standard, "off-the-
                   shelf" items under fixed-price contracts may require lower levels of
                   monitoring,  whereas cost-reimbursement  type contracts frequently require
                   a high level of monitoring.  Careful attention to the monitoring and
                   inspection levels  required is  a key responsibility of the Project Officer.

                   Review of a draft  report is one type of inspection.  Revisions can be directed
                   before the  final report  is submitted.  Project Officers must ensure,
                   however, that draft reports are reviewed within the time period specified  in
                   the contract. Delays could result  in loss of our rights to obtain the final
                   product on time.

               (2)  Periodic  Meetings

                   Another helpful tool in monitoring  progress is  the  practice of periodic
                   meetings to discuss performance.  Depending upon the contract, these may be
                   conducted on a regular  schedule, or on an "as-needed" basis, and may be
                   specific to one or more aspects of performance or may  cover the overall
                   contract.  It might be sufficient to hold these by telephone if the need is
                   minor and the contractor is not locally  available.  Where there are major
                   problems, however, or many  complex areas are under discussion, face-to-
                   face meetings may be the only feasible method of reviewing contract
                   performance.  Restraint should be exercised, however,  in order to avoid
                   using an  unreasonable  amount of contract funds not commensurate with the
                   complexity of the problems.

                   The Contracting Officer should always be .notified of all meetings to be held
                   with the contractor and provided an opportunity to attend.  In addition, the
                   EPA Project Officer, Work Assignment Manager or Delivery Order Officer
                   must document the general content of all meetings, including all telephone
                   conversations.  Failure  to document such decisions can leave EPA staff very
                   vulnerable to allegations of changes made by EPA in such conversations or
                   meetings. Sample forms for routine documentation  are included on pages
                   296-7, and should note the date, the parties involved, and a summary of the
                   discussion and any decisions made. Next steps required by EPA or the
                   contractor should also be noted.

               (3)  Monitoring  through Progress Reports

                   Most contracts  incorporate  clauses requiring the submission of periodic
                   progress reports  incorporating both technical  and financial information  (see
                   pages  298-9).   A sample progress report outline is included on pages 301-
                   2.

                   A good progress  report will a) indicate  the complete status of all project
                   elements, b) highlight  the contractor's  accomplishments  for  the  period; c)
                   point out any problems or obstacles encountered; d) discuss what key
                   personnel did on the project;  e) discuss any changes in key personnel; f)
                   discussed work planned for the next month, including deliverables due and
                   their delivery dates; g)  compare the level of effort expended to date  with that


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                   agreed to in the work plan; and h) estimate the level of effort required to
                   complete the project.

                   The use of a contractor's written progress reports can be of significant help
                   in providing a picture of work progress under the contract.  The Project
                   Officer is  responsible for ensuring that the contractor complies with
                   reporting provisions.  When  reports are part of a contract, they have been
                   included in the contract price or cost.  Accordingly, the  Project Officer
                   should ensure that the Government gets exactly those reports required, in
                   the time frames provided for, and in the detail required.  Care should be
                   taken not  to require extra reports above contract  requirements, as they
                   could lead to a claim against the Government for increased costs.

                   Information  required by the Project Officer is important in  evaluating
                   progress and for making management decisions relating  to technical
                   performance of the contract.  Although the information flow provided must be
                   adequate to the requirements of the Government, it should not be so detailed
                   and involved as to create unnecessary administrative and financial burdens
                   on the contractor.  Additionally, the Government personnel assigned to
                   review the contractor's reports must be capable of assessing  the included
                   information.

                   Often the  contractor is reluctant to make certain information available.  This
                   is caused by a tendency to withhold "bad news" or information that may
                   indicate that the contractor is having problems.  Contractors generally
                   believe that things can be worked out, given a little time. Both the
                   contractor and the Project Officer  must remember that the reason for
                   progress reports is to enable the Government to determine whether the
                   contract is being performed properly.  Accordingly, it is vital that the
                   Project Officer ensure the timely submission of progress reports from the
                   contractor and review the reports with great care.

                   If the Project  Officer  determines  after contract award that the  reporting
                   requirements are insufficient to meet program needs, the Contracting Officer
                   should be requested to negotiate a modification.  If reports are not submitted
                   on time, or are deficient, the Project Officer should request that the
                   Contracting  Officer direct the contractor  to promptly remedy the situation.

                   It is essential that Project Officers read  progress reports promptly, so that
                   any problems  which have arisen can be dealt with right  away.  Failure to
                   read and  understand  progress reports renders them virtually useless.
                   Similarly, progress reports that are vague or too general are of no value and
                   may be an effort on the part of the contractor to obscure problem areas.  The
                   Project Officer should get whatever clarification is required  to render
                   progress reports meaningful and seek whatever assistance is required to
                   fully understand them.  Verification of the information contained in  progress
                   reports should be  accomplished,  at the minimum, on a spot-check basis.

               (4)  Reviewing Financial Management  Reports

                   The financial management reviews conducted by PCMD's Quality Assurance
                   staff and discussed in Chapter 11 are a good tool  for monitoring progress
                   from a technical standpoint,  as well.  A major emphasis  of these reviews is
                   the cost-to-complete estimate, which may often represent the most accurate


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                  measurement of contractor progress.  Project Officers should therefore pay
                  close attention to the report generated from a financial management review,
                  as it may tell more than just how costs are being managed.  Project Officers
                  on large contracts will need to ensure that they get feedback from their Work
                  Assignment Managers and  Delivery Order Officers on how technical progress
                  is matching financial expenditures before approval of such  reports.

              (5) Reviewing  Work Plans

                  If a work plan or task plan similar to those on pages 259 and 271 was
                  submitted,  it can be a useful  tool in monitoring progress.  Actual progress
                  can be compared against the  overall scheme presented in the work plan.
                  Technical personnel can use  it to assist in identifying delays in completion
                  and noting  areas where the contractor may have fallen behind.

                  The work plan should contain a schedule that identifies each step required for
                  contract  completion  and the period of time needed to accomplish that step.
                  The schedule is usually expressed in calendar days or weeks. The plan should
                  be updated as required  to reflect changes in estimates for completion of work
                  elements and the total work effort.

        10.5  Assuring  Timeliness and Quality

              Contractor deficiencies can  affect either the timely completion of contract
        requirements or the quality of the products or services provided  to the  Government.
        While monitoring contractor progress,  attention should be paid equally  to both aspects
        of performance.  The following discussion is designed to help guide Project Officers and
        their  representatives in monitoring both.

        Assuring Timeliness of  Performance

              The Project Officer must understand from the onset that the contract type has an
        impact both on the amount of monitoring needed and the probability of  timely
        performance by the contractor.  In fixed-price contracts, the Government's right to
        terminate for default under the "Default"  clause (see Chapter 14) may  motivate the
        contractor to complete on time.  In the case  of cost-reimbursement contracts, which are
        "best effort"  contracts, possible motivators include withholding of payment and  the fact
        that the  firm will gain a poor reputation.   However,  legitimate charges cannot be
        withheld in a cost reimbursement  arrangement.  Accordingly, with this type of  contract
        the assurance of timely completion  of the work effort is highly dependent on the
        monitoring efforts of the Project Officer.

              Failure to deliver on time almost always is the result of  a build-up of factors
        during performance. If the Project  Officer keeps in close touch with the progress of the
        work effort, such interim delays can be identified and corrective action initiated.  The
        Agency depends on the Project Officer to obtain and analyze progress information and to
        develop a recommended course of action.

              All contracts contain a period of performance or delivery  schedule, as shown
        below:
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                (1) Completion Contracts and Nonseverable Delivery Orders Under  Indefinite
                    Delivery Contracts

                    Completion contracts and some orders under indefinite delivery  contracts
                    call for a finite job, such as writing a handbook or collecting specific data
                    and delivering it in a certain format.  These contracts or orders specify a
                    time for completion of the work and delivery of the results.  The date must be
                    met for the contractor to fulfill its obligation.  But often, other matters are
                    at stake.  For example, the completed work may be required before other
                    work  can begin.  Untimely delivery can result  in program  delays, with a
                    cumulative effect  beyond the initial work effort,  impacting program effort,
                    personnel, and costs.

                (2) Term Form (Level-of-Effort) Contracts and  Severable Delivery Orders
                    under Indefinite Quantity Contracts

                    In these types of contracts, what is being purchased is an obligation by the
                    contractor to apply a specified level of effort towards a specific  objective or
                    kind of work over a certain period  of time.  In these cases, the completion or
                    end date in the contract or order relates more  to the contractor's obligation
                    to work than the completion of the effort. Once the end date comes, the
                    contractor has no further obligation to continue work on the order,
                    regardless of the status of job completion  or hours remaining in the contract
                    or order.  In such cases, there is no assurance that the work will be
                    completed and, therefore, there is  potential waste.  Close technical
                    monitoring is critical to ensuring completion of the product or service.

         Assuring Quality

                The quality of the contractor's work  is most important. If it is poor, the product
         or service may be useless.

                Contracts for supplies can  usually specify the physical attributes that will result
         in an acceptable  product.  Contracts for services, particularly those involving creative
         work or investigations, typically  cannot describe specific attributes of the final  result.
         Quality control in  service contracts can best be assured by monitoring both the
         personnel assigned to the work and the methods used by the contractor as the work
         progresses.

                The quality of a study or analysis depends to a great extent on the methods used.
         The validity of the conclusions may be suspect if the contractor failed to take into account
         all data or relevant factors. Interim conclusions that  are suspect may seriously
         undermine all follow-on efforts,  resulting in a total waste  and possible requirement for
         a new start.

                Generally,  in contracts for technical services, the Project Officer is responsible
         for continuous monitoring of the contractor's efforts, as they progress, in order to
         assure satisfactory quality of work performed.  This does not mean taking charge of the
         contractor's work  effort.  It does mean:

                (1)  Using technical expertise to identify contractor actions or lack of action that
                    affect the quality of the work.

                (2)  Identifying and calling the contractor's attention to deficiencies.

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PCMD 9/89                                          7

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                (3)  Keeping well-informed of what the contractor is doing.

                (4)  Working out appropriate action to remedy deficiencies.

                Quality of the contractor's output is also dependent upon the competence of its
         personnel.  In many cases, the best way to assure quality of work performed is to assure
         that personnel with the necessary capabilities, qualifications, and experience are
         assigned to the work effort.  This is true in service contracts calling for creative or
         conceptual development or analysis.  However, Project Officers should never appear to
         act as the contractor's personnel department.  These functions are the contractor's, not
         the Government's.  The Project Officer's role is one of reviewing and working with the
         contractor to remedy any inadequacies.

                If a "Key Personnel" clause is included in the contract (see Chapter 7), the
         Project Officer should ensure, through monitoring, that such individuals have not been
         removed or diverted from the contract work and that they are providing the required
         level of effort.  Key personnel should be working in those capacities and at the levels
         agreed to by the contractor and the Government in the original  proposal or work plan.

                The competence of non-key personnel is also important in assuring the quality of
         the work performed.  If contractor personnel do not appear satisfactory with regard to
         training, experience, or other factors, the  Project Officer should direct this to  the
         attention of the contractor.

                Under cost-reimbursement and some indefinite delivery contracts, the  Project
         Officer may learn a great deal about the number and types of contractor personnel being
         utilized by reviewing invoices.   Also, the Project Officer is  normally permitted  to ask
         for and  receive information (i.e., resumes, position  descriptions, etc.) that is
         reasonably  required to determine if the personnel are qualified to perform the
         assignment.

         10.6  Effective  Communication  with  Contractors

                Successful monitoring of quality and timeliness  absolutely requires continuous
         and effective communication with the contractor. To accomplish this requires several
         elements. First, communications must be frequent. Second, get all proposed changes in
         due dates in writing.   Third, be sure to discuss what you anticipate receiving in a report
         and get a copy of the  draft table of contents (and ideally, a draft outline of the entirety)
         before a written deliverable is completed, so that you are sure that you are getting what
         is needed.  Fourth, be sure to bring the proper levels of personnel into all discussions,
         that that time is not wasted with the wrong people present.   Fifth, formally amend work*- *0^ .1
         assignments and delivery orders whenever changes occur, and document all other           \^
         discussions where decisions are made. And finally, be sure to call in advance to confirm
         meeting agendas, people attending, etc. or to confirm delivery requirements.
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PART 52—SOLICITATION PROVISIONS AND CONTRACT CLAUSES
                                           52J46-2
Government's expense  or otherwise dispose of  the
property or (2) effect repairs to return the property to
its condition when inspected under the solicitation or,
if not inspected, last available for inspection under the
solicitation.  AAer completing the  directed  action and
upon written request of the Contractor, the Contract-
ing Officer shall equitably adjust any contractual provi-
sions affected by the return, disposition, or  repair in
accordance  with the procedures  provided for in  the
Changes clause of this contract. The  foregoing provi-
sions for adjustment  are the exclusive remedy available
to the Contractor, and the Government shall not  be
otherwise liable  for any delivery of Government prop-
erty furnished "as is" in a condition other than that in
which it was originally offered.
  (d) Except as otherwise provided in  this clause. Gov-
ernment property furnished "as is" shall be governed
by  the  Government Property clause  of this  contract
                  (End of clause)
             (AV 7-104.24
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 S2J46-2
 FEDERAL ACQUISITION REGULATION  (FAR)
 fortuity with contract requirements.  The Government
 may reject  nonconforming  supplies  with or  without
 disposition instructions.
   (g) The Contractor shall remove supplies rejected or
 required to  be corrected. However, the Contracting
 Officer may require or  permit  correction in place,
 promptly  after notice, by and at the expense of the
 Contractor. The Contractor shall not  tender for accept-
 ance corrected or rejected supplies without disclosing
 the former rejection or requirement for correction, and,
 when  required, shall disclose the  corrective action
 taken.
   (h) If the Contractor fails to promptly remove,  re-
 place, or correct  rejected supplies that are required to
 be removed or to be replaced or corrected, the Gov-
 ernment may  either (1) by  contract or otherwise.
 remove, replace, or correct the supplies and charge the
 cost to the Contractor or (2) terminate the contract  for
 default Unless the Contractor corrects or replaces the
 supplies within the delivery schedule, the Contracting
 Officer may require  their  delivery and make an equita-
 ble price reduction.  Failure  to  agree  to a price reduc-
 tion shall be a dispute.
   (i) (1) If this contract provides for the performance
 of Government quality  assurance at  source, and if re-
 quested by the Government, the Contractor shall fur-
 nish advance notification of  the time  (i) when Contrac-
 tor inspection or  tests will be performed  in accordance
 with the terms and  conditions  of the contract and  (ii)
 when the supplies will  be  ready for  Government  in-
 spection.
     (2) The  Government  request  shall  specify  the
   period and  method of  the advance notification and
   the Government representative to  whom it shall be
   furnished.  Requests shall  not  require more than 2
   workdays of advance notification if the Government
   representative  is  in  residence in  the Contractor's
   plant, nor more than  7 workdays  in other instances.
   0) The Government shall  accept or reject supplies as
 promptly as practicable  after delivery, unless otherwise
 provided in  the contract. Government failure to inspect
 and accept or  reject the  supplies shall not relieve  the
 Contractor from  responsibility, nor impose liability on
 the Government, for nonconforming  supplies.
   (k) Inspections and tests by the Government do  not
 relieve the Contractor  of responsibility  for defects or
 other failures to meet contract requirements discovered
 before  acceptance.  Acceptance  shall be conclusive,
 except for latent  defects,  fraud, gross mistakes amount-
 ing to fraud, or as otherwise provided in the  contract.
   (1) If acceptance  is  not  conclusive for any of  the
 reasons in paragraph (0 hereof, the Government, in
 addition to any other rights and  remedies  provided by
 law. or under other provisions of this  contract, shall
 have the right to  require  the Contractor (1) at no
 increase in  contract price,  to correct or replace  the
 defective or  nonconforming  supplies at  the original
 point of delivery or at the Contractor's  plant at  the

PCMb^/89
Contracting Officer's election, and in accordance with
a reasonable delivery schedule as may be agreed upon
between the  Contractor  and the Contracting Officer,
provided, that the Contracting  Officer may require a
reduction in  contract price if the Contractor fails to
meet such delivery schedule, or (2) within a reasonable
time after receipt by the Contractor of notice of defects
or nonconformance, to repay such portion of the con-
tract as is  equitable  under  the  circumstances  if the
Contracting Officer elects not to require correction or
replacement. When supplies are returned to  the Con-
tractor,  the  Contractor  shall bear the transportation
cost from the original point of delivery to the Contrac-
tor's plant and return  to the original point when that
point is not  the  Contractor's plant  If the Contractor
fails to perform or act as required in (1)  or (2) above
and does not cure such failure within a  period of 10
days (or such longer period as the Contracting Officer
may authorize in writing)  after receipt of notice from
the  Contracting  Officer specifying such  failure,  the
Government shall have the right to contract or other-
wise to replace or correct such supplies and  charge to
the  Contractor the cost occasioned  the  Governmeni
thereby.
                   (End of clause)
               (R 7-103.5(a) 1958 MAY)
               (R 7-I03.5(d) 1977 SEP)
                    (R  1-7.102-5)
   Alternate I (APR  1984).  If a fixed-price incentive
contract is contemplated, substitute paragraphs (g), (h),
and 0) below for paragraphs (g), (h). and  0)  of the
basic clause.
   (g) The Contractor shall remove supplies rejected 01
 required to  be  corrected.  However,  the Contracting
Officer may require  or permit correction  in  place,
 promptly after notice. The Contractor shall not tendei
 for acceptance corrected or rejected supplies without
 disclosing the  former rejection or requirement for cor-
 rection, and when required shall disclose the  corrective
 action  taken. Cost of removal, replacement,  or  correc-
 tion shall be considered a cost incurred, or  to be in-
 curred, in the total final negotiated cost fixed under the
 incentive price revision  clause. However,  replacements
 or  corrections  by the Contractor after  the  establish-
 ment of the total final price shall be at no increase  in
 the total final price.
   (h)  If the Contractor fails to promptly remove, re-
 place,  or correct rejected supplies that are required  to
 be  removed or  to be replaced or corrected,  the Gov-
 ernment may either  (1) by  contract  or  otherwise.
 remove, replace, or correct the supplies and equitably
 reduce the target price or. if established, the total  final
 price  or (2) may terminate  the  contract for  default.
 Unless the Contractor corrects or replaces the noncon-
 forming supplies within  the delivery schedule, the Con-
 tracting Officer  may require their delivery and equita-
 bly reduce any  target price or.  if it is established, the

                                                 314

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    PART 32—SOLICITATION PROVISIONS AND CONTRACT CLAUSES
                                            52.246-3
    total  final  contract  price. Failure to agree upon an
    equitable price reduction shall be a dispute.
      0)  If accept ince  is not conclusive Tor any of the
    reasons in  paragraph (0 hereof, the Government,  in
    addition to any other rights and remedies provided by
    law. or under other provisions of this contract, shall
    have  the  right  to  require  the Contractor (1) at  no
    increase in any target price or, if it is established, the
    total final price  of this contract,  to correct or replace
    the  defective or  nonconforming supplies at the original
    point  of delivery or at  the  Contractor's plant at the
    Contracting Officer's election,  and in accordance with
    a reasonable delivery schedule  as may be agreed  upon
    between  the  Contractor and the Contracting Officer;
    provided, that the Contracting  Officer may  require a
    reduction in any target price, or, if it is established, the
    total final price of this contract, if the Contractor fails
    to meet such delivery schedule; or (2) within a reason-
    able time after receipt by the Contractor of notice of
    defects or nonconformance,  to repay such portion of
    the  total final price  as is equitable under  the circum-
    stances if the Contracting Officer elects not to require
    correction or replacement. When supplies are returned
    to the Contractor, the Contractor shall bear  the trans-
    portation costs from the original point of delivery to
    the  Contractor's  plant and return to the  original  point
    when  that point is  not  the  Contractor's  plant  If the
    Contractor fails to perform or act as required in (1) or
    (2)  above and  does not cure  such  failure within a
    period of 10 days (or such longer period as the  Con-
    tracting  Officer may authorize  in writing) after receipt
    of notice from the Contracting  Officer specifying such
    failure, the Government shall have the right by con-
    tract or otherwise to replace or correct such supplies
    and  equitably reduce any target price or,  if it is estab-
    lished, the total final price of this contract.
                 (R 7-103.3(b)  1962 NOV)
      Alternate II (APR  1984). If a fixed-ceiling-price con-
    tract with retroactive price redetermination is contem-
    plated, substitute paragraphs (g), (h), and 0) below  for
    paragraphs (g), (h), and (1) of the basic clause:
      (g) The Contractor shall remove supplies rejected or
    required to  be  corrected. However, the  Contracting
    Officer  may  require  or permit  correction  in  place,
    promptly after notice. The Contractor shall not tender
    for acceptance corrected or  rejected supplies without
    disclosing the former rejection  or requirement for cor-
    rection, and when required shall disclose the corrective
    action taken. Cost of removal,  replacement, or correc-
    tion  shall be considered  a cost incurred, or to be in-
    curred, when redetermining  the prices under the price
    redetermination clause. However, replacements or cor-
    rections  by the Contractor  after the establishment of
    the  redetermined prices shall be at no increase in  the
    redetermined price.
      (h) If the  Contractor fails  to promptly  remove,  re-
    place  or correct rejected supplies that are required  to
be removed or to be replaced  or corrected, the Gov-
ernment  may either (1) by  contract or  otherwise.
remove, replace, or  correct the supplies and equitably
reduce the initial contract prices or. if established,  the
redetermined contract prices or (2) terminate the con-
tract  for  default.  Unless the Contractor corrects or
replaces the nonconforming supplies within  the deliv-
ery schedule, the Contracting Officer may require their
delivery and equitably reduce the initial contract price
or, if it is  established, the redetermined contract prices.
Failure to agree upon an equitable price reduction shall
be a dispute.
  0)  If acceptance  is not conclusive  for my  of  the
reasons  in paragraph (0 hereof, the  Government, in
addition to any other rights and  remedies provided by
law. or under other provisions of this contract, shall
have  the  right  to require  the Contractor  (1) at no
increase in the initial contract prices, or,  if it is estab-
lished, the redetermined  prices  of this  contract, to cor-
rect or replace the defective or nonconforming supplies
at the original point of delivery or at  the Contractor's
plant at the Contracting Officer's election,  and in ac-
cordance  with a  reasonable delivery  schedule as  may
be agreed upon between the Contractor and the Con-
tracting Officer; provided, that  the Contracting Officer
may require a  reduction in the initial contract prices.
or,  if it is established, the redetermined prices  of  this
contract, if the Contractor fails to  meet such delivery
schedule;  or (2) within a reasonable time after  receipt
by the Contractor of notice of defects or  nonconfor-
mance,  to repay such  portion  of  the initial contract
prices, or, if it is established, the redetermined prices of
this contract, as is equitable under the circumstances  if
the Contracting Officer elects not to require correction
or' replacement.  When  supplies are  returned  to  the
Contractor, the Contractor shall bear the transportation
costs from the original point of delivery to the Con-
tractor's plant and  return to the original point when
that point is not the Contractor's piant If the Contrac-
tor fails to  perform or  act  as required  in  (1) or (2)
above and does not cure such failure within a period of
10 days for such longer period  as the Contracting Offi-
cer may authorize  in writing)  after  receipt  of notice
from the  Contracting Officer  specifying such  failure.
the Government shall have the right by contract or
otherwise to  replace or correct such supplies and equi-
tably reduce the initial contract prices, or, if it is estab-
lished, the redetermined prices of this contract.
              (R 7-103.5(c) 1962 NOV)
52J46-3  Inspection of  Supplies—Cost-Reimbursement.
  As prescribed in 46.303, insert the following clause  in
solicitations and contracts for supplies, or services that
involve the furnishing of supplies, when a cost-reim-
bursement contract is contemplated:
       INSPECTION OF SUPPLIES—COST-
          REIMBURSEMENT (APR 1984)
  (e) Definitions.
MO 9/89

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   S2J46-4
FEDERAL ACQUISITION REGULATION (FAR)
    "Contrictor's managerial personnel.". as used in this
  clause, means any of the Contractor's directors, offi-
  cers,  managers, superintendents,  or equivalent  repre-
  sentatives who have supervision or direction of—
      (1) All or substantially all of the Contractor's busi-
    ness;
      (2) All or substantially all of the Contractor's oper-
    ation at a plant or  separate location at which the
    contract is being performed; or
      (3) A separate and complete major industrial oper-
    ation connected with performing this contract
    "Supplies," as used in this  clause, includes but is not
  limited to raw materials, components, intermediate as-
  semblies, end products, lots of supplies, and, when the
  contract does not include the Warranty of Data clause,
  data.
    (b) The Contractor shall  provide  and maintain an
  inspection system acceptable to the Government cover-
  ing the supplies, fabricating methods, and special tool-
  ing under this contract Complete records of all inspec-
  tion work performed by the  Contractor shall be main-
  tained and made available to the Government  during
  contract performance and for as long afterwards as the
  contract requires.
    (c) The Government has the right to inspect and test
  the contract supplies,  to  the extent  practicable at all
  places and times, including the period of manufacture,
  and in any event before acceptance.  The Government
  may also inspect the plant or plants of the Contractor
  or any subcontractor engaged in the contract perform-
  ance. The Government shall perform  inspections and
  tests in a manner that will not unduly delay the work.
    (d) If the Government performs inspection or test on
  the premises of the Contractor or a subcontractor, the
  Contractor shall furnish and  shall  require subcontrac-
  tors to furnish all reasonable  facilities and assistance for
  the safe  and convenient performance of these duties.
    (e) Unless otherwise specified in  the contract,  the
  Government shall accept supplies as promptly as prac-
  ticable after delivery, and supplies  shall be  deemed
  accepted 60 days after delivery, unless accepted earlier.
    (0  At any time during contract performance, but no
  later  than 6 months (or  such other  time as  may be
  specified in the contract) after acceptance of the sup-
  plies  to be  delivered under  the contract, the Govern-
  ment may require the Contractor to replace or correct
  any supplies that are nonconforming at time  of deliv-
  ery. Supplies are nonconforming when they are defec-
  tive in material or workmanship or are otherwise not in
  conformity  with contract requirements. Except as oth-
  erwise provided in  paragraph (h) below, the cost of
  replacement  or correction shall be included in 'allow-
  able  cost, determined as  provided  in  the Allowable
  Cost  and  Payment clause, but no additional fee shall be
  paid. The Contractor shall not tender  for acceptance
  supplies required to be replaced or corrected without
  disclosing  the  former requirement for replacement or

     32-176
PCMD 9/89
correction, and, when required, shall disclose the cor-
rective action taken.
  (g) (1) If the Contractor fails to proceed with reason-
able promptness to perform  required replacement or
correction, the Government may—
      (i)  By contract or otherwise,  perform the re-
    placement or correction  and charge to the Con-
    tractor  any  increased cost or make an  equitable
    reduction in any  fixed fee paid  or  payable  under
    the contract;
      (ii) Require delivery of undelivered supplies at
    an  equitable  reduction in  any fixed  fee paid  or
    payable under the contract; or
      Oii) Terminate the contract for default
    (2) Failure to agree on  the amount of  increased
  cost to be charged to the Contractor or to the reduc-
  tion in the fixed fee shall be a dispute.
  (h) Notwithstanding  paragraphs (0 and (g) above.
the Government may at any  rime require the Contrac-
tor to correct or replace, without cost to the Govern-
ment, nonconforming supplies, if the nonconformances
are  due to (1)  fraud,  lack  of  good faith, or  willful
misconduct on the pan of the Contractor's managerial
personnel or (2)  the  conduct of one or  more  of the
Contractor's employees selected or retained  by the
Contractor after any  of the Contractor's managerial
personnel  has reasonable grounds to believe that the
employee is habitually careless or unqualified.
  (i) This clause applies in the same manner to correct-
ed  or  replacement supplies  as to supplies  originally
delivered.
  (j) The Contractor  shall have no obligation* or liabili-
ty  under this contract  to replace  supplies that were
nonconforming at the time of delivery, except as pro-
vided in this clause or as may be otherwise provided in
the contract
  (k) Except as otherwise specified in the contract the
Contractor's obligation  to correct or replace Govern-
ment-furnished  property shall  be  governed  by  the
clause pertaining to Government property.
                   (End of clause)
               (R 7-203.5(a)  1974 OCT)
                     (R 1-7.202-5)
 52.246-4   Inspection of Serrices—Fixed-Price.
   As prescribed in 46.304, insert the following clause in
 solicitations and contracts for services,  or  supplies that
 involve the furnishing of services,  when a fixed-price
 contract  is contemplated and the  contract  amount is
 expected to exceed  the small purchase limitation. The
 clause  may be inserted in such solicitations and con-
 tracts  when  the  contract amount  is  expected to -be
 within the small purchase limitation, and inclusion of
 the clause is in the Government's interest.
    INSPECTION OF SERVICES—FIXED-PRICE
                     (APR  1984)
                                             316

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  PART 52—SOLICITATION PROVISIONS AND CONTRACT CLAUSES
                                           52J46-6
    (a) Definitions.  "Services," as used in this  clause.
  includes services performed, workmanship, and  materi-
  al furnished or utilized in the performance of services.
    (b) The Contractor shall  provide and  maintain  an
  inspection system acceptable to the Government cover-
  ing the services under this contract. Complete records
  of all inspection work performed by  the  Contractor
  shall  be maintained and made available to the Govern-
  ment during contract performance  and for as  long
  afterwards as the contract requires.
    (c) The Government has the right to inspect and test
  all services  called  for by  the contract, to the extent
  practicable at all times and places during the term of
  the contract The  Government  shall perform  inspec-
  tions  and tests  in a manner that  will not unduly delay
  the work.
    (d) If any of the services do not conform with con-
  tract  requirements, the Government may require the
  Contractor to perform the services again in conformity
  with  contract requirements, at no increase  in contract
  amount.  When the defects in services cannot be cor-
  rected by reperformance.  the Government may (1)  re-
  quire the Contractor to take necessary action to ensure
  that  future performance conforms to contract require-
  ments and (2) reduce the contract price to reflect the
  reduced value of the services  performed.
    (e)  If the Contractor fails  to  promptly  perform the
  services again or to take the necessary action to ensure
  future performance in  conformity  with contract  re-
  quirements,  the Government may (1)  by contract or
  otherwise, perform the services and charge to the Con-
  tractor any  cost incurred by the Government  that is
  directly related  to the performance of such service or
  (2) terminate the contract for  default
                    (End of clause)
                (R 7-1902.4 1971  NOV)
  52J46-5   Inspection of Services—Cost-Reimbursement
    As prescribed in 46.302, insert  the following clause in
  solicitations  and contracts for services, or supplies that
  involve the  furnishing of services,  when  a cost-reim-
  bursement contract is contemplated:
        INSPECTION OF SERVICES—COST-
           REIMBURSEMENT  (APR 1984)
    (a)  Definition. "Services,"  as used in this clause, in-
  cludes services performed, workmanship, and material
  furnished or used in performing services.
    (b) The Contractor shall  provide and  maintain an
  inspection system acceptable to the Government cover-
  ing the services under this contract Complete  records
  of all inspection work performed  by the Contractor
  shall  be maintained and made available to the Govern-
  ment  during contract performan9e and  for  as long
  afterwards as the contract requires.
    (c) The Government has the right to inspect and test
  all services  called  for by  the contract to the extent
  practicable at all places and  tunes during the term of
  the contract. The  Government  shall  perform  inspec-
tions and tests in a manner that will not unduly delay
the work.
  (d) If any of the services performed do not conform
with contract  requirements, the Government may  re-
quire the Contractor to perform the services again in
conformity with contract requirements, for no addition-
al  fee. When the defects in services cannot be correct-
ed by reperformance. the Government may (1) require
the Contractor to take necessary action to ensure that
future performance conforms to contract requirements
and (2)  reduce any fee  payable under the contract to
reflect  the reduced value  of the services performed.
  (e) If the Contractor fails to promptly perform  the
services again or take the action necessary  to ensure
future  performance in  conformity  with contract  re-
quirements,  the Government may (1) by contract or
otherwise,  perform the services  and reduce any  fee
payable by an amount that is equitable under the  cir-
cumstances  or (2) 'terminate  die  contract for default.
                  (End of clause)
              (R 7-1909.5 1971 NOV)
52.246-6  Inspection—TIme-and-Material  and  Labor-
   Hour.
   As prescribed in 46.306.  insert the following clause in
solicitations and  contracts when  a time-and-matenal
contract or a labor-hour contract is contemplated:
   INSPECTION—TIME-AND-MATERIAL AND
            LABOR-HOUR (APR 1984)
   (a) Definitions. "Contractor's managerial personnel,"
as used in this clause, means any of the Contractor's
directors,  officers, managers, superintendents, or equiv-
alent representatives who have supervision or direction
of—
    (1)  All or substantially all of the Contractor's busi-
   ness;
    (2)  All or substantially all of the Contractor's oper-
   ation  at any one plant or separate location at which
   the contract is being performed; or
    (3)  A separate and complete major industrial oper-
   ation  connected with the  performance of this con-
   tract
   "Materials," as  used in this  clause,  includes data
when the contract does not include  the Warranty of
Data clause.
   (b) The Contractor shall  provide  and maintain an
inspection system acceptable to the Government cover-
ing the material,  fabricating methods, work, and serv-
ices under  this contract.  Complete  records of all in-
spection work performed  by the Contractor shall be
maintained  and made  available  to the  Government
during contract performance and for as long afterwards
as the contract requires.
   (c) The Government has the right to inspect and test
all materials furnished  and services performed  under
this contract,  to the extent practicable at all places and
times, including this period of performance,  and  in any
event before  acceptance.  The  Government may  also
>CMD 9/89
                                          317
                                                                                                     52-177

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S2J46-7
 FEDERAL ACQUISITION REGULATION (FAR)
inspect  the  plant or plants of the Contractor or any
subcontractor engaged  in  contract performance. The
Government shall perform inspections  and tests in a
manner that will not unduly delay the work.
  (d) If the  Government performs inspection or test on
the premises of the Contractor or a subcontractor, the
Contractor  shall furnish and shall require subcontrac-
tors to furnish all reasonable facilities and assistance for
the safe and convenient performance of these dudes.
  (e)  Unless otherwise specified in the contract, the
Government shall accept or reject services and materi-
als  at the place of delivery as promptly as practicable
after delivery, and they shall be presumed accepted 60
days after the date of delivery, unless accepted earlier.
  (0 At any time during contract performance, but not
later  than 6 months (or such other time as may be
specified in  the contract) after acceptance of the serv-
ices or materials last delivered under  this contract, the
Government may require the Contractor to replace or
correct  services or materials  that at  time of delivery
failed to meet contract requirements.  Except as other-
wise specified in  paragraph (h)  below,  the cost of re-
placement or correction shall  be determined under the
Allowable Cost and Payment clause, but the "hourly
rate"  for labor hours  incurred  in the replacement or
correction shall be  reduced to exclude  that portion of
the rate attributable to profit. The Contractor  shall not
tender for acceptance materials and services required to
be replaced  or corrected without disclosing the former
requirement for replacement or correction, and,  when
required, shall disclose the corrective action taken.
  (g) (1) If the Contractor fails to proceed with reason-
able promptness  to  perform required replacement or
correction, and if the replacement or correction can be
performed within the ceiling price (or the ceiling price
as  increased by  the Government),  the  Government
may—
      (i) By contract  or  otherwise, perform the re-
    placement or correction, charge to the Contractor
    any increased cost, or deduct such increased cost
    from any amounts paid or due under this  contract;
    or
      (ii) Terminate this contract for default
    (2)  Failure to  agree to the amount of increased
  cost to be charged to the Contractor shall  be  a dis-
  pute.
  (h) Notwithstanding  paragraphs (0 and (g) above.
the Government may at any time require the  Contrac-
tor to remedy by correction  or replacement,  without
cost to the Government, any failure by the Contractor
to comply with the requirements of this contract, if the
failure is due to (1) fraud, lack of good  faith, or willful
misconduct  on the pan of the Contractor's managerial
personnel or (2)  the  conduct of one or more of the
Contractor's employees selected  or retained by  the
Contractor  after  any  of the Contractor's  managerial
personnel has  reasonable grounds  to believe that the
employee is habitually careless or unqualified.
  (i) This clause applies in the same manner and to the
same extent to corrected or  replacement materials or
services as to materials and  services originally deliv-
ered under this contract.
  (j) The  Contractor has no obligation or  liability
under this contract to correct or replace materials and
services that  at time of delivery do not meet contract
requirements,  except as provided in this clause or as
may be otherwise specified in the contract.
  (k) Unless  otherwise specified  in  the contract, the
Contractor's  obligation  to correct or replace Govern-
ment-furnished property shall be  governed  by  the
clause  pertaining to Government property.
                  (End of clause)
               (R 7-901.21 1974 OCT)
  Alternate I (APR  1984). If Government  inspection
and acceptance are to be performed at the contractor's
plant, paragraph (e) below may be substituted for  para-
graph (e) of the basic clause:
  (e) The Government  shall  inspect for acceptance all
items (other  than aircraft to be flown away, if any) to
be  furnished  under  this contract at the  Contractor's
plant or plants specified in the contract, or at any other
plant or plants approved for such  purpose in writing by
the  Contracting Officer. The Contractor  shall inform
the contract  administration office or Contracting Offi-
cer when the work  is ready for inspection. The  Gov-
ernment reserves the right  to charge to the Contractor
any additional cost of Government inspection and test
when items are not ready at the time for which inspec-
tion and test  is requested by the Contractor.
               (R 7-901.21 1974 OCT)
  Alternate II (APR 1984). If a labor-hour contract is
contemplated, and if no specific reimbursement for ma-
terials furnished is  intended,  the  contracting officer
may add  the following  paragraph  G) to the  basic
clause:
  0) The  terms of  this clause that  govern reimburse-
ment  for materials  furnished are considered  to have
been deleted.
52.246-7  Inspection  of Research and Development—
  Fixed-Price.
  As  prescribed  in 46.307(a),  insert the  following
clause in solicitations and contracts for  research and
development when  (a) the  primary objective of the
contract is the delivery of end items other than designs.
drawings,  or reports, (b) a fixed-price contract is con-
templated, and (c) the  contract amount is expected to
exceed the small purchase limitation; unless use of the
clause is impractical and the clause prescribed  in 46.309
is considered to be  more appropriate. The following
clause may be used in  such  solicitations and contracts
when  the contract amount is expected to be within the
small  purchase limitation and its  use is in the Govern-
ment's interest.
        INSPECTION OF RESEARCH AND

                                            318

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   PART 52-SOLICITATION  PROVISIONS AND CONTRACT  CLAUoES	32M64

      DEVELOPMENT—FIXED-PRICE (APR 1984)
     (a)  Ths Contractor  shall provide and  maintain an
   inspection system acceptable to the Government cover-
   ing the work under this contract. Complete records of
   all inspection work performed by the Contractor shall
   be maintained and  made available to the Government
   during contract performance and for as long afterwards
   as the contract requires.
     (b) The Government has the right to inspect and test
   all work called for  by the contract, to the extent practi-
   cable at all places  and times,  including the period of
   performance,  and in any event before acceptance. The
   Government may also inspect the premises of the Con-
   tractor or any subcontractor engaged in contract per-
   formance.  The Government shall perform  inspections
   and tests in a manner  that will  not unduly delay the
   work.
     (c) If the  Government performs any inspection or
   test on the premises of  the Contractor or a subcontrac-
   tor, the Contractor shall furnish  and shall  require sub-
   contractors to furnish,  without  additional charge, all
   reasonable facilities and assistance for the safe and con-
   venient performance of these duties.  Except as other-
   wise provided in the contract, the Government shall
   bear the  expense of Government inspections or tests
   made at other than the Contractor's or subcontractor's
  premises.
    (d) The Government shall accept or reject the work
  as promptly as practicable after delivery, unless other-
  wise specified in the contract. Government failure  to
  inspect and accept or reject the work shall not relieve
  the Contractor from responsibility, nor impose liability
  on the Government, for noncontorming work. Work is
  nonconforming  when  it  is  defective in  material or
  workmanship  or is otherwise not in conformity with
  contract requirements.
    (e) The Government has the right  to reject noncon-
  forming work. If the Contractor  fails or is unable  to
  correct or to  replace nonconforming work within the
  delivery schedule (or such later time as the Contracting
  Officer  may  authorize), the Contracting Officer may
  accept the work and make an equitable price reduction.
  Failure to agree on a price reduction shall be a dispute.
    (0 Inspection and test by the Government  does not
  relieve the Contractor from responsibility for defects or
  other failures  to meet  the contract requirements that
  may be discovered before acceptance. Acceptance shall
  be conclusive, except  for  latent defects, fraud,  gross
  mistakes amounting to fraud, or as otherwise specified
  in the contract. If acceptance is not conclusive for any
  of these  causes,  the Government, in addition to ai y
  other rights and remedies  provided by law, or under
  other provisions of this contract, shall have  he right to
  require the Contractor (1) at no  increase in contract
  price, to correct or replace  the defective or noncon-
  forming supplies (work) at the original point of deliv-
  ery or at  the Contractor's  plant at the  Contracting
  Officer's  election, and  in accordance  with a reasonaole

;MD 9/89
delivery schedule as may be agreed upon between the
Contractor and the Contracting Officer; provided, the
Contracting Officer may require a reduction in con-
tract price if the Contractor fails to meet sucli delivery
schedule; or (2) within a reasonable time after the Con-
tractor's  receipt of notice of  defects or nonconfor-
mance, to repayment of such portion of the contract
price  as  is  equitable  under  the circumstances  if the
Government elects not  to require correction  or  re-
placement.  When supplies (work) aie (is) returned  to
the Contractor, the Contractor shall bear transportation
costs  from the original  point of delivery to the Con-
tractor's plant and return to the original point of deliv-
ery when that point is not the Contractor's plant
                  (End of clause)
               (R 7-302.4(a) 1976 JUL)
                  (R 1-7.302-4(8))
52.246-8  Inspection  of  Research  and Development—-
  Cost-Reimbursement.
  As  prescribed in 46.308. insert the following clause in
solicitations and contracts  for  research and develop-
ment  when (a) the primary objective is the delivery of
end items other than designs,  drawings, or reports, and
(b)  a  cost-reimbursement  contract  is  contemplated;
unless use of  the clause is impractical and  the clause
prescribed in 46.309 is considered to be more appropri-
ate:
INSPECTION OF RESEARCH  AND DEVELOP-
  MENT— COST-REIMBURSEMENT (APR  1984)
  (a)  Definitions. "Contractor's managerial personnel."
as used in this clause, means the Contractor's directors,
officers, managers, superintendents, or equivalent repre-
sentatives who have supervision or direction of—
    (1) All or substantially all of the Contractor's busi-
  ness;
    (2) All or substantially all of the Contractor's oper-
  ation at any  one plant or separate location at which
  the contract is being performed; or
    (3) A separate and complete major industrial oper-
  ation connected with performing this contract.
  "Work." as used in  this clause, includes data when
the contract does not  include  the Warranty of Data
clause.
  (b)  The  Contractor  shall  provide  and  maintain  an
inspection system acceptable to the Government cover-
ing the work under this contract. Complete  records of
all inspection work performed by  the Contractor shall
be maintained and made available to the Government
during contract performance and for u long  afterwards
as the contract requires.
  (c)  The Government has the  right to inspect and test
all work called for by the contract, to the extent practi-
cable  at all places and times, including the period of
performance, and in any event before acceptance. The
Government may also inspect the plant or plants of the
Contractor  or  its  subcontractors engaged in the con-
tract  performance. The Government  shall perform  in-

                                              52-179
                                             319

-------
                              FAC  84-18
 52.246-9
JULY 30,1986
  FEDERAL ACQUISITION REGULATION  (FAR)
 spections and tests in a manner that  will not unduly
 delay the work.
   (d)  If the Government  performs any inspection  or
 test on the premises of the Contractor or a subcontrac-
 tor, the Contractor shall furnish and shall  require sub-
 contractors to furnish all reasonable facilities and assist-
 ance for the safe and convenient performance of these
 duties.
   (e)  Unless otherwise provided  in the contract,  the
 Government shall accept work as promptly as practica-
 ble after delivery, and work shall be deemed  accepted
 90 days after delivery, unless accepted earlier.
   (0 At any time during contract performance, but  no
 later  than 6 months (or  such  other  time as may  be
 specified in the contract) after acceptance of all of the
 end items (other  than designs, drawings, or reports) to
 be delivered under the contract, the Government may
 require the  Contractor  to replace or correct work not
 meeting contract  requirements. Time devoted to  the
 replacement  or correction of such  work shall not  be
 included in the computation of the above time period.
 Except as otherwise provided in paragraph (h) below,
 the cost of replacement or  correction shall be deter-
 mined as specified in the Allowable Cost and  Payment
 clause,  but  no  additional  fee shall be paid. The Con-
 tractor shall not  tender for  acceptance work required
 to  be  replaced or  corrected  without disclosing  the
 former requirement for replacement or correction, and,
 when  required,  shall disclose  the corrective  action
 taken.
  (g) (1) If the Contractor fails to proceed with reason-
 able promptness  to  perform required replacement  or
 correction, the Government may—
      (i)  By contract or otherwise,  perform the  re-
    placement or correction, charge to the Contractor
    any increased cost, or make an equitable reduction
    in any  fixed  fee paid  or payable under the con-
    tract;
       (ii) Require delivery of any undelivered articles
    and shall have the right to make an equitable re-
    duction in any fixed fee  paid or payable under the
    contract; or
       (iii) Terminate the contract for default.
    (2) Failure to agree on the amount  of increased
  cost  to be charged the  Contractor or to the reduc-
  tion in fixed fee shall be a dispute.
  (h)  Notwithstanding  paragraphs  (0 and (g) above,
 the Government may at any  time require the Contrac-
 tor to  remedy by correction or replacement, without
cost to the Government, any failure by the Contractor
to comply with the requirements of this contract, if the
failure  is due to (1) fraud,  lack of good faith, or willful
misconduct on the part of the Contractor's managerial
personnel or (2)  the  conduct of one  or more of the
Contractor's  employees selected  or retained by the
 Contractor  after any  of the Contractor's  managerial
 personnel has reasonable grounds  to believe that  the
 employee is habitually  careless or unqualified.
   (i) This clause shall apply in  the same manner to a
 corrected or replacement end item or components as to
 work originally delivered.
   0)  The  Contractor  has  no  obligation or  liability
 under  the  contract to  correct or  replace articles  not
 meeting  contract requirements  at  time of delivery,
 except as provided in  this clause or as may otherwise
 be specified in the contract.
   (k) Unless otherwise  provided  in the  contract,  the
 Contractor's obligations to correct or replace Govern-
 ment-furnished  property shall  be  governed  by  the
 clause pertaining to Government property.

                    (End of clause)
               (R 7-402.5(a)(l) 1974 OCT)
                    (R l-7-402.5(a))

   Alternate I (APR 1984). If it is contemplated  that the
 contract will be on a no-fee basis, substitute paragraphs
 (0 and (g) below for paragraphs (0 and (g) of the basic
 clause.
   (0 At any time during contract performance, but not
 later  than 6 months (or such other time  as  may be
 specified in the  contract) after acceptance of all of the
 end items (other than  designs, drawings, or reports) to
 be delivered under the contract, the Government may
 require the Contractor to correct or replace work not
 meeting  contract requirements. Time devoted to the
 correction or replacement of such work shall not be
 included in the  computation of the above time period.
 Except as  otherwise provided in paragraph (g) below,
 the allowability  of the cost of any such replacement or
 correction shall be determined  as  specified in  the Al-
 lowable Cost and Payment clause. The Contractor shall
 not tender for acceptance corrected work without dis-
 closing the  former requirement  for correction, and,
 when  required,  shall   disclose  the corrective action
 taken.
   (g) If the Contractor fails to proceed with reasonable
 promptness to perform required replacement or correc-
 tion,  the  Government  may  (1) by  contract or other-
 wise,  perform  the replacement  or  correction and
 charge to the Contractor any in  Teased cost, (2) require
 delivery of any  undelivered articles, or (3) terminate
 the contract for default. Failure to agree on  the amount
 of increased cost to be charged  to the Contractor shall
 be a dispute.

              (R 7-402.5(a)(3) 1974 OCT)
                    (R l-7-402.5(b))

 52.246-9   Inspection  of  Research  and  Development
   (Short  Form).
   As prescribed in 46.309. insert the following clause-
                                                                                                            320

-------
                               FAC 84-18        JULY 30,1986
PART 52—SOLICITATION PROVISIONS AND  CONTRACT CLAUSES
                                          52.246-12
        INSPECTION OF RESEARCH AND
   DEVELOPMENT (SHORT FORM) (APR 1984)
  The Government has the right to inspect and evalu-
ate the work performed or being performed under the
contract, and  the  premises where the  work is  being
performed, at all reasonable times and in a manner that
will not unduly delay the work. If  the Government
performs inspection or  evaluation on the premises of
the Contractor or a subcontractor, the Contractor shall
furnish and shall  require subcontractors to furnish  all
reasonable  facilities and assistance for the safe and con-
venient performance of these duties.
                  (End of clause)
              (R 7-402.5(b) 1959 FEE)
              (R 7-302.4(b) 1959 JUN)
                  (R l-7.302-4(b))
                  (R l-7.402-5(c))
52.246-10   Inspection  of Facilities.
  As precribed in 46.310, insert the following clause in
solicitations and contracts when a facilities contract  is
contemplated:
    INSPECTION OF FACILITIES (APR 1984)
  (a) Definition. "Contractor's managerial  personnel*,"
as used in this clause,  is defined in the Liability for the
Facilities clause of this contract.
  (b) The  Contractor shall provide  and  maintain  an
inspection system acceptable to the Government cover-
ing the facilities and  work called for by this contract.
Complete records of all inspection work performed by
the Contractor shall be maintained and  made available
to the Government during contract performance and
for as long afterwards as the contract requires.
  (c) The Government has the right to inspect and test
the facilities and work called for by the contract,  to the
extent practicable at all places and times, including the
period of manufacture.  The Government may also  in-
spect the  facilities and work at  the  plant  or plants of
the Contractor or  its subcontractors engaged in the
performance of the  contract. The Government shall
perform inspections and tests in a manner that will not
unduly delay  the work to be performed by  the  Con-
tractor under this  contract  or  any  related  contract.
  (d) If the Government performs inspection or te t on
the premises of the Contractor or a subcontractor, the
Contractor shall furnish and shall require  subcontrac-
tors to furnish all reasonable facilities and assistance for
the safe and convenient performance of these duties.
  (e) The Contracting Officer  may, at any time, require
the Contractor to correct or replace facilities or work
that is  defective or does  not  conform  to contract  re-
quirements. Except as provided in paragraph (0 below,
corrections and replacements  shall be at Government
expense if, under the  terms of this contract, the facili-
ties or work corrected or replaced  were  initially fur-
nished, or required to be performed at Government
expense.
PCMD 9/89
  (0 The Contracting Officer may, at any time, require
the Contractor to correct or replace facilities or work
that  is defective or does  not conform to contract re-
quirements, without cost to the Government under this
contract or any related contract or subcontract,  if the
defects or failures are due to fraud, lack of good faith.
or willful  misconduct on  the part of the  Contractor's
managerial personnel; or to the conduct of one or more
of the Contractor's employees selected or retained by
the Contractor after any of the Contractor's managerial
personnel  has reasonable  grounds to believe that the
employee is habitually careless or unqualified.
  (g) Corrected or replacement facilities or work shall
be subject to  this clause in the same manner as facilities
or work originally completed under the contract.
                  (End of clause)
                (R 7-702.6 1964 SEP)

52.246-11  Higher-Level Contract Quality Requirement
  (Government Specification).
  As prescribed in 46.311, insert the following clause in
solicitations  and contracts  when  the inclusion  of  a
higher-level contract quality requirement  is appropriate
(see 46.202-3):
HIGHER-LEVEL   CONTRACT   QUALITY   RE-
  QUIREMENT                  (GOVERNMENT
  SPECIFICATION)(APR 1984)
  (a) Definition. "Contract date," as used in this clause,
means the date set  for  bid opening or, if this is  a
negotiated contract or a modification, the effective date
of this contract or modification.
  (b) The Contractor shall  comply with the specifica-
tion  titled  	   [Contracting  Officer
insert the title and number of the specification], in effect
on the contract date, which is hereby incorporated into
this contract.
                   (End of clause)
               (R 7-104.28  1967 AUG)
               (R 7-104.33  1967 AUG)
               (R 7-703.44  1967 AUG)
               (R 7-203.5(b) 1967 AUG)
               (R 7-302.4(c) 1967 AUG)
               (R 7-402.5(c) 1967 AUG)
               (R 7-602.10(b) 1967 AUG
               (R 7-901.25  1967 AUG)

52.246-12   Inspection of Construction.
   As prescribed in 46.312, insert the following clause in
solicitations  and contracts for construction  when  a
fixed-price contract  is contemplated  and the contract
amount is expected to exceed the small purchase limita-
tion. The clause may be  used in  such solicitations and
contracts  when the contract amount  is expected to be
within the small purchase limitation and its use is in the
Government's interest.
  INSPECTION OF  CONSTRUCTION  (JUL 1986)
                                            52-181
                                           321

-------
       FINANCIAL MONITORING

               OR....

       THE PROJECT OFFICER'S
            LAMENT —

   WHERE, OH WHERE, DOES THE MONEY GO?"
PCMD9/89              11-0               323

-------
          PROGRESS REPORT OUTLINE
                EPA CONTRACT # 00-00-0000
                  Work Assignment #00

    FINANCIAL

    I.    Workhours Proposed Vs. Actual Vs. Estimated to
         Completion

    II.    Funds Budgeted Vs. Actual (Period Vs. Cumulative)
         Vs. Estimated To Completion (By Task) And Variance

    III.   Average Cost Per Hour

    IV.   Summary of Travel (Budgeted Vs. Actual),
         Description of Trips

    V.    Summary of ODC's (Budgeted Vs. Actual),
         Description & Breakdown

    VI.   Subcontract Costs (By Subcontractor-Budgeted
         Vs. Actual)
°CMD 9/89
                           11-1

-------
         COMPARING ESTIMATED VS. ACTUAL

                LABOR HOUR COSTS
  Estimated Average Cost Per Direct Labor Hour


  Estimated Cost Of Contract:             $750,000


  Level Of Effort Available:                20,000 hours


  Average Cost Per Labor Hour:           $ 37.50



  Incurred Average Cost Per Direct Labor Hour


  Cost Incurred:                        $425,000


  Level Of Effort Expended:               10,000 hours


  Average Cost Per Labor Hour:           $42.50
                          11-2
PCMD9/89                                              326

-------
                   SAMPLE

  MONITORING  PERCENTAGE  OF COMPLETION
             (Completion Form Contract)

    MONTHLY FINANCIAL REPORT FOR THE PERIOD
                  ENDING JUNE 30
         Percentage Of Work Completed = 90%
             Cost to Complete = $10,000
$120

 100 __

  80 __

  60 __

  40 „

  20 __
($95,000)
($100,000)
       OCT NOV DEC JAN FEB MAR APR MAY JUN JUL
                 = Projected expenditures
                 = Actual expenditures
PCMD 9/89
                         11-3
                     327

-------
                               SAMPLE
        MEMORANDUM

        SUBJECT:   Payment under Contract No..
        FROM:       	, Project Officer

        TO:              '	, Work Assignment Manager
                You have been designated as a Work Assignment Manager for at
        least one of the work assignments issued under subject contract. As
        such, you are accountable and responsible for the monitoring of the
        contractor's performance, within the allotted budget and time frame.
        Accordingly, I look to you to provide me with a monthly Work Assignment
        Notification so that I have a basis to certify the contractor's monthly
        invoices. To this end, please forward to me by the 1st of EACH MONTH
        a completed Work Assignment Status Notification, a copy of which is
        attached hereto. A separate form should be submitted for each work
        assignment which you manage.

               Thank you for your cooperation.
PCMD9/89                                11-4
                                                                             328

-------
                             SAMPLE
                  Work Assignment Status Notification
                      Contract No.	
                      Invoice No.
                  I have reviewed the invoice costs and recommend
                  payment in full.
                  I have reviewed the invoice costs and recommend
                  suspension of	amount for the
                  reasons set forth below.
•»CMD 9/89                           11-5
                                                                 329

-------
                              SAMPLE
        SUBJECT:  Contract Invoice*      For Delivery Order*.
        TO:         	, Delivery Order Project Officer

        FROM:      	, Project Officer, PM-213
                                                 382-xxxx
        Enclosed is a copy of an Invoice for services performed under your
        Delivery Order on Contract Number	. Payment is due
        promptly. .

        I need your approval WITHIN ONE WEEK of the date above in order to
        pay the Invoice. Please indicate your approval by signing below, or by
        calling me at 382-xxxx.

        Thank you.
        Delivery Order Project Officer:

        Charges reflected in this Invoice are appropriate for payment and are
        mathematically correct

                                            Signed:  	
                                                        DOPO

                                            Date:     	
                                       11  6
PCMD9/89                                i i  w                                 330

-------
             VOUCHER PAYMENTS ON
    MULTIPLE  ACCOUNT FUNDED  CONTRACTS


   Whenever A Contract Has Multiple Account Funding,
   The Project Officer Must Provide On Every Certification
   For Payment The Accounts And Amounts To Be
   Charged.
-CMD 9/89                    11-7                    331

-------
  &EPA
          US Environmental Protection Agency
               Washington. DC 20460

Project Officer Invoice Approval
    1  Complete and return to the servicing finance office indicated
    below %his form is required for every invoice Submit only one
    invoice per form
    2  Return tnb original copy, retain the yellow copy for your files
    3  Send either* completed form or an explanation for disapproval
    within five calendar days  of your receipt of invoice to  assure
                                                    Instructions
                           responsive payment processing w the contractor  If you cannot
                           approve payment, or if you approve partial payment, return the
                           invoice with a memorandum of/explanation
                           4. Dollar amounts diatributM by eccount number must equal
                           total amount to be paid.   /
                           5 You may anach invoices with specific account  charging data
                           instead of completing Pag II of this form
\ Part 1. Identification /
Servicing Finance Office,.
US Environmental Protection Agency
Financial ManagementOivision (MD-32)
Customer Assistance Unit
Research Triangle Park. NC 2771 1
Phone Commercial (919) 5^-1 148. FTS 629-1 148



Contractor /
Contract Number /
nvoice Number/ (
)ate of Invoice
\ Part II. Account Charging Insttuctions
WA No. and/or DCN (Optional)














\ Account Number













/
>










/
/

\
V








/
/



\
s





/
/






\
s



/
/








\
\
/
I/











^
/\










(
/

\
\








/
/



\
s






/






\
\





Total Amount To Be Paid IZJ as invoiced LJ partial payment
Incomplete end inaccurate date on this
P*t Ml. Approval
I have determined that the doove cited contract has commenced and the
payment requested is commensurate with the contractor's level of pro-
grass on the contract /
LJ Goods or services /ave been delivered in full as requested by the
contract to suppo/t this payment
LJ Sufficient progress has been made by the contractor to support this
progress payment as authorized by the contract
~>ro|ect Officer's Name (Type or print legibly!

PrfgxtnDCBntV and Mail Code
I Dollar Amount








S
\




$









y
\















\















\















\
*














\




























































•
•
•
•
•
•
•
•
•
•
•
•
•
•
•






























form will delev payment of tne invoice.
Payment Document
Requires Immediate
Action
Project Officer's Signature
44 a
• •• | | - V • •
Office Telephone
Date
E-Mail 10 Number 332
EPA Form 2BBO-19 (Rev. 6-86) Previous editions are obsolete
                                              SERVICING FINANCE OFFICE COPY

-------
o

58
                    SAMPLE


TRACKING SYSTEM FOR MULTIPLE ACCOUNT NUMBERI


                    ACCOUNT NUMBERS
VOUCHER #

#1

-42
•
CO
#3

#4
BREAKDOWN

COST
FEE

COST
FEE

COST
FEE

COST
FEE
A
100.000
5,000
400
94,600
800
64
93.736



B
30.000
985
79
28,936
600
48
28.288



C
25.000
0
0
25,000
1,000
80
23.920



D
645.000
1,250
100
64,300
4,700
376
641.547



TOTAL
800.000
7,235
579
792,186
7,100
568
784.518



w
w
w

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  Standard Form 1034-A
      September 197}
    4 TRMUIT FRM 2000
                    PUBLIC VOUCHER FOR PURCHASES AND
                       SERVICES OTHER  THAN PERSONAL
                                                                                         VOUCHH NO.
 U S. Of PAITMf NT. IUKAU. Ot ESTAlllSMMf NT AND IOCATION
                                                    OAT! VOUCMII PKPAKD
                                                                                         SCMDUU NO.
                                                    CONTIACT NUMK* AND DAK
                                                                            PAID IT
                                                    KOUISmON NUMKI AND OATI
  PATH'S

   NAMI

   AND

  AOOIKS
          r
          L
                                                                            OATI INVOICE MCIIVCO
                                                       j
                                                                                         DISCOUNT THMS
                                                                                         PAVtrS ACCOUNT NUMIfl
                                      TO
                                                                         WflCMT
                                                                                         GOVKNMINT I/I NUMtll
  NUMBER
 AND DATE
 OF  ORDER
 DATE OF
 DELIVERY
OR SERVICE
          ARTICLES OR SERVICES
 (Cutir diuriplmm. iiim mmmbtr tf rw/mrf or ftdml
Mfflj ubtJlllt. *mj tlbtr i*ftrm*lio* JttmtJ mcillarf)
QUAN-
 TITY
          UNIT PRICE
        COST
                ffl
                            AMOUNT
                                            must NOT us* HM> «poc« Wow)
                                                                      TOTAL
PAYMENT:

Q COMPUTI

Q PAtTIAl

Q HNAl

Q NOOHSS

   ADVANCI
                                                             DIFFERENCES.
                                                         Amoum verified: comet for
                                                                     ISigmilun or ailifht
                                          MEMORANDUM
                                            ACCOUNTING CLASSIFICATION
CHECK NUMBER
| CASH
ON TREASURER OF THE UNITED STATES
DATE
CHECK NUMBER ON (Ntmt «/*••«;

                                                                  U.S. GOVERNMENT PRINTING OFFICE:  1975-563-HW

-------
(X^ >
                 MA^

















Standard Form IOJ»
4 TKMMT FKM 2000
10)1-110 -


U.I.MMIMM.MUU.MMM
NUMHI
AND DATI
Of Of DM
TAG C
P.O.
Seven









1






-el







OlSHVICi
RPORATIO
OX 12345
Seas, Tet

















PUBUC VOUCHER FOR PURCHASES AND
SERVICES OTHER THAN PERSONAL

CONTINUATION SHEET
U.S. Environmental Protection Agency
AITICU S 01 SHVICtS
fCiftr Jiurfafm. Mm mmmttr •/ ttmnmti tr FiJitml tmfflj
MflVflRNVi mtmtmf 9t9tf '•/•^•M^MVI •PMcW •4VMM07/
Contract No. 68-OX-1234

nessee OOOOX
COST ELEMENTS
1. Direct Labor
2. Overhead and Fringe
Benefits (111% of Direct Labor
3. Travel /J^Vr V»*
4. Consultants tPcfo
' Jf
5. Subcontractors
6. Other Direct Costs

SUBTOTAL DIRECT COSTS
7. G & A Expenses (25% of
total costs)
TOTAL COSTS /\,
8. Fixed Fee[(10%)\ >r ^J
TOTAL AMOUNT CLAIMED
11-11
__ UNIT-flCI
TITY COW 11
Estl nated 2pst:
Flxei Fee 17.5%)
Total CPFT^ 	 x
Current
Amount Claimed
$20,486

22,739
— ^(^000^)
1,200

25,000
4,500

82,925
20,731

103,656
10,366
114,022

. 5
KMOUU NO
SMUT NO


AMOUNT

\ $1,213,101
:J 90.983
$1.304,084
Cumulative
Amount Claimed
8137,000

152,070
12,000
4,000

65,iOOO
12.530

382,600
95,650

478,250
38,461
516,711


>«•«,
      »o. an

-------
                                    CONTRACTOR'S COST PROPOSAL
                                  (covers two-year bast period)

            1.  Direct Labor                               5669,016
            2.  Overhead  and Fringe Benefits
                (11U of  ieen 1)
            3.  Travel
            6.  Conaulcanci
            S.  Subconcraeeors
            6.  Other Direct Costs
                SUBTOTAL
            7.  G &  A Expense (18.32 of items 1-6)
                SUBTOTAL                                  SI.213.101
            8.   Fixed  Fee  (7.5%)                              90.983
                TOTAL  (ESTIMATED  COST  PLUS FIXED FIE)     SI.306.086

                               AVERAGE MONTHLY INCREMENTS

            1.   Direct Labor
            2.   Overhead & Fringe
            3.   Travel
            4.   Consultants
            5.   Subcontractors
            6.   Other  Direct Coses
                SUBTOTAL
            7.   G  &  A  Expense
                SUBTOTAL  (AVERAGE MONTHLY ESTIMATED COST)    S50.546
            8.   Fixed  Fee
                TOTAL  (AVERAGE MONTHLY CPFT)


PCMD9/89                                 11-12

-------
                                        INVOICE "3
                                      SUPPORTING DATA
   I.  Direct Labor Breakdown
            N'ana

       J. Thelsman
       A. Haig
       L. Thomas
       S.E.  Swing
       T. D.  Nixon
       B. Goodman
       W. Churchill
       3. Rather
       R. Lavelle
            Category

        Project Manager
        V.P.
        Sr. Researcher
        Research Ass'e.
        Pesticide Expert
        Researcher
        Staff Writer
        Secretary
        Clerk-Typist
 Race

S27.00
 30.00
 22.00
 14.30
 26.00
 13.20
 18.00
 11.30
  9.00(reg.)
 13.50(OT)
 Hour]
                     TOTALS
  100
  I60(reg.)
   40(QT)
+.112
Cost
                                                            $20.486
   2.   Travel Breakdown
a. 2 round-trips to Washington. DC
   to meet with Project Officer

b. local mileage (100 miles 3 .203)

c. local parking expensas

d. I round-trip to Manhattan to
   review pesticide data
                                                                    $430

                                                                      21

                                                                      77
                                                                      332
                                                                     $900
    3.   Subcontractor Expensas

                a.   Enviro-nmane.  Inc.

                b.   Mr.  Clean Contractor Croup

                c.   Caah ConfUMrs, LTD
                                                    $9,200

                                                     6.500

                                                     9.300
                                                   $23,000
   4.  Other  Direct Costs

                  .   purchase
                 b.   photocopying, offica supplias,
                     mailing, ate.
                                                     $3,900
                                                                    $4,300
:MD 9/89
                                       11-13
                                                                                 337

-------
              PROMPT PAYMENT  ACT
          Requires Government To Pay Invoices Within
          30 Days Of Invoice Receipt Or Incur Interest
          Penalty.


          Exceptions:

          (a)  Payment may be delayed because of dispute
          between EPA and contractor over payment amount
          or other  issues regarding contract  compliance.

          (b)  Does not apply to  provisional, advance or
          progress  payments,  although Agency policy is
          to pay within 30 days  regardless.

          (c)  Payments  on construction  contracts are due
          within 14 days, unless  a  longer  period  has  been
          provided  for in the solicitation to  give EPA adequate
          time  to  inspect the work.

          (d)  To  obtain  contractor discount, EPA must make
          payment by discount date.
PCMD9/89                                                       338
                               11-14

-------
                       FIXED FEE
       Authorizes Contracting  Officer To Withhold
       Up To 15% (Or Maximum  of $100,000)  Of
       Fee As  Reserve  To  Protect Government's
       Interest
                      FIXED FEE (FAR/APR 1984)

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

          (b)   Payment of the fixed fee shall be  made  as
          specified  in  the Schedule:   provided,  that after
          payment of 85  percent of the fixed fee, the
          Contracting Officer may  withhold further payment
          of fee  until a reserve  is set  aside in an amount
          that  the  Contracting  Officer  considers necessary
          to protect the  Government's  interest.  This  reserve
          shall not exceed  15  percent of  the total fixed fee
          or $100,000, whichever is  less.
                               11-15
"CMD 9/89                          ilia                         339

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           LIMITATION  OF  COST
      CONTRACTOR MUST NOTIFY GOVERNMENT
      WHENEVER:

       Costs Within Next 60 Days Will Exceed 75%
       Of Total Estimated Cost

       Total Cost Will Be GREATER Or SUBSTANTIALLY
       LESS Than Estimated Costs (Overrun Or
       Significant Underrun)
PCMD 9/89                   11-16                   340

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                                                                                            FAR  Clause
           LIMITATION OF COST (APR 1984)
      (a) The parties estimate that performance of this >
    tract exclusive of any fee, will not cost the Govern-
    ment more than (l)'the estimated cost specified ia the
    Schedule or, (2) if this is a cost-sharing contract the
    Government's  share of the «•»{•«•§••« cost specified in
    the  Schedule.  The Contractor  agrees to use ha beat
    efforts to perform the work specified ia the Schedule
    and all obligations under this contract within the esti-
    mated cost which, if this is a cost-sharing  contract
    includes both the Government's and the Contractor's
    share of the cost.
      (b) The Contractor shall notify the Contracting Offi-
    cer in writing whenever it has reason to believe that—
        (1) The costs the contractor expects to incur under
      this contract in the next 60 days, when added to all
      costs previously incurred, will exceed 73 percent of
      the estimated cost specified in the Schedule; or
        (2) The total  coat for the performance of. this eon-
      tract exclusive of any fee, will be either greater or
      substantially  *ftt **»•• had KITH previously *g***"*^fd
      (c) As part of the notification,  the Contractor shall
    provide the Contracting Officer a revised estimate of
    the total cost of performing this contract
      (d) Except  as required  by other provisions of this
    contract specifically citing and stated to be an excep-
    tion to this rlsiisf
        (I) The Government is not obligated to reimburse
      the Contractor for costs incurred in excess of (i) the
      estimated cost specified m the Schedule or. (ii) if this
      is a cost-sharing contract the fsthnatfd coat to the
      Government specified in the Schedule; and
        (2) The Contractor ia not ftMigaftd to continue
     performance under  this contract (Including actions
     under the Termination  dause of dua contract) or
     otherwise incur costs in r*rfii of the estimated
     specified in the Schedule, until the Contracting Offi-
     cer CO notifies the Contractor m writing that  the
     estimated coat has been increased and (H) provides a
     revised estimated total coat of performing this
     tract If this is a oost-tharing contract, the
  shall be  allocated in accordance with  the  formula
  specified ia the Schedule
  (e)  No notice, communication, or representation in
any form other than  that specified in subparagraph
(dX2) above, or from any person other than the Con-
tracting Officer, shall  affect  this contract's estimated
cost to the Government. In the absence of the specified
notice, the Government is not obligated to reimburse
the Contractor for any costs in excess of the estimated
cost or. if this is a cost-sharing contract for any costs
in excess of  the estimated cost to the  Government
specified ia the Schedule,  whether those excess costs
were  incurred during the course of the contract or as a
result of termination.
  (0  If the estimated cost  specified in the Schedule b
increased, any costs the Contractor incurs before the
increase that are in excess of the previously estimated
cost shall be allowable to the same extent as if incurred
afterward,  unless the Contracting Officer issues a termi-
nation or  other notice directing that the increase is
solely to cover termination or other specified expense*.
  (g) Change order* shall not be considered an authori-
xation to exceed the estimated cost to the Government
specified in the Schedule,  unless they contain a state-
ment increasing the estimated cost
  (h) If this contract is terminated or the estimated cost
is not increased, the Government and the Contractor
shall  negotiate an  equitable distribution of all  property
produced or purchased under the contract based upon
the share of costs incurred  by each.
PCMD 9/89
                                                     11-17
                                              341

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          LIMITATION OF  FUNDS
      Applicable To Incrementally Funded Contracts

      Requires Contractor To Notify Government
      Whenever It Expects Costs Within The Next
      60 Days Will Exceed 75% Of The Incrementally
      Funded Amount
PCMD9/89                    11-18                   342

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                                                                                                 FAR Clause
                   LIMITATION OP FUNDS (APE 1914)
               (a) The parties estimate that performance of this con-
             met wiU not cost the Government more than (I) the
             estimated cost specified as the Schedule or. (2) if this is
             a cost-sharing contract the Government's share of the
             estimated cost specified in the Schedule.  The Contrac-
             tor agrees to use to bast efforts to perform the work
             specified in the Schedule and aU obligation under this
            contract  within  the estimated cost  which, if  this is a
            cost-sharing contract includes both the
            and the Contractor's share of the cost
               (b) The Schedule  specifies  the
            available for  payment by the Government and allotted
            to this contract the hems covered, the  Government's
            share of the cost if this is a cost-sharing contract and
            the period of performance it is  •*•••••*  the allotted
            amount will  cover. The parties contemplate  that the
            Government  will allot additional funds  imuiimiialty
            to the contract  up to the full estimated  cost to the
            Government specified in the Schedule, exclusive of any
            fee. The Contractor agrees to perform, or have per-
            formed, work on the contract up to the point at which
            the total amount paid and payable by the Government
            under the contract  approximates but does not
            the total amount actually allotted by the
            to the contract.
              (O The Contractor shall notify the Contracting Offi-
            cer in writing whenever it has reason to  believe that
            the costs it expects  to incur under this contract in the
            next 60 days, when added to all costs  previously in-
            curred, will exceed  73 percent of (I) the total amount
            so far allotted to the contract  by the  Government or.
            (2) if this is  a cost-sharing contract, the amount then
            allotted to the contract by the  Government  plus the
            Contractor's  corresponding share.  The notice  shall
            state the estimated amount of additional  funds required
            to continue performance for the period specified in the
            Schedule.
              (d) Sixty days before the end of the period  specified
            in the Schedule, the Contractor shall notify the Con-
            tracting Officer  in  writing of the estimated amount of
            additional funds, if any. required to continue  timely
            performance  under the contract or  for  any further
            period specified in  the Schedule or otherwise agreed
            upon, and when the funds wiU be required.
               (e) If.  after notification, additional lands arc not al-
            lotted by the end of the period specified in the Sched-
            ule or another agreed-upon date; upon'the Contractor's
            written request the Contracting  Officer  wffl terminate
            this contract on that date in accordance with the provi-
            sions of the Termination clause of tint contract  If the
            Contractor estimates that the funds available will allow
            it to continue to discharge to obhptiom beyond that
            date, it nay specify a bier date in  to request and the
            Contracting Officer may terminate this contract on that
            later date.
               (0  Except as required by other provisions of this
            contract, specifically citing and  stated to be an
            tioa to this clause—
   (I) The Government is not obligated to i
 the Contractor for coats incurred  in excess of the
 total amount allotted by the Government to this con-
 tract; and
   (2) The Contractor  is not  oMipted to continue
 performance  under this contract (including  af lions
 under  the Termination clause of this contract) or
  otherwise incur com in excess of 0) the amount then
  allotted to the contract by the Government or. 
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                            LIMITATION  OF  COST  CLAUSE


       Manpower Program Analysis Consultation and Training  Inc.   (LBCA
       No.   80-BCA-113, November 4,  1981.   Contract No.  99-6-601-08-82)

       FACTS

       Finding of  Fact

       1.   On August  27,  1976,  the  Institute for Manpower  Program
       Analysis Consultation and Training,  Inc.  (IMPACT) entered  into
       an  agreement (subcontract) with  the Small Business  Administration
       (SBA) (Contract No.  SB 543(8a)  76-C-315)  for the  development  and
       field testing  of a job bank  openings summary data retrieval
       system under the prime contract  between  SBA and  the Department of
       Labor (DOL)  (Contract No. 99-6-601-08-82).  The  estimated  total
       amount of the  contract prior to  any modification  was $88,696  and
       the  period  of  performance extended  from  August  27,  1976  through.
       August 26,  1977.

       2.   The basic  contract provided  for estimated direct costs of
       $68,234, indirect cost of $15,441 (32.8% of $47,804) and a profit
       of  $5,021.

           The four-page Statement  of Work, which was  drafted by  DOL
       staff (Tr.  225-26),  stated that  the project was  designed to
       improve the effectiveness and efficiency of the  Employment
       Service system by improving  the  ability  of  the  Job  Information
       Service staff  to use and implement  job  search  information  and
       techniques  that facilitate job  placements.  Specifically,  the
       project was stated to involve the preparation of training
       materials related to the job search function and training.

       3.   The General Provisions of the contract  provide  under clause
       three, Limitation of Cost:

            "(a) It is estimated that  the  total cost  to the Government
                 for  the performance of this  contract,  exclusive  of
                 any  fee, will not  exceed  the  estimated cost set  forth
                 in the Schedule, and  the  Contractor  agrees to use  his
                 best efforts to perform the  work  specified in the
                 Schedule and all obligations  under  this contract
                 within such estimated  cost.   If,  at  any time,  the
                 Contractor has reason to  believe  that the cost which
                 he expects to incur in the performance of this
                 contract in the next  succeeding 60  days,  when added
PCMD9/89                              11-20                             34«

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                 to all costs previously incurred, will exceed 75
                 percent of the estimated costs then set forth in
                 the Schedule, or if, at any time, the Contractor
                 has reason to believe that the total cost to the
                 Government for the performance of this contract,
                 exclusive of any fee, will be greater or substan-
                 tially less than the then estimated cost hereof,
                 the Contractor shall notify the Contracting Officer
                 in writing to that effect, giving the revised
                 .estimate of such total cost for the performance of
                 this contract.

             (b) Except as required by other provision of this
                 contract specifically citing and stated to be an
                 exception from this clause, the Government shall
                 not be obligated to reimburse the Contractor for
                 costs incurred in excess of the estimated cost set
                 forth in the Schedule, and the Contractor shall
                 not be obligated to continue performance under the
                 contract (including actions under the Termination
                 clause) or otherwise to incur costs in excess of the
                 estimated cost set forth in the Schedule, unless
                 and until the Contracting Officer shall have notified
                 the Contractor in writing that such estimated cost
                 has been increased and shall have specified in such
                 notice a revised estimated cost which shall thereupon'
                 constitute the estimated cost of performance of this
                 contract.  No notice, communication, or representation
                 in any other form or from any person other than the
                 Contracting Officer shall affect the estimated cost
                 of this contract.  In the absence of the specified
                 notice, the Government shall not be obligated to
                 reimburse the Contractor for any costs in excess of
                 the estimated cost set forth in the Schedule, whether
                 those excess costs were incurred during the course of
                 the contract or as a result of termination.  When and
                 to the extent that the estimated cost set forth in
                 the Schedule has been increased, any costs incurred
                 by the Contractor in excess of the estimated cost
                 prior to such increase shall be allowable to .the same
                 extent as if such costs incurred by the Contractor
                 had been incurred after the increase; unless the
                 Contracting Officer issues a termination or other
                 notice and directs that the increase is solely for
                 the purpose of covering termination or other specified
                 expenses.
                                       -2-
PCMD9/89

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            "(c) Change orders issued pursuant to the Changes
                 clauses of this contract shall not be considered
                 an authorization to the Contractor to exceed the
                 estimated cost set forth in the Schedule in the
                 absence of a statement in the change order, or
                 other contract modification,  increasing the
                 estimated cost."

       4.   On June 15, 1977, IMPACT submitted  cost and technical
       proposals to add two training sessions, 150 training packages
       and 75 audio-visual presentations.  Negotiations culminated in
       September 1977 and^aT modif icatiorQaised the contract amount to
       $118,673 While extending t-hg nnmplftfr < on Ham t-o Amjiiui  in,
       19~78~.

       5.   On December 5,  1977, Ms. Patricia King, the DOL project
       officer, spoke on telephone with Mr. Willis Thibado, the Director
       of  Appellant's Training Division, regarding certain alterations
       in  the work products.  Predicated on this call, Mr. Thibado, in
       his December 6, 1977 letter to Ms. King confirmed the following
       understanding:  (1) IMPACT would combine the use of the training
       manuals with the audiovisual presentation; (2) the same number
       of  manuals would be developed and the same amount of time for
       material development would be necessary; (3) there would be no
       increase or decrease in costs in the development of the manuals!
       (4) the slide/tape  presentations would  be organized, to coincide
       with the five chapters of the training  manual and would be self-
       contained; (5) the  same number of slides, the same amount of tape,
       and the same amount of time for material development would be
       used;  and (6j_ there would be no increase or decrease in costs  for
       development of the  slide/tape presentation.  During the month  of
       March,  1978 IMPACT  completed three separate revisions of the
       training manual as  requested by Ms. King on behalf of DOL.

       6.   By letter to Ms. King dated June 6, 1978, Mr. Thibado
       requested a modification of IMPACT'S cost proposal.  The letter
       indicated that IMPACT'S expenditures through May 31, 1978 exceeded^
       the Modification's  cost animates by $11,382.00 with an additional
       $2,000.00-$4,000.00 to be spent in writing the final reports.
       Several reasons were advanced by Mr. Thibado for the overruns,
       including the following:  (1) the change in emphasis of the
       training materials  that was imposed after the training needs
       assessment was conducted; (2) the impact this change in emphasis
       had on the size of  the training manual; (3) the costs of
       developing the training portfolios, materials not required  to be
       produced under the  contract as executed; (4) the substantial
       increases in the scope and size of the drafts of the training
       manual  and workbook that were required.
                                       -3-
                                    11-22                             346
PCMD9/89

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        7.  After  receipt  of  the June 6 letter,  Ms. King requested that
        IMPACT submit  aHHit-•%» in suppoct^of therequest
        for modification,   l^presponsetp the request tfasl received^jErom
        IMPACT during  the  rar '"'* 'aL— *******•» ft- ^oirfrtrm^jtfo':  By letter
        dated September  15,  1978,  IMPACT submitted the requested
        additional documentation and indicated that the request for
        modification then  amounted to $17,423.00.

        8.  All products and services which IMPACT was required to provide
        to DOL were delivered  and  furnished prior to the date of contract
        completion.

        9.  On May 22, 1980, the DOL Contracting Officer, disallowed all
        amounts claimed  bv IMPACT in excess of the contract**price ot
        $1.18,673, because  IMPACT dio" not compy with General Provision  3,
        "Limitation of Cost" clause, which .requires the Contractor to
        notify the Contracting Officer in advance and in writing of a
        possible cost overrun and  to secure advance approval.
                                         -4-
PCMD 9/89                              11-23                             34?

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          MONITORING GOVERNMENT
                       PROPERTY
          A Significant Financial Responsibility In Some
          Contracts Involving Monitoring Purchase, Use
          And Disposition Of Government Property

          Activities Involved:
          (a)  Review Reimbursement Vouchers To  Ensure
          That Acquisitions  Are  Authorized And  Itemized  On
          EPA Form  1730-1.

          (b)  Review Contractor Inventory And Recommend
          Appropriate  Disposition Of Property To  Property
          Administrator

          (c)  Inspect Property  Status  And Use At  Contractor
          Site;  ensure Appropriate  Preventative  Maintenance.

          (d)  Coordinate With  Contractor,  Contracting Officer
          And Property Administrator On  Desired  Changes,
          Alterations,  Returns,  Transfers, Or  Trade-ins Of
          Property.

          (e)  Ensure Filing Of Information To Property
          Administrator Or  Contracting Officer If  Property
          Is Lost, Stolen Or Damaged.

          (f)   Assure Appropriate Disposal,  Return Or Transfer
          Of Government  Property  At  Contract Completion.
PCMD 9/89                         11-24                         348

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        PROPERTY CERTIFICATION
         I Certify That The Listed Property Is Free Of
         Biological, Radioactive, Chemical, Or Any
         Other Contamination Hazardous To Health
         And That The Property Is Safe For Disposal
         And Reuse.
         Signature
         Title
         Date
PCMD9/89                    11-25                    349

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aT» •^••jm wuMmpjn. OC 20*50 ~
tiPSf CHr\ Report of Nonexpendable Government
Property Acauired bv Contractor
Instructions to Cofnr&ctoff!
a) Submt original to Property Administrator.
b) A copy of this report Mini be attached to voucher submitted to Financial
Management Division to support dabn tor reimbursement
LM baton each ante* o»
Oly

1C
P«
NomentUtua/OneOfOon (Mud* mfa. none)
Item, description, manufacturer's name
EXAMPLE:
Computer, personal, portable laptop -Tandy
NOTE: It you have a large number of acquisitions,
you may use this form as a cover sheet Fill in all
information on the fmin except the Item data, and

•fitly KIM ttw itMaiMfiti 1 DM made on Ma torn and il otto

Htm ma Addrraof EPA Pnpany Admimatraiar
Designated by a clause In your contract
DIM
Asquirad
MO-OA-YR
lybnufacfuraf'ft
Modal
Numtaw
GAwity
MFC
Manutacturar-i
SaiW
Numbar
GVanty
MfG
EPA
Daeal
Number
Oecalt
pfovktod
by EPA.
Contract Numbar
SaffoptamiO"/
Conu •dAr • Vouohv No.
Xou assign M>
bPhyilealyLaoMad
O^tf mm ifciMiifclan
Oow tt^MBriaiDiy
EPA
Asoounl
Numbar
Provided In
your contract.
See page 47
tor more

CcctfUcrton
hmMn «Mr«M m tn», Mounli. *nd ooraplil*. 1 Kknawtadg* awl iny knowingly Id
PurctittA Autftofny
OauM NxntMr of Contract
Clause or mod. t authorizing property
Conttacting Offioafi LMM of Appraral Quad:
Fill In date of letter (attach copy)
OnartfaaMnJ
EMB/wto.' property Justification (attach oopv]
toport Number
Youaaalgnlhla
Date prepared

Contractw'*
PO Numbar to
Wndor/Mta
Pure/use
Order* you
assigned
when the Item
was ordered.


Unit Cost
COST a/ the
A&mt
including
tax, shipping
and/or
handling.
Round off to
nearest dottai


IpflmtM^ wl vtMibabtui 4 ^•|^^aa«iiUli«4
floor contacf person:
HOT an Ef A representative
rma
TUeolslgnee
EPA Muchar Numbar
CRAwffiasstan

Data
EPA wilt date
                                                                                                                                                                                                  CO
                                                                                                                                                                                                  CO
                                                                                                                                                                                                  CO
                                                                                                                                                                                     (0
                                                                                                                                                                                     o
                                                                                                                                                                                     M
                                                                                                                                                                                     • •
                                                                                                                                                                                     m
                                                                                                                                                                                     5
              CPAronn 1730-1 (RM.»«8) Pnwioiiaadillonaaraobaolaia.
I
 
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Management

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                                           Chapter 11
                          FINANCIAL MANAGEMENT OF CONTRACTS
              The degree of financial management required in monitoring contracts is directly
       related to the type of contract and the amount of risk assumed by the Government.  The
       greater the risk which EPA is bearing, the greater must be our oversight.  Thus, in a
       firm fixed price situation where the Government bears almost no risk for the cost of
       performance, the contractor has a strong incentive to perform the contract in the most
       economical way.  Little financial monitoring is needed.

              Under cost-type contracts, however, the contractor has little incentive to control
       costs, as he or she will be reimbursed for whatever he or she spends in doing the work
       barring a determination that costs are unreasonable or unallowable.  Most of the  risk in
       this situation  is borne  by the Government and a significant amount of oversight is
       required.   A time-and-materials,  labor-hour, or fixed-rate indefinite-quantity for
       services contract is of even more concern, for the contractor has a direct  incentive not
       to control costs or perform efficiently, because every additional hour of labor charged
       will result in additional profit.

              Federal employees have a responsibility to monitor the efforts of contractors in
       order to prevent waste of  public funds and to obtain the required services within the
       amount budgeted. Therefore, the importance of diligent financial management of
       contracts cannot be  emphasized too strongly. This chapter provides guidance to Project
       Officers on their role in this activity.

       11.1   Cost-reimbursement  Contracts

              Under EPA cost-type contracts, there is  a requirement  for the contractor to
       submit a combined  monthly technical and financial progress report.  While  Project
       Officers, Work Assignment Managers and Delivery Order Officers might properly be
       particularly concerned about technical progress, the financial status of a  project  is of
       equal importance.   Project Officers are responsible for reviewing the financial portion
       of the report  each month and reporting to their Contracting Officer any problems they
       see developing.

              Format and content of the financial reports differ in a number of respects
       between term form  and completion  form contracts.  Term form (level of  effort)
       contractors are required to include the following  information  each month:

              (1)  Cumulative costs and direct labor hours expended from the effective date of
                  the contract through the last day of the current reporting month.  A
                  cumulative  incurred  cost-per-direct-labor-hour-average computation
                  (actual "loaded" contract cost per labor hour) will be included, with a
                  comparison of the result to the cumulative average cost per direct labor hour
                  derived from the estimated cost of the contract.

              (2)  Actual costs and direct labor hours expended during the current reporting
                  month.

              (3)  Estimated costs and direct labor hours to be expended during the next
                  reporting  period.
PCMD9/89                                       1                                             351

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              (4)  Actual costs and direct labor hours incurred for each work assignment
                  issued and estimates of costs and staff hours required to complete each work
                  assignment.

              Work Assignment Managers and Delivery Order Project Officers should review
       the information for their own work assignments  and delivery orders, while Project
       Officers need to be concerned with the contract as a whole.  Project personnel should pay
       particular attention to the average incurred cost per hour versus the estimated cost  per
       hour, as this will help highlight any potential problem of the funding being depleted
       before the hours have been expended. (See sample on page 326).  This may signify
       excessive use of higher labor categories than necessary or anticipated.  Diligent
       monitoring of remaining costs and hours is a must, and Project Officers should keep
       track of actual costs and hours expended versus the amounts in the contract.  If it
       appears that more than 100% of the contract hours will be required, preparation should
       begin as early as possible for supplemental contract support.  In most cases, this will
       have to be obtained competitively, which involves a substantial lead time before award.

              Individual work assignments should be  monitored  from the perspective of
       percentage of completion compared to the actual effort and costs expended. If a work plan
       budget was prepared by the contractor, the financial status should be compared against
       that. For example,  if  at 25% of completion of the effort, 50% of the estimated hours  and
       costs have been expended, the Contracting Officer may have to increase the number of
       hours on that work assignment, and the Work Assignment Manager's own cost estimate
       will have to be adjusted. The Contract Project Officer needs to be  aware of this as well,
       in order to track the financial status of the contract as a whole.  The total contract hours
       and dollars, in fact, are the controlling  factors  in financial management of a  term form
       contract.

              Under  a completion-form contract, the monthly financial  progress report will
       include a graph showing the actual and projected rate of expenditure against the total
       estimated cost of the contract.  (See sample on page 327.)  This graph will enable
       Project Officers to track the rate of expenditure each month, and spot potential  problems
       before they occur.  The contractor's projected cost to complete the effort should be
       compared to the remaining available funds, to determine whether or not additional funds
       will be  required before the contract is completed.

              Monthly vouchers are another good way to identify potential problems. Vouchers
       break down the monthly expenditures by  cost element (i.e., direct labor, materials,
       subcontracts, indirect expenses,  etc.), which makes it easier to spot where the  higher
       level of spending has occurred.  If further detail  is necessary, the Project Officer should
       request an explanation from the contractor and back-up documentation, e.g., copies of
       vendor invoices, a breakdown of the direct labor charges,  etc.

              Project Officers should also request Work Assignment Managers and  Delivery
       Order Officers to review and sign off on contractor invoices routinely, since these
       individuals are most  likely to be aware of contractor performance. Sample forms for
       Project  Officers to use in  such  certification are included  on pages 328-30.

              Where it is evident that potential problems exist,  the Contracting  Officer should
       be informed immediately.  If only minor cost growth trends  are indicated, they may be
       susceptible to correction.  For example, the Project Officer might be able  to suggest to
       the contractor that lower levels of personnel are acceptable for less critical  portions of
       a project, or convince him that fewer trips  need to be taken at contract expense.
PCMD9/89                                       2                                             352

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        Perhaps the contractor is simply not managing the contract in an efficient manner.
        Measures can be taken to alleviate these types of problems.

               However, if corrective action will not prevent the funding from being depleted
        before the end of the period of performance, decisions regarding additional funding or
        reducing the scope of the contract will have to be made. This should be done as early as
        possible, and the decisions will have to be made jointly between the Contracting Officer
        and the Project Officer.

               All  cost-reimbursement contracts contain a clause  entitled "Limitation  of Cost,"
        which limits the Government's obligation to the amount set forth in the contract.  (See
        page 341 for text.)   It also relieves the contractor of the obligation to proceed  any
        further once the estimated cost has been expended.  (When the contract is incrementally
        funded, the "Limitation of Funds" clause governs,  relieving the contractor from
        proceeding once the amount funded is exhausted. See page 343 for text.)  And,  both
        clauses require the  contractor to inform the Contracting Officer immediately when  75%
        of that amount will be exceeded within  the next 60  days, or any time he or she believes
        that the total cost for performance  will be either greater or substantially  less than had
        been included in the contract.  This notification allows the Government to avoid a crisis
        by making a decision about what to  do before the funds are actually depleted.

               If a contractor's costs exceed or are expected to exceed the estimated cost in the
        contract, the contract is in a cost overrun situation.  Legally, by the terms of the
        contract, the Government is not obliged to pay  the overrun  if the contractor has failed to
        notify the Contracting Officer.  Formal notification  of  a possible overrun  is required by
        the "Limitation of Cost" or "Limitation of Funds" clause.  However,  if the Government has
        other ways  of being aware of the situation (e.g., through monthly  reports or vouchers),
        and by  silence or other action encourages the contractor to continue working, the courts
        and the Boards of Contract Appeals have ruled that such action (or inaction) effectively
        obligates the Government to reimburse the contractor for the additional costs.
        Therefore, Project Officers must take  precautions  to  refrain from encouraging any
        continuance of work once funds have been exhausted.

        11.2  Time-and-Materials,  Labor-Hour,  and  Fixed-Rate  for  Services
             Contracts

              The monthly reporting requirements for time-and-materials, labor-hour,  and
        indefinite  delivery/indefinite  quantity fixed-rate services contracts differ somewhat
        from those  for cost-reimbursement contracts.  The following information is required to
        be included:

               (1)  Cumulative costs and labor hours expended from the effective date of the
                  contract  through the last day of the current reporting month.

              (2)   Actual costs and labor hours expended during  the current reporting month.

              (3)   Estimated costs and labor hours to  be expended during the next reporting
                  period.

              (4)   For  indefinite quantity contracts, percentage of work ordered  and completed
                  during the reporting period, actual  costs and direct labor hours incurred for
                  each delivery order issued, and estimates of costs and staff hours required to
                  complete each delivery order.
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              All contracts in this category contain an amount which represents the maximum
       liability of the Government, and beyond which the contractor may not charge EPA. A
       fixed rate, indefinite quantity contract also contains a minimum amount which is
       guaranteed to the contractor unless the contract is  terminated.  Between the minimum
       and maximum amounts, the Government will issue delivery orders for services within
       the scope of the contract.

              These contracts typically include a provision that establishes the agreed hourly
       rate of compensation for each category of labor.  The rate includes direct labor costs,
       indirect costs, and profit.   Estimates of the number of hours to  be utilized in each
       category are set forth  in the contract.  The Government may order up to these ceiling
       amounts. (When total amounts are set forth in each delivery order, however, they are
       treated as ceilings on  hours in each labor category.) Each rate  also represents a range of
       actual salaries within each labor category.  This means that the contractor may earn a
       different  amount of profit based on the salary of the employee actually used to perform
       the work. For example, the category average  is $15 per hour, but  the actual salary
       range in  this category is $14 - $16. John S. is at the bottom end of the scale making
       $14 per hour while Sue T., in the same labor category, earns $16.  The fixed rate in
       this category  is $15  direct labor + $15 (100%)  in indirect costs + $2.40 (8%)
       profit,  or $32.40.

              The following breakdown shows what happens to the contractor's profit margin if
       the contractor uses the lower paid employee to perform work on the contract:
              total fixed rate

              direct labor

              indirect costs (100%
              of direct labor)

              profit
                                    category average
$32.40

$15.00


$15.00

S 2.40
John S.
$32.40
$14.00
$14.00
$4.40
M5%1
SueT.
$32.40
$16.00
$16.00
$ .40
M.25%\
              Obviously, it is to the contractor's advantage to utilize John S. on the contract,
       because the contractor receives 15% profit instead of 8%.  But what does this mean for
       the Government?  Are we really getting the  quality of service we require?

              The fact that John S. earns $2.00 less per hour than Sue T. probably indicates
       that he  is somewhat  less experienced,  and may require more hours to perform the work,
       thereby earning  more profit for the contractor.  But the contractor has the right to
       assign John S. to the contract provided he meets the minimum qualification standards,
       and the higher profit incentive means it is likely he will do  so.  And John's lesser
       capabilities may result in more time required on the project.  Every additional  hour
       spent means another $4.40 in profit returned to the contractor.  Clearly, the contractor
       has no incentive to control the total number of hours expended on a project, provided the
       contractor stays  within the ceiling of the  delivery order. And, since ceilings are often
       established based only on the Government's best estimate, they sometimes may not equate
       to what the work actually costs.
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              For these reasons, adequate surveillance of performance is necessary by both
       EPA Project Officers as well as Contracting Officers.  It is perfectly acceptable to pay a
       visit to the contractor's  facility if feasible, and survey the work being performed.  The
       Contracting Officer should be notified before the visit.  Ask for labor records or find out
       who is working on the contract.  Many contracts require submission of staff resumes.
       Monthly financial reports should be studied to spot problems.  And invoices or vouchers
       should be reviewed for information on each labor category. To avoid reaching  ceilings
       prematurely, Project Officers should keep a running check on total hours in each
       category, both expended and estimated.  It is also important to monitor the costs of
       travel, materials, and other direct costs.  This  attention is critical, because if  the
       contract or delivery order ceiling  is reached while a project  is still in progress, EPA
       may not realize any value from the work.  Ceilings cannot easily be raised.

       11.3  Financial  Management  Reviews

              The Procurement and Contracts Management Division "Blue Team" often
       performs financial management reviews on EPA cost-reimbursement and indefinite
       delivery type contracts over $5 million.  These reviews, held during the course of
       contract performance, focus on the contractor's own financial management and
       accounting procedures,  including  cost control, monitoring  of each individual cost
       element, payment to subcontractors,  etc. The cost analysts who perform these reviews
       also examine monthly progress reports and vouchers, and obtain  from the contractor an
       estimate of cost to complete performance. The  reports issued as a result of these
       reviews can be a very useful tool  in financial management, and will be made available to
       the contract Project Officer.

       11.4  Cost  Management -  The Contractor's  Job

              The information  in this chapter is designed to assist Project Officers in the very
       important function of contract financial management.   With proper attention,
       Government funds will not be wasted. The more the contractor realizes that a close
       watch is being kept on the status of the funds and  the contract expenditures, the more
       incentive there  is to be economical.  A Project Officer who continually asks  questions can
       go a long way towards preventing a cost overrun or a depletion of funds before the work
       is completed.

              When working with contractors to correct  problems  which have arisen,
       however,  Project Officers must take care to remember that  managing the contract work
       is basically the contractor's job. The proper approach is to observe this management
       activity, and require the contractor to proceed in an economical or efficient manner.  It
       is not the Project Officer's function to take over the management  of the contract and
       substitute his or  her own judgment for the contractor's.  If inefficient or wasteful
       methods are being used by the contractor, report  it to the Contracting Officer.

       11.5  Voucher  Certifications  And  Payments To Contractors

               As stated in Chapter 2, the fundamental obligation of the Government is to make
       payment to the contractor for supplies or services delivered and accepted.  Processing of
       payments begins with the submission of invoices or vouchers by  the contractor.
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       11.6  Project  Officer  Responsibilities

              It is  the  Project Officer's  responsibility to verify contractor invoices/vouchers.
       Government personnel have a responsibility to process these documents for payment in a
       timely fashion. Undue delay can cause financial hardship for the contractor and can
       result in the case of fixed price  contracts, in the Government's having to pay interest to
       the contractor, as provided in the  Prompt Payment Act (See section 11.8, below). All
       vouchers should  be certified and submitted to the  Financial Management Division  - RTP
       (FMD-RPT)  by the Project Officer within one (1) week of receipt.

              The Project Officer's involvement in the processing of vouchers and invoices
       differs depending upon 1) the type of contract, 2) the payment provisions of the
       contract, 3) what is being purchased, and 4) the types of appropriations and accounts
       which make  up the funding on the  contract. The following is an explanation of the
       difference in the requirements:

              (1)  Provisional Payments  Under Cost-Reimbursement Contracts and  Fixed
                  Rate  for Services Indefinite Delivery/Indefinite Quantity Contracts:

                   Provisional Payments are made subject  to final audit to determine the
                   allowability, allocability, and reasonableness of the costs paid under cost-
                   reimbursement contracts,  and to verify the accuracy of charges under
                   indefinite delivery/indefinite quantity contracts.  The following are  Project
                   Officer responsiblities for the processing of invoices/vouchers under these
                   types of contracts.

                   (a)  Immediately upon receipt of  the Project Officer Invoice Approval
                       Form (see EPA Form 2550-19 on page 332) from the  FMD-RTP, the
                       Project Officer determines whether  the payment request is
                       commensurate with the items delivered and/or services performed by
                       the contractor.  This may required  obtaining verification from Work
                       Assignment Managers and Delivery Order Project Officers.  Project
                       Officer response  is required  within  one (1) week.

                   (b)  When no exception is taken,  the Project Officer shall approve and sign
                       the Form 2550-19 and return it to the EPA Financial Management
                       Division (MD-32), Research Triangle  Park, NC  27719 for further
                       processing.  A  copy of the invoice/voucher should be retained by the
                       Project Officer for the  file.

                   (c)  If, during the review, the Project Officer takes exception to any of
                       the costs being invoiced, he/she  must prepare a memorandum setting
                       forth (a) the reasons  for the recommended suspension, and (b) the
                       amount recommended for payment,  and submit it together with the
                       invoice/voucher,  to the FMD-RTP for appropriate action.

                   (d) At the same time, a copy of the memorandum recommending
                       disallowance or suspension, and a copy of the invoice/voucher, should
                       be forwarded to the Contracting  Officer, who will investigate the
                       problem and determine the amount due and payable.  If any deductions
                       are taken, the  Contracting Officer will notify the FMD-RTP and the
                       contractor in  writing.
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              NOTE:  Approval should not be given for payment of the entire minimum quantity
                    under indefinite delivery/indefinite quantity contracts unless the Project
                    Officer has verified that the minimum has been ordered and delivered.

              (2)  Completion Voucher. Cumulative Claim and  Reconciliation Under
                  Cost-Reimbursement Contracts:

                   The completion voucher is submitted when the contractor has incurred all
                   costs under the contract.  It is a provisional voucher designated
                   "completion" and initiates  an audit of all costs incurred under the contract.
                   This voucher summarizes all direct and indirect costs incurred under the
                   contract.  The  Project Officer shall process completion vouchers in exactly
                   the same manner as provisional vouchers, as set forth above.

              (3)  Lump Sum Payments for Services. Supply, and Equipment Under Fixed-
                  Price Contracts:

                   (a) The Project Officer reviews the invoice and ascertains that the
                      contractor  has performed and/or delivered all services and/or
                      materials contracted for; and that the Government has conducted final
                      inspection of, and has accepted, all contract  services and/or materials.

                   (b) When no exceptions are taken, the Project Officer signs the Project
                      Officer Invoice Approval, EPA Form  2550-19, and returns it to the
                      FMD-RTP,  retaining the copy of the invoice for the file.

                   (c) If, during the review, the Project Officer takes exception to any of
                      the services or items being invoiced,  he/she must prepare a
                      memorandum setting forth (a) the reasons for the recommended
                      disallowance or suspension, and (b) the amount recommended for
                      payment, and submit it, together with the invoice, to the FMD-RTP for
                      appropriate action.

                   (d) At the same time, a copy of the memorandum recommending disallow-
                      ance or suspension, and a copy of the invoice/voucher, should be
                      forwarded to the Contracting Officer, who will investigate the problem
                      and determine the amount due and payable. If any deductions are taken,
                      the Contracting Officer will notify the FMD-RTP and the contractor in
                      writing.

              (4)  Progress and Partial Payments for Services. Supplies, and Equipment
                  Under Fixed-Price Contracts:

                   Partial payments refer to those made when a part of  a fixed-price contract
                   is delivered, accepted, and  paid. Progress payments are payments made
                   under fixed-price contracts that are based on the progression of work.
                  (Progress  payments on fixed price contracts are only authorized if the
                  contract states  for what the payment will be made, and if the work is
                  "priceable.")  Payment for an order under an indefinite quantity contract is
                  similar to  a partial payment under a fixed price contract,  as the Government
                  is paying for a specified number of hours  at the fixed  rates in the contract.
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                   (a)  The Project Officer reviews the invoice to ascertain that all
                        services and/or items billed have been  satisfactorily performed and/or
                        received, inspected, and accepted by the Agency.

                   (b)  When no exceptions are taken, the Project Officer approves and signs
                        the Project Officer Invoice Approval (EPA Form 2250-19) and returns
                        it to the FMD-RTP, retaining a copy of the invoice for the file.

                   (c)  If, during the review, the Project Officer  takes exception to any of the
                        services or items being invoiced, he/she must prepare a memorandum
                        setting forth (a) the reasons for the recommended disallowance or
                        suspension, and (b) the amount recommended for payment, and submit
                        it, together with the invoice, to the  FMD-RTP for appropriate action.

                   (d)  At the same time, a copy of the memorandum recommending disallow-
                        ance or suspension, and a copy of the invoice/voucher, should be
                        forwarded to the Contracting Officer, who will investigate the problem
                        and determine the amount due and payable.  If any deductions are taken,
                        the Contracting Officer will notify the FMD-RTP and  the contractor in
                        writing.

               (5)  Progress Payments Under  Fixed-Price  Contracts for Construction:

                   (a)  The Project Officer reviews the invoice and ascertains that all services
                        and/or items invoiced have been satisfactorily performed and/or
                        delivered by the contractor and accepted by the Agency.

                   (b)  If no exceptions are taken to the amount invoiced, the Project Officer
                        shall (a) sign the Project Officer Invoice Approval (EPA Form 2550-
                        19), signifying agreement with the amount invoiced, and (b) forward
                        the approved Notification form and the original and three copies of the
                        contractor's invoice to the Contracting Officer (not the finance office)
                        for further processing,  retaining the fourth copy  of the invoice for the
                        file.

                   (c)  If, during the review, the Project Officer takes exception to any of the
                        work being billed, he/she should prepare a memorandum setting forth
                        (a) the reasons for the recommended disalllowance or suspension,  and
                        (b) the amount recommended for payment, and submit it, together with
                        the invoice, to the Contracting Officer for appropriate action.

               (6)  Final Payments Under Fixed-Price Contracts for Construction.

                   The Project Officer approves the final invoice when the following conditions
                   have been satisfied:

                   (a)  Final inspection has been made.

                   (b)  All work, including the  correction of punch list items, has been
                        accepted by the Government. The  Project Officer then certifies and
                       dispatches  invoice copies in accordance  with (5) above.
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               (7) Provisional  Payments  Under Time-and-Materials and Labor-Hour
                  Contracts.

                   (a)  Immediately upon receipt of the Project Officer Invoice Approval
                       (EPA Form 2550-19) from the FMD-RTP, the Project Officer conducts
                       a review of the invoice and determines whether the payment request is
                       commensurate with the services performed and materials delivered by
                       the contractor.  Project Officer response is  required within one (1)
                   (b)  When no exception is taken, the Project Officer shall approve and sign
                       the  Form 2550-19 and return it to  the servicing finance office for
                       further processing.  A copy of the invoice/ voucher should be retained
                       by the Project Officer  for the file.

                   (c)  If, during the review, the Project Officer takes exception to any of the
                       services or items being invoiced, he/she must prepare a memorandum
                       setting forth (a) the reasons for the  recommended disallowance or
                       suspension, and (b) the amount recommended for payment, and submit
                       it, together with the invoice/  voucher, to the FMD-RTP for appropriate
                       action. At the same time, a copy of both the memorandum and the
                       voucher  should be forwarded to the Contracting Officer, who will
                       determine the amount due and payable.

               Project Officers should use  EPA Form 2550-19. Project Officer Invoice
        Approval (Page 332) to specifically state the account numbers to be charged by amounts
        on the invoice. If the entire invoiced amount is to be  charged to  a single account, that
        account number must be  stated.  If the invoice is detailed by work assignment totals and
        each total is charged to only one account, it is  acceptable to provide the account number
        next to the work assignment amounts on the invoice itself.  Where multiple accounts are
        involved, however, the amount to be charged to each  account must be noted on the form.
        Any partial payment instructions must be accompanied by an explanation.

        11.7  Guidelines for Suspension  or Disallowance  of  Amounts Invoiced

               Under the provisions of a cost-reimbursement contract, the contractor is paid
        all allowable, allocable, and reasonable costs  up to a pre-determined contractual
        maximum in  return for its best efforts to perform the work.   The costs incurred by  the
        contractor in performing the work must be allowable, allocable,  and reasonable as
        defined in the Federal Acquisition  Regulations. In  addition, cost expenditure must be in
        accordance with any special provisions of the  contract.

               The Project Officer, in reviewing costs submitted under a cost-reimbursement
        contract, must examine them from the perspective of whether the expenditure is
        attributable to the contract and what a prudent businessperson would  pay under like or
        similar circumstances. The Project Officer may recommend suspension of the cost(s)
        and recommend payment of the vouchers less the suspended cost. Prior to recommending
        suspension of costs, every effort within  the time allowed should be made by  the Project
        Officer  to obtain from the contractor the rationale' and back-up supporting the
        expenditure.  Lacking either the back-up or an acceptable rationale, the suspension
        should be recommended.
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              The contractor knows that while it has the right to manage the work effort, EPA
        has the right to "disallow" costs that are unreasonable in nature or amount. This can be
        a powerful means of persuading a contractor to manage efficiently.  This right, which is
        different from a suspension, can be exercised only by the Contracting Officer.  A
        disallowed cost is one where the Contracting Officer has made a final determination that
        the Government will not pay the cost.  When a contractor is aware that Project Officer is
        keeping an eye on costs and may raise questions, there is a greater incentive to manage
        the work effort  economically.  Indefinite  Delivery,  Time-and-Materials and  Labor-Hour
        contracts contain already agreed-to costs per labor hour.  However, even though the
        Government is generally obligated to pay  for all  hours incurred in good faith for contract
        performance, the Project Officer still may question  the contractor where  it appears  that
        excessive labor  hours are being used, or higher than required levels of personnel are on
        the job.

              The only time an exception should be taken on an invoice under a fixed price
        contract is if the items were not delivered, services were not rendered, or the items or
        services were not accepted by the Government.   Otherwise, the contractor is ultimately
        due the  full fixed price of the contract, whether paid on a partial, progress, or lump sum
        basis.

        11.8 The  Prompt Payment Act

              The Prompt Payment Act (Public Law 97-177) was designed to encourage
        Federal agencies to pay  their bills on time. Amendments to the Act incorporating
        clarifications and revisions  went into effect for all payments made after April 1, 1989.
        The Act  and its Amendments authorize the charging  of an interest penalty when payments
        are made after 30 days from receipt of an invoice or when discounts are taken after the
        discount period  has expired.  For this reason, any delays by Project Officers in
        processing invoices might cause an interest penalty to be assessed against EPA. Any such
        interest will be paid out  of the appropriate program funds.

              Although provisional, advance, and progress payments made during performance
        of a contract are not subject to interest on overdue payments, prompt payment requires
        the Agency to pay  all vouchers within 30 days after receipt.  Interest charges can only be
        assessed on partial or lump-sum payments under fixed price contracts and  final
        vouchers under cost-reimbursement and  fixed-rate  indefinite quantity contracts when
        payment is made late. Nonetheless, all employees handling vouchers should be mindful to
        make payment within 30 days of actual receipt of an invoice or the payment due date.

              On construction contracts, however, EPA is  required to pay interest on progress
        payment requests that are not paid within 14 days, unless a longer period has been
        specified in the contract to enable the Government adequate opportunity to inspect the
        work.  EPA is also  required to pay interest on any amounts which EPA has retained under
        a prime  contract clause providing for retaining a percentage of progress payments that
        are approved for release, if payment is not made by the contract date or by the 30th day
        after final acceptance. Interest is also due on all final payments or partial payments
        made a) after the 30th day after receipt of a proper invoice, or b) after the 30th day
        after Agency acceptance  of the completed work or services.

              Interest payments also do not accrue when payment is delayed because of a dispute
        between EPA and the contractor over the amount of payment or other issues regarding
        compliance with contract terms. However, the appropriate disputes procedures must be
        followed and the Contracting Officer.


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               If the contractor specifies a discount date on the invoice, EPA may take the
        discount whenever economically justified, but only after acceptance has occurred. EPA
        may not take the discount after the time specified by the contractor.

        11.9  Processing  Payments

               Submission of invoices or vouchers with documentation supporting the
        contractor's cost claims starts the payment process.  Listed below are a few suggestions
        which will help you, as Project Officers, to  expedite the payment process:

               1.  Assign an alternate Project Officer who can fill in for you during your
        absence.  This can be accomplished by designating an alternate project officer in a
        memorandum, sending the memorandum to the Contracts Office and a copy to FMD-RTP
        and the alternate project officer.

               2.  Use E-mail and/or telefax media to communicate with FMD-RTP.  In an
        emergency situation, FMD-RTP will accept  a telefax copy of the signed approval form.
        The original invoice/voucher and approval  form, however, must be forwarded to FMD-
        RTP prior to actual payment to the contractor.  FMD-RTP's E-mail ID is "EPA 3195
        (RTP.CAP)."   The  telefax  number is FTS 629-7971, or commercial (919) 541-7971.

               3.  If for some reason an invoice/voucher is "invalid," and the entire amount
        must be rebilled by the contractor, do not  return the invoice/voucher to  the contractor.
        Immediately notify FMD-RTP via phone or  E-mail,  and return the invoice/voucher  to
        FMD-RTP. FMD-RTP will return the  invoice to the  contractor and delete it from the
        delinquent file.

               4.  Contact FMD-RTP "Customer Assistance Office" immediately should you have
        any questions. This staff is responsible for serving your needs.  Hours of operation  are
        from 7:30  AM to 5:30 PM EST/EDT each workday.  For your convenience, off hour
        messages can be left through a phone service.  This number is FTS 629-1148, or
        commercial  (919) 541-1148.

               The Contracting Officer reviews all  invoices/vouchers recommending suspension
        to determine what costs should be allowed or paid. Where the contract provides for
        reimbursement of indirect costs at negotiated rates, costs must be examined to assure
        that there  is no duplication of costs between direct and indirect cost items.

               The degree of the  Contracting Officer's examination depends on the circumstances.
        Payment for questionable  items can be suspended by the Contracting Officer pending
        resolution, and over- and  under-payment can be subsequently adjusted.  Especially
        under the  Prompt Payment Act Provisions,  it is  important that the Project Officer
        promptly advise the Contracting Officer of any concerns regarding an invoice or voucher
        provided for  review prior  to payment.

               The Contracting Officer has the authority to suspend payment while  problems are
        being resolved.  (It should be noted that the Interest penalty provisions do not apply  to
        progress, advance or provisional payments made to the contractor, but do apply to the
        final payment.)  The potential adverse impact of the Contracting Officer's failure to
        exercise this important right on behalf of the Government was illustrated in a recent
        case where a contractor was allowed  to recover interest on over $34,000 in holiday pay
        expenses as a fringe labor cost on the basis of its proof that holiday pay was
        contractually excluded from  overhead  rates as an indirect cost.  In part, the contractor's


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        proof was based on the fact that the Project Officer responsible for approval and
        certification of invoices routinely approved  requests for holiday pay during more than
        half the contract's duration.  This case illustrates the need for clear expression of
        contract provisions regarding costs, complete understanding of such provisions by
        persons authorized to approve and certify invoices, and immediate communication
        between the Contracting Officer and his or  her authorized representative in the event of
        any questions.

              A detailed audit is conducted, in most cases, prior to final payment of cost-
        reimbursable contracts.  The Contracting Officer will  seek clarification and justification
        of any items of cost questioned by the audit. The Contracting Officer should make the
        final decision, under the "Disputes"  clause,  to resolve the matter if agreement  cannot
        otherwise be reached.  Acceptance of final payment releases the government from any
        claims against it by the contractor.  However, the government should also obtain a signed
        release from the contractor.

        11.10  Monitoring  and  Control  of  Government  Property

              Many government contracts do not involve any  government property. In some
        contracts, however, monitoring the purchase, use and  disposition of government
        property is  a significant financial responsibility and  needs be taken quite seriously by
        the government monitor.

              There  are a number of  activities involved in monitoring and controlling
        Government property in the possession of contractors which require Project Officer
        involvement. These  are summarized below:

               (1)  Review of  Reimbursement Vouchers

                   Vouchers submitted by the contractor under cost-reimbursement  contracts
                   are forwarded to  the Project Officer by the Financial Management  Office for
                   review and approval of contractor-acquired Government property  as well  as
                   other costs claimed.  A copy of any such voucher must also be forwarded by
                   RPT to the Property Administrator as a means of notification of equipment
                   receipts.  All direct charges to the contract for acquisition of nonexpendable
                   equipment and material must have been previously authorized within the
                   contract.

                   Such acquisitions must be individually itemized on EPA  Form 1730-1,
                   "Report of Nonexpendable Government Property  Acquired By  Contractor", to
                   show the required personal property management information. (See sample
                   in Appendix and on  page 350.)  Those items acquired but not authorized
                   under the contract should be brought to  the attention of the Financial
                   Management Office, the Contracting Officer, and  the Property Administrator.
                   If  the Project Officer determines that an acquisition was not required nor
                   authorized for the performance  of a contract, he should  recommend to the
                   Contracting Officer and  Financial Management Office that  the  contractor not
                   be reimbursed for the purchase.

               (2)  Inventories

                   (a)  The Property Administrator requires  annual, final, or if  necessary,
                       special inventories from contractors having  contracts under which
                       property has been  furnished or acquired. The inventory  is performed


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                       by the contractor and includes property associated with particular
                       contracts.  The process includes reconciling the inventory with the
                       Property Administrator's records.

                       Annual inventories include  all  accountable property (i.e.,  nonexpendable
                       personal property with an acquisition cost of $1000 or more and
                       sensitive items costing  $300 or more) acquired, furnished, and/or
                       rented/leased.  Final inventories also include accountable items,  as well
                       as expendable items not consumed during the performance of the
                       contract, regardless of their value.  The amount of accrued lease  credits
                       for leased property are included on the final  inventory.  A copy of the
                       final inventory is furnished by the Property Administrator  to the
                       Project Officer for disposition recommendation.  Annual and special
                       inventories are available to the Project Officer on request.  The  Project
                       Officer may recommend that the Agency:

                             (!)   reassign the  inventory or a part thereof to another contract;

                             (ii)  reassign inventory to a licensee by means of a Revocable
                                  License Agreement for a loan;

                             (iii)   have the inventory returned to the sponsoring program; or

                             (iv)  report the inventory as excess to  the needs of the
                                  sponsoring program.

                   (b)  If the property is installed so as to necessitate  removal and/or
                       restoration, the contractor should provide the  Property  Administrator
                       with estimated costs of removal and restoration and with a list of actions
                       required (e.g., disconnection of utilities, use of crane, special handling
                       equipment, etc.).  The Project Officer should advise  the Property
                       Administrator of any and all unusual circumstances related to the
                       inventory.  For example, is the property contaminated  or unsafe for
                       further use? Do any odors exist that could prohibt further use?  How is
                       the property installed (underground,  in a body of water)?

               (3)  Inspections

                   (a)  During site visits,  the Project Officer should ascertain or verify the
                       status of both  contractor-acquired and/or Government-furnished
                       property that is in  the possession of the  contractor.  The Project Officer
                       should also assure that  the contractor has affixed Agency property
                       number decals to Government equipment in  the contractor's possession.
                       In addition, a positive determination should be made that the property is
                       being used according to the contract performance requirements and is
                       still needed for performing  the contract work. (Note: Equipment not
                       required for performance is to be reported by the contractor to the
                       Property Administrator for  coordination with the Project Officer as to
                       future needs.) If equipment is not required,  the Project Officer may
                       recommend it be:  (1) assigned to another EPA contractor, (2) assigned
                       to a licensee through a Revocable License Agreement;  (3) returned to
                       the sponsoring program; (4) made available to  another EPA program;  or
                       (5)  declared excess to the  program needs.
PCMD 9/89                                         13                                           363

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                   (b)  The Property Administrator will coordinate all disposal transactions
                       with the contractor  after receiving written instructions from  the
                       Contracting Officer and advice from the Project Officer.

               (4)  Preventive Maintenance

                   Project Officers should verify that preventive maintenance is performed on
                   a regularly scheduled basis by the contractor in accordance with approved
                   property  system procedures  to prevent malfunctions and  to correct minor
                   defects before they result in serious consequences. An effective preventive
                   maintenance program must be established by the contractor, and records
                   must be maintained to disclose the maintenance actions performed and
                   deficiencies discovered as a result of inspections.

               (5)  Changes. Modifications,  or Alterations to Property by Contractors

                   (a)  A Project Officer desirous of  requiring or allowing a  contractor to
                       modify or alter property  in the contractor's possession should request
                       authorization from the Contracting  Officer  before the actual transaction.
                       The Property Administrator will present  the  contractor/Project
                       Officer's request to the Contracting Officer to a three-member panel for
                       approval.

                   (b)  Contractors may  not modify  or alter any  property until written
                       approval is received from the Contracting Officer.  Contractors may be
                       liable when Government property is damaged or destroyed,  or when
                       there is evidence of unreasonable use or consumption.

               (6)  Return/Transfer of Property

                   (a)  If property is to be returned to the  Government before completion
                       of the contract,  both the Contracting Officer  and the Property
                       Administrator must be advised promptly in writing before the
                       transaction occurs so that an  adjustment in accountability is made to the
                       contract.

                   (b)  If the need arises to transfer  an item of property from one  contract
                       to another, the  Contracting Officer and the  Property Administrator for
                       both contracts must  be advised in writing before the  transaction occurs
                       so that all records (both contract and property) can be modified.
                       Detailed property  information  should be included in the correspondence
                       to assure  that the proper item is transferred.

               (7)  Trade-in  of Property

                   The contractor should  first discuss the need or reason for a trade-in of
                   property with the Project Officer.   If there are no  reasonable alternatives,
                   such as reassignment of  the  needed item from  in-house inventories to the
                   contractor, the Project Officer should advise the contractor to acquire quotes
                   for purchase prices with  and without trade-in.  Once the quotes  are acquired,
                   they should be submitted to the Contracting Officer for review and approval.
                   The Contracting Officer may review the transactions with the Property
                   Administrator to determine whether outright purchase or purchase with


PCMD 9/89                                         14                                           364

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                   trade-in option is the most beneficial to the Government.  Once the
                   Contracting Officer determines the appropriate method, a contract
                   modification will be  issued to authorize the contractor to acquire the
                   property.

               (8)  Lost. Stolen, or Damaged Property

                   When accountable equipment is lost, missing, or damaged, a comprehensive
                   report  must be filed with the Property Administrator by the contractor
                   within three days  after the Contracting Officer determines the actual status
                   of the property. All the circumstances surrounding the transaction should be
                   outlined, including names of individuals involved in the  investigation,  their
                   title, and organization. The local police and the FBI must be advised of any
                   EPA property suspected of having been stolen.  Damaged property should be
                   retained by the contractor until written notification is received from the
                   Contracting Officer relieving  him of accountability.  Attached to the report
                   for missing property should be copies of police and FBI reports.

                   A report of lost property should include a statement indicating what search
                   was made and which responsible individuals were contacted  in attempts to
                   locate the property.

                   Any given case involving lost, missing or damaged property will be
                   considered open until the contractor receives a written response from the
                   Contracting Officer.

               (9)  Suspension of Payment

                   Whenever the Property Administrator has problems with the contractor in
                   acquiring final inventories, information to confirm shipment, or
                   transactions relating to lost, missing, or damaged items of Government
                   property, a memorandum will be provided to the Contracting Officer
                   recommending: (i) withholding of fee, (ii) that a given amount be suspended
                   from the next voucher; or (iii) that  the amount of the item in question  be
                   denied until the problem can be resolved. The Property Administrator will
                   furnish the Project Officer copies of all correspondence.  The Contracting
                   Officer will notify the Financial Management Office of what action to take
                   until the problem  is resolved.

        11.11   Disposal,  Return,  or  Transfer of  Government  Property

               At the end of the contract period of  performance, Government-owned property
        must be removed from the contractor's possession unless title has been vested in the
        contractor or a follow-on contract is awarded.  The contractor can purchase the property
        from EPA.  In most situations the property will either be  returned to EPA or transferred
        to a new contractor.  However, if there is no longer a need for an item, or it is no longer
        useable, the Contracting Officer may authorize it be abandoned or disposed of.  In all
        situations, it is imperative that the Property Administrator be advised of the
        recommended disposition of the property.  He or  she will make the appropriate
        arrangements and coordinate  with the contractor.

               Upon completion, certain contracts require that any Government property which
        has been exposed to hazardous or toxic substances must be certified by the Contractor
        that it is free  of biological, radioactive, chemical or any other contamination hazardous


•3CMD9/89                                        15                                           365

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        to health and that the property is safe for shipment or acquisition by others. The
        following certification must be signed by an authorized official of the contractor for each
        excess declaration transaction or for the final inventory and forwarded to the Property
        Administrator with  a courtesy copy to the Project Officer:
                                    PROPERTY CERTIFICATION

               I certify that the listed property is free of biological, radioactive, chemical,
               or any other contamination hazardous to health and that the property is safe
               for disposal or reuse.
               Signature
               Title
               Date


               When the contractor is unable to decontaminate the property for shipment, the
        condition shall be identified on the final inventory or by special letter to the  Property
        Administrator. A copy of such information will be sent to the Project .Officer who should
        provide information to the Property Administrator recommending further procedure to
        process the property.  This information will be submitted to the Contracting Officer.

               Once the Property  Administrator receives disposal instructions from the
        Contracting Officer, the contractor will be advised as to how to dispose of the property.
        The  Property Administrator will determine whether the property is  needed within the
        Agency or whether it is excess to EPA's needs, and will advise the Contracting Officer.

               Sale of Property

               Specialized equipment needed for a contract which cannot be used by EPA because
        of its specialization may  be authorized for purchase by the contractor.  A contractor may
        be authorized to secure at his expense the services of an independent appraiser,
        acceptable to the Government, to evaluate and determine the current on-site, fair
        market value of the equipment. The contractor will then credit the contract for the
        amount estimated by the appraiser, thereby transferring title to the contractor.  These
        transactions usually take place at the end of the contract.

               Disposal of Installed Personal  Property

               Installed personal properly  falls  into  three  categories.  The first is property that
        can  be readily removed from the contractor's facility with simple labor  services (i.e., it
        is not installed into any utilities, and it requires no restoration). The second  category  is
        property that is installed in the contractor's facility and that requires restoration of the
        contractor's premises.  The third category is property installed into (i) contractor's


PCMD9/69                                          16                                            36C

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        equipment and/or equipment in the possession of the contractor but owned by another;
        (ii) EPA equipment authorized for use under another contract for which the period of
        performance has not expired.

               A  determination regarding restoration of the contractor's facility or equipment
        should be made by the Contracting  Officer and  incorporated into the official contract at
        the same  time the property is  authorized in the contract.

               Qn-Site Transfer of Equipment to a New Contractor

               The transfer of Government-owned facilities or property between two
        contractors requires extremely close coordination by both the Project Officer and
        Property Administrator. Both  the present contractor and the new contractor must
        conduct their own physical inventories independently of each other and submit their
        findings to the Property Administrator for reconciliation and resolution.  The inventory
        from the present contractor is used as its final  inventory, and if completed to the
        satisfaction of  the  Property Administrator,  authorization of contract property
        administration closeout is granted.

               The inventory provided by the new contractor is used to ensure that the
        Government-furnished  property is accurately stated in the  contract and any problems
        are resolved with the  previous contractor before contract property  administration
        release.  Many contracts involve significant inventories, and it is to EPA's advantage to
        ensure that the new GFP  listing in the contract is totally correct.  Discrepancies between
        the old and new contracts may require the issuance of a contract modification to the new
        contract to reflect the differences.   Project Officers  are requested to assist in  resolving
        any overages and/or shortages reported by  either contractor and, if necessary, in the
        preparation of  supporting documents to determine liability.
PCMD 9/89                                         17                                            367

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                                      FAC 84-7            APRIL 30,1985
       PART 52—SOLICITATION  PROVISIONS AND CONTRACT  CLAUSES
                                           52.216-7
         Contractor -shall provide complete details to support
         any claimed reduction in refunds.
           (3) If the Contractor fails to submit the quarterly
         statement within 45 days after the end of each quar-
         ter and it  is later determined thai the Government
         has  overpaid  the  Contractor, the Contractor  shall
         repay  the  excess  to  the Government immediately.
         Unless repaid within 30 days after the end of the
         statement submittal period, the amount of the excess
         shall bear interest, computed from the date the quar-
         terly statement was due to the date of repayment, at
         the  rate  established in accordance with the Interest
         clause.
         |(h) Subcontracts.  No  subcontract  placed under this
       contract may provide for payment on  a cost-plus-a-
       percentage-of-cost basis. The Contractor shall—
           (1) Insert in each price redetermination or incen-
         tive price revision subcontract the substance of para-
         graph (g) above, and of this paragraph (h). modified
         to omit  mention  of the Government and to reflect
         the  position of the Contractor as purchaser and of
         the subcontractor  as vendor, and  to omit that pan of
         subparagraph  (gX2) above relating to tax credits; and
            (2) Include  in each cost-reimbursement subcontract
         a requirement that each lower-tier pnce redetermina-
         tion or incentive  price revision subcontract contain
         the  substance  of  paragraph  (g)  above, and of this
         paragraph (h) modified as required by subparagraph
         (1) above.
         (i) Disagreements.  If the Contractor and the Contract-
       ing  Officer  fail to agree  upon  redetermined  prices
       within 60  days (or within such other  period as the
       parties agree) after the date on which the data required
       by paragraph (c) above are to be submitted, the Con-
       tracting Officer shall promptly issue a decision in ac-
       cordance with the Disputes clause. For the purpose of
       paragraphs (e),  (0.  and (g) above, and pending final
       settlement of the disagreement  on appeal, by failure to
       appeal, or by agreement, this decision shall be treated
       as an executed contract modification.
          (j) Termination. If this contract is terminated before
       price  redetermination. prices shall be established  in ac-
       cordance with  this  clause for  completed supplies and
       services not terminated. All other  elements of the ter-
       mination shall  be resolved  in accordance with  other
       applicable clauses of this contract.
                           (End of clause)
                     (AV  7-109.3(b) 1980 FEB)
        52.216-7   Allowable Cost and Payment.
     |    As prescribed in I6.307(a). insert the following clause:
        ALLOWABLE COST AND PAYMENT (APR 1984)
          (a)  Invoicing.  The Government  shall make payments
        to the Contractor when  requested as work progresses.
        but (except for  small business concerns) not more often
        thantonce every 2 weeksAin amounts determined 10 be
        allowable  by  ilie  Ldnifacting  Officer  in accordance
        with  Subpart 31.2 of the Federal  Acquisition Regula-
tion (FAR) in effect on the date of this contract and
the terms of this contract. The Contractor may submit
to an authorized representative of the Contracting Offi-
cer, in such form  and reasonable detail  as the repre-
sentative may require, an invoice or  voucher supported
by a statement  of  the claimed allowable cost  for per-
forming this contract.
  (b)  Reimbursing  costs. (1) For the purpose of reim-
bursing allowable costs (except as provided in subpara-
graph  (2) below,  with  respect to  pension,  deferred
profit sharing, and  employee stock ownership plan con-
tributions), the term "costs" includes only—
       (i) Those recorded costs that, at the time of the
    request for reimbursement, the Contractor has paic
    by cash, check, or other form of actual  payment
    for items or  services purchased directly  for the
    contract;
       (ii) When the Contractor is not delinquent  ii
    paying costs of contract performance in the ordi-
    nary  course of business, costs incurred, but no
    necessarily paid, for—
        (A)  Materials issued from  the Contractor's in-
       ventory  and  placed  in the  production process
       for use on the contract;
        (B) Direct labor;
        (C) Direct travel:
        (D) Other direct in-house costs: and
         (E)  Properly allocable and allowable indirec
       costs,' as shown in  the records maintained by the
       Contractor for purposes of obtaining reimburse
       ment under Government contracts; and
       (iii) The amount of progress payments that havt
     been paid to the Contractor's subcontractors under
     similar cost standards.
     (2) Contractor contributions to any pension, profit
   sharing, or employee stock ownership plan funds that
   are paid quarterly or more often may be included ii
   indirect costs for  payment  purposes; provided, tha
   the Contractor  pays  the contribution  to  the  funu
   within  30 days  after the close of the peruod covered
   Payments made 30 days or more after the close of .
   penod  shall  not be  included until  the Coniracto
   actually makes  the payment.  Accrued costs lor such
   contributions that are  paid less  often than quarter!'
   shall be  excluded from  indirect costs  for  paymcn
   purposes until  the Contractor  actually makes  ihi
   payment.
     (3) Notwithstanding the audit and adjustment o
   invoices or vouchers  under paragraph (g) below, al
   lowable indirect  costs under this contract shall b<
   obtained by  applying indirect cost rates established n
   accordance with paragraph (d) below.
     (4) Any statements m specifications or other docu
   ments incorporated in  this contract by reference de*
   ignaiing performance of services or furnishing of mu
   tenals  at the Contractor's expense or at  no cost t<
PCMD 9/89
                                                                                                            368

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       S2LZU-7
FEDERAL ACQUISITION REGULATION (FAR)
         the Government shall be disregarded for purposes of
      -^pa-reimbursement under this clause.
      f  '-) Small business concerns. A small business concern
      '      be paid more often than every 2 weeks and  may
       m     • and  be  paid  for  recorded costs  for items  or
       SB   -ts  purchased  directly  for  the contract,  even
              the concern has not yet paid for those items or
         (d) Final indirect cost rates. (1) Final  anni'U indirect
            rates and the appropriate bases shall be .rstablished
       • accordance with Subpart 42.7 of the  Federal Acqui-
             Regulation (FAR) in effect for the  period cov-
           I by the indirect cost rate proposal.
           (2) The Contractor shall,  within 90 days after  the
         expiration of each of its fiscal years, or by a later
         date approved by the Contracting Officer, submit to
         the cognizant Contracting Officer responsible for ne-
         gotiating its final indirect cost  rates and. if required
         by agency procedures, to the cognizant audit activity
         proposed final indirect cost rates for that period and
         supporting cost  data specifying the contract and/or
         subcontract to which the rates apply. The proposed
         rates shall  be  based  on the  Contractor's  actual cost
         experience for that period. The appropriate  Govern-
         ment representative  and Contractor  shall  establish
         the final indirect cost rates as  promptly  as  practical
         after receipt of the Contractor's proposal.
           (3) The Contractor and the appropriate  Govern-
          -cut representative  shall execute a  written  under-
             ling setting  forth the final indirect  cost  rates.
         .... understanding shall specify (i) the agreed-upon
         final annual  indirect cost rates, (ii) the bases to which
         the rates apply,  (iii)  the periods for which the rates
         apply, (iv) any specific  indirect cost items treated as
         direct  costs in the settlement, and (v) the affected
         contract and/or  subcontract, identifying any with ad-
         vance agreements or special terms and the applicable
         rates. The understanding shall not change any mone-
         tary ceiling, contract obligation, or specific cost al-
         lowance or disallowance provided for in this con-
         tract. The  understanding is incorporated into  this
         contract upon  execution.
           (4) Failure by the parties to agree on a final annual
         indirect cost rate shall be a dispute within the mean-
         ing of the Disputes clause.
         (e)  Billing rates.  Until final'annual indirect cost-rates
       are  established for any period,  the  Government shall
       reimburse the  Contractor  at billing rates established by
       the  Contracting Officer or by an authorized representa-
       tive  (the cognizant auditor),  subject  to  adjustment
       when  the  final  rates  are  established.  These  billing
       rates—
           (1) Shall be the anticipated final rates: and
           (2) May be  prospectively or retroactively revised
  by  mutual agreement, at either  party's request, to
  prevent substantial overpayment or  underpayment.
  (0  Quick-closeout procedures.  When the Contractor
and Contracting Officer agree, the  quick-closeout pro-
cedures of  Subpart  42.7  of the FAR may be  used.
  (g)  Audit. At any time or times before final payment.
the Contracting Officer may have the Contractor's in-
voices or vouchers and statements of cost audited. Any
payment may be (1) reduced by amounts  found by the
Contracting Officer not to constitute allowable costs or
(2) adjusted for prior overpayments or underpayments.
  (h)  Final payment. (1) The Contractor shall submit a
completion  invoice  or voucher, designated as  such.
promptly upon  completion of the  work, but no  later
than one year  (or longer, as the Contracting Officer
may approve  in writing)  from  the  completion date.
Upon approval  of that invoice or  voucher,  and upon
the Contractor's compliance with all terms of this con-
tract,  the Government shall promptly pay any balance
of allowable costs and that pan of the fee Of any) not
previously paid.
    (2)  The Contractor shall pay  to the Government
  any refunds, rebates, credits, or  other amounts (in-
  cluding interest, if any)  accruing to or received by
  the Contractor or any assignee under  this contract,
  to the extent that those amounts  are properly alloca-
  ble  to costs  for which the Contractor has been reim-
  bursed by the Government.  Reasonable expenses in-
  curred by the Contractor for securing refunds, re-
  bates, credits, or  other  amounts shall  be allowable
  costs  if approved by the Contracting Officer.  Before
  final  payment under this  contract, the  Contractor
  and each assignee  whose  assignment  is in effect at
  the time of final payment shall execute  and deliver—
      (i) An assignment to  the Government, in  form
    and substance satisfactory to the Contracting Offi-
    cer, of refunds, rebates, credits,  or other amounts
    (including  interest, if any) properly allocable  to
    costs for  which  the  Contractor has been  reim-
    bursed  by  the  Government under  this contract;
    and
      (ii) A release  discharging the Government,  its
    officers, agents, and employees from all liabilities,
    obligations, and claims arising  out of or under this
    contract, except—
         (A) Specified claims stated  in exact amounts.
      or in estimated amounts when  the exact amounts
      are not known;
         (B) Claims (including reasonable incidental ex-
      penses)  based  upon liabilities of the Contractor
      to third  panics arising out of the performance of
      this contract: provided,  that the claims are not
       3246
F   /ID 9/89
                                          369

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     PART 32—SOLICITATION PROVISIONS AND CONTRACT CLAUSES
                                          52J16-.U
           known to the Contractor  on the date of  the
           execution of the release, and that the Contractor
           gives notice of the claims in writing to the Con-
           tracting Officer within  6 yean following the re-
           lease  date  or notice  of final  payment  date.
           whichever is earlier, and
             (Q  Claims for reimbursement of costs, includ-
           ing  reasonable incidental expenses, incurred by
           the  Contractor under the patent clauses of this
           contract, excluding, however, any expenses aris-
           ing  from the Contractor's indemnification of the
           Government against patent liability.
                       (End of clause)
                   (R 7-203.4
-------
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Control or CBunmienlPteperly. Form Approved. OMB No MOMO73 Expire! M 1-90 (/) -J

^jjjf Cv^rm Report of Nonexpenaaoie Government
Prooertv Acauired bv Contractor


invtnjcuof iv to Contractor:

a) Submit original to Property Administrator






b) A copy of this report Must be attached to voucher submitted to Financial
Management Division to support dalm for reimbursement.

LM below each article ol
MminiMtableoroperty

7

7
7
7
7









Nofiwnctiture/Dtvoriplion (Indudo mfg name)
Computer, personal, portable laptop • Tandy

Sampler, air. constant flow with skip - Anderson
Monitor, dust -GCA
Meter, combustible gas whh accessories • MSA
Computer, personal - IBM
$3,500 Initial acquisition cost
1 year lease e&res 11-30-89
$250lmonOi, straight lease no credits

TOTAL

NOTE: This sample Includes a sensitive Hem
and a leased Item






Dale
Acquired
77-72-88



77-7-88
77-7048
77-2-88
77-7-88



















I o>ft)fy ttwt tfw BtttMiMntt 1 hnv nwds on Vita hunt md vi it(Vonfii9nti BM
pureehaMe by line or rmpriaonment or boA under appUoibl* tan
Nvne end Addrat* of EPA Property MmMflntor
Contract Property Administrator
Faculties Management and Services DMslon
Environmental Protection Agency. MO-36
Research Triangle Pott. N.C. 27777
3 EPAFonmno-1(R**.»«8) Pmioul edition* are obaokne.


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Mvwtactuter't
Model
Number
723-7234

AB111
1000223
260
60









MtnurKturer'i
Serlel
Number
72345678

.54327
7234
735787
7234567









EPA
Oeeel
Number
098765

098767
098760
098768
f. 72345









Contract Number taporl Number
68-WM725 2
CornreMor a Voucher No. Dale
2 77-3048
Contreclor'a Name and Location Where Property
bPhtfileeJIytoeeMd
DYNATREND INCORPORATED
21 Cabot Road
Wobum. Massachusetts 07807

EPA
Aocoum
Number
7ABC33XOAR

7ABC33XQAR
7ABC33XOM
7ABC33XOAR
7BC33XOAR









Cornractora
PONumbetlo
Vcndor/Mfo
88-724

88-727
88-778
88-770
88-702

,








unit Con

f 400

7.700
7.600
7.050
'SO



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Oeute Number of Comma
Q.77
Comvttngarioor-tLeWrolApproMlOiled:
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Contact Administrator

EPA Voucher Number bale
IK
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-------
     EVALUATING PERFORMANCE
        AND DELIVERABLES
       AND GIVING FEEDBACK
'CMD9/89            12-0             3?3

-------
      CONTRACTOR PERFORMANCE
                EVALUATION
     1.   On-Site Inspections
     2.   Written Communications
     3.   Evaluation Of Deliverables
     4.   Evaluation Of Overall Performance On
         Each Work Assignment
     5.   Summary Evaluation By Project Officer
         On Contract As A Whole
                       12-1                   375
PCMD 9/89

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   GIVING CONTRACTORS FEEDBACK
             ON PERFORMANCE
    1. DON'T DELAY!  Give Feedback Immediately When
      A Problem Is Discovered.

    2. BE SPECIFIC:  Indicate Specific Problem, Using
      Specific Example(s).  Be Accurate. Avoid
      Generalities. Give Examples Of Correct Performance,
      If Possible.

    3. KEEP RECORDS:  Record Time/Date Of Feedback
      And Feedback Given. Record Contractor's
      Response. Write Memo To File Following
      Feedback Session And Give Copy To Contractor.

    4. REINFORCE POSITIVE PERFORMANCE:  Give
      Positive As Well As Negative Feedback.
                        12-2                    376
PCMD 9/89

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         GIVING CONTRACTORS FEEDBACK
                ON PERFORMANCE
                      (Cont.)

  5.  BE PREPARED: Have Agenda For All Contractor
      Meetings; Review Materials In Advance And Have
      Comments Ready.

  6.  DEAL WITH PRIME CONTRACTOR ONLY: Give
      Feedback Directly To Prime, Not To Subcontractor.

  7.  KEEP PROJECT OFFICER/CONTRACTING OFFICE!
      INFORMED.
                       12-3                    377
'CMD 9/89

-------
 OPTIONS FOR  HANDLING  DEFICIENT
    OR DELINQUENT PERFORMANCE


    1. Fixed Price Contracts: Reject Deliverable.

    2. Cost Reimbursable Contracts: Discuss Deficiencies
      With Contractor. Since The Contractor Only
      Guarantees Best Efforts, Government Must Pay
      For Reperformance. If Contractor Does Not
      Correct Deficiencies, Government Can Suspend
      Payment On Future Payments.

    3. LOE Contracts: CO Can Disallow Contractor's
      Costs If Contractor Ignored Agency's Written
      Technical Direction Or Clearly Exceeded Scope Of
      Work Requested By Agency (I.e., Contractor
      "Volunteered") Or Where Contractor Failed To
      Inquire About And Clarify Obvious Ambiguities
      Or Acted In Bad Faith.

    4. Government Can Claim Liquidated Damages If
      The Original Contract So Provided.
PCMD9/89
                                                 378

                         12-4

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                              SAMPLE

                 DELIVERABLE REVIEW FORM
     Contract-
       l. Order/Work Assignment*.
     Deliverable Due Date:	
     Date of Receipt:
     Deliverable Number & Title:
     Description of Deliverable (Exact Contract Specifications)
       (Attach if more space needed)
     Decision:  [ ] Accepted [ ] Rejected  (See Comments)
              [] Amendment Proposed (See Comments)

     Comments:

            1.   Were all specifications met, to the desired level of
                quality? If not, what is missing?
            2.   Was deliverable timely? If not timely, did delay make
                deliverable of reduced value to government? Why was
                it not timely?
            3.   What, if any, changes are needed to meet specifications
                or improve quality or usefulness?
            4.   Will any changes requested/desired affect the
                contractor's scope of work or constitute a contract
                or work assignment modification?
~CMD 9/89
     Reviewer:	Date Reviewed:	


                                  12-5                             379

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             REVOCATION  OF
               ACCEPTANCE
                   (Fixed Price)


      EPA May Revoke Acceptance Of A Deliverable
      On The Following Conditions:

           Latent Defects

           Contractor Fraud

           Gross Mistakes

           Guarantees Or Warranties Provided By
           Contractor That Are Not Met
                        12-6                   380
PCMD9/89

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            WAYS TO  IMPROVE
      CONTRACTOR PERFORMANCE
    1.   Use Of Fixed Price Contracts

    2.   Refusal To Accept Deficient Performance
        (Services Or Deliverables); Requiring Reper
        formance With No Additional Fee

    3.   Refusal To Pay Contractor Invoices Pending
        Correction Of Deficiencies

    4.   Effective Feedback On Performance;
        Appropriate Use Of Praise Or Criticism

    5.   Careful And Thorough Contract Monitoring

    6.   Periodic Performance Evaluations

    7.   Exercising Of Contract Option Years

    8.   Use of Award Fee Contracts
                         12-7                     381
'CMD 9/89

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                                                      EXHI3I7  V-4
                                                  OSWER Directive 9242.2-*'l

                                                                     (10X   I
                                                                        I   J
                                       CRCS CONTMACTOM PfftPOftMANCf SUMMANY
               • CONTRACT NO.
           1 OBJVIHV ONOIM NO.
                                                                              i NIQ1ON/USCG OISTHICT:
              4 aiLiVlMVONOfMCBUNO AMOUNT:
                      TO: CONTMACTOM I
                                              IZONfc
                                                              7. NKSPONSI LOCATION:
              I MSI
ttlM:
9. ON-SCINICOONOWATOM: (AMm «M MOM M»>
              10. OISCMIIISCOM Of WOMK:
              11. HMSONN& AND tOUIMIOlT ON SITI WITHIN MfOUlNIO MISMNSI HMD  COMMINT:
              1L WOMlOOiraNMIO SV: OICS CONTNACrOM

                SUSCONTMACTON l/l
                                  13. INITIAC COST ISTIMATI:


                                    ANAL COST:  _____
              14. ANY MOSLOMS NISULTINO «OM
                USI Of SUSCONTNACTOM?
                                 11 MASONS WM COST SAV1NOS/OV1MMUN. If ANY:
              It. .VALUATION Of CONTMACTOM-S COST CONTNOtS:
              17. DAILY COST MWOMTS;
                                      CUMMOtT.
                       ACCUMATI
                                                         V-17
PCMD ft/89
                                               12-8
                                                                                                382

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                                      _..„__,_ „  .  ,_    .     .     OSWER Directive 9242.2-0IB
                                      EXHIBIT V-4  (Continued)                       (10X87)
                                      	    'AQI20PI
                               EMCS CONTRACTOR Pf RFORMANCI SUMMARY
        CONTRACT NO.
                                                    DHJV0IT OHDBI NO.
       [it.reisoNNa.AM>
                       USB IN AN
                                                             T:
         . INTERACTIONS HTWIM IMC9 CONTMACTOM ANO OTNIM QN-SCfNI POSONNB. U.A. TAT. Wtim. 3mm
                Z 0000      = SATtSMCTOMV      C UNSATIVACTOMV
21. NKIS8AMY SAMTV MfCAUTIONS TAKMF   « VIS ~ NO
                                                        COMMMNT:
       O. UNUSUAL PttOSUMS/OCCUmSNCU AmCTINO CONTMACTOrS WRWRMANCfc
      XL OVfMAU ASSESSMENT Of CONTMCTOirS raWHIMANCS:
                                                  V-18
'CMD9/89
                                             12-9
                                                                                    383

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                                                                         EPAAR Clause
                                   AWARD FEE (APR 1984)

            The Mount of award fee cha Contractor earna*  if any*  ia  baaad on a
          subjective evaluation by tha Government of tba quality of tha  Con-
          tractor 'a parforaanca la aceordanea with tha award faa plan..  Tha
          Government will determine tha amount of award faa a vary	
          •ontha baglnning 	  Tha Faa Dataralnatlon Official
          (FDD) will uallatarally determine tha amount of award faa.  Tha FDO'a
          determination will ba in writing to tha Contractor and ia not  subject
          to tha "Maputo*" clauaa. 'Tha Government may unilaterally change  tha
          award fee plan at any time and will provide aueh chaagea ia writing to
          tha Contractor prior to tha baglnning of tha applicable evaluation
          period.  The Contractor may submit a voucher for the earned award  fee.
          Available award faa not earned during one period doea not carry over to
          aubaaquant parloda.
PCM D 9/89                                  12-1°                                    384

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    COST PLUS AWARD FEE  (CPAF)
               CONTRACTING
  Elements of a CPAF Contract:

  1. ESTIMATED =  Negotiated Cost
     COST

  2. BASE FEE  =  Fixed Dollar Amount - Normally
                  3% Or Less

  3. AWARD FEE =  Based On Negotiated Estimated
     POOL         Costs X (.07). Maximum Amount
                  Available To Award Good Perfor-
                  mance - Normally 7%
     (Base And Award Fee Amount Normally Does
     Not Exceed 10% Of The Estimated Cost.)
PCMD 9/89                   12-11                  385

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o
58
                      SAMPLE
COST PLUS AWARD FEE (CPAF) CONTRACTING
  Contract No:
                Fee Allocation  Matrix
                    Contractor:
ro
ro
EVALUATION
CATEGORY:
Sampling & Analysis
Emergency Response
Technical Support
Data Security/Risk Analysis
Program Management
Total Available Dollars
PERFORMANCE EVALUATION PERIODS
1
10%
20%
10%
10%
50%
$30K
2
30%
20%
10%
10%
30%
$35K
3
35%
20%
10%
10%
25%
$25K
4
30%
20%
15%
10%
25%
$20K
5
30%
20%
15%
10%
25%
$20K
6
25%
20%
20%
10%
25%
$35K
7
25%
20%
20%
10%
25%
$35K
8
20%
20%
25%
10%
25%
$30K
  Approved:
                                  Date:
u
8
      Chairman, Performance Evaluation Board

   PROCUREMENT AND CONTRACTS MANAGEMENT DIVISION

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•a
o
8
CPAF CONTRACT PERFORMANCE REPORTING

   REVIEW AND EVALUATION PROCEDURE
                  * Letter of Performance And Award
     FEE DETERMINATION OFFICIAL (FDO)
                  * Performance Of Evaluation Report


                  * Fee Award Recommendations
                                           CONTRACTOR
   PERFORMANCE EVALUATION BOARD (PEB)
            * Event Summary (Form No. 1900-41 A)


            * All Reported PE's (Periodically)
                                                 CONTRACTOR
         EVALUATION COORDINATOR
                  * Individual PE Report

                   (Form No. 1900-41B)
                                 * Contractor's Reports Of

                                  Individual Performance

                                  Events
         J L
              1
           J [
                 1
J L
      1
 u
 o»
     Performance Monitors

  PROCUREMENT AND CONTRACTS MANAGEMENT DIVISION

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CONTRACTNO. I CONTRACTOR
REPORTING ELEMENT
DATE OF R
TASK ORDER NO.
EPORTED EVENT
        CPAF CONTRACT INDIVIDUAL  PERFORMANCE EVENT
  PERFORMANCE EVALUATION CATEGORY
  WAS CONTRACTOR NOTIFIED ?   I   I YES
           NO   BY WHOM?
    WHEN?
  DESCRIPTION OF PERFORMANCE EVENT
 MONITOR
 COORDINATOR'S ASSESSMENT
SIGNATURE OF MONITOR
DATE
 COORDINATOR
SIGNATURE OF COORDINATOR
DATE
PCMD9/89
                                 12-14
                                                                       388

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•o
o
 to
 01
                DEFINITION  OF  PERFORMANCE

        The Performance Monitors will observe the following definitions of
        Contractor performance in reporting and judgijng observations:

        (1)  Superior                  "+"     The observation is
                                            indicative of performance
                                            which exceeds the
                                            satisfactory level.
        (2) Satisfactory                "CT     The observation is
                                            indicative of an acceptable
                                            level of performance.

        (3) Subtandard                "-"     The observation is
                                            indicative of performance
                                            which is less than satisfactory.

         PROCUREMENT AND CONTRACTS MANAGEMENT DIVISION
u
OB
to

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 Evaluating
Performance

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                                            Chapter 12
           EVALUATING PERFORMANCE AND DELIVERABLES AND  GIVING  FEEDBACK
                What is the Government's remedy if the contractor is not performing properly,
         in accordance with the terms of the contract? What should a Project Officer do if he or
         she is not satisfied with an intermediate deliverable, or the final work product?  How do
         we handle a deficiency discovered after acceptance of an item?  The answers depend upon
         the type of contract involved  and the specific provisions contained therein, as well as the
         actions of the Government during the  course of contract performance.  If the contract is a
         firm-fixed-price  type, the  contract is  usually very clear on the rights and
         responsibilities of the parties. But in  a contract for research and development, for
         example, where the Statement of Work is vague, the situation may involve  the exercise
         of judgment and discretion by the Contracting Officer.   If the contract is a cost-plus-
         award-fee contract, an intermediate performance evaluation can send the contractor a
         clear financial message.

         12.1   Evaluating  Contractor  Performance

                There are a variety of ways and points in the life of a contract  to formally
         evaluate contractor performance.  One method, the conduct of inspections, was discussed
         earlier in Chapter 10.  Conduct of an on-site inspection is appropriate whether the
         contractor is providing a service or a  deliverable.

                Evaluation of deliverables is a  second means of formal contractor evaluation.
         Formal evaluation should also take place at the conclusion of each work assignment or
         delivery order, as well as at  the conclusion of the entire contract.  And finally, for very
         large and long contracts, a schedule of periodic formal evaluation may  be built in. Award
         fee contracts incorporate such a periodic evaluation.

         12.2   Giving  Contractors  Feedback  On Performance

                The importance of prompt Government action if potential deficiencies are
         discovered during the contract performance cannot be stressed enough. The longer
         problems drift along, the worse they tend to get, the more difficult and time-consuming
         they are to resolve, and the greater the chance exists that the Government may  lose its
         contractual rights. The goal  in contract monitoring is to be aware of all situations
         arising  under the contract. Proper and timely action on the part of technical personnel
         gives the Government the  time and opportunity to make decisions and adjustments as
         problems  arise.

                Several common-sense rules apply in giving contractors feedback on
         performance.

                a.  Don't Delay. First and foremost, feedback should be immediate. Once a
                   problem is discovered, act  immediately to document the problem and inform
                  the  contractor.

                b.  Be Specific.  In giving  feedback, indicate the specific problem, using specific
                  examples. Don't use generalities.  If possible, give positive examples of the
                  desired performance, preferably drawn from  the contractor's existing work to
                  date. Be sure to be accurate.
PCMD 9/89                                         1                                            391

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                c.  Keep Records. Document the time and date the feedback is given, and the
                  nature of the feedback, as well as the contractor's response.  Write a memo to
                  the record following the feedback session, and give  a copy to the contractor.
                  (Or ask the  contractor to summarize it for you.  But if you do, be sure to
                  verify its  accuracy.)

                d.  Reinforce Positive Performance. Positive feedback reinforcing the desired
                  performance Is extremely important, particularly when it comes to making
                  the contractor  aware of exactly what the Government wants, and creating good
                  communication with  the contractor.  Be  sure to reinforce the positive  work the
                  contractor has done along with pointing out the deficiencies.

                e.  Be Prepared.  Before contractor meetings, prepare an agenda, and be sure
                  to have reviewed all  materials for the meeting and have comments prepared.
                  Identify  in advance (for yourself and the contractor) what the objective of the
                  meeting is, and what you want to accomplish.

                f. Deal Only With The  Prime Contractor.  Unless there is a contractual exception
                  (e.g.,  as there may be with some Superfund  contracts), give feedback only to
                  the prime contractor, even if the feedback relates to subcontract work. It is
                  the prime's  responsibility to  communicate feedback to its subcontractors.

                g.  Keep The Contracting  Officer Informed. When there are deficiencies in
                  contractor performance  to be communicated, be sure  to  inform the  Project
                  Officer for the  contract, as well as the Contracting Officer.  Both can advise as
                  to the appropriate way to proceed.   And it certain cases, it may be their
                  responsibility to proceed rather than yours.

         12.3  Deficiencies   Discovered  During  Performance

                 Contractors guarantee their performance  in fixed price  contracts. Fixed price
         contracts for supplies generally call for inspection during performance.  If this  takes
         place, and an item is found to  be  defective, it will be rejected  immediately and the
         contractor notified. New items will have to be produced.  If this is not done or they  are
         still defective, or if future delays can  be  clearly foreseen the contractor will be
         formally notified that the Government considers this a condition  endangering
         performance, and the  contract may be terminated for default  if the problem is not
         corrected.  Hopefully,  this will be sufficient to get performance back on track.  If not,
         the Contracting Officer has the option of  termination for default  (see Chapter 14) or of
         accepting the items which are late or defective at a reduced price or in exchange for some
         other form  of consideration.

                Under a cost-reimbursement contract, the contractor is required only  to use his
         best efforts to perform the work.   Quality is a subjective opinion, and the statement of
         work does not always clearly express  what the Project Officer had in  mind when
         envisioning the work  results.  For this reason, diligent contract monitoring is
         important.  Early discussion with  the  contractor in order to redirect the effort can  help
         avoid delivery of services which are of poor quality.  In  most cases, the contractor will
         be responsive to this  approach and will voluntarily take action to improve performance.

                When a Project Officer discovers that a contract  requirement is  not being met,  he
         or she  should call attention to  the discrepancy and first seek a voluntary commitment by
         the contractor to take  remedial action.  The Contracting Officer must be notified


                                                                                                392
PCMD 9/89                                         7

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        immediately, and follow-up action is necessary to ensure that the deficiency has been
        corrected.

              In cases where the contractor disputes the existence of the discrepancy, claiming
        the requirements of the contract are, in fact, being met, the Government must determine
        the grounds for the contractor's claim.  This must be in writing, and must involve the
        Contracting Officer at the earliest stage possible. If the Project Officer believes the
        contractor's position  is wrong or unreasonable, he or she should inform the Contracting
        Officer in writing, and the Contracting  Officer will make a decision.  If the contractor
        disagrees, the matter will become a Dispute. (See Chapter 14.)

              Failure to perform on time is another possible deficiency to watch for.
        Depending upon the situation, when a  delay is anticipated,  there might be alternative
        actions available.  Work  may be accelerated by applying greater resources, e.g.,
        personnel, overtime, or equipment. (The availability of resources and money must be
        determined by the program office.)  At times, a new technical approach or system may
        be used  to solve the problem. It is possible that the program office may find the delay to
        be acceptable.   However, the Project Officer is not  authorized to waive the requirements
        of the delivery schedule. It must also be understood that if the contract to be accelerated
        is of  a cost-reimbursement type, the accelerated effort will most probably increase the
        cost to the Government. If it is a fixed-priced completion contract  and acceleration is
        needed to avoid default,  the cost of acceleration will be borne by the contractor.

              One powerful right of the Government is the  right to suspend payment of
        authorized progress  payments on fixed price contracts unless and until satisfactory
        progress has been shown or deliveries made.  If a Project Officer is not satisfied with a
        contractor's progress, the Contracting Officer should be notified immediately.  A decision
        will then  be made as to whether progress payments should be withheld.  In cost-
        reimbursement contracts, however, the right is merely one  of suspending payment.  The
        government must  ultimately reimburse the contractor for work performed by the
        contractor in response to the government's written technical direction regardless  of the
        government's satisfaction with the work produced. The government can refuse payment
        only where Contracting Officer determines that the contractor exceeded the scope  of work
        requested, charged for hours not spent on the contract, proceeded in bad faith, or some
        similar circumstance.  Costs that are reasonable, allowable  and allocable must be paid.

              Liquidated damages are another means of adjusting for deficiencies in contract
        performance, but they must have been negotiated into the original contract agreement
        before they can  be assessed during performance. Usually,  they take the form of dollar
        reductions for each day of delayed performance.  Liquidated damages provisions are not
        often  used in EPA contracts.

        12.4  Acceptance or  Rejection

              Every contract has some type of inspection clause which sets forth the rights and
        responsibilities  of the contracting parties concerning the delivery  or performance of
        acceptable supplies or services.  The impact of the clause is dependent upon the type of
        contract involved as well as whether the contract is  for supplies or services.  Some of
        the various rights and responsibilities  are  listed below:

              (1)  The contractor is required to provide and maintain an inspection system
                  acceptable to the Government and maintain complete records of such
                   inspections.
PCMD 9/89                                        7                                             393

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               (2)  The Government has the right to inspect supplies or services before
                   acceptance.  With this right goes the responsibility to make inspection in a
                   manner that will not unduly delay the work.

               (3)  The Government has the right to reject supplies that do not conform to
                   contract specifications.  In cost-reimbursement type supply contracts, the
                   Government may, up to six months after acceptance, require the contractor
                   to replace or correct supplies that are nonconforming at the time of delivery.

               (4)  In fixed-price supply contracts, acceptance by  the Government is  not
                   conclusive with regard to latent defects, fraud, or such gross mistakes as to
                   amount to fraud.  (See Chapter  14).

               (5)  In  cost-reimbursement service contracts, if services performed do not
                   conform to contract requirements, the Government has the right to require
                   the contractor to perform the services again for no additional fee.  However,
                   the Government must pay the contractor's costs for  reperformance.

               If the products or services conform to contract requirements, they  should be
        accepted by the Project Officer.  But if they do not conform, the CO must reject them
        immediately.  To exercise its  right of rejection,  the Government must notify the
        contractor of the rejection. The notice should be prepared by the Project Officer and
        signed by the Contracting Officer. The written notice should:

               (1)  Specifically identify what is rejected;

               (2)  Identify the  basis for rejection;  that is, the specific failure to conform to
                   contract requirements;

               (3)  State what corrective action is  required; and

               (4)  State whether correction  should be  made at  the Government facility or
                   elsewhere.

               Page 378 provides a sample  deliverable review form that Government personnel
        can use to document the results of their review of deliverables and communicate it to the
        contractor. This form can be  modified to suit the individual contract needs.

               Unless the  contract provides  otherwise, acceptance or rejection must be made as
        promptly as is practical after delivery, since a  delay in such notice may,  in some
        circumstances, imply acceptance. Inspection of partial products or work in process does
        not relieve the contractor of the responsibility for correcting defects discovered prior to
        acceptance of the  final product or the completed work.  Furthermore, Government
        failure to inspect, and to accept or reject, does not relieve the contractor  from
        responsibility for a defect.

        12.5  Revocation of Acceptance

               Normally, once a product or service is accepted by the Government, acceptance is
        final and binding.   However, in a few instances, the Government has a right to require
        correction after an  item has been accepted.  One of the following conditions must be
        present:
PCMD 9/89                                        4                                            394

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                (1) Latent Defects

                   A patent defect is one that could reasonably be discovered by normal
                   inspection methods.  A latent defect is one that could not be reasonably
                   discovered using normal inspection techniques. It does not have to be
                   impossible to discover.  A defect  discoverable by special tests (X-ray) is a
                   latent defect if such special  tests  are not normally used to inspect that kind of
                   item.

                   The fact that the contractor could have very easily discovered the defect does
                   not make it patent.  Government contracting personnel or  full-time quality
                   assurance/quality control specialists  are qualified to determine  if a defect
                   discovered after inspection is patent or latent.  Only latent defects discovered
                   after acceptance are subject to correction by the contractor without cost to
                   the Government under a fixed price contract.

                (2) Fraud

                   The Government has the right to revoke acceptance if it was deceived into an
                   acceptance  by fraud.  Fraud involves an intentional deceit or falsehood.
                   Acceptance  due  to fraud may be revoked even if the defect was patent.

                (3) Gross  Mistakes

                   If the contractor's conduct with respect to a defect involves a mistake so
                   gross as to amount to fraud, the Government has the right to revoke
                   acceptance  as if there were  fraud.

                (4) Guarantees or Warranties

                   A guarantee or warranty is a promise or affirmation given by a  seller to EPA
                   regarding the nature, usefulness or condition of the supplies or performance
                   of services to  be furnished.  The  principal purposes of a guarantee/warranty
                   are to delineate  the rights and obligations of the contractor and EPA for
                   defective items and services and  to foster quality performance.  Generally,
                   warranties survive acceptance of the contract items for a stated period of
                   time or use, or until  the occurrence of a specified event, notwithstanding
                   other contractual provisions  pertaining to acceptance by the Government.
                   Thus, they allow EPA additional time  after acceptance in which to assert a
                   right consistent  with the warranty or guarantee.

                   When acceptance is properly revoked, the Government has the same remedies
                   available as when the defects are discovered prior to acceptance and the items
                   rejected  at that  time.

        12.6  Periodic Formal  Performance   Evaluations

                The conduct of periodic formal performance  evaluation is a very useful means of
        giving the contractor feedback and attempting to provide an incentive for improved
        performance.  Such evaluations can be scheduled on a routine basis (e.g., quarterly or
        semi-annually), or be tied to the completion  of work assignments or deliver orders.
        Several of the Superfund contracts have established forms for the conduct of such
        evaluations, e.g., see pages 382-3. The final evaluation of contractor performance
PCMD 9/89                                                                                      395

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        conducted as part of contract closeout is discussed in Chapter 14. A sample form for
        conducting such an evaluation is provided on page 451.

        12.7  Cost-Plus-Award-Fee  Contracts

               Another means the government has for encouraging high performance quality is
        to provide monetary incentives for good performance.  This is done through use of cost-
        plus-award fee contracts.

               All the policies and requirements covering CPAF contracts are contained in the
        Environmental Protection Agency Acquisition Regulations, Part 1516.4.   Project
        Officers can obtain a copy of these from their Contracting Officers. Presented here is a
        brief summary of the contract administration functions  relating to these  contracts.

               An award fee plan is included in the solicitation and incorporated into each CPAF
        contract. This document describes what criteria the Government will use to determine
        the fee to be awarded the contractor each period.  The following elements must be
        included:

               (1)  The base fee amount;

               (2)  The  total award  fee pool;

               (3)  Performance areas to be evaluated;

               (4)  Criteria  to be used in evaluations;

               (5)  Relative weights to be assigned to performance areas and to the evaluation
                   criteria;

               (6)  Frequency and timing of award fee determination;

               (7)  Proportion of the total award fee pool to be  available for each evaluation
                   period; and

               (8)  Procedures to be  followed (the timing  involved) in evaluating performance
                   and determining  the award fee.

               The Government may unilaterally change the award fee plan (except base fee
        amount and the total fee pool), but  must notify the contractor prior to the evaluation
        period in which any changes will take effect.  If the plan is incorporated into the
        contract, a contract modification is  required.

               A Performance Evaluation Board (PEB) is a board of EPA officials established
        before the award of an CPAF contract. These individuals perform the in-depth review of
        all aspects of contractor performance at periodic intervals (usually every 4  months)
        during the period of the contract.  They then recommend to the Fee Determination Official
        (FDO) an appropriate amount of fee to be awarded to the contractor. The FDO makes the
        final determination of the award fee.  (The  Fee Determination Official is the Chief of the
        Contracting Office which is administering the CPAF contract).  The PEB Chairperson and
        the other members   are initially appointed by the Director, PCMD; thereafter, any
        changes are approved by the PEB Chairperson. One voting member of the PEB will
        always be a representative from the contracts office.
PCMD 9/89                                        6                                            396

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               The PEB evaluates performance on the basis of Performance Event Reports (see
        page 388) which are submitted each period by Performance Monitors (individual EPA
        employees who observe the contractor's performance on a close, continuous day-to-day
        basis). Performance Monitors report on either technical or business aspects of the
        contractor's performance, and report their  observations on individual "events" which
        occur during the period, and which are  representative of contractor performance.

               Events are reported on EPA Form 1900-41B, CPAF Contract  Individual
        Performance Event (See page 388), and submitted to the Evaluation Coordinator.
        Performance monitors should assess the performance using the definitions stated in the
        contract.  The EPAAR specifies the following rating plan:

               (1)  Superior -  "+" - The performance event exceeds  the satisfactory level.

               (2)  Satisfactory  - "o" - The performance event is  acceptable.

               (3)  Substandard - "-" - The performance event is less than  satisfactory.

               However, some programs have been granted deviations, e.g., the Superfund TAT
        (Technical Assistance Team) contracts,  five levels of rating criteria are being used:
        exceptional, exceeded expectations, satisfactory, marginal, and  unsatisfactory.  These
        are summarized on pages 398-9, and accompanied by more detailed performance
        observation reports.  Emergency Response  contracts (ERCs) also have their own
        performance summary and CPAF performance event reports (see pages 400ff).

               The Evaluation Coordinator will present these reports to the Performance
        Evaluation Board (PEB), along with a summary of significant events.  The PEB will
        review  these reports against each performance evaluation category and determine the
        recommended award fee for each category.  A Performance Evaluation Report will then be
        prepared  and forwarded  to the Contracting  Officer, who will present it  to the Fee
        Determination Official for final determination of the amount of fee to be awarded  to the
        contractor.

               A  letter will then  be sent to the contractor's  general management, informing
        them of the amount and basis of the fee awarded, and any changes to the award fee plan to
        be effective during the next evaluation period.  The contractor is then  authorized to
        invoice for the award fee earned during the previous period.
PCMD 9/89                                        7                                           397

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                                                       EXHIBIT VIM 1


                               RATING GUIDEUNES FOR PERFORMANCE EVALUATION CRfTERIA
               RATWO
<
IH

IH

I
              IICfEKO

             UFtCTATKMI
             •AnSFACTOOT
            UNSATBFACTOIIY
                                                         TAT PERFORMANCE EVALUATION CMfEMA
                                h

                               •I Wort.
                                          AMOMMCMATPH
                                                                       by EPA
                                                                                       AKItnc

                                                                                                            IFFOMT
                                                                                                       fel •BOM €f HOrtl >rf I
                                                                                                                                 o
                                                                                                                                 VI
50

a
»•••
n
                                                                                                                                 (D
                                                                                                                                 K>
                                                                                                                                 CO

                                                                                                                                 (D
                                                                                                                                 
-------
                                     OSWER Directive 9242.4-01A   September 1987




                                           EXHIBIT VlI-12

                    Award Fee Percentages vs. Performance Assessment Definitions


                               PERFORMANCE  SPECTRUM

                                20	40	50	60	80	100
                    0-19      Performance below 20 is indicative of serious
                                mismanagement, negligence, and/or incom-
                                petence.  Continued performance at this level
                                may require the Government to consider contract
                                termination for cause.

                   20 - 39      Performance between 20 and 39 is substandard,
                                and requires the contractor to take immediate
                                corrective action.  Areas of adequate or better
                                performance are offset significantly by poorer
                                performance in other areas.

                   40 - 59      Performance between 40 and 59 is satisfactory,
                                with the 50 point being the expressed level of
                                satisfactory performance that can be expected
                                from a good CPAF contractor.  Areas requiring
                                improvement are approximately offset by better
                                performance in other areas.

                   60 - 79      Performance between 60 and 79 is superior.  The
                                satisfactory level is exceeded and the monitors
                                can cite only a few minor areas requiring im-
                                provement .

                   80 - 100     Performance of 80 or above is outstanding.
                                There are no significant areas of poor
                                performance and there are factors indicating
                                creativity, ingenuity, initiative, and/or
                                excellent performance under very adverse
                                circumstances.
                                               VII-38
PCMD 9/89                                                                      399

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                               OSWER Directive  9242.4-01A

                                   EXHIBIT V-4(l)
                                                                                        i»o/
                                     By:
                                                                                O Fovnul RtpOrt
                                                                                QtMrRiport
                                                                                ORmolBrMng
                                                                                QOtw(Sp«c*y)
                               ISgrannofComciar
              Dttcripdon of GTM
                     By:
                                    Mm/no*
             Rafinff 5,4,12.1
                   SgmnnolERfc
             HQ CoodrMDf• Bakatoi By:
                                  Nmafflto
             OPOAebOR
             CaMlbOi
                       •Ul I IMW D00n proMoiQ vvi M f
                         to «w nbjMl TOO wMn id arigim or
SnMt 1 Wtiitt • HdQtn Coordinator
ShMt2Whiw-OPOCopy
ShMtSBhw-TATLCopy
ShoK 4 Gram - ZPM Copy
                                            SIMM S Cwvy • Proi«t Offinr Copy
                                            SIMM 8 Mi* • Contracting Off few Copy
                                            SIMM 7 Gokfanrod • OPO (Imrim Copy)

                                                 V-25
PCMD9/89
                                                                                      400

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                                            EXHIBIT V-4(2)
COST CINTIM
ACKNOWLEDGEMENT OF COMPLETION
PERFORMANCE OBSERVATION REPORT: PART 1
CONTRACTOR: _ . . _ .
Ecology and Environment, Inc.
MWOMTINO ILIMINT:
OATIISI Of MIPOMTID OMINVATION
AFPMOX. NO. Of NOUMS
CONTRACT Na.
684)1-7368
TOO NO.
ACCOUNT Na
MMPOMMANCI IVALUATION CATIGONV:
 oucMirrioN of CONTMACTON OMIMVATION iv:
 MATING: S. 4. 3. 2. 1
    SIOMATUNI Of CONTNACTON:
                          OATI:
 OMCMirriON Of IPA OMIMVATION iv:
                                                     MAMI/riTU
 MATING: S. 4. X 2. 1
   SMMATUNf Of WA:
                                                                                 OATI:
SIONATUMI OF MOIOMAkPON COONOINATOM:
                                                                OATI:
HO COONOINATOirS IVALUATION BV.
                                                    MAMI/TITLI
MATING. B. 4. 3. 2.1
   KONATUMI Of NO:
                                                                                 OATI:
OPO ACTION:
                          D
WITH ixeirrioM
QMUICTIO
COST TO OATI:
                  OATI:
TOTAL COST TO CLOSUMI:
    ACTUAL TOTAL NOUMS:
ICIMTIFV THAT TNI ATTACMIO MATINIALS MIIT AND
MIOUIMIMINTS Of TNI BMJI
          TATL SIQNATUMIIINTIMIMI
                               ,V WrtTM ALL
                                                    TATL SIONATUMI (FINAL)
                                                                                 OATI:
                                                                                        INTIMIM
I ACKNOWLIOOI THAT I MAWI BUN MOVIOIO WITH TNI MATIMIALS AND
UMVICIIVICIPIIO IN TMI SUIJICT TOO WITHIN ITS OMMINAL OM
MIVISIO TIM! PMAMII.
                                                                                 OATI:
                                                                                        INTIMIM
        OfO SIGNATUMI IINTIMIMI
                                                                                         FINAL
                                  OfO SIONATUMI IPINAU
      1

      3  HIM
      4

      •
TATU
                                V-26
                                                                                         401

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                                                 EXHIBIT Via
                                                                         QSHER Directive 9242.2-01B
                                                                                             (10/87)
                                   CPAF CONTRACT I!
 5 EVENT
                    Oft

               CATEGORY
                                                ADJECTIVAL
CMfaOMVMTMB

            a


            *• *"•**"" •"*"

                                                                      Mil
                                                  VX-10
PCMD9/89
                                                                                                   402

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              EXHIBIT VM
                                  OSWER Oinetiv* 9242.2-01B
                                                  (10/87)
SUMMARY OF PERFORMANCE EVENT REPORTS
CONTRACT*

DELIVERY
ORDER
NUMBER

CONTRACTOR

TOTAL
HOURS

REGION EVALUATION PERIOD
mOM! TO:
RATING
EPA

COM-
IRMTOf

EVALUATION COORDINATOR
SIGNATURE
DESCRIPTIVE TITLE
OF WORK

DATE
                    VZ-16
                                                       403

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                                                                   OSWER Directive 9242.2-018
                                                                                      (10/87)
                             Preparing   an  evaluation   package  for   the   PEB   containing
                             individual  PERs and a Summary of PERs

                             Attending  the  PEB  review  meetings,  serving  as  PEB  Executive
                             Secretary,   and   presenting   information  contained   in   the
                             evaluation package.

                       Upon  receipt of  the  PERs from each Regional EPA office,  the Project
                  Officer  should review each PER.  Particular  attention  should be  given to
                  comparing  EPA's  assessments  with  the  contractor's  assessments,  whenever
                  possible.  Discrepancies in ratings should be noted  by the Project Officer
                  on  the  PER.   The Project Officer can modify the  ratings in either the EPA
                  or  contractor  PERs.  as appropriate.   Any  such  modifications  should  be
                  explained  in the box designated for "Coordinators Assessment."

                       Zn  reviewing the PERs.  the  Project Officer should assess evaluation
                  ratings  and supporting comments for consistency and  clarity.   Zf  problems
                  are  encountered,   the  Project  Officer  should   resolve   them  through
                  discussions with the CSC who originated the PER.

                       After  reviewing   and  commenting  on  each PER,  the  Project  Officer
                  should sign  and date  the  PER. and assemble it with other  PERs  from that
                  Region for submission to the PEB.

                  3.2  The Summary of Performance Evaluation Reports

                       Prior to  submitting the  PERs. however,  the Project Officer  should
                  prepare  a  Summary of  Performance  Evaluation Reports.   Exhibit VZ-4 shows
                  the form that  should  be  used for  this  purpose.   The  Project  Officer  is
                  responsible for completing this Summary,  which provides  a quick assessment
                  of  the   contractor's  overall  performance.    Contractor   and EPA  overall
                  ratings  are  lisced for each  Delivery Order  evaluated  during the  period.
                  along with a  brief description of  the activities  carried  out  under  the
                                               VZ-15
PCMO8/89

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     CONTRACT MODIFICATIONS
                1 3-0
"CMD9/89             •* w               4Q5

-------
                MODIFICATIONS

        Modifications Can Result From Any Of The
        Following Circumstances:

        -- Changing Agency Needs

        - Inadequate Specifications That Resulted In
          Inadequate Deliverables

        - Need to Increase or Decrease Funds

        -- Exercise of Options to Continue Work

        -- Extensions to Provide Additional Time

        -- Suspension of Work

        -- Equitable Adjustments
PCMD 9/89                                               407

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       CONTRACT  MODIFICATIONS
    UNILATERAL MODIFICATIONS Require Only The
    Signature Of The Contracting Officer.
    BILATERAL MODIFICATIONS Require The Signature
    Of (Both Parties) The Contracting Officer And The
    Contractor.
                        13-2
'CMD9/89                                           408

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        UNILATERAL MODIFICATIONS
     UNILATERAL  MODIFICATIONS Are Authorized
     Only In The Following Circumstances:

     -- Administrative Changes

       Examples:  Changes In Accounting  Data,
       Designation Of A New Project Officer

     -- Changes Which The Contract Itself Allows
       The Government To Issue Unilaterally

       Examples:  Change Orders Issued Pursuant
       To The "Changes" Clause, Options,
       Terminations  For Default  Or  Convenience

     -- Incremental Funding
                        13-3
PCMD9/89                                          409

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      BILATERAL  MODIFICATIONS

       Bilateral Modifications Result From Any Off
       The Following Circumstances:

       - Novation Agreements

       -- New Procurement That Increases The Scope
        Or Quantity Of Work

       -- Inspection And Correction Of Defects (Cost-
        Reimbursement Supply And R&D)

        Equitable Adjustments
                        1 3-4
'.MD9/89                                            410

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   EPfl -
     AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT
                                                                               1. CONTRACT ID CODE
                                        3. EFFECTIVE DATE
                                                            4 REQUISITION/PURCHASE REQ. NO.   IS. PROJECT NO. Of
 a ISSUED i
                                  CODE
                                                            7 ADMINISTERED 8V (If olittr Man ft
                                                                                                 CODE

CODE
                                       [FACILITY CODE
                                                                                   9A. AMENDMENT OF SOLICITATION NO.
                                                                                   9B. DATED ISM* JTCM 1 1 J
                                                                                   10A. MODIFICATION OF CONTRACT/ORC
                                                                                   i OB. DATED faujr
                                                                                                      in
                            11  THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
 l_l  The above numbered wlicititien is amended m set forth in ItMn 14. The hour and daw apecif M for receipt of Offers  LJ it
 tended
                                                                                                           U.
                                                                                                                 n« (•••
 Offers must acknowledge receipt of this amendment prior to the hour and date soeeif ied in the solicitation or as amended, by one of the following method*:
 (•) By completing Items 8 end IS. and reluming .
                                                of the emendmeni. (b) By acknowledging receipt of this amendment on etch copy of the offer
submitted: or Ic) By separate letter or telegram wh«h includes e reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDG-
MENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY REStl
IN REJECTION OF YOUR OFFER  If by virtue of this amendment you desire to change an offer already submitted, such change may be made by Wegrin
toner, provided each telegram or letter makes reference to the solicitation end this amendment, and is received prior to the opening hour end dm specified.
12. ACCOUNTING ANO APPROPRIATION DATA 0f RfCjUfeld)                                                     ~~""™~
                       13  THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS.
                           IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
     A THIS CHANGE ORDER is ISSUED PURSUANT TO: (Bptcir* •uftorfiyj THE CHANGES SET FORTH IN ITEM u ARE MAOC IN THE CON-
       TRACT ORDER NO IN ITEM 10A.
     B. THE ABOVE NUMBERED CONTRACT/OROCR IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES
       appropriation d*M. tic I SET FORTH IN ITEM 14. PURSUANT TO THE AUTHORITY OF FAR 43.103(0).
                                                                                              latek m eftoMMe I" MVln* ofl
     C THIS SUPPLEMENTAL AOREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
     O. OTHER ISp*€lf» f>p* of modlHemtto* u*4 euMorify>
E. IMPORTANT: Contractor  LJ is not,  LJ is required to sign this document and return.
                                                                                         copies to the issuing office.
14. DESCRIPTION OF AMENDMENT/MODIFICATION
                                                    •v l/CFMcHon fteadfnar 
1SB. CONTRACTOR/OFFEROR
rStfnefyi* of ptrton •ulftonmd' fo ill*!
ISC DATE SIGNED
16A. NAME ANO TITLE OF CONTHAtflNO OFFICER 1
16B. UNITED STATES OF AMERICA
MlfiMlwe of Co»tnfHn§ Officer)
Tiwe OF fftntt
ISC- DATE SlGJ
411
PREVIOUS EDITION UNUSABLE
                                                       13-'?
                                                            IDS
                                                                                            •TANDAMO FOUII30 (REV. 1C
                                                                                            Proscribed Dy OSA
                                                                                            FAR (4S CFR) 31.243

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                     Instructions for items other than those that are self-explanatory, are as follows.
   Item  1  (Contract ID Code). Insert the contract type
     identification code that appear; in the title block of
     the contract being modified.

  IrO Item 3 (Effective date).

     (1) For a  solicitation amendment, change order, or
        administrative change, the effective date shall be
        tne issue date of the amendment, change order, or
        administrative change.

     (2) For a supplemental agreement, the effective date
        shall be  the  date agreed to  by the contracting
        parties.

     (3) For a modification issued as an initial or confirm-
        ing notice of termination for the convenience of
        the Government,  the effective date and the modi-
        fication number of the confirming notice shall be
        the same as the effective date and  modification
        number of the initial notice.

     (4) For a modification converting a termination for
        default to a termination for  the convenience of
        the Government,  the  effective date shall  be the
        same as the effective date of the termination for
        default.

     (5) For a  modification  confirming the contracting
        officer's  determination  of  the amount due in
        settlement of a contract termination, the effec-
        tive date  shall be the same as the effective date of
        the initial decision.

     Item 6 (Issued  By). Insert the  name and o-jress of
    the issuing  office. If applicable, insert the appropriate
    issuing office code m the code block.

    Item 8 (Name and Address of Contractor). For modi-
    fications to a contract or order, enter the contractor's
    name, address, and code as shown in the original con-
    tract or order, unless changed by this or a previous
    modification.
    (2) Accounting classification
            Net decrease
(p)  i:ems 9. (Amendment  of  Solicitation  No.—Dated).
    and  10.  (Modification of  Contract/Order  No.-
    Dated) Check the appropriate box and  in the corres-
    pond ing blanks insert  the  number and date of the
    original solicitation, contract, or order.        -

(•i  Item  12 (Accounting and Appropriation Data). When
    appropriate,  indicate the impact of the  modification
    on each affected accounting classification by inserting
    one of the following entries.
   (1) Accounting classification
            Net increase
    NOTE  If there are changes to multiple accounting
    classifications that cannot  be placed m block  12,
    insert  an  asterisk  and the words "See continuation
 •   sheet".

(g)  Item 13.  Check the appropriate box to  indicate the
    type of  modification.  Insert  in the corresponding
    blank  the authority under which the modification is
    issued. Check whether or not contractor must sign
    this document. (See FAR 43.103.)


(h)  Item 14 (Description of Amendment/Modification).

    (1) Organize amendments or modifications under  the
       appropriate  Uniform  Contract  Format  (UCF)
       section headings from the applicable solicitation
       or contract. The UCF table of contents, however,
       shall not  be set forth in this document.

    (2) Indicate  the  impact of the modification on  the
       overall total contract price by inserting one of  the
       following entries:
       (i)   Total contract price increased by  $

       (ii)  Total contract price decreased by $

       (iii)  Total contract price unchanged.

    (3) State reason for modification.
      PCMD 9/89
    (4) When  removing, reinstating,  or adding  funds,
       identify the contract items and accounting classi-
       fications.

    (5) When the SF 30 is used to reflect a determination
       by the contracting officer of the amount due in
       settlement of a  contract terminated for the con-
       venience of the Government, the entry in Item 14
       of the modification may be limited to -

       (i)   A reference to the letter determination; and

       (ii)   A statement of the net amount determined
            to be due in settlement of the contract.

    (6) Include subject  matter or short title of solicita-
       tion/contract where feasible.


(i)  Item 16B. The contracting officer's signature is not
    required on solicitation amendments. The contracting
    officer's signature is normally affixed  last on supple-
    mental agreements.

                     STANDARD PONM IB BACK (Mv. 10-M)
                                             412

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          THE CHANGES  CLAUSE
    The Government May Unilaterally Direct A Change,
    Within The General Scope Of The Contract, In Any
    One Or More Of The Following:

     - SUPPLY CONTRACTS

         1.  Drawings, Designs Or Specifications*
         2.  Method Of Shipment Or Packing
         3.  Place Of Inspection, Delivery Or Acceptance

     - SERVICE CONTRACTS

         1 -  Description Of Services To Be Performed
         2.  Time Of Performance (Hours Of The Day,
            Days Of The Week, Etc.)
         3.  Place Of Performance Of The Services

     * This Does Not Apply To Commercial Specifications.
PCMD9/89                   13-7

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                                                    1984)                                FAR  Clause
                                (•) file Contracting Officer nay it any  time, toy
                              written Older, and without notice to the sureties, if say.
                              mike changes within the genera] scope of this contract
                              in any one or more of the following:
                                  (1) Drawings, designs, or specifications when the
                                supplies to be furnished are to be specially  manufac-
                                tured for the Government in accordance  with  the
                                drawings, designs, or specifications.
                                  (2) Method of shipment or packing.
                                  (3) Place of delivery.
                                (b) If any such change causes an increase or decrease
                              in the estimated cost of, or the time required for, per-
                              formance of any part of the work under this contract.
                              whether or not changed by the order,  or otherwise
                              affects any other terms and conditions of this contract.
                              the Contracting Officer shall  make an equitable adjust-
                              ment in the (1) estimated cost,  delivery  or  completion
                              schedule, or both; (2) amount of any fixed fee, and (3)
                              other affected terms and shall modify the contract ac-
                              cordingly.
                               (c) The  Contractor  must submit any  "proposal  for
                              adjustment" (hereafter referred -to as proposal)-under
                              this clause within 30 days from the date, of receipt of
                              the written order. However, if the Contracting Officer
                              decides that the facts justify it, the Contracting Officer
                              may receive and act upon a proposal submitted before
                              final payment of the contract
                               (d) Failure  to agree to any adjustment  shall be a
                              dispute under the Disputes clause.  However, nothing in
                              this clause shall excuse the Contractor from proceeding
                              with the contract as changed.
                               (e) Notwithstanding  the  terms and  conditions of
                              paragraphs (a) and (b) above, the estimated  cost of this
                              contract and.  if this contract is incrementally funded,
                              the funds aliened for the performance of this •
                             shall not  be. increased or considered to be increased
                             except by specific written modification of the contract
                             indicating the new contract estimated cost  and. if this
                             contract is incrementally funded, the new amount allot-
                             ted to the contract Until this modification is made, the
                             Contractor shall not  be obligated to continue perform-
                             ance or incur costs beyond the point established in the
                             Limitation of Cost or Limitation of Funds clause of
                             this contract
                                               (End of clause)
                                             (R 7-203.2 1967 APR)
                                                 (R 1-7.202-2)
                               Alttnau I (APR  1984).  If the requirement is for
                             services and  no supplies are to be furnished, substitute
                             the following paragraph (a) for  paragraph (a) of the
                             basic HtutT*
                               (a)  The Contracting Officer may  at  any  time,  by
                             written order, and without notice to the sureties, if any.
                             make changes within the general scope of this contract
                             in any one or more of the following:
                                 (1) Description of services to be performed.
                                 (2) Time of performance (i.e., hours  of the day,
PCMD9/89                      daysoftheweek.ete:).t3-8                                            414
PCMD 9/89                                                Qf ,„,

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                                                                                      FAR  Clause
                              CHANOES-T1ME.AND.MATER1ALS OR
                                      LABOR-HOURS (APR 19S4)
                             (•) The  Contracting Officer may at any time, by
                           written order, tad without notice to the sureties, if any,
                           nuke cbanges within the general acope of this contract
                           in any one or more of the following:

                              (2) Method of shipment or packing.
                           —(3) Place of delivery.
                            '  (4) Amount of Oovernment-fumished property.
                             (b) If any change causa  an increase or daman m
                           any hourly rate, the ceiling  price, or the time required
                           for performance of any part  of the work under tins
                           contract, whether  or not changed by the order, or
                           otherwise affects any other terms and conditions of this
                           contract, the Contracting  Officer shall make an equita-
                           ble adjustment in the (1) ceiling price. (2) hourly rates.
                           (3) delivery schedule, and (4) other affected terms, and
                           shall modify the contract accordingly.
                            (c)  The Contractor must submit any "proposal for
                           adjustment- (hereafter referred to as proposal) under
                           this clause  within 30 days from the date of receipt of
                           the written order. However, if the Contracting Officer
                          decides that the facts justify h. the Contracting Officer
                           may receive and act upon a proposal submitted before
                           final payment of the contract*
                            (d)  Failure to agree to any adjustment shall be a
                          dispute under the Disputes clause. However, nothing m
                          this clause shall excuse the Contractor from proceeding
                           with the contract as chanted.
'7MD9/89                                         13-9                                          415

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           CARDINAL CHANGES
    A Cardinal Change Is One Which Is Outside The
    Scope Of The Original Contract, I.e., Not Within The
    Contemplation Of The Parties At The Time Of Award.

    A Cardinal Change Issued Under The Changes
    Clause Constitutes A Breach Of Contract By The
    Government.
                       13-10
PCMD9/89                                           416

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        EQUITABLE  ADJUSTMENTS
     FOUR BASIC PRINCIPLES:

     --  Both Parties Should Be Made Whole As A Result
        Of The Adjustment.

     --  Neither Party Should Gain An Advantage Or
        Suffer A Loss.

     --  Profitable Contracts Should Remain Equally
        Profitable.

     -  Existing Losses Should Not Be Borne By The
        Government.
                       13-11
"CMD9/89                                            417

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                                                                                                FAR  Clause

            mpSOUiaanm** ,-M,      ZK^TS^J^^SSX
           (a) A^*w.-Coatnctiag Officer,- aa tnad in da.   . a chaage as tocrted i.,(b)ebove! SETS?*!
           "~ ""-"* "**. "• "r-"*** **• C-   •r^taU-B-.m.provid^in,    "talllinb'
         (SARX" as uand ta tint cmuse, maaai aay person the
         Cenunetioi Officer hat so eeetaneted by written notice   copies furnished to the Contractor anTk..

         \^!fnW^l"B^pIW*tallBthtCoillfietor)   •«  O"6"  Tta Contracting Officer i^ .-_„
         whtch .hep rate to <• •Hie.u.tyh ead ehaD he   countermandanyac£^waJcbewaZte«tenT»f
         baaed to the desiyiatad repimiiaUve before the SAR   tbeSAR.                            •"•"T«
         oereaq mch_aathoriry.	                   (d) Gmmunew  fuamat.  The  Contracting Officer
           (b) Afonc*. The primary purpose of tins dam* is to   ahefl  promptly,  wnhta.~ (» to  -mrtatt^ ralenrtar
         obuir. prompt reporting of Government oonduct that   day. after receipt of aoticc, respond to the BOtice m
         the Contractor coaaden to constitute a chaage to this   writine. IB —p~«-i the Coatnctmn Offinsr
         oniractBiMiNtochMgHideBtifladesenchtewrit.   eLher-    "*—+ "* COBB»BI»« Ora8«r
         •n^swlBii^ by tneC^tractii^ Officer, the Comrac-      (I) Oaaft« that the oaaduet of which the
         tor ihall notify the Adauaistntive Contractiaf Officer    tractor nave untie* ,BMrin^. dZT^
         ta  writing promptly. wrthm.._<*> to MjoianaO cnlen-    ..^^ Z«A.^S.rf ft-S-^
         dar days from the date that me ConoMaTuentiflss    ^!^     JT      " hnb"
         aay Ooverameat oonduei (mcl-MM-g trrtfrm. mactiona,    ...^ couatermaad aay communication regarded as a
         aad written or oral eonunumcations) that the Confine*      „, _     ..      .    ....
         tor regards SB a «*—gt to the eontnct terms  end      ^ D"By thal"" CO"*JC| •*wtaeB <•• Contractor
                  Oa the basis of the earn arrv"** mfomnv    ^*
         tioa available to the Contractor the notice ehaD etata—    *na Uie awde c/further performance; or
            (l)Thedate,aeture.aadciicumittMeaoflheooB.      <*>. "•T(i- *• ?M?S'l'oltot
          diictnganledaaacluawe;                          to«Ti±lpW.tt T"^*^^ "-§L^f.X
            /7\ TV* n«m» ftuLj tLi-E. —*  -•  *- -t —«. ^—-     or \j) above, advise the Contractor whet addltiuud
            m IM BBBM; Itactioa. ead activity of each Oov-    Jatomatto ia raquirel end eB«<*h the  deie by
                                                    "T    which h should be funaehed and the date
                                                    •"    by which i
            t\\ TTn« iri»»ijBn«iinj  <^ •_» -*- -  -  • -	-« -^ -     (') CsndeMr ne/HfiNiOTO. (I) If the vononcnnn mn*
          ^.1.1.^ af  ^^ndTj^LZL^^ hl^i^Li t!   **  eo»fll»» *•»  O"*T«" .^ ^ gg^y^

          MKO txmuci,                                   raotn aa '"•IHIT or decrease m the Contractor^ CTB
            (4)latheiastaaceofalk«edacederaiiMofaehed.   of. or the IIBM reqinnd to. pertomaaee of any pan of
          utod^perfonn«n« or delivery, the hatis upon which   ^ ^^ ^^ ^j, counett wbtlbtr ehaaged or not
                                        	           changed by i
            (9) The uankular dements of ounlinui perforav  he made—
          aace to which the^Contractor msyseek M eanmhta        (i) I" the contract price or delivery schedule or
          adjustment under thai clause, tadudtag—                 ^^ ri^

              (i) What eontnct hne items have beea or Bmy        f^\ •_ «Bch «^*»~ nrovinonB of ***• rnjiirjjt ••
            be affected by the alleged cheage;                     may be sflected.    ^w*~"~
              (n) Whui Jahor or mauriab or both have^beae      m rht ^ggg^ ^u ,, MBM a wrtnng *-
            Out BUy DC uW4MQe OdCtCBa CV WeVMB By talC HNCJCB    MMwliBatlv Itt *^B*> n^annV 4mf nffaMfittBlfL u^Hnmnt IV •aVetnOfl*

            eh"^!      _-L_. ....riirilili                   catioBi whkh are defective and far which the Oev-

                                  ,	^    j.        ^^	      e*B«»*iBiBmj HVBJ %•!•••> BUBMBI HunVK VABJBHBMMBM MM ujvn^ajv/ •^•nnUMHr

            been or may be enuaed by  the efiVfad change;    ^^^  with „. &&*
              Qv)w^atadjuatnaani to ooetnct price; debvery    specirkaiions before the
            schedule, ead other pfovuaoai eflected by the el-    neaonably ahouM have identified, such defect When
            leged change an estimeted; end                    the cost of property mede obsolete or cacess as a
            (6) The Contractor's estimate of dkt BBM by which    result of a change confirmed by the CoBtracong Of*

                   »*m»ma.m£.^ ^^^^  A^Mm*a ^^ ^£».»»^»1^^^ ^*9 ^^^*-    •^I^W^MM^i.^kft  A^«^ ^^j^Btmmm^m^ ^^Mk»»M •^•11 ^M»**B *^^
                   mnuBuce OBB». oeaiy or e»rupaon at per*    anjuanaeni. me wanmci*ng mnBer BBBII neve me


          (e) CenaVnMef fnftrmum. PaOowtag tntaMon of    pw"«»-l»- This equitable ed>anmeat shaDBOt taclude
        the  notice required by (h) above,  dkt Contractor shall    BBBreanni OOOBJ or BBM erneniiOBB inr^ uaiay rusurang


                                    ^  ^^           ^	     JSk% •«»jl ft*\ *^M»a*B


        cer  or e eoejuBU&MBtion nom e atAlt of tint'
        tag  Officer, ta either of which evi
                                                         4vMB> elMBBntVUBtf^lBV d*n? tnTft aVBanvAan^muflkiBBBl f^nnWumnBT


PCMD9/89                                              13-12                                           41fi

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     SUPPLEMENTAL AGREEMENTS
     A Supplemental Agreement Is Any Contract
     Modification Which Is Accomplished By Mutual
     Agreement Of The Parties.
     It Must:
     ~  Involve Consideration For Both Sides.
     -  Not Eliminate Or Change Any Contract Clause
        Required By Law.
     --  Not Waive Any Substantive Right Of The
        Government Without Consideration.
     --  Contain All Six Elements Of A Contract:
          An AGREEMENT
          Between COMPETENT PARTIES
          For A VALID CONSIDERATION
          To Accomplish A LAWFUL PURPOSE
          With TERMS CLEARLY SET FORTH
          In The FORM REQUIRED By Law.
                     13-13
;MD9/89                                           419

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                     OPTIONS
     An Option Is A Unilateral Right Of The Government To:


       - Obtain Increased Quantitites Of Supplies Or
         Services Within The Existing Contract Period.


      --  Obtain Additional Periods Of Performance.
                         13-14
PCMD 9/89                                                42(

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                    OPTIONS
       WITHIN AN EXISTING CONTRACT PERIOD

       --  May Not Exceed 50% Of The Base Quantity
           Without Approval Of The Director, P6MB6W)

       --  Will Usually Be Restricted In Terms Of Time,
           Frequency And Increments In Which They
           Can Be Exercised

      TO EXTEND THE PERIOD OF PERFORMANCE

       -- Total Contract Period May Not Exceed 3 Years
          Without Approval Of The Chief, Contracts
          Office

       -- Written Notice Of Intent To Exercise The Option
          Must Be Furnished To The Contractor At Least
          60 Days Before The Effective Date Of The
          Option
                        13-15
°CMD 9/89                                              421

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                                                                         EPAAR Clause
                         OPTION TO EXTEND THE TERM OP THE CONTRACT—
                                COST-TYPE CONTRACT (APR 1984)

              The  Government  has the option  to extend the term of this contract for
            	 additional  perlod(s).  If more than 60 days remain in the
            contract  period of  performance,  the Government, without prior written
            notification, may exercise  this  option by Issuing a contract modifica-
            tion.  To exercise  this option within the last 60 days of the period of
            .performance, the  Government must provide to the Contractor written
            notification prior  to  that  last  60-day period.  This preliminary
            notification doss.not  commit  the Government to exercising the option.
            The Government's  estimated  level of effort is 	 direct labor
            hours  for the first option  period and 	 for the second.  Use
            of an  option will result  In the  following contract modifications:

              (s)  The "Period of Performance" clause will be amended to cover a
            base period from	to	and option periods from
            .......... to  ..........  and  .......... to  ••«•«««•«•

              (b)  Paragraph (a) of the  "Level of Effort" clause will be amended  to
            reflect a new and separate  level of effort of  ...•..'...•. for the first
            option period and a new and separate  level of effort of  	 for
            the second option period.

              (c)  The "Estimated Cost snd Plxed Pee"  clause  will be amended  to.
            reflect Increased estimated costs and fixed  fee  for eech option  period
            as follows:

                                   Option 1      Option 2

              Estimated Cost        	       	
              Plxed Pee             ••••••••       ........
              Total                 ••••••••       ••••••••

              (d)  If  this  contract contains "not  to exceed amounts"  for elements of
            other  direct costs  (ODC), those amounts will be Increased  as follows:


                      Other  Direct
                       Cost  Item            Option  1      Option  2
PCMD9/89
1 3*1 0                                   422

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                                                                        EPAAR Clause
               OPTION P01 XNCBEASED QOAHTITT—COST-TTPE CONTBACT (APB  1984)

           By  issuing a contract modification, the Government may increase the
         estimated level of effort  by  	 direct labor hours during the
         base  period	during the flret option period, and	
         during the  second option period.  The Government msy issue a maximum of
         	 orders to increase the  level of effort in blocks of 	
         hours during any given period.  The  estimated coet and fixed fee of
         each  block of hours is as  follows:
                                Base Period   Option 1     Option 2
           Estimated Coat
           Pixed Pee
           Total
           When these options ere exercised , paragraph (a) of the "Level of
         Effort" clauae end the "Estimated Cost and Pixed Pee" clauae vill be
         modified accordingly.
°CMD9/89                                   13-17                                   423

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                  OPTIONS - EXERCISE OF OPTIONS - TIMELY NOTICE

       Fourth Street Estates, Inc.
       GSBCA No. 5813.  September 1, 1981,  Contract No.  GS-03B-6116


       Facts

            On March 28, 1972, the United States Government,  through its
       General Services Administration, entered into a lease  with Fourth
       Street Estates, Inc. (FSE), whereby the Government leased the
       premises known as 400 T Street, NE,  in Washington, DC, together
       with its adjacent parking lot.  The term of the lease  was five
       years, beginning June 1, 1972 and ending May 31,  1977  at an annua
       rate of $1.43 per square foot, payable monthly.  The lease con-
       tained an option in favor of the Government to renew the lease for
       five one year renewal terms at the same rental rate.  To exercise
       its renewal option the Government was required to give notice in
       accordance with the following lease provision:

            "This lease may be renewed at the option of the
            Government, ... provided notice be given in writing
            to the Lessor at least 60 days before the end of
            the original lease term or any renewal term; ...."

            The Government exercised its renewal options during the
       years 1977, 1978, and 1979, without incident, or objection by
       FSE.  The notices of renewal for the years 1977 and 1979 were sen
       more than sixty days before the end of the then current term.  The
       notice for the year 1978 was nine days late, but FSE made no
       objection.  In the year 1980, the Government hand delivered  its
       lease renewal notice to the office of FSE's agent on April 2 at
       4:15 p.m.  The agent refused to accept it because it was given less
       than sixty days before the end of the current term.  On the  same
       date FSE offered to re-lease the premises at $7 per square foot.
       At the date of hearing, March 24, 1981, the Government was in
       possession of the premises and had been paying the rent set  out  i~
       the lease.  Appellant had accepted those payments.

            In response to FSE's position that the renewal notice was not
       given in time, the contracting officer issued a  final decision on
       July 11, 1980, that found  the renewal notice  timely and  the  renew  .
       lease in effect.  FSE challenges that decision.
PCMD 9/89                             13-18                             A9f
                                                                     424

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      COMPETITION IN CONTRACTING
                  ACT (CICA)


       Effective April 1, 1985

       Requires Government To Compete All
       Procurements Above A Certain Amount
       Unless Criteria Justifying The Use Of Other
       Than Full And Open Competition Are Met.

       Applies To Both New Awards And
       Modifications To  Existing Contracts That
       Increase The Scope  Of The Contract, I.e.,
       Additional  Performance Periods.
PCMD.9/89                   *                     425

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     JUSTIFICATION FOR OTHER THAN
       FULL AND OPEN COMPETITION


   1.  ONLY ONE RESPONSIBLE SOURCE*

       --When  The  Supplies Or Services Required
        By The Agency Are Available From  Only
        One Responsible Source, As Determined
        By A Market Search, And No Other  Type Of
        Supplies Or Services  Will Satisfy Agency
        Requirements.

   2.  UNUSUAL AND COMPELLING  URGENCY*
       --When  The  Agency's Need For The
        Supplies Or Services  Is Of Such Unusual
        And Compelling Urgency That The
        Government Would Be Seriously Injured
        Unless The Agency Is Permitted To Limit
        The Number Of Sources From Which It
        Solicits Bids Or Proposals.

   * EPA Generally Uses Only #1, 2 And  5.
PCMD 9/89                 13-20                  426

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         JUSTIFICATION FOR OTHER THAN
        FULL AND OPEN COMPETITION (Cont.)

3.   INDUSTRIAL  MOBILIZATION, OR EXPERIMENTAL,
    DEVELOPMENTAL OR RESEARCH WORK
    --  When It Is Necessary To Award The  Contract
       To A Particular Source Or Sources In Order
       To:

       1)  Maintain A Facility, Producer, Manufacturer,
          Or Other Supplier Available For  Furnishing
          Supplies Or Services In Case Of A National
          Emergency Or To Achieve Industrial
          Mobilization,  Or

       2)  Establish Or Maintain An Essential
          Engineering, Research Or Development
          Capability To  Be Provided By An
          Educational Or Other Nonprofit Institution
          Or A Federally Funded Research And
          Development  Center.
                       1 3-21
DCMD9/89                                           427

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         JUSTIFICATION FOR OTHER THAN
       FULL AND OPEN COMPETITION (Cont.)


   4.   INTERNATIONAL AGREEMENT

       --When Precluded  By The Terms Of An
         International Agreement Or Treaty
         Between The United States And Foreign
         Government Or International Organization,
         Or The  Written Directions Of A Foreign
         Government Reimbursing  The Agency For
         The Cost Of The Acquisition Of The
         Supplies Or Services  For Such  Government.

   5.   AUTHORIZED OR REQUIRED BY STATUTE*

       --When:

         1) A Statute Expressly Authorizes Or
            RequiresThat The  Acquisition Be Made
            Through Another Agency Or From A
            Specified  Source,
            Or

         2) The Agency's Need Is For A  Brand
            Name Commercial  Item For Authorized
            Resale.
                      13-22
PCMD9/89                                          428

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         JUSTIFICATION FOR OTHER THAN
       FULL AND OPEN COMPETITION (Cont.)


   6.   NATIONAL SECURITY

       --When The Disclosure Of The Agency's
         NeedsWould  Compromise The National
         Security Unless The Agency Is Permitted
         To Limit The Number Of Sources From
         Which It Solicits Bids  Or Proposals.

   7.   PUBLIC INTEREST
       --When  The Agency  Head Determines
         That It Is In The Public Interest In The
         Particular Acquisition  Concerned And
         Notifies Congress At Least 30 Days In
         Advance Of Such An Award.
PCMD 9/89                  13-23                    42g

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          CONSTRUCTIVE CHANGE
     An Implied Change, I.e., An Act (Or Omission)
     By The Contracting Officer Or Other Authorized
     Government Official Which,  By Its Nature, Can
     Be Construed To Have The Effect Of A Formal
     Written Change Order,  Entitling The Contractor
     To Equitable Adjustment Under The Changes
     Clause.
     E.g.,  A. Requirement That The Contractor
     Perform Work Different From That Prescribed
     By The Original Terms Of The Contract.

     EPA Contracts Require The Contractor To
     Immediately Notify The CO When Any
     Government Action Implies  A Contract Change.
                        13-24
PCMD9/89                    '°                     430

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                RATIFICATIONS
     Government Agreement To Assume Legal
     Liability For An Action Taken By Government
     Personnel Lacking Formally  Delegated
     Contracting  Authority.

     I.e., The Government Takes The Federal
     Employee Off The Hook  For Personal Liability
     For Unauthorized Action.

     However, Ratification Can Only Occur If The
     Action  Would Have Otherwise Been Valid  If
     Made By A  Contracting Officer.  EPA Cannot
     Ratify Illegal Actions.

     The Assistant Administrator Of OARM Sends  A
     Formal Notification Of The Person's
     Unauthorized Action And Its Ratification To
     The Pertinent Assistant,  Associate Or Regional
     Administrator.   (Very Visible!)
                         1 3-25
PCMO 9/89                                             431

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   Contract
Modifications

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                                            Chapter 13
                                   CONTRACT MODIFICATIONS


                Contract administration would be a fairly routine procedure if everything in the
        original wording of a contract, work assignment or delivery order remained the same
        throughout the period of performance.  Unfortunately, that is not always possible, and
        changes to the terms or conditions of a contract often become necessary as a result of
        unforeseen  circumstances, ambiguous or unclear provisions, deficient  specifications, or
        changes in the Government's requirements.  Such changes are effected through a device
        called a contract modification.  The various types and the regulations surrounding their
        use are examined in this chapter.

        13.1   Unilateral vs.  Bilateral  Modifications

               Contract modifications fall into two major classes: unilateral and bilateral.
        Unilateral modifications require only the  signature of the Contracting Officer, and are
        classified either as administrative modifications, or changes that the contract  schedule
        itself  authorizes on a unilateral  basis (such as change orders that are issued under the
        authority of the "Changes" clause, exercise of options within the time period allowed, or
        notices of termination).  Bilateral modifications, which require the signature  of both
        parties (the Contracting Officer and the  contractor), include all  supplemental
        agreements and any other changes not authorized to be issued unilaterally. Below are
        examples of typical contract modifications  and their classifications:

               Purpose of Modification                Unilateral      Bilateral

               Changes in:
                   specifications, designs,               X
                   drawings, place of
                   delivery,  inspection,
                   acceptance, or method of
                   shipping or packing.

               Exercise of option                        X

               Termination                              X

               Administrative changes                    X

               Novation agreements                                    X

               New procurement: increase in
               scope or quantity of work                                X

               Equitable adjustments:
                   Definitization of change orders                      X
                   Differing site conditions                            X
                   Suspension of work                                 X
                   Government property (fixed-price and R&D)         X
                   Inspection (fixed-price supply  and R&D)            X

               Inspection and correction of defects
               (cost-reimbursement supply  and R&D)                  X

                                                                                               433
PCMD 9/89                                          1

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               Whether a modification may be executed unilaterally or bilaterally depends on
        whether it is administrative or a new agreement, or whether the provisions of the
        contract give the Government the right to act unilaterally.  Administrative changes are
        ones that do not affect the rights or obligations of either party; examples are changes in
        accounting or appropriation data, or the designation of a new Project Officer or
        Contracting Officer.  A bilateral change  affects  the price, quantity, quality, or delivery,
        or the terms and conditions of the contract. Administrative changes may be effected
        unilaterally by  the Contracting  Officer; other  changes may be made unilaterally only if
        the contract so provides in its language.

        13.2 The "Changes" Clause

               The "Changes" clause in Government  contracts provides that the Contracting
        Officer may unilaterally direct a change,  within the  general scope of the contract, in any
        one or more of the following:

                                     CONTRACTS FOR SUPPLIES

               (1)  Drawings, designs, or specifications (in the case of supplies, only where the
                   supplies are to be  specifically manufactured for the Government);

               (2)  Method of shipment or packing;  or

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

                                     CONTRACTS FOR SERVICES

               (1)  Description of services to be performed;

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

               (3)  Place of  performance of the services.

               Such changes may be directed without the consent of the contractor, who is
        obligated to proceed with the work as changed when a change order is issued. If there is
        an impact on schedule, cost, or any other contractual aspect, the contractor may submit
        a proposal for an equitable  adjustment  within thirty (30) days of receipt of a change
        order.  If the cost of work is decreased as a result of the change, the Government has a
        similar right to a downward equitable adjustment in the contract price.  Negotiation of an
        equitable adjustment  is a subsequent action, and is considered a supplemental agreement
        effected by a bilateral contract modification.

               An extremely close review of the contractor's  proposal for an equitable
        adjustment must be made, as there may be a tendency for the contractor to use this as a
        means of recovering  losses under a fixed price contract or disguising an overrun under a
        cost reimbursement contract.  Equitable  adjustments should cover only the cost impact
        of the change.

               Changes are limited to the above types and  must fall within the general scope of
        the contract. Change orders should be issued in writing by the Contracting Officer.
PCMD9/89                                        2                                             434

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        13.3  Supplemental Agreements

               A supplemental agreement is any contract change which is accomplished by
        mutual agreement of the parties.  It must always involve consideration for both sides,
        just like a contract.  This type of modification is preferred over a  change order because
        negotiation usually precedes its issuance, thereby allowing the Government to assess the
        cost impact of the change and negotiate both cost and technical aspects before directing
        the contractor to proceed.  A supplemental agreement may affect  any part of a contract,
        but may not eliminate or change any contract clause required by  law, nor waive any
        substantive right of  the Government without consideration.

               Both change orders and supplemental agreements may be requested by the Project
        Officer;  if a cost increase  is anticipated, a Procurement Request must be submitted with
        the request. Contract modifications are executed on Standard Form 30 (See page 411 for
        sample.)

        13.4  Equitable Adjustments

               Under the "Changes" clause, equitable adjustments to price, estimated cost,
        delivery schedules, or other areas impacted by the change must be reflected in a
        supplemental agreement.  In addition to "Changes,"  several other clauses call for
        equitable adjustments under certain circumstances.  Among  these clauses are:

               (1)   Differing  Site Conditions (construction);

               (2)   Suspension of Work (construction);

               (3)   Government  Property;

               (4)   Inspection (fixed-price supply and  fixed-price R&D);  and

               (5)  Inspection and Correction of Defects (cost-reimbursement supply and
                    cost-reimbursement R&D).

               The most common adjustments  arise under the "Changes" clause.  Basic
        principles apply to all equitable adjustments. Both parties should  be made whole as a
        result of the adjustment. Neither party should gain an advantage or suffer a loss.
        Profitable contracts  should remain equally profitable and any existing losses sustained
        by the contractor should not be borne by the Government. That is the essence of the term
        "equitable."

               Most adjustments are based on costs, although they  may be priced by reference to
        catalogs or market value of supplies or services.  If based on costs, adjustments must
        consider the effect of the change on the  entire contract, not just the portion of the work
        affected by the change.

               Changes in costs may  also require a change in profit or fee to reflect the
        circumstances of the new situation.  In some cases an adjustment  may be negotiated only
        with respect to the fee - for example,  in  the event of delivery of  nonconforming supplies
        in  a cost-reimbursement contract.

               If the contractor's claim is for a few dollars, it is not safe to assume that little
        examination is required. For example, the deleted work may be labor intensive,  with
        costs  comprised primarily of direct labor and,  therefore, subject  to overhead charges.


PCMD9/89                                         3                                             435

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        The added work may be capital intensive, and the costs not subject to the same extent of
        overhead. Unless care is taken, the contractor could compare only the direct costs of the
        deleted and added work and end up collecting overhead expenses as well.

               Often, estimating the cost of a change is difficult. Out of necessity, such
        estimating requires a particularly thorough and careful cost or price analysis by the
        Contracting Officer before a supplemental agreement can be negotiated.

               Difficulty may still be encountered even though cost data is available.  The
        estimates of costs of work deleted can be based on either (1) the cost estimated at the
        time the contract was negotiated, or (2) the costs at the time the change was made.  If the
        original estimate  is used and costs have risen, then the contractor will suffer a smaller
        loss or more profit.  If the reverse is true, then the  contractor will have  a greater loss
        and less  profit.  Contractor-suggested changes should be thoroughly reviewed to assure
        that the contractor is not suggesting changes to enhance its  profit position.

               Pricing adjustments after the work is done is much easier than estimating costs
        in advance.  The contractor's data may clearly show the actual costs of the changes to
        which a customary profit may be added.  This is an appealing rationale, but it has its
        dangers.  If a change order has been issued and the work is completed prior to pricing the
        adjustment, then the more that is spent on the added work, the higher the contractor's
        cost may be. Even if the contractor can be trusted to control costs in such a situation,
        the Government will not have  had an opportunity  to  review the  contractor's proposed
        costs  and possibly point out more  efficient production methods or management controls.

               Forward pricing, that is, issuance of a single  supplemental agreement instead of  a
        unilateral order followed by an adjustment, allows for a complete negotiation on
        technical as well as price aspects of a change.  It  may not  be practical to  do this for all
        changes, especially if there are many small ones to be made. In that case, a single
        negotiation session resulting in a single supplemental agreement  may be preferred.

        13.5  Exercise of Options

               Options that were included as part of the original contract  may be exercised
        unilaterally by the Contracting Officer within the period stipulated.  They are not
        considered to be  new procurements, as they were clearly  within the contemplation of the
        parties at the time of award.

               Options may be either additional quantities during  a specific contract period, or
        may extend the contract period with increased quantities in the new term.  It  is even
        possible  to include options within options (e.g., during Option  Period I, there is a level
        of  effort  of 5000  hours, with an option of 2000 additional hours during  the  period).
        Generally, options for increased quantities are limited to 50% of the basic quantity, and
        the total  term of the contract is limited to 3 years,  unless you  obtain prior approval of
        the Director, PCMD. The cost or price of all options is provided for in the basic
        contract,  and is negotiated with the basic contract amount.

               Unless otherwise stated  in the  contract, all service contracts employing option
        periods require that a preliminary written notice  of  the Government's intention  to
        exercise  the option be furnished to the Contractor at least sixty (60) calendar days
        prior to the  end of the  current period.  Failure  to provide such preliminary notice  within
        the timeframe established in the contract waives the Government's right  to exercise the
        option unilaterally and may  require a justification for other than  full and open
PCMD 9/89                                         4                                             436

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        competition and the negotiation of a bilateral contract modification in order to extend the
        period of performance where such an extension is authorized.

               When the term of the service contract coincides with the fiscal year and delays in
        receipt of authority to obligate funds for the new fiscal year are anticipated, the
        Contracting Officer, if the contract so provides, may, within 60 days after the end of the
        fiscal year,  unilaterally exercise an option to extend the  term of the contract.  Project
        Officers must provide advance notice to their Contracting Officers in order that the
        notice be  issued to the contractor within the time  required.  The option may be exercised
        only if funds become available within the  60-day period.  In the event that sufficient
        funding is not available within the 60-day period, the Government waives the right to
        exercise the option unilaterally, thereby rendering  any additional requirements subject
        to normal competitive procurement procedures.

               The Contracting Officer, if the contract so provides and subject to certain
        conditions, may exercise an option contingent upon the availability of funds.  To exercise
        such  an option, the contract must contain the clause entitled "Availability of Funds".
        Under no circumstance shall any action be taken which could be construed as creating a
        legal  liability on the part of the Government until a formal notice of availability of funds
        in the form of a contract modification has been  issued by the Contracting Officer.
        Acceptance of any goods or services under such an arrangement is strictly prohibited
        until funds are  obligated.

        13.6  Cardinal  Changes

               Mutual agreement is not always enough to authorize use of a sole source
        modification. Certain changes are not permitted because they are outside the scope of the
        contract.  Additional work or additional hours not covered in options fall within this area
        and are considered new procurement; they must be obtained  competitively or fall within
        the seven (7) statutory exceptions to full  and open competition (see 13.8, below).

               The scope of the contract is defined as whatever was within the contemplation of
        the parties at the time of entering into the  contract.  Any change order issued under the
        "Changes" clause which is outside the scope is defined as a "cardinal change", and
        constitutes a breach of contract by the Government.  For this reason, many changes
        which Project  Officers seek to improve their contract will be  refused by their
        Contracting Officer.  Within the area of "permissible" changes, Contracting Officers will
        support the program office  to the fullest exent possible, but cardinal changes are not
        within any Contracting Officer's  authority.

        13.7  Increases In Scope

               Many times, the initial amount of contract support provided in a  contract proves
        to be insufficient.  Increases in the contract are often  necessary to complete  a job
        already underway, if no options exist allowing for a greater quantity of  hours or
        services.  Depending upon  the type of contract involved, it may or may not be possible to
        obtain an  increase.

               Completion form cost reimbursement contracts may be increased (in the cost
        portion only) if the original work cannot be completed within the  estimated cost; the
        contractor receives no increase in fee to complete the work called for by the contract.
        This is not considered an increase in scope. An increase in the scope of  work required,
        however,  (i.e., additional hours) would constitute new procurement.  Work assignments
        under term form contracts and delivery  orders  under indefinite delivery/indefinite


PCMD9/89                                         5                                             437

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       , quantity contracts may be increased within the total contract limits of hours and dollars,
       but any increases in these contract maximums are also considered new procurements.
       Fixed price contracts would never be increased unless the requirements changed (quality
       or quantity), and such increases in scope would be new procurements, as well.

       13.8  Exceptions to  Full and Open Competition

               Because of the regulations concerning full and open competition, such new
       procurements will  normally have to be made on a competitive basis, and there is no
       guarantee that the same contractor will win the award. The Competition  in Contracting
       Act, which took effect on April 1,  1985, severely limited the Government's ability to
       award other than  fully competitive contracts or contract modifications.  There are now
       only seven (7) statutory exceptions to the requirements for obtaining full  and open
       competition.  These are:

               (1) Only One Responsible Source (when the supplies or services required by
                  the agency are available from only one responsible source, as determined by
                  a market search, and no other type of supplies or services will satisfy
                  agency requirements);

               (2) Unusual and Compelling Urgency (when the agency's need for the  supplies
                  or services is of such an unusual and compelling urgency that the
                  Government would be seriously injured unless the agency is permitted to
                  limit the number of sources from which it solicits bids or  proposals);

               (3) Industrial Mobilization: or  Experimental.  Development, or Research Work
                  (when it is necessary to award the contract to a particular source or sources
                  in order (i) to  maintain a facility,  producer, manufacturer, or other
                  supplier available for furnishing  supplies or services in case  of a national
                  emergency or to achieve industrial mobilization, or (ii) to establish or
                  maintain an essential engineering, research or development capability to be
                  provided by  an educational or other nonprofit institution or a federally
                  funded research and development center);

               (4) International Agreement (when precluded by the terms of  an international
                  agreement or a treaty between the United States and foreign government or
                  international organization,  or the written directions of  a foreign government
                  reimbursing the agency for the cost of the acquisition of the supplies or
                  services for such government);

               (5) Authorized or Required by  Statute  (when (i) a statute expressly authorizes
                  or requires that the acquistion be made through another agency or from a
                  specified source, or (ii) the agency's need is for a brand name commercial
                  item  for authorized resale);

               (6) National Security   (when the disclosure of the agency's needs would com-
                  promise the  national security unless the agency is permitted  to limit the
                  number of sources from which it solicits bids or  proposals); and

               (7) Public Interest (when the agency head determines that it is in the public
                  interest in the particular acquisition concerned and notifies Congress at  least
                  30 days in advance of such an award).
PCMD9/89                                        6                                            438

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               If a situation does not fall within one of the above exceptions, competition must be
        obtained.  If a sole source procurement can be authorized, the Project Officer must
        prepare a Justification for Other than Full and Open Competition (JOFOC) with the
        assistance of the Contracting Officer. It's a good idea to meet or talk with the Contracting
        Officer and the EPA Competition Advocate, who must approve all JOFOC's over
        $100,000, before undertaking  this  effort to be  sure there is sufficient justification to
        limit competition.

               Increases in scope could often be justified in the past on a sole source basis, but
        the new regulations clearly limit that possibility now.  For this reason, the use of
        options is encouraged if the possibility of  increased requirements exists, and Project
        Officers should take care not to allow wasteful utilization of contract resources.  Diligent
        financial monitoring will  also help spot shortages early, and a  redirection of effort at
        that time may eliminate the problem altogether.

        13.9  Constructive  Changes

               Sometimes, the Government, by its actions, changes the contract without a formal
        written modification.  This  is an implied change,  also known as a "constructive" change,
        and is defined as an oral or written act or omission  by  the Contracting Officer or other
        authorized Government official which is of such a nature that  it  is construed to have the
        same effect as a formal written change order under the "Changes" clause.  In other
        words, the Contracting  Officer, by  requiring  a contractor to  perform work different
        from that prescribed by  the original terms of  the contract, may actually change the
        contract without issuing  a change order, and the contractor is entitled to relief (an
        equitable adjustment)  under the "Changes" clause.  Therefore, it is critical that any
        actions on the part of a Contracting Officer do not imply a contract change.

               The conduct of a Project Officer may have the same effect. Therefore, care should
        be taken to avoid crossing  the  line between providing technical direction and inferring a
        change.  Project Officers do not have the  authority to direct any action that will affect the
        cost or price, description of the work, or the time or place for performance or delivery.
        What  might not seem important at the time, may  end up having  a substantial effect on
        final costs, or the work  product required, and the contractor  is entitled to file  a claim.

               EPA contracts contain  a provision requiring  the contractor to notify the
        Contracting Officer immediately when any  action  on the part of  Government personnel
        implies a change to the terms and conditions of a contract.  This allows the Contracting
        Officer either to issue a formal change order, or require the contractor to discontinue
        work on the implied changes.  However, it may be impossible not to formalize a
        constructive change if the Government has received any benefits, and program offices
        will be assessed the cost of any equitable adjustments resulting  from such changes.

               At  times a contractor may suggest modifications to the contract.  Often the change
        will technically  improve  the contract services or supplies and the  Project Officer should
        realize this.  However, it should be  kept in mind that contractors, especially those who
        are experiencing a loss under a contract, will suggest changes so as to provide a chance to
        better their profit position.   It  is important to review the contractor's expenditures on a
        contract and technical progress made to attempt to verify if the contractor is possibly
        trying  to recover from a  loss position. The Project Officer also must beware of leading
        the contractor to believe that the Project Officer's opinion authorizes the contractor to
        proceed.  Such improper authorization would be in effect a constructive change.
PCMD 9/89                                         7                                             439

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               If the contractor makes the change and later claims extra costs, the  Government
        may find it very difficult to deny these claims for costs if they were incurred in good
        faith (especially if the agency benefits). The Project Officer's action would be improper
        and unauthorized since only Government personnel designated as Contracting Officers
        have the authority to obligate the Government.

               The Project  Officer has  considerable responsibility for identifying need for
        change orders, even though only the Contracting Officer has the power to issue such
        orders.  Since the Project Officer monitors the contract performance, he or she will
        often be in an excellent position to recommend changes that meet the Government's
        requirement and can help formulate that change.  The Project Officer can also be of
        significant assistance in determining both what a reasonable price/cost of the change
        should be and the effects of the  change on the contract. It is important that all potential
        effects of a change are examined, so if additional funding is required it can be obtained
        prior to issuing the change order.

               After a change order  has been issued, the Project Officer is responsible for
        assuring  that the  contractor is implementing it.

        13.10  Ratifications

               If actions are taken by Government personnel who do not have formally delegated
        contracting authority, they do not  necessarily obligate the Government for the
        expenditure of funds.  However, under  certain circumstances, unauthorized actions may
        be ratified. Ratification of an unauthorized action can only occur if the action would have
        been valid had it been made  by a Contracting Officer. If an unauthorized action is
        otherwise improper, a Contracting Officer cannot ratify it and the Agency must deny
        legal liability, in which case the  person committing the unauthorized action  may become
        personally liable.  Therefore, extreme caution must be taken to avoid such a situation.

               Unauthorized procurement actions are not limited to new procurements or
        purchases. Increases in scope and other changes to existing contracts, directed by an
        unauthorized person, or even a change in the period of performance, are unauthorized
        actions.

               When an unauthorized action has been revealed, the following procedures apply:

               (1)  The program office  must notify the cognizant contracting office by
                   memorandum of  the circumstances surrounding the action. The memorandum
                   must include:

                   (a)  All relevant documents and records;

                  (b)  Documentation why the work was necessary to and for the benefit of
                       the  Government;

                  (c) A  statement of steps taken or proposed to prevent  reoccurrence of the
                       unauthorized action;

                  (d)  Approval of  the Division Director (or equivalent) of the responsible
                       office;
PCMD 9/89                                        g                                             440

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                   (e)  If expenditure of funds is involved, the notification must also include a
                       Procurement Request/Order  (EPA Form 1900-8) with sufficient funds
                       to cover the supply or service involved; and

                   (f)  If the service or supply was beyond the scope of the existing contract, or
                       involved any  new procurement on a sole source basis, the notification
                       must  include a justification for other than full and open competition
                       (JOFOC).

               (2)  After  receipt of the notification, the  Contracting Officer:

                   (a)  Makes a determination and findings regarding ratification of the
                       unauthorized act.  Additional  information may be required from the
                       contractor and an opinion from the General Counsel;

                   (b)  Informs (at the Contracting Officer's discretion) the  Inspector General
                       through the Director, PCMD;  and

                   (c)  Prepares a memorandum from  the Assistant Administrator for Adminis-
                       tration and  Resources Management to the Assistant, Associate or Regional
                       Administrator of the program  advising of the person committing the
                       unauthorized action.

               Accomplishment of  (2) (b) and (c) above for actions that would entail small
        purchase procedures is at the discretion of the Chief of the Contracting Office or the
        Management Division Director or equivalent at a regional or field activity.

        13.11   Amendments to  Work Assignments  or  Delivery Orders

               As noted above, it may be necessary to amend part of a work assignment or
        delivery order (rather than the  contract itself) as a result of the contractor's work plan
        or because of unforeseen developments which arise during the course of performance.
        An amendment may take many forms, such as increasing the number of hours or the
        ceiling price,  decreasing a  portion of the  effort, changing the period  of performance, or
        modifying the Statement of Work. Any anticipated amendments should be discussed as
        soon as possible with  the Contracting Officer,  as certain types of changes may require
        formal negotiations with the contractor, and some may not be within the scope of the
        contract and therefore cannot be executed unless certain other actions are taken.

               When a decision has been made to amend the assignment or order, a written
        request should  be forwarded through the  Project  Officer to the Contracting Officer.  (See
        page 63 for a sample work  assignment amendment form.)  The basis for the change
        should be explained, with whatever specific wording changes or substitutions are
        necessary. If a revised work plan will be required of the contractor, this should be
        indicated.

               Only the Contracting Officer can direct  a change to any terms or conditions of a
        contract, work assignment,  or delivery order.   A contractor who is advised of a change
        without the signature of the Contracting Officer  is required to notify  the Contracting
        Officer immediately and identify any adjustments to the cost or delivery schedule which
        are affected by  the change. The contractor is prohibited from proceeding with the change
        unless formal approval is given by  the Contracting Officer.   Project Officers, Work
        Assignment Managers or Delivery Order Officers who direct unauthorized changes to a


PCMD 9/89                                        9                                           441

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        contract may be relieved, of their authority by the Director, PCMD,  and may become
        personally liable for any increase in costs.
PCMD 9/89                                        1 0                                          442

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Disputes, Terminations,
     andCJCloseouts^,

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  DISPUTES,  CLAIMS,  TERMINATIONS

          AND CLOSEOUTS
                1 4-0
PCMD 9/89                             443

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           HANDLING  DISPUTES:
    Contract  Disputes   Act  of  1978


      1.  First Step: Final Decision of Contracting Officer

      2.  Second Step: Appeal to Agency Board of
         Contract Appeals
            or
         Direct Petition to Claims Court (lengthy
         procedure)

      3.  Third Step: Appeal to Federal Court of Appeals
                      14-1
PCMO 9/89                                          445

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        CONTRACT  TERMINATION


      TWO TYPES:

       Termination For Convenience Of The Government:

        When Supplies Or Services Are No Longer
        Needed Or It Is Otherwise In The Government's
        Best Interests.

       Termination For Default:

        When The Contractor Has Failed To Perform Its
        Contractual Obligations.
PCMD 9/89                                             44.6

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   TERMINATION  FOR  CONVENIENCE
         -- Can Stop Contract At Will Of Government


         - Contractor Gets All Or Negotiated Portion
          Of Fee


        - Settlement Costs
                     14-3
'CMD9/89                                        447

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      TERMINATION  FOR DEFAULT


      The Government's Right To Terminate For Default Is
      Based On The Contractor's Failure To:

      1) Perform On Time.

      2) Perform Any Other Provision Of The Contract.

      3) Make Progress, To The Extent That The Delay
         Endangers Contract Performance.
                       14-4
PCMD S/89                                            448

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  STEPS  IN CONTRACT TERMINATION

               FOR DEFAULT
      £f
            d      S^i*~*+*T- A
            *o •     \*~*^ • _  '
                                  ' J
                                   iL^  e^yf*" rOx \
     1 .  Government Issuance Of Notice To Cure  ™
     2.  Government Issuance Of Show Cause Letter


     3.  Passage Of Required 10-Day PeriocK,^


     4.  Notice of Termination
                    14-5
CMD 9/89                                       449

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        PROJECT OFFICER RESPONSIBILITES
               IN  CONTRACT CLOSEOUT


    1.  Certifying That All Technical Requirements Of The
       Contract Have Been Met, That The Products Or
       Services Have Been Satisfactorily Completed Within
       The Contract Amount, And That The Final Report And
       All Other Deliverables Have Been Received And
       Accepted.

    2.  Recommending The Disposition Of All Government
       Property In The Contractor's Possession.

    3.  Reviewing And Determining The Accuracy Of The
       Contractor's Reporting Of Inventions, Data Rights,
       Copyrights And Software Development.

    4.  Examining And Approving The Completion Voucher
       (On Cost-Reimbursement Contracts).

    5.  Evaluating The Contractor's Performance.
                        14-6
PCMD 9/89                                              450

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          PROJECT OFFICER'S EVALUATION OF CONTRACTOR PERFORMANCE
         	     (Read instructions on reverse before completing form)
  1.FROM
2. TO
 I 3. FORWARD (origin*! on/yj TO:
 1    Quality Assurance Section (PM-214)
     Washington, DC 20460
4. CONTRACT NO.
6. ACTIVITY
  6. CONTRACTOR'S NAME AND ADDRESS
7. PROJECT OFFICER'S NAME
                                                                              8. TECHNICAL PROGRAM
                                                     9. BASIC CONTRACT COST
                          10. FINAL CONTRACT COST
                                                     11. CONTRACTOR PROJECT OFFICER'S NAME
  12. PROJECT TITLE
| 13. EVALUATED CONTRACTOR'S TECHNICAL ADHERENCE TO SCOPE OF WORK AND COMMITMENT OF PERSONNEL (Circle one
    of th* following indgivonirrutNO of ruing)     E   VO   A   P    U


I
 14. EVALUATE CONTRACTOR'S TECHNICAL PERFORMANCE AND TECHNICAL APPROACH TO THE PROJECT (Circle one of the following
    give narrative of rating)     E   VO   A   P   U
|15. EVALUATE CONTRACTOR'S SUBMISSION/DELIVERY OF PROGRESS REPORT. FINANCIAL REPORT. FINAL REPORT. EQUIPMENT (Circlt
    on* of the following and give narrative of rating)     E   VO   A   P   U
 16. EVALUATE CONTRACTOR'S DELIVERED END PRODUCT Report Equipmtnt. uc.) (CM* on* of th* following »nd give nvruivo of rating,
          E   VO    A   P   U
 17. HAS CONTRACTOR Q OVERRUN. OR Q UNOERRUN THE CONTRACT (fxplun nmten for tHherf
 18. RECOMMENDATIONS AND ADVICE TO PERSONNEL CONSIDERING THIS CONTRACTOR FOR FUTURE AWARDS
 19. PROJECT OFFICER'S SIGNATURE
20. DATE
21. OVERALL RATING fCnoet ono
    E   VO    A   P   U
                                                                    u. s. oovnmaaR nmrrzm
                                                   14-7

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                                           INSTRUCTIONS
Prepare in duplicate and distribute as follows:
Original to be forwarded to Headquarters. Quality Assurance Section (PM-214), Washington. DC 20460.
Copy to be forwarded to Contract Administrator for contract file.
The following guidelines are to be used by the Project Officer responsible for the project in the preparation of the form.
the completion of the technical phase and/or acceptance of the final end product of the contract. The information must t
accurate, as it will provide other program staff personnel or anyone else in the agency an orderly and uniform method
determining and recording the effectiveness of  contractors in meeting their contractural commitments for futui
consideration in contract awards. The information will be filed in the contract file, and with the contractor's bidde
application file. The Project Officer's technical rating of the contractor and the contracting officer's business * ating will t
entered in the contractor performance evaluation system maintained by the Quality Assurance Section. All items ha\
been numbered to identify specific instructions as they pertain  to individual items.
Rate Contractor in areas listed in items 13. 14. 15. 16. and 21 by circling one of the following on the form:
                                                /
E (Excellent); VG (Very Good); A (Average); P (Poor); or U (Unsatisfactory)
Provide a detailed narrative of background material to support the rating. Attach additional sheets, if necessary.
               FOLLOWING ITEMS TO BE FILLED IN BY THE CONTRACT ADMINISTRATOR*
                                  RESPONSIBLE FOR THE CONTRACT.
ITEM(S)
I  thru 4      Self-explanatory
5             Activity responsible for the project such as Washington. DC, RTP. Cincinnati. Region No. or Laborator
6 and  7       Self-explanatory
8             Name of Section or Division within the Program responsible for the project.
9 and  10     Self-explanatory.
11            Self-explanatory.
12            Self-explanatory.
                FOLLOWING  ITEMS TO BE FILLED IN BY COGNIZANT PROJECT OFFICER
13            Has contractor fulfilled the requirements of the scope of work as specified in the contract? Did tr
              Contractor adhere to his proposal, including his proposed commitment of personnel?
14            Indicate degree of creative contribution (level of technology) made by the contractor in response to thi
              understanding of EPA's mission. If engaged in study contract or consulting  contract, contractor
              understanding of Federal Laws affecting the work (e.g.. for a consultant on impact statements, undr
              standing of NEPA and all related guidelines and significant court decisions).
15            Did the contractor submit the report or equipment as per contract schedule? If not, give reason.
16            Is the report or equipment delivered of  high value and/or good quality? Did the report require ma
              corrections, and did the contractor balk at making the corrections without additional cost?
17            Information desired is: give number of overruns and reasons for this (do not consider scope chanc
              where contractor had to submit a proposal for the additional work); ratio of additional funding unc
              limitation of cost provision to original estimated costs. Was underrun achieved by reducing the scope
              work or through the development of new methods?
EPA Form 1900-27 (R«v. 4-84) Ml

                                                   14-8                                          452
  PCMD 9/89

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                                            Chapter 14
                     DISPUTES, CLAIMS, TERMINATIONS AND CLOSEOUTS
               Most contracts are completed as planned with few problems, and once work is
        completed, the contract closeout process occurs. However,  disagreements do arise from
        time to time which are difficult to resolve.  If a  Project Officer notes an emerging
        difference of opinion regarding  the rights or obligations of either party, he or she should
        immediately notify the Contracting Officer to attempt to resolve it to everyone's mutual
        satisfaction. The longer a disagreement goes on, the harder it is to settle and the more
        time and effort will be required in the process.

               If a controversy  cannot be satisfactorily resolved, the Contracting Officer will
        attempt to negotiate a formal bilateral agreement.  One possible  outcome is contract
        termination. If no agreement can be reached, the Contracting Officer will issue a final
        decision under the disputes clause, and the procedures are governed by statute and the
        provisions of the contract.

        14.1  Contract  Disputes Act of  1978

              The Contract Disputes Act of 1978 is applicable to all types of disagreements
        (except fraud) under Government contracts and provides for 1)  a decision by the
        Contracting Officer, then 2) an  appeal (if desired by the contractor) to either  the Board
        of Contract Appeals or directly to the U.S. Court of Claims.  It requires the contractor to
        proceed diligently with performance of the contract  (in accordance with the Contracting
        Officer's final decision) while the dispute is under appeal. The Act sets forth time
        frames under which disputes 'and appeals must be filed and decisions must be issued.  It
        also provides for payment of interest on contractor claims should the dispute be resolved
        in favor of the contractor.

              The disputes procedure is the traditional means for resolving conflicts arising
        under a contract  which cannot be resolved by means of negotiation and mutual agreement.
        The contract clause entitled "Disputes" implements the law and  sets forth  the procedures
        the contractor must follow in the event of a dispute. Because the Government would be
        unable to  fulfill its lawful duties if all contract work  stopped every time a disagreement
        arose, the administrative disputes procedure requires that contract work continue
        during the appeals process.

        14.2  Contracting  Officer's  Final  Decision

              It is Government policy that all contractual issues be resolved at the level of the
        Contracting Officer without litigation,  if at all possible.  Informal  discussions will be
        held first,  with participation by the Project Officer,  and might also  include individuals
        uninvolved in the dispute, if necessary to resolve the disagreement. When such
        measures  are unsuccessful, the contractor may request, in writing, a final decision by
        the Contracting Officer.  (In some situations, the Contracting Officer may issue such a
        decision without  such a  request by the Contractor.)

              The law requires that a written decision  be issued by the Contracting Officer
        before the contractor can take the case elsewhere. The decision must be issued within 60
        days of receipt of a  monetary claim if it is $50,000.00 or less,  and within a reasonable
        time if over $50,000.00 provided  the contractor is  notified within the 60-day  period
        as to when the decision will be issued. Failure to issue a decision within the required
PCMD 9/89                                         1                                             455

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        time may be deemed a denial of the claim, and the contractor is authorized to file an
        appeal.

               The decision of the Contracting Officer is the first step in the disputes procedure.
        It is based upon a review of all available facts and on the advice of legal counsel, and may,
        on occasion, go against the position of the Project Officer if the facts so warrant.
        Therefore, early coordination of problems with the Contracting Officer will  help avoid
        this possibility at a later date.

               Any amounts which are owed to a contractor under a claim but are not in  dispute
        must be paid promptly, without awaiting the results of an appeal.  Payment for work
        which continues during the appeal will also be paid in accordance with contract payment
        provisions.

        14.3  Board  of Contract Appeals

               If a contractor disagrees with the final decision issued by the Contracting Officer,
        he has the right to appeal to the Agency Board of Contract Appeals. Pursuant to a
        longstanding interagency agreement between EPA and the Department of Interior, the
        Department of the Interior Board of Contract Appeals  (IBCA) will hear appeals from
        final decisions of EPA Contracting Officers.

               An appeal must be filed within 90 days after receipt of  the Contracting Officer's
        decision. If an appeal is filed, EPA must submit an answer to the complaint. This must
        be accomplished within 30 days, and will probably require Project Officer  input if the
        dispute involves something in the Statement of Work or any other technical aspect. The
        IBCA will conduct an administrative hearing at which both parties may be present or
        represented.  Presence is not required, however.  The Board of Contract Appeals  has the
        following time periods in which to issue a decision:

               Claims of $10,000 or less - 120  days

               Claims of $50,000 or less - 180 days (whenever possible)

               Claims of over $50,000 - no  time limit

               If the decision is in the contractor's favor, it is  up to  the Contracting Officer to
        implement the decision of the Board.  Interest is payable on the  amount due on the claim
        from the date the Contracting Officer receives it to the date of payment. The Government
        can only appeal the decision with the approval of the Agency Head and the Attorney
        General of the United States.

               Contractors who wish to appeal a decision of the IBCA must do so within 120
        days.  Appeals are heard by the Court of Appeals for the Federal Circuit. The ruling from
        this court  is final.

        14.4  Court  of  Claims

               Rather than file an  appeal of a Contracting Officer's decision with the Board of
        Contract Appeals, the contractor has direct access to the claims court, and may file a
        petition with  the court within 12 months from  the date of receipt of the final decision.  If
        he or she chooses to go this route, the IBCA will not get involved. As a practical matter,
        this option is  rarely pursued unless the amount of the claim  is substantial, as
        proceedings in this court may take years to be resolved.


PCMD9/89                                        2                                            456

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        14.5   Contract  Termination

              The laws which give the Government the power to enter into contracts also give it
        the right to terminate such contracts.  Most contracts provide for termination by the
        Government for either of two reasons:  default of the contractor or convenience of the
        Government.  The ability to terminate a contract is  a unilateral right of the Government;
        the contractor does not have any such rights.

              Terminations may be complete or partial. A complete termination requires the
        contractor to stop all work under the contract, while a partial termination discontinues
        only a portion of the uncompleted work.  Whether a contract is partially or completely
        terminated is dependent upon the exact circumstances surrounding the decision to
        terminate.

              It is preferable to work out possible solutions to contracting problems before
        resorting to contract termination.  Terminations can be costly  and time-consuming,  and
        often wind up in litigation.  Nonetheless, terminations are sometimes unavoidable.  The
        two types are explained in  detail in this chapter.

        14.6  Termination for  the Convenience  of the Government

              Under the Termination for Convenience clause, the Government has a right to
        cancel work under a contract whenever it determines that it is in its best interest.  Such
        a decision is a unilateral right of the Government. It is  not,  however, a decision that can
        be made lightly. Cancellation of the work under a contract is an expensive and
        undesirable course of action. A default termination  may result in a need  to reprocure,
        which can be expensive and time-consuming; it may require payment of the contractor's
        entire fee as part of settlement.  Generally, such terminations occur because of changes
        in Government requirements or because contract funding is not available.  However,
        there may be other circumstances which make termination advisable, such as an
        unavoidable organizational  conflict of interest, a decision that it would be more cost-
        effective to do the work in-house, etc.

              The Termination for Convenience clause outlines the actions of the contracting
        parties to be taken in consumating the termination of work and settlement.  In
        terminating a contract, there may be extensive adminstrative effort involved on the part
        of the Government with respect to the various actions necessary to complete the
        settlement.

              The first step  in a termination for convenience is written notification to the
        contractor by the Contracting Officer. The  notice clearly indicates that the contract is
        being terminated for the convenience of the Government. It also gives: (1) an effective
        date for the termination (usually the date of the notice); (2) the extent of the
        termination identifying what portion,  if  any, should be continued; and (3) any special
        instructions.

              Upon receipt of the  notice,  the contractor is obligated to comply with the
        Termination clause and the terms of the notice, which generally include:

              (1) Stopping work  on the terminated portion of the contract;

              (2)  Terminating related subcontracts;
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               (3)  Continuing with the unterminated portion and promptly requesting any
                   equitable adjustment in price on the continued portion;

               (4)  Taking action to protect and preserve any Government property or to return
                   it as directed by the Contracting Officer;

               (5)  Settling claims and  liabilities arising from  terminated subcontracts; and

               (6)  Promptly submitting  its own claim for settlement.  (The contractor has one
                   year to submit such a claim.)

               The Contracting Officer directs the actions of the contractor, reviews the
        settlement proposal, and promptly negotiates a settlement.  A number of people,
        including the Project Officer, may be involved in fulfilling these multi-faceted duties.
        One of the activities of the Contracting Officer in which the Project Officer may
        participate is the settlement conference.  At the conference, the Contracting Officer will:

               (1)  Explain the general principles governing settlements under the relevant
                   clause, including the contractor's obligations with respect to subcontracts;

               (2)  Determine  the status of the work, and, if necessary, clarify the extent of the
                   termination;

               (3)  Determine the subcontracts being terminated and who is handling them for
                   the contractor;

               (4)  Make all arrangements for proper handling  and disposition of Government
                   property;

               (5)  Discuss the form of the settlement proposal  and the accounting data
                   required; and

               (6)  Establish a tentative schedule for negotiation of the settlement.

               Aside from possibly making the recommendation to terminate for convenience,
        the Project Officer will be involved  in settlement conferences, advising the Contracting
        Officer on the  disposition of property and evaluating the reasonableness (quantitatively
        and qualitatively) of the contractor's settlement proposal.

        14.7   Termination  for  Default

               The Government has a contractual right to terminate, in whole or in part, the
        contractor's right to proceed with the work when it  has failed to perform its contractual
        obligations.  The decision to terminate is discretionary.  Termination may not be in the
        best interests of the Government even  if a default termination is justified, because of the
        lengthy time required to procure  another contractor and get the  new contractor up to
        speed. The Contracting Officer should exhaust all reasonable efforts to prevail upon the
        contractor to correct whatever problems exist.

               If a contract is  terminated for default, however, and  it is determined afterwards
        that the contractor was not in default or that the default was  "excusable" (see section
        14.10, below), the termination will be considered to be for the convenience of the
        Government. The rights of the parties are then governed by the Termination for
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        Convenience clause.  Or, if the Contracting Officer determines it to be in the best
        interests of the Government, the contract may be reinstated by mutual agreement.

               The Government's right to terminate for default is based on the contractor's
        failure to:

               (1)  Perform on time, as provided in the contract;

               (2)  Perform any other provision of the contract; or

               (3)  Make progress, to the extent that the delay endangers contract performance.
                   Although not expressly provided for in the Default clause, the Government
                   may immediately terminate for default  if the contractor definitely exhibits
                   an intention not to perform within the time fixed in  the contract, even if he
                   is not yet "late."

               Depending upon contract type, the following consequences may result from a
        termination for default:

               (1)  Under fixed-price type contracts, the Government does not have to pay the
                   costs of uncompleted work, but only the costs of products delivered to and
                   accepted by the Government.  In the case of a cost-reimbursement contract,
                   the Government is  liable for costs incurred up to the date of termination,
                   plus a proportional  part of any fee.  In this situation, Government is not
                   liable for settlement expenses, nor for any profit on costs of preparation for
                   work in progress;

               (2)  The contractor must return any progress or  advance payments;

               (3)  The Government has the right to take over the contractor's inventory,
                   subject  to a negotiated compensation;

               (4)  Under fixed-price type contracts, the contractor may be liable for any
                   excess  costs the Government has to pay in repurchasing the supplies or
                   services. (However, a cost-reimbursement contract does not contain any
                   provision for recovery of excess repurchase costs.); or

               (5)  The contractor may  also be liable for breach  of contract damages.

               Prior to taking any default action,  the Contracting Officer will normally take
        action on one  of the following remedies short of termination.  At this time, the
        Contracting Officer should also  determine:

               (1)  Whether it would be effective to withhold payment  until satisfactory
                   performance is demonstrated;

               (2)  Whether, if default  action is taken, there is  an alternative source of supply;

               (3)  Whether the contractor's financial condition is such that it would be able to
                   reimburse the  Government for the excess costs of repurchase;

               (4)  What would be the  impact of default upon the contractor's ability to liquidate
                   progress payments  or continue to perform under other Government
                   contracts;


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               (5)  Whether continued performance under a revised delivery schedule would be
                   more in the Government's interest;

               (6)  Whether the Government's interest would be better served by offering
                   advance payments or some other special financing agreement;

               (7)  Whether, if the contractor cannot continue to perform, an arrangement to
                   have the contract performed by a capable subcontractor might be an
                   appropriate solution;

               (8)  Whether, where a capable organization declines to perform as a subcon-
                   tractor, a novation agreement can be arranged whereby the desired
                   performance can  be obtained from that organization while the original
                   contractor still remains legally liable for the  contract;

               (9)  Whether there is  a surety or trustee in bankruptcy who would be willing
                   to take  over the responsibility for performing  the contract; and

               (10) Whether, where the requirement for the supplies or services no longer
                   exists and the contractor is not liable to the Government for damages, a no-
                   cost termination agreement should be executed.

               The Contracting Officer, with the assistance of the  Project Officer, has a
        reasonable time to determine if it is in the. Agency's best interest to exercise its  right to
        terminate a contract for default. The definition of a reasonable period of time depends
        upon the facts of each case and varies from case to case.  The contract file must be fully
        documented to explain the reason(s) for default and the Agency's rationale for evoking
        the  Default provision.

               The Government is not required to give notice  of failure or notice of the
        possibility of  default prior  to issuing a termination for default if the basis for default is
        failure to deliver or  to perform on time.  If, however,  the Government fails to enforce
        the  provisions related to timely  delivery, or takes any action that might be construed as
        a waiver of the delivery or performance date, then the Contracting Officer must send a
        preliminary notice to the contractor, proposing or setting a new date.  It is important
        that Project Officers do not take actions that could possibly be construed as a waiver of
        the  Government's contractual rights.

        14.8   Cure  Notice

               In cases where the failure to perform involves provisions other than those
        concerned with timely delivery,  or failure to make such progress as to endanger
        performance altogether, the Contracting Officer must give  the contractor notice of such
        failure and allow at least ten  (10) days for cure (remedy) of the failure before issuing a
        termination notice.  This "ten-day cure  notice":

               (1)  States that a termination for default may arise unless the failure to
                   perform  and make adequate progress is cured within ten (10)  days (or
                   longer);

               (2)  Calls the contractor's attention to its contractual liabilities in the event
                   of default;
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               (3)  Requests an explanation of the failure to perform and plan for correc-
                   tive  action;

               (4)  States that failure to present an explanation may be taken as an
                   admission that there is no valid explanation; and

               (5)  Where appropriate,  invites the contractor to discuss the matter at a
                   conference.

               If the contractor responds with a valid explanation of  an "excusable delay", or
        cures his or her failure to perform within the 10-day period, nothing further  is done
        except to keep a close eye on future progress.  If, however, the failure to perform is not
        remedied, and/or there was no existence of a condition of "excusable delay", the
        Contracting Officer may decide to terminate the contract for default.

        14.9  Termination

               Once the Contracting Officer determines that termination for default is in order,
        then the Contracting Officer will issue an official written notice of termination that:

               (1)  Sets forth the contract number and date and describes the  acts or omissions
                   that  constitute the default;

               (2)  States that the contractor's right to proceed with performance of the
                   contract (or a portion of the contract) is terminated;

               (3)  States, if the Contracting Officer has not determined whether the failure to
                   perform is  excusable, that it is possible that the contractor will be held
                   liable for any excess costs the Government must pay in repurchasing
                   terminated supplies or  services;

               (4)  States, if the Contracting Officer has determined that the  failure to perform
                   is inexcusable, that  (1)  the notice of termination constitutes such a
                   determination and is a final decision under the Disputes clause, (2) the
                   contractor will be held liable for any excess costs of repurchase, and (3) the
                   contractor has the right  to appeal under the Disputes clause;

               (5)  States that the Government reserves all rights  and remedies provided by law
                   or under the contract; and

               (6)  States that the notice represents a decision that the contractor is in default
                   as specified and that the contractor has the  right to appeal  under the Disputes
                   clause.

        14.10  Excusable Delays

               The contractor has certain defenses against the Government's notice of
        termination for default which are contained in the Default clause.

               If the failure to  perform  is caused  by factors beyond the control of the
        contractor, and without contractor fault or negligence, the  contract cannot be terminated
        for default.  If the failure to perform is caused by a subcontractor (at any tier), and if it
        is caused by factors beyond the control of the contractor and subcontractor and without
        their fault or negligence, then the contract cannot be terminated by default unless the

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        supplies or services to be furnished by the subcontractor were obtainable elsewhere to
        meet the required delivery dates.

        Simply put:

              -  A contractor's default is excusable if it is not caused by either contracting
                 party, or if it is caused by the Government.

              -  A contractor's default is inexcusable if caused by the contractor's own fault
                 or negligence, by that of something or someone within its control, or by that of
                 one of the subcontractors.

              There are several  excusable causes listed in the excusable delay section of the
        Default clause, some of which are:

              (1)  Acts of God or the public enemy;

              (2)  Acts of the Government in either its sovereign or contractual capacity;

              (3)  Fires, floods, epidemics, or quarantine restrictions; and

              (4)  Strikes, freight embargoes, or unusually  severe weather.

              In every such case, the failure to perform must be beyond the control and without
        fault or negligence of the contractor.  Also,  the excusable cause must be the direct cause
        of the failure to perform.  If actions by both the Government and the contractor
        contribute to the default, and the specific causes and effects of the responsibilities  of
        each are so intertwined as to defy disentanglement, then the contractor's default will not
        be excused.

                If, prior to issuance of a  notice of termination, the Contracting Officer
        determines that the contractor's failure is  excusable but  the termination is in the best
        interests of the Government, the Contracting Officer can take either of these actions:

              (1)  Terminate for convenience where the contract contains a Termination  for
                   Convenience clause; or

              (2)  Negotiate to terminate at no cost to either party, where the contract does
                   not contain a Termination for Convenience clause.

              If the Contracting Officer is not able to  determine whether the contractor's
        failure is excusable prior to the issuance  of the termination, the Contracting Officer will
        issue a written decision as soon as possible.  The written decision will be delivered to the
        contractor.promptly, with advice on the contractor's right to appeal under the Disputes
        clause.

        14.11   Waiver of  Default

              Personnel  who are involved with contractors must take extra precautions not to
        act in a  manner which will waive the Government's rights to  terminate for default.   The
        situations described below are of  special concern:
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               - After the contractor is found to be in default, the Government's rights will be
                 waived if (1) the Government acts or fails to act and thus encourages the
                 contractor to continue performance, and (2) the contractor, relying on  that
                 encouragement, continues to work and incurs costs in performance of the
                 contract.

               - If, after default, a contractor continues to perform and incurs costs, the Board
                 of Contract Appeals will carefully examine the contract administration
                 personnel to see if they said or did anything, or failed to say or do anything,
                 that may have encouraged the contractor to continue. If the Board finds such
                 evidence, it  will hold that a waiver  is the result.

               - The following kinds of acts on the part of Government personnel have been held
                 to waive a default:

                      (1)  Accepting  late delivery;

                      (2)  Ordering and accepting corrective action after default;

                      (3)  Encouraging continued performance;

                      (4)  Negotiating  a revised delivery schedule; or

                      (5)  Revising other contract terms.

               - The following kinds of acts on the part of Government personnel have been
                 held to not waive a default:

                      (1)  The  Contracting Officer conducts negotiations concerning revisions of
                          delivery times, without implying to  the contractor that late delivery
                          is acceptable without any consideration.

                      (2)  If,  after default, the contractor does nothing to continue work or
                          incur costs, then  there will normally be no waiver, in spite of
                          anything the contract administration personnel may have or have not
                          said or done. The Government's right to terminate for default will
                          remain intact.

                      (3)  The  Government  attempts, unsuccessfully, to revise other contract
                          terms.

               The best way to  avoid waiver of default is to have good  rapport and communication
        between the Contracting Officer and the Project Officer so that all personnel  who are
        involved with the contractor will know the contract status, the Government's position,
        and what each party is supposed to do and not do.

               When it is concluded that the Government's action or failure to act is grounds for
        a waiver of the contractor's default, the Contracting Officer should take immediate steps
        to establish a new delivery schedule.  These steps will  revive the Government's right to
        terminate for default so  that the  right is available in the event of a new default.
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       14.12  Contract Closeout

              A contract is considered complete when 1) all deliverables have been delivered
       and accepted, or 2) all required services have been performed and accepted, and 3) the
       period of performance, including all option provisions which have been exercised have
       expired.  Contracts that are physically complete must be administratively closed out,
       which involves the settlement of all outstanding contractual issues and the documentation
       of the file.  The Contracting Officer is responsible for closing  out the contract with the
       assistance of  the Project Officer.

       14.13  Closeout Procedures

              The contract closeout process encompasses all those actions required to see that
       the Government has received the goods or services under contract, the contractor has
       been paid  the correct amount, Government property is accounted for, all required
       reports have been received  and the file is properly documented and  transmitted to the
       records center.

              The Federal Acquisition Regulations set forth the following time standards for
       closing out contract files:

              Firm Fixed  Price Contracts - 6 months from the date on which the Contracting
              Officer receives evidence of physical completion.

              Cost Reimbursement And Indefinite Quantity Contracts Requiring Settlement of
              Indirect Cost Rates - 36 months from  the date on which the  Contracting Officer
              receives evidence of physical completion.

              All  Other Contracts - 20 months from  the date on which the  Contracting Officer
              receives evidence of physical completion.

              Timely closeout of contracts is important because there might be  payments due
       the contractor, and EPA's financial accounts need to be closed  out.  Excess funding must
       be returned to the Treasury Department, typically because closout occurs so long after
       funding that excess funds cannot be deobligated and reprogrammed for use at EPA.  Also,
       allowing completed contracts to remain open can generate late claims and disputes.

              After all  costs have  been incurred under a cost-reimbursement  central, and/or
       items delivered, the contractor will submit a completion voucher, summarizing all costs
       claimed throughout the contract period.  (This step is  not necessary for firm fixed price
       contracts, as the voucher submitted after the items are accepted will specify the fixed
       price of the contract  and contractor costs are  irrelevant.) The Project Officer will be
       requested  to examine the voucher from the perspective of (1) was the work performed
       and (2) are the costs allocable and reasonable.

              The completion voucher serves as the basis for requesting a final audit, which
       will provide to the Contracting Officer a report on the contractor's actual costs and
       serves as the basis for negotiating a final cost settlement.  The Contracting Officer must
       then determine the allowability, allocability, and reasonableness of costs claimed and
       may enter  into negotiations  with the contractor. A final cost is then  negotiated and final
       payment can be made. The final voucher submitted by the contractor is certified  by the
       Contracting Officer (not the Project Officer)  and is subject to all provisions of the
       Prompt Payment Act (see Chapter 11).  Other requirements of closeout of completed
       contracts are:


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              - proper disposition of Government property;

              - release of all future claims from  the contractor;

              - proper disposition of any classified material; and

              - disclosure of all inventions.

       14.14   Project  Officer  Responsibilities

              Project  Officers will be requested to assist in part of the contract closeout
       process.  Listed below are the tasks the Project Officer normally will be responsible for
       performing:

              (1) Certifying that all technical requirements of the contract have been
                  satisfied,  that the products or services have been satisfactorily completed
                  within the contract amount, and that the final report and all deliverables
                  have been received and accepted;

              (2) Reviewing and determining the accuracy of the contractor's reporting of
                  inventions;

              (3) Examining the completion voucher  (on cost-reimbursement contracts); and

              (4) Evaluating the contractor's performance under the contract.

              Most of these activities will be requested by the Contracting Officer in writing,
       so the Project Officer need only respond to the written request.  Nonetheless,  it is
       essential that the tasks be performed as quickly as possible, as contract closeout is a
       time-consuming process and many steps are dependent upon completion of the preceding
       steps.  Project Officers must take care to be responsive to these requests, as their duties
       as Project Officers do not end until contract closeout is completed.

              It is essential  that contractor evaluations be well thought out by Project  Officers
       and backed up by documentation. These evaluations can later serve as the basis for
       evaluating past performance of a potential  contractor  in consideration for award of
       future  requirements.

              Good or bad experiences can be used by the Contracting Officer and thus enhance
       EPA's  acquisition program in  later years.  EPA  Form  1900-27 (See page 451)  will be
       used for this purpose, and will be forwarded to the Project Officer by a PCMD contract
       specialist or contract  administrator during  the closeout process.
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     MISCELLANEOUS CONTRACT
     PROVISIONS AND SPECIAL
         CONTRACT TYPES
               1 5-0
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Miscellaneous
  Provisions

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             SPECIAL  PROVISIONS
   1.  Patents
           Generally, Contractor may elect to  retain
           title  to invention made in performance of
           contract  work,  but Government receives
           license to practice  invention  worldwide;
           contact EPA's  Patent  Advisor  for  information.
   2.  Data Rights
           Contracts  involving  acquisition  of  limited
           rights  data (developed  at  private expense that
           is trade  secret,  commercial,  financial,
           confidential,  or  privileged), or  restricted
           computer software,  must contain clauses
           defining  the  respective  rights  of Government
           and  contractor regarding its  use,  duplication
           or disclosure.
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      SPECIAL   PROVISIONS   (Cont.)
   3.  Peer And Administrative Review

          All  scientific,  Informational  or  educational
          material  designed  for  public distribution and
          attributable to EPA and produced by an EPA
          employee,  consultant,  contractor  or  grantee,
          must undergo EPA's review  process prior
          to  publication by EPA  or the contractor.
   4.  Contractors' Working Files
          Contractor must  maintain accurate working
          files  on all work documentation required In
          performance; Contracting  Officer  can require
          contractor  to provide EPA with all such
          Information.
                          1 5-2
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   SPECIAL  PROVISIONS  (Cont.)
5.   Confidential Business Information

        Contractor given access to proprietary
        data  submitted to  EPA  must protect its
        confidentiality.  Contractor must:

        Use data only to carry  out  contract work

        Not disclose  Information to other  than
        EPA  employees  unless  prior written
        approval

        Return  all copies  to Contracting Officer

        Not use it to compete against related
        businesses

        Get Contracting  Officer consent prior to
        entering into  subcontract requiring
        disclosure

        Include  disclosure  restrictions  in  sub-
        contracts.
                       '5-3                         471

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       SPECIAL   PROVISIONS  (Cont.)
    6.  Drug-Free Workplace

       -  Offeror/contractor  required  to  certify and
          agree  that offeror/contractor and  employees
          will  not  engage in unlawful  manufacture,
          distribution, dispensing,  possession,  or  use
          of a controlled substance in the performance
          of a government  contract

          Offeror/Contractor  with  employees  agrees to:

          Notify  employees  of  prohibition/that  required
          to notify  employer if convicted under criminal
          drug statute  within 5 days  of  conviction;
          provide  copy drug-free  certification  statement

          Establish  drug-free awareness   program

          Notify  contracting officer of any  violations
          and  take  appropriate  personnel  action

          Make a good-faith effort to maintain a drug-
          free  workplace

          Penalties:  Suspension   of contract  payments;
          termination for default;  suspension; debarment
                            15-3b
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        CONTRACTS  SUBJECT TO
         SPECIFIC  LABOR  LAWS

  Government Contracts Are Subject To The Following
  Labor Laws Requiring Certain Minimum Pay Standards
         CONTRACT WORK HOURS AND SAFETY
         STANDARDS ACT - applies to laborers &
         mechanics for contracts over $2500, and
         contraction  contracts over $2000

         WALSH-HEALEY PUBLIC CONTRACTS ACT -
         applies to all contracts over $10,000
         for  manufacture  or  furnishing of materials,
         supplies,  articles  or equipment

         FAIR LABOR STANDARDS ACT - applies  to
         all  government  contracts

         SERVICE CONTRACT ACT - applies to service
         employees on service contracts over  $2500

         DAVIS BACON ACT - applies to all contracts
         for  construction,  alteration or repair  over
         $2000.
                       15-4                        «72
:MD 9/89

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       CONSTRUCTION  CONTRACTS
      Construction Contracts Have Unique Requirements,
      Including:
         Contractor Must Furnish  Performance
         And  Payment Bonds If Contract Over
         $25,000

         If  Site Conditions Differ Materially  From
         Those Known When Fixed Price Contract
         Bid  Submitted, Contractor Entitled To
         Adjustment

         Special Contractor Evaluation Is  Required
         By FAR For Contracts:   1) $500,000 Or
         More; 2)  $100,000  Or More If Any Element
         Either  Unsatisfactory Or  Outstanding;  3)
         $100,000  Or  More, If Contract Terminated
         For Convenience Of Government.
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        SECTION  8(a)  CONTRACTS
      Section 8(a) Of Small Business Act Authorizes
      SBA To Contract With Federal Agencies And
      Then Subcontract Work To Socially/Economically
      Disadvantaged Small Business. 8(a) Contracts
      Have Special  Requirements:


          Contract Modifications  Require Two
          Changes - One With SBA  Prime Contract And
          One Between  SBA And Subcontractor

       -   Payment Is Made Directly To Subcontractors
          (Not Thru  SBA);  Advance  Payments May Be
          Issued And Should Be Expedited

          May Require  More Project Officer Assistance
          Because Of Government's Special Responsibility

       -   Award of  8(a) Contract Excluded  From
          Requirements For Full And Open  Competition

       -   Agency Restricted In Terminating Contract;
          Must Terminate  With SBA First.
                         15-6
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                                          Chapter 15
         MISCELLANEOUS CONTRACT PROVISIONS AND SPECIAL  CONTRACT TYPES


             It is impossible to describe in this chapter all of the many contract provisions
       which require special administration duties.  Many are only applicable to one type of
       contract or certain specific situations. Nonetheless, presented here are several which
       are common to many EPA contracts and are of interest to Project Officers. Others may
       be included in individual contracts; in these situations, Contracting  Officers will advise
       their  Project Officers of their responsibilities with  respect to these unique provisions.

       15.1  Patents and  Data  Rights

       (1) Patents

             A patent is a grant given by the Government to an inventor, which gives the
       inventor exclusive control for 17 years of the invention and the opportunity to enforce
       that control by court action against any infringers.  The Government's policy is to
       encourage the use of inventions in performing contracts, even though the inventions may
       be covered by US patents.  In those cases where the Government has authorized or
       consented to the manufacture or use of an invention covered by a patent, any suit for
       infringement of the patent based on a Government contractor's use or manufacture of the
       invention can be maintained only against the Government and not against the contractor
       or subcontractor.

       However, if the patent  infringement results from performance under construction
       contracts or contracts for supplies or services that normally are sold by any  supplier to
       the public in the commercial open market, the liability may ultimately be borne  by the
       contractor or subcontractor.  Therefore, the Government may require that the
       contractor agree to indemnify the  United States against liability for patent infringement
       in these situations.

       The general rule is, where the contractor performs work or provides supplies which  are
       unique to the Government and which he does not ordinarily make for his commerical
       customers, the Government assumes the risk of indemnity and does not include an
       indemnity clause.  But where the supplies or services are  "standard commercial" and
       have  been sold to the general public, the contractor must assume the risk.  EPA
       contractors  are  required to notify the Contracting Officer of  all claims of infringement
       that come to their attention in connection with contract performance.

             Under the terms of most EPA contracts, the contractor may elect to retain title to
       any invention made in the performance of work under the  contract.  If this occurs, the
       Government will receive a nonexclusive, nontransferable, paid-up license to  practice
       any such invention throughout the  world.  Under certain circumstances, the Government
       is granted  only  limited rights, or takes title to the invention itself.

             To exercise its right to retain title to an invention,  the contractor must disclose
       it to the Contracting Officer within  two months after it is disclosed to the contractor by
       the inventor. The contractor must decide within a  certain period of time after disclosure
       whether it elects to retain title to the invention,  and must file its initial patent
       application within another specified period after that.  (The time periods vary  depending
       on whether the contractor is a small  or large business or a nonprofit organization). The
       contractor is also required to submit annual reports on the utilization of any invention
       when  title is vested in the Government.


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               Since the  majority of EPA's contracts cover services rather than supplies,
        inventions are infrequently created under our contracts.  EPA does have a Patent Advisor
        in the Office of General Counsel who is available to answer questions if the issue does
        arise.

        (2)  Rights in Data and Copyrights

               It is necessary for EPA, in order to carry out its missions and programs, to
        acquire or obtain access to many kinds of data produced during or used in the
        performance of its contracts to meet programmatic and statutory requirements,
        including regulatory activities.  At the same time, EPA recognizes that its contractors
        may have a proprietary right or other valid economic interest  in certain data resulting
        from private investment, and that protection  from unauthorized use and disclosure of
        this data is necessary in order to prevent  the compromise of such property right or
        economic interest, avoid jeopardizing the  contractor's commercial position, and
        maintain EPA's ability to obtain access to or use such data.

               The protection of this data by EPA  is necessary to encourage qualified contractors
        to participate in EPA programs and apply innovative concepts to such programs.
        Subpart 1527.70 of the Environmental  Protection Agency Acquisition Regulations
        (EPAAR) set forth specific policies, procedures, solicitation provisions, and contract
        clauses relating to the acquisition of data and the rights in data or copyrights relative
        thereto.

               It is important for Project Officers  to recognize  that acquisition of data involves
        not  only the identification and definition  of the data to be acquired and the circumstances
        of its use, but also the rights of the Government to the use of such data.  In fact, in many
        cases, the Government is acquiring the right to use of the data rather than title to the
        data itself.  It is EPA's practice to identify and define its data requirements to the extent
        possible in the statement of work of the contract. Recognizing that this may not always
        be feasible, EPA has made provisions for the acquisition of data subsequent to award of
        the  contract. In either event, since preparation, maintenance and storage of data
        generally represent a substantial expense to  both the Government and contractor, data
        requirements shall be kept to a minimum consistent with program needs.

        Following are definitions of various terms as they are used in the EPAAR:

               (a)  "Computer software" means computer programs, computer data bases, and
                    their documentation.

               (b)  "Data" means recorded information, regardless of form or media and
                    includes computer software.  It does not include information incidental to
                    contract administration such as  financial, business or management
                    information.

               (c)  "Form, fit, and function data" means data relating to, and sufficient to
                    enable physical and functional interchangeability; as well as data identifying
                    source, size, configuration, mating and attachment characteristics,
                    functional  characteristics,  and performance requirements.

               (d)  "Limited rights" means the rights of the  Government in limited-rights data,
                    as set forth in a Limited Rights Notice  if included in the data  rights clause of
                    the contract.


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             (e) "Limited-rights data" means data that embodies trade secrets or is
                  commercial or financial and confidential or privileged to the extent that
                  such data pertains to items, components, or processes developed (or with a
                  backup computer in case of inoperability) at private expense, including
                  minor modifications thereof.  (Contracting Officers  may, with  the
                  concurrence of the Project Officer, use the  following alternate definition:
                  "Limited-rights data" means data developed at private expense  that embodies
                  trade secrets or is commercial or financial and confidential or privileged).

             (0  "Restricted computer software" means computer software developed at
                  private expense and that is a trade secret, or is commercial or financial and
                  confidential or privileged, or is published copyrighted software.

             (g) "Restricted rights" means the right of the Government in restricted
                  computer software as set forth in  a Restricted Rights Notice if  included in a
                  data rights clause of the contract or as otherwise may be included or
                  incorporated in the contract.

             (h) "Unlimited rights" means the right of the Government, without additional
                  cost to the Government, to use, disclose, reproduce, prepare derivative
                  works, distribute copies to perform publicly  and display publicly, in any
                  manner and for any purpose, and  to have or permit others to do so.

             All contracts which involve the acquisition of data discussed and defined above
      must contain clauses which define  the respective rights of both the Government and the
      contractor regarding such matters as its use, duplication and disclosure. The type of
      contract, the particular subject matter of the contract, or  the intended use of the data,
      must be considered in selecting the appropriate contract  clause.  It is therefore essential
      that all Project Officers whose  acquisition includes data  be familiar with the various
      clauses so that they may assist the Contracting Officer in  selecting the clause which best
      serves both the Government and the program being supported.

             Following is a brief general discussion of the various clauses.  Their full text is
      contained in EPAAR Temporary Regulation 1 (effective date: July 15, 1984) and may be
      obtained by contacting your supporting Contracting Officer.  Specific questions regarding
      the selection of clauses, appropriate to program needs, should be addressed to the
      Contracting Officer early in  the pre-solicitation phase of  the acquisition process.

             (a) Rights in Data - General (EPAAR  1552.227-71)

                 (i)  This clause balances EPA's program and  mission needs with the
                      Contractor's right  to protect property and valid  economic  interest
                      stemming from private investment.  The Contractor is protected from
                      unauthorized use  or disclosure  of limited rights data or restricted
                      computer software either by withholding delivery or by placing a
                      "Restricted Rights  Notice" authorized by the clause on the data to be
                      restricted.  Further, the categories or types of data which the
                      Government is to acquire with  limited rights are  specifically  identified
                      along with an enumeration and definition of the  use or  disclosure rights
                      of EPA. Although the Contracting Officer may revise these  purposes
                      consistent with EPA's needs, appropriate purposes include:  use by
                      support service contractors, evaluation by non-Government evaluators
                      and use where required by other contractors participating in the same
                      program.


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                 (ii)  Pursuant to this clause, contractors may establish or maintain
                      copyright protection for data first produced and/or delivered under the
                      contract. However, the Government will normally be granted a
                      nonexclusive, irrevocable license, which includes the rights to
                      reproduce, prepare derivative works, and distribute to the public.  The
                      Contractor is permitted to establish claim of copyright to scientific and
                      technical articles based on. ix derived from, the contract work and
                      published in academic, professional, or technical journals.   Such
                      permission may also be granted in other cases.

                 (iii)  Regarding  restricted computer software, the means of protection
                      afforded the contractor are the same as those for limited rights data.
                      However, the Contractor may also  substitute form, fit and function data
                      or deliver the  software with restricted  rights  relative to its use,
                      disclosure, and reproduction. It is important in circumstances when
                      such software is needed for use in more than one computer that the
                      number  be specified in the contract schedule.

                      When EPA acquires software with  restricted rights, it may use the
                      software (or copy for use)  in or with the  computer or computers  for
                      which it  was acquired.  EPA may also reproduce it for archival or
                      backup purposes, modify, adapt or combine it with other software (the
                      resultant software is subject to the same  restriction in rights).  It also
                      may be  disclosed or reproduced by support contractors or their
                      subcontractors, subject to the same restrictions in  rights.

                 (iv)  In the event EPA questions the Contractor's authority to limit the use
                      of data or restrict the use of software, procedures are provided by the
                      clause.

              (b) Riohts in Data - Special Works (EPAAR 1552.227-72)

                  (i)  Generally,  this clause is used in contracts which are primarily for
                      the production or compilation of data (other than limited rights data or
                      restricted computer software) for  EPA's internal use, or when there  is
                      a need to limit the distribution or use of the data or to obtain indemnity
                      for liability that may arise  from the content, performance, or use  of the
                      data.  It would also be used where "existing works" are being modified.

                  (ii)  The following are circumstances under which  use of the clause is
                      required:

                             (A)  Production of audio-visual works;

                             (B)  Agency histories;

                             (C)  Recruiting, morale, training, or career guidance works;

                             (D)  Works involving instruction or guidance  of Government
                                 officers and employees;
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                           (E)  Works intended for use in connection with EPA regulatory
                                or enforcement activities not involving research,
                                developmental or experimental work;

                           (F)  Collection of data containing personally identifiable
                                information, the disclosure of which would violate rights of
                                privacy  or publicity;

                           (G)  Investigatory reports; and

                           (H)  Works, the early release for EPA regulatory or enforcement
                                activities.

                 (iii)   Under this clause, EPA has unlimited rights in all data delivered and in
                      all data  first produced, the right to  limit the Contractor's claim to
                      copyright,  and the right to limit the use and release of data except for
                      purposes specifically provided for in the contract.

                 (iv)   The contractor indemnifies the Government and its officers, agents, and
                      employees against  liability  resulting from violation of trade secrets,
                      copyrights, a right of privacy or publicity, provided the Government
                      gives timely  notice of its intent to  make such a claim.

             (c)  Rights in Data - Existing  Works  (EPAAR 1552.227-73)

                 (i)   This clause  is used in contracts for the acquisition (without
                      modification) of such works as motion pictures, videotapes, sound
                      recordings, literary, pictorial  or other similar works.   The contract
                      may limit the use of such work in terms of means of exhibition or
                      transmission, time, audience, or geographical locations.

                 (ii)   In the case of existing computer software, no special  clause is required,
                      although the contract must contain terms sufficient to  permit EPA to
                      fulfill the need for which the software is being acquired.  Care should be
                      exercised to  ensure  that any vendor's standard commercial lease,
                      license,  or purchase agreement be consistent with EPA's purpose for
                      acquisition.  As with the acquisition of other computer software, Project
                      Officers  should consult early on with the Contracting Officer regarding
                      EPA's intended use and the establishment of the contract language
                      necessary to protect the rights of EPA in that use.

                 (iii)   Contracts  for other  existing works,  being acquired off-the shelf with
                      no intent of reproduction or use which may be prohibited by the author's
                      or publisher's rights, need and contain any of the clauses discussed
                      above.

                 (iv)  Modification of existing works is considered to be "Special works" for
                     rights in  data purposes.
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               (4)  Additional Data  Requirements  (EPAAR 1552.227-74)

                   In recognition of the fact that in  some contracting situations, it may not be
                   possible or appropriate to ascertain all data requirements at the time of
                   contracting, this clause permits the Government to order data any time
                   during contract performance or within three years of final payment any data
                   which was first produced or specifically used in the contract.  It provides for
                   compensation to the Contractor for formatting, production, and delivery.

        15.2  Peer  and Administrative  Review

               The Administrator has implemented  an internal review process for EPA
        scientific, informational,  and educational  materials designed for public distribution.
        Any such materials attributable to EPA,  whether produced by an EPA employee,
        consultant,  contractor, or grantee, must be  reviewed through the control system
        established in the EPA Order prior to public distribution. The intent of the Order is to
        ensure the  high quality, completeness,  and  accuracy of materials attributable to EPA.

               A contract clause restricts the contractor from independently publishing or
        printing material generated under contract until  after completion  of the EPA review
        process. A copy of any paper, article,  or other dissemination of information intended for
        publication  must be submitted  to the Contracting Officer at  least 30 days prior to
        publication.  The Government  is to notify the contractor of  review completion within the
        number of calendar days specified in the contract clause after the contractor's
        transmittal to the Project Officer of material developed under the contract.  If the
        contractor does  not receive Project Officer notification within this period,  the
        contractor is to  notify the Contracting  Officer in writing.

               The contract clause will establish statements the contractor must include in any
        public distribution of the contract-generated material, whether  or not the Agency has
        decided to publish the material.

        15.3  Contractors' Working  Files

               EPA contracts may provide that contractors must maintain accurate working files
        (by  task or work assignment,  if applicable) on all work documentation required in
        performance. The Contracting Officer has the right  to require  the contractor to provide
        EPA with all information contained in these working files.

        15.4  Treatment  of  Confidential Business Information

               Periodically, the Agency has requirements that call  for a  contractor to review or
        analyze proprietary data that has been submitted to EPA.  Contract clauses exist which
        protect the  confidentiality of such data  by requiring  the contractor to:

               (1)  use the confidential information only for the purposes of carrying out  the
                   work required by the contract;

               (2)  not disclose the information to anyone other than EPA employees without
                   the prior written approval of EPA's General Counsel;

               (3)  return all copies of the information to the  Contracting Officer when it is
                   no longer required or upon  completion of the contract;
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              (4)  not use any confidential information supplied by EPA or obtained during
                  contract performance to compete with any business to which the confidential
                  information  relates;

              (5)  obtain  the written consent of the Contracting Officer prior to entering into
                  any subcontract that will  involve the disclosure of such  confidential
                  information to the subcontractor; and

              (6)  include the same requirements in any subcontract which will involve the
                  furnishing  of confidential business information to the subcontractor.

              More specific procedures are  included in contracts which involve  access to
      confidential business information, related to either the Federal Insecticide, Fungicide,
      Rodenticide Act or the  Toxic Substances Control Act.

              Project Officers who discover that a contractor is not in compliance with any of
      the contract requirements in this area must immediately notify their Contracting
      Officer.

      15.5   Certification   Regarding  a  Drug-Free  Workplace

              In March of 1989, a new FAR regulation (at  52.223-5 and 6) was published
      requiring  that all offerers for Government contracts certify that they will not engage in
      the unlawful manufacture, distribution, dispensing, possession, or use of a controlled
      substance in the performance of the  government contract. Failure to so certify renders
      the offerer unqualified and ineligible for the award of a government contract.

              In submitting any offer for a government contract, the  offerer (if other than an
      individual)  certifies that it will:

              (1)  publish a  statement notifying employees that  the unlawful manufacture,
                  distribution, dispensing, possession, or use of a controlled substance is
                  prohibited  in the offerer's workplace, and specifying the  actions to  be taken
                  against employees for any violation of that prohibition;

              (2)  establish a drug-free awareness program to inform employees about
                  the dangers of drug abuse in the workplace, the Contractor's policy of
                  maintaining  a drug-free workplace,  available drug counseling,
                  rehabilitation, and employee assistance programs, and the penalties for drug
                  abuse violation;

              (3)  provide all employees engaged in contract performance with  a copy
                  of the statement of (1) above;

              (4)  notify employees that they are required to abide by the terms of the
                  statement  and to notify the employer of any criminal drug statute conviction
                  within five  days of such conviction;

              (5)  notify the  contracting officer within  10 days of any such notification
                  by an employee or otherwise  receiving actual notice of such  conviction;
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               (6)  impose sanctions or remedial measures on any employee convicted of
                   drug abuse violations occuring in the workplace (including personnel actions
                   up to and including termination, or requiring the employee to satisfactorily
                   participate in  a drug assistance or rehabilitation program); and

               (7)  make a good faith effort to maintain a drug-free workplace through
                   implementation of the above  (1) through (6).

               In addition,  any individual offerer/contractor that has no more than one employee
        including the offerer/contractor agrees, by award of the contract or acceptance of a
        purchase order, not to engage in the unlawful manufacture, distribution, dispensing,
        possession, or use  of a controlled substance in the performance of the contract. The
        contractor's failure  to comply with these requirements may render the contractor
        subject to suspension of contract payments, termination of the contract for default, and
        suspension or disbarment.

               Project Officers who discover that a contractor is not in compliance with any of
        the contract requirements in this area  must immediately notify their Contracting
        Officer.


        ADMINISTRATION OF SPECIAL TYPES OF CONTRACTS

               Certain types of contracts contain provisions which demand special
        administration techniques. While it would be too lengthy to discuss them all  here, the
        most typical ones used at EPA are set forth in this chapter with a short discussion about
        their unique provisions.

        15.6  Contracts  Subject to Specific  Labor  Laws

                All Government contracts contain provisions requiring certain pay standards.
        Various laws have been promulgated for the protection of these employees; these are
        summarized below:

               (1)  Contract Work Hours and Safety Standards Act - applicable to laborers and
                   mechanics on all contracts over $2500 ($2000 for construction contracts);

               (2)  Walsh-Healey Public Contracts Act - Applicable to all contracts over
                   $10,000  for the  manufacture or furnishing  of materials, supplies, articles,
                   or equipment;

               (3)  Fair Labor Standards Act - applicable to all government contracts
                   regardless of  size;

               (4)  Service Contract Act - applicable to service employees on all service
                   contracts over $2500; and

               (5)  Davis Bacon  Act - applicable to all contracts for construction, alteration, or
                   repair which  are over $2,000.

               Much of the enforcement of the labor laws  is handled by the US Department of
        Labor.  Nonetheless,  EPA has certain responsibilities, and any Government employee who
        is aware of or suspects a violation of any such law is responsible for reporting it to the
        Contracting Officer, who  will refer the matter to the appropriate authorities.


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             The last two acts listed above require the most monitoring by the contracting
       agency.  Both require the inclusion of wage determinations in those contracts which are
       applicable and the enforcement of minimum wage standards for the employees affected.
       Most of the administration of the Service Contract Act requirements is handled by the
       Department of Labor (DOL). EPA Project Officers and Contracting Officers, however,'
       are responsible  for ensuring that 1) DOL is notified of the existence of all such
       contracts,  2)  all contractors are fully informed of their responsibilities, and 3)
       contractors post DOL Form  SC-1  in a prominent place at every job site.

             The Davis Bacon Act, applicable to construction contracts, requires the review of
       weekly payroll records for all employees (whether employed by the prime contractor or
       any subcontractor) to verify compliance with  the minimum wage rates and other
       provisions  of the law.  Project Officers must ensure that wage  determinations  are posted
       in a prominent place at the work site, and they may be asked to verify that the
       employees' classifications on the payroll records conform with the work actually
       performed.

             Violations of these labor laws may result in suspension of payment, liquidated
       damages assessment, or ultimately, suspension  or debarment of the contractor from
       receiving future  Government contracts.  Technical personnel who are assigned to
       monitor contracts with any of these  provisions should review the requirements  and their
       own  responsibilities with their Contracting Officers  immediately  after award.

       15.7  Construction Contracts

             Besides  the administration of the Davis Bacon Act provisions, construction
       contracts carry with them a number of unique  requirements with which technical
       personnel should become familiar.  The majority of the Agency's construction activities
       which are contracted are in the Superfund program,  and the majority of these are
       handled  as subcontracts under the remedial planning program. Therefore,  much of the
       administration is managed by the prime contractors.  However, Project Officers should
       know the requirements, and there are a certain  number of prime contracts for
       construction awarded in EPA,  which do require special administration activities.

              One unique feature of construction contracts over $25,000 is the requirement
       for the furnishing of both performance and payment bonds by the contractor. A
       performance bond is a guarantee that the contractor will fulfill 100% of the obligations
       of the contract; a payment bond assures payment to  all persons supplying labor  or
       material  under the contract. This means that if the contractor fails  to fulfill either of
       these requirements, a "surety"  is named to be legally liable for the debt.  Prime
       contractors will  usually require the same guarantees from their subcontractors.

             Fixed price construction contracts also provide that  if  site conditions  differ
       materially from those known at the time of submission of a bid or proposal, the
       contractor may be entitled to an adjustment in contract price as a result.  Project
       Officers  will be  required to  provide input on  the evaluation of contractors' claims if or
       when this occurs.

             Finally, special contractor evaluations are required by the  FAR for  each
       construction contract of 1) $500,000 or more,  2) $100,000 or more, if  any element
       of performance  was either  unsatisfactory or  outstanding, 3) more than $10,000, if the
       contract  was terminated for default, or 4)  $100,000 or more, if the contract was
       terminated  for convenience of the Government.  The evaluation must be prepared by the


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        Contracting Officer with input from the Project Officer within two weeks after final
        acceptance of the work or contract termination.

        15.8  Contracts with  the Small  Business Administration  Under the  8(a)
              Program

               Section 8(a) of the Small Business Act, as amended, authorizes the Small
        Business Administration (SBA) to contract with Federal agencies and then to subcontract
        the work to socially and economically disadvantaged small business. Any type of service
        may be contracted for under the 8(a) program.

               SBA delegates the administration of 8(a) subcontracts to the procuring agency,
        which results in  certain  differences in contract administration.   For example, contract
        modifications must be accomplished by two changes: one with the SBA prime contract,
        and the other between SBA and the subcontractor.

               Some  8(a) contracts may call  for advance payments, since these firms are small
        businesses and often do not have the  cash flow to finance their contracts to completion or
        until receipt of progress payments.  It is therefore important that Project Officers
        expedite payment requests from these firms to avoid possible disruptions in contractor
        performance caused by cash flow problems. Under the terms of the contracts, payment
        is made directly to the subcontractors, and does not "pass through" SBA.

               It is a special responsibility of the Government to assist an 8(a) contractor in
        becoming  a viable business entity. Project Officers may become particularly involved
        in  spending extra effort  in guiding  and directing the firm's performance.  Hopefully, this
        will result  in a better product or service than might otherwise have been obtained.  In
        addition, because awarding a contract to an 8(a) firm requires  no statutory exemptions
        for other than full and open competition, program offices may gain benefits through
        follow-on or succeeding contracts with the  same company, not often possible with other
        firms,  due to  the requirements  for competitive acquisitions.

               The 8(a)  subcontractor is subject to the termination clauses contained in the
        prime  contract with SBA.  However, independent exercise of the termination right by the
        agency is  restricted. Normally, the SBA will try to reach an agreement  to modify the
        requirements of the  contract to avoid termination.  If this fails,  the agency may actually
        terminate the contract with SBA, who cannot be held liable for any excess costs of
        repurchase (see Chapter 14). If this  occurs, SBA in  turn will terminate the
        subcontract.
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Appendices

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     APPENDICES
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                              ETHICS PRETEST AND RESPONSES
       Which of the following circumstances would EPA view as ethical employee behavior.
       (Indicate  yes/no/comments)

       1. EPA employee accepts Christmas gift from EPA contractor who has been personal
          friend  for 10 years and has been giving Christmas gifts during that entire period.

          Response: Issue is whether personal friendship proceeded EPA contractor
          relationship.  Okay, if gift result of personal friendship' that proceeded EPA
          contractor status.  However, if employee is managing EPA contract with contractor at
          time of gift, is not acceptable.

       2. EPA employee speaking on behalf of EPA at professional meeting two hours from
          Washington accepts ride to meeting with other speaker from private company.

          Response:  Issue is whether transportation is considered "incidental" and whether
          other speaker is personal friend/professional acquaintance or EPA contractor.  If
          incidental, okay; if personal friend/professional acquaintance, okay.  If not incidental
          and also EPA contractor, not okay. This would be considered incidental and okay.

       3. EPA employee attends federal office automation trade show and accepts the following
          items from vendors there:
              a)  desk calendar;
              b)  discount coupon for software worth $99.00;
              c)  disk holder with vendor's  name and address (worth $12.00 retail);
              d)  pen with vendor's name and address (worth $4.99 retail);
              e)  free buffet lunch.

          Response:  Issue is value of promotional item (if less  than $10.00 retail value) and
          if it would give appearance of preference (e.g., vender's name is prominently
          displayed and employee uses in  office.)  a)  okay; b) no; c) no; d) okay; e) okay if all
          attendees receive.

       4. EPA employee in OSWER has received proposals from several companies in response
          to solicitation. The lowest bidder presently has contract with OARM. OSWER
          employee calls project officer in OARM to inquire if lowest bidder has been
          performing satisfactory work and within original contract budget.  Is project officer
          permitted to  respond?

          Response: Issue is how the project officer responds. Okay to offer facts;
          inappropriate to offer subjective  opinions.  Information received can't be  used  by
          inquirer  in scoring proposals.

       5. EPA employee receives unsoliciated proposal, but has no funds to fund proposal.
          One year later, EPA employee writes RFP for competitive procurement based on
          proposal submitted, and divulging the methods proposed in the unsolicited proposal.
          Is this permissible?  Does the original submitter have a right to protest?
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          Response: Issue is whether the RFP divulged confidential procurement information.
          If the methods are unique and employee can't describe them without giving away the
          approach, is not permissible.  If divulges, original submitter has right to protest.

       6.  EPA employee receives invitations from EPA contractors to attend Christmas parties.
          To avoid any showing of partiality, EPA employee decides to attend all  parties.

          Response: Not appropriate, because may have appearance of conflict of interest.
          However, it has been considered proper to attend such an event where the EPA
          employee has recently  worked for the company, under the personal relationship
          exception.

       7.  EPA employee attends all-day briefing by EPA contractor at contractor's office.
          Contractor provides buffet lunch for all attendees, both public and private.

          Response: Issue is whether there is any way for  the EPA employee to pay for the
          lunch.  If not,  it's permitted under the "widely attended gathering" exception.

       8.   EPA employee's husband has substantial private stock  in EPA contractor company,
          representing 25% of husband's net worth; employee  is  husband's beneficiary. EPA
          employee serves on technical review panel for major procurement, where EPA
          contractor has submitted proposal.

          Response: Employee should recuse self from the panel.

       9.  EPA employee receives and accepts invitation to  speak  on behalf of EPA at private
          conference at  the Greenbriar funded by state government funds. Invitation includes
          transportation, meal and lodging expenses and $200 honorarium. Employee also
          attends separate reception and dinner for speakers sponsored by private company
          arranging the conference.

          Response: Acceptance directly from the  state is okay if there is an I PA agreement, or
          the private company is a 501(c)(3) (charitable  or educational) organization.  If so,
          acceptance of travel and meals is okay.  If private company, acceptance is not
          permitted except for  meals available to all attendees. If the Greenbrier offers a deal
          whereby they  charge regular  rates  for everyone else and government rate within per
          diem amounts for government speakers, this could also be acceptable. Honorarium
          may not be accepted because this is official appearance.

       10.  EPA employee  is friend of local official running for reelection, and assists official
           in  telephone  poll on specific election issues totally unrelated to federal activities or
           issues.

           Response:  Hatch Act prohibits if assistance is on behalf of partison candidate or
           (except in local counties with large number of federal employees) if any of  the
           candidates is a Republican or Democrat.

       11.  EPA employee prepares competitive  procurement RFP. During the alloted response
           period, employee leaves EPA and joins firm that is bidding on the RFP, assists firm
           in  preparing  bid proposal, and appears as staff in the proposal.

           Response during suspension of Procurement Integrity  Act: Appearing as staff is
           okay.  However, if the procurement were noncompetitive, approval of Assistant
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            Administrator for Administration would be required.  However, this may be viewed
            as unfair competitive advantage depending on nature of procurement.

            Response when Procurement Integrity Act implemented: Not acceptable to appear as
            staff on contract.  Under Act, no official who has participated personally and
            substantially in conduct of Federal agency procurements shall participate
            personally and substantially on behalf of the competing contractor in the
            performance of such contract during the period ending two years after the last date
            such individual participated personally and substantially in the conduct of such
            procurement.

        12.  EPA contract is due to expire and be recompeted. Existing contractor requests EPA
            project officer for information  regarding anticipated requirements and  continuation
            work.  EPA project officer gives information to contractor.

            Response: As long as contractor requests information and it is actively  solicited by
            contractor, is permissible, if the information is also available upon request to
            other contractors. To avoid creating situation of giving competitive advantage to any
            specific contractor,  however, information should be made available to all
            prospective contractors at same time.

        13.  If a bribe if offered,  the employee should not accept anything, but indicate a
            willingness to consider the offer, and then contact EPA's Office of Inspector General.

            Response: Yes, because rejection of the bribe may threaten the briber and cause the
            briber to attempt to throw the blame on the employee by reporting that the
            employee solicited the bribe.

        14.  An EPA employee served on a technical evaluation panel for a contract award. After
            he left EPA, he went to work for the contractor and was assigned to work as project
            manager for the contract he helped to award. A dispute arises over the meaning of a
            contract provision and the company's management asks the former employee to
            prepare a written submission to EPA for signature  of the company's president.

            Response during suspension of Procurement Integrity Act: Okay, because the statute
            bars only representational activity, and not aid and assistance. Could not send under
            his own name. Is okay to work on the contract. Is not acceptable for former
            employee to service as project manager, however; only as staff.

            Response after implementation of Procurement Integrity Act: Not acceptable to
            work on contract. No Government official or employee who has personally reviewed
            and approved  the award, modification or extension of any contract for a
            procurement shall, during the period ending two years after the last date such
            individual personally reviewed and approved the award, modification or extension of
            any  contract for such  procurement, shall participate personally and substantially
            on behalf of the competing contractor in the performance of such contract.

        15.  An employee  is the treasurer of an environmental group which has applied to EPA
            for a grant. The employee receives no pay for this activity.

            Response: The employee is barred from participating in any way,  even  by advice or
            recommendation, in the EPA decision on the application, since he is an officer of an
            organization which  has a financial interest in the matter.
PCMD7/90                                                                                      488

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       16.  Which of the following qualify as indicators of potential fraud: (Circle ones that are
            indicators)

           a. Purchasing items and services from single source.  (Yes)

           b. Selective release of information concerning requirements and pending purchases.
              (Yes)

           c. Providing mailing list of potential contractors to contracting officer for mailing
              out RFPs.  (No)

           d. Defining statement of work and  specifications to fit products/capabilities of
               limited set of contractors.  (Yes, unless minimum needs are described)

           e. Using statements of work, specifications or sole source justifications developed
              by or in consultation with a specific contractor.  (Yes, if that contractor is
              permitted to bid.  That contractor must be prohibited from bidding.)

           f.  Splitting up requirements to fit within the  small purchase requirements
              ($25,000).   (Yes)

           g. Vague specifications.  (Yes.  It allows offerers to determine government needs.)

           h. When requested by a contractor  to recommend possible subcontractors or experts
              with the desired  expertise, providing references to several known individuals or
              groups.  (No.  It's okay if the contractor asks; but don't recommend any given
              one.)

           i.  Acceptance of a late bid  (e.g.. five minutes after deadline). (Yes)

           j.  Wide variance between the technical rating given the best proposal and all other
              proposals. (Yes)

           k. Bidders who are qualified and capable of performing fail to bid with no apparent
              reason, and relatively fewer than normal bids are submitted. (Yes.  May be
              collusion;  may have lost faith in EPA's competitive process.)

           I.  Identical bid amounts on  a contract line Item by two or more contractors. (Yes.
              May be collusion.)

           m. Contractor includes interest costs as part of contract costs to be reimbursed by
              the government.  (Yes	not allowable.)

           n. Contractors submits progress payment  request for work completed but  not yet
              accepted by the government.  (No.  Is okay if is not final payment.)
CMD7/90                                                                                       489

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                              DECISION


 (1 15,436] MANPOWER PROGRAM ANALYSIS CONSULTATION AND TRAINING, INC.


     LBCA No. 80-BCA-113.  November 4, 1981.  Contract No. 99-6-
     601-08-82.

Cost Principles — Limitation of Coat Clause — Timely Notice

     Because he failed to give the proper notice under the
Limitation of Cost clause, a contractor was not entitled to be
reimbursed for additional costs-incurred under a cost reimburse-
ment contract for a data retrieval system.  The contractor claimed
a cost overrun of $17,423 and requested funding of that amount
under the contract.  Under the Limitation of Cost clause, a
contractor must notify the contracting officer when he has reason
to believe.that the costs he expects to incur within the next
60 days will exceed 75 percent of the estimated cost, or that the
total cost of performance* will be substantially greater or less
than-the estimated cost.  Although the contractor gave notice to
government administrative personnel, he did not address such
notice to'the contracting officer.  Approval of an overrun by
the administrative personnel would have had no effect.  Even if
the notice had been submitted to the proper person, it was
questionable whether he had not already incurred the costs.  In
that case, notice would have been untimely.
                                                           490

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                              DECISION


Fourth Street Estates, Inc.

     Exercise of a lease renewal option by the government was
ineffective because the notice requirement in the lease was  not
met.  Whether the notice on April 2, 1980, satisfied the lease
requirement that renewal notice be given 60 days before the  end
of the current term—in this case Nay 31, 1980—depended on  how
the days were counted.  The government took the position that in
calculating the notice period the notice-day was to be counted,
but the board found the better view to be that the day of the
notice should not be included.  Therefore, beginning on April 3
and counting the days there were 28 remaining in April and 31 in
May, a total of 59.  Furthermore, even though the lessor accepted
rent at the old rate, this did not constitute waiver of his  right
to insist on timely notice of renewal.  The lessor objected  to
the late notice at the time of delivery, refused to accept it,
and has maintained his objections since.

     The attempted lease renewal was ineffective.  This appeal
is remanded to the contracting officer for such action as is
deemed appropriate.  Appellant is entitled to the difference
between the rent paid by the Government after May 31, 1980,  and
the fair market rental value of the premises during the period
of Government occupancy, subject to limitations imposed by law,
together with interest according to law until paid.  50 AM JUR
2d, Landlord and Tenant 11200; 41 U.S.C. H611 (Supp. II, 1978).
                                                          491

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                    WORK PLAN NEGOTIATION


Instructions-for EPA Work Assignment Manager

     You are John Wamo, working for EPA.   You drafted  the
attached work, assignment, and have worked  with TAG before on
previous work assignments.  You were somewhat surprised to
receive TAC's work plan and discover the task expansion (e