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Contracting under theFederal Acquisition Regulation

UNDERSTANDING THE FAR

Julie T. Norris, Director EmeritusOffice of Sponsored Programs

Massachusetts Institute of Technology

jtnorris@houston.rr.com

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Overview About the FAR Organization Contracting Under the FAR Subcontracting Under the FAR Selected Clauses Conclusion

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United States Code (USC)

TITLE TOPIC TITLE TOPIC1 General Provisions 26 Internal Revenue Code2 The Congress 27 Intoxicating Liquors3 The President 28 Judiciary & Judicial Procedure4 Flag & Seal, Seat of Government, & the States 29 Labor5 Government Organization & Employees 30 Mineral & Lands & Mining6 Surety Bonds 31 Money & Finance7 Agriculture 32 National Guard8 Aliens & Nationality 33 Navigation & Navigable Waters9 Arbitration 34 Navy

10 Armed Forces 35 Patents11 Bankruptcy 36 Patriotic Societies & Observances12 Banks & Banking 37 Pay & Allowance of the Uniformed Services13 Census 38 Veterans' Benefits14 Coast Guard 39 Postal Service15 Commerce & Trade 40 Public Buildings, Property, & Works16 Conservation 41 Public Contracts17 Copyrights 42 The Public Health & Welfare18 Crimes & Criminal Procedure 43 Public L&s19 Customs Duties 44 Public Printing & Documents20 Education 45 Railroads21 Food & Drugs 46 Shipping22 Foreign Relations & Intercourse 47 Telegraphs, Telephones, & Radiotelegraphs23 Highways 48 Territories & Insular Possessions24 Hospitals & Asylums 49 Transportation25 Indians 50 War & National Defense

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Code of Federal Regulations (CFR)

TITLE TOPIC TITLE TOPIC1 General Provisions 26 Internal Revenue2 [Reserved] 27 Alcohol, Tobacco Products and Firearms3 The President 28 Judicial Administration4 Accounts 29 Labor5 Administrative Personnel 30 Mineral Resources6 Homeland Security 31 Money and Finance: Treasury7 Agriculture 32 National Defense8 Aliens and Nationality 33 Navigation and Navigable Waters9 Animals and Animal Products 34 Education

10 Energy 35 Panama Canal11 Federal Elections 36 Parks, Forests, and Public Property12 Banks and Banking 37 Patents, Trademarks, and Copyrights13 Business Credit and Assistance 38 Pensions, Bonuses, and Veterans' Relief14 Aeronautics and Space 39 Postal Service15 Commerce and Foreign Trade 40 Protection of Environment16 Commercial Practices 41 Public Contracts and Property Management17 Commodity and Securities Exchange 42 Public Health18 Conservation of Power and Water Resources 43 Public Lands: Interior19 Customs Duties 44 Emergency Management and Assistance20 Employees' Benefits 45 Public Welfare21 Food and Drugs 46 Shipping22 Foreign Relations 47 Telecommunication23 Highways 48 Federal Acquisition Regulations System24 Housing and Urban Development 49 Transportation25 Indians 50 Wildlife and Fisheries

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Relationships

U.S.C. (law) C.F.R. (implementation of law)

Chapters (agencies)

Titles (topics)

Parts (specific topics)

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What is the FAR?

The FAR is a system of uniform policies and procedures governing the acquisition or contracting actions of all federal executive agencies.

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Using the FAR

When do you use the FAR? on grants? on cooperative agreements? on contracts? on other transactions?

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Where is the FAR?

The FAR is codified at Title 48 of the Code of Federal Regulations (CFR) and consists of 61 chapters. Chapter 1 is commonly known as the FAR,

or Basic FAR; Chapters 2-61 are known as FAR

Supplements, one for each Executive agency

Today we’re primarily concerned with Chapter 1 and Chapter 1, part 52

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Basic Structure Chapter (one per agency)

Parts (one per topic) Parts 1-51 contain instructions for Part 52 Part 52 contains provisions and clauses Part 53 contains forms

Subparts (subtopics)

Sections Subsections

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Chapters in the FAR SystemCHAPTER AGENCY NAME ACRONYM

1 Federal Acquisition Regulation FAR2 Defense Federal Acquisition Regulation Supplement DFARS3 Health & Human Services Acquisition Regulation HHSAR4 Agriculture Acquisition Regulation AGAR5 General Services Acquisition Regulation GSAR6 Department of State Acquisition Regulation DOSAR7 Agency for International Development Acquisition Regulation AIDAR8 Veterans Affairs Acquisition Regulation VAAR9 Department of Energy Acquisition Regulation DEAR

10 Treasury Acquisition and Procurement Regulations TAPR12 Transportation Acquisition Regulation TAR13 Commerce Acquisition Regulation CAR14 Department of Interior Acquisition Regulation DIAR15 Environmental Protection Agency Acquisition Regulation APAAR16 Federal Employees Health Benefits Acquisition Regulation FEHBAR17 Office of Personell Management18 NASA FAR Supplement NFS19 Information Agency Acquisition Regulation IAAR20 Nuclear Regulator Commission Acquisition Regulation NRCAR21 Life Insurance Federal Acquisition Regulation LIFAR23 Social Security Acquisition Regulation SSAR24 Housing and Urban Development Acquisition Regulation HUDAR25 National Science Foundation Acquisition Regulation NSFAR28 Justice Acquisition Regulation JAR29 Department of Labor Acquisition Regulation DOLAR30 Department of homeland Security HSAR34 Education Acquisition Regulation EDAR35 Panama Acquisition Regulation PAR44 Federal Emergency Management Agency Acquisition Regulation FEMAAR51 Department of the Army Acquisition Regulation DAAR52 Department of the Navy Acquisition Regulation DNAR53 Department of the Air Force Acquisition Regulation Supplement DAFARS54 Defense Logistics Agency Acquisition Regulation57 African Development Foundation Acquisition Regulation61 General Services Administration Board of Contract Appeals63 Deparment of Transportation Contract Board of Appeals99 Cost Accounting Standards CAS

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PART TITLE PART TITLE1 Federal Acquisition Regulation System 27 Patents, Data, and Copyrights2 Definitions of Words and Terms 28 Bonds and Insurance3 Improper Business Practices 29 Taxes4 Administrative Matters 30 Cost Accounting Standards Admin.5 Publicizing Contract Actions 31 Contract Cost Principles and Proced.6 Competition Requirements 32 Contract Financing7 Acquisition Planning 33 Protests, Disputes, and Appeals8 Required Sources of Supplies and Services 34 Major Systems Acquisition9 Contractor Qualifications 35 Research and Development Contr.

10 Market Research 36 Construction and Architect-Engineer Contracts11 Describing Agency Needs 37 Service Contracting12 Acquisition of Commercial Items 38 Federal Supply Schedule Contracting13 Simplified Acquisition Procedures 39 Acquisition of Information Technology14 Sealed Bidding 40 Reserved15 Contracting by Negotiation 41 Acquisition of Utility Services16 Types of Contracts 42 Contract Adminitsration17 Special Contracting Methods 43 Contract Modifications18 Reserved 44 Subcontracting Policies and Procedures19 Small Business Programs 45 Government Property20 Reserved 46 Quality Assurance21 Reserved 47 Transportation22 Application of Labor Laws 48 Value Engineering23 Environment, Conservation 49 Termination of Contracts24 Protection of Privacy and Freedom of Info. 50 Extraordinatory Contract Situations25 Foreign Acquisition 51 Use of Governments Sources by Contractors26 Other Socioeconomic Programs 52 Solicitation Provisions and Contract Clauses

53 Forms

Parts in the FAR

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Agency Supplements Each Agency has the authority to issue

a supplement, subject to review Agency Supplemental Clauses either

Implement existing, basic FAR clauses, or Supplement existing, basic FAR parts,

subparts, sections or subsections

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Numbering SystemXX-XX.XXX-XX

Chapter (not used with Chapter 1 (basic FAR))

Part

Subpart

Section

Subsection

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Example 1 27.303

Chapter (agency)Part (topic)

SubpartSection

Subsection

52.227-11

Chapter (agency)Part (topic)

SubpartSection

Subsection

Instruction

Clause/Provision

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Example 2 227.304

Chapter (agency)Part (topic)

SubpartSection

Subsection

252-227-7039

Chapter (agency)Part (topic)

SubpartSection

Subsection

Instruction

Clause/Provision

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How is the FAR Issued?

Federal Register

CFR

Federal Acquisition Circulars

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Contracting Under the FAR

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Where Do I Start?

Determine the Nature of the Contract Type

Cost-Reimbursement Fixed-Price Time & Material/Labor Hour Indefinite Delivery/Indefinite Quantity Basic Ordering

Purpose Construction Research & Development Supply Service

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Fixed Price Contracts Discussed at 16.2

Procurement of supplies or services on the basis of reasonably definite functional or detailed specifications.

When costs can be estimated reasonably accurately.

Imposes on contractor maximum incentive to control costs, but with minimum administrative burden.

Preferred method of contracting by gov’t.

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Fixed Price Contracts (cont.) Why might you want one?

Freedom to rebudget Limited financial reporting Keep it if you don’t spend it

Why might you not want one? Payments tied to deliverables (e.g,

full payment upon receipt of final report)

Associated FAR clauses (DEFAULT) If you run out of funds, too bad.

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Cost-Reimbursement Contracts

Discussed at 16.3. Procurement of non-commercial

items which cannot be based on reasonably definite functional or detailed specifications (i.e., R&D).

There is no incentive for contractor to control costs, thus government imposes tighter controls.

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Cost-Reimbursement Contracts

Why might you want one? Best efforts basis: when you run out

of funds, you stop working FAR clauses may be more favorable

Why might you not want one? Tighter rebudgeting controls More frequent financial reports Closer scrutiny

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R&D Contracting Discussed at Part 35 To advance scientific and technical

knowledge and apply that knowledge to the extent necessary to achieve agency and national goals.

Centers around the Statement of Work.

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CR/FP - How Do I Tell? Cost-Reimbursement

“Total estimated cost” or “not to exceed amount”

Invoicing based on expenditures

Listed FAR clauses.

Fixed Price “Total Price” Invoicing based on

milestones Generally, POs are

fixed-price Listed FAR clauses

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Time & Material/Labor-Hour

Discussed at 16.6 Reimbursement of hours worked, not

costs incurred. Fixed hourly rate that incorporates

salary, fringe benefits, F&A, and fee. Rates invoiced must match proposed

rates. Audit?

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T&M/LH (cont.) What to do about them

Propose with disclaimer Don’t accept this contract type, unless

accounting system can comply Argue on basis of cost accounting

standards Negotiate a buffer

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Basic Ordering Agreements

Discussed at 16.703 Not a contract - no fiscal

commitment. Contains:

Terms and clauses applying to future orders between the parties during the term of the BOA;

A description of supplies or services to be provided;

Methods for pricing, issuing and delivering future orders under BOA.

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How is it organized?Part I – The Schedule

A. Solicitation/contract form

B. Supplies or services and prices/costs

C. Description/specifications/ work statement

D. Packaging and marking

E. Inspection and acceptance

F. Deliveries or performance

G. Contract administration data

H. Special contract requirements

Part II – Contract ClausesI. Contract clauses

Part III – List of other documents, exhibits and other attachmentsJ. List of attachments

Part IV – Representations and InstructionsK. Representations, certifications,

and other statements of offerors

L. Instructions, conditions and notices to offerors

M. Evaluation factors for award

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Looking up FAR Clauses Look-up the clauses listed in your

contract in Part 52 of the relevant FAR Chapter (e.g., basic, DoD, NASA, etc), to obtain the full text of each clause.

Use the cross-reference stated in the first line of each FAR clause to find the prescription.

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Which Clauses are Acceptable?

Read the clause - can you live with it? Read the prescription - does it apply?

Contract type (FP, CR, T&M) Contract purpose (R&D, Supply, Service) Recipient type (for-profit, non-profit, educational)

Is there a trigger, or does it apply no matter what?

Is it Required or Optional THE KEY: Read the prescription!!

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Subcontracting Plans Discussed at 19.7 What are they?

Established goals for including a minimum percentage of small business concerns, small disadvantaged business concerns, and women-owned small business concerns in any subcontracting activity under a specific contract. The Subcontracting Plan is incorporated into the contract.

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Subcontracting Plans (cont.)

Required at the request of the Contracting Officer if contract, and potential modifications, exceed $500,000.

Process to create an individual plan: Obtain detailed budget Work with PI to determine possible vendors

for subcontracting Establish estimates by percentages for large,

small, small disadvantaged, and woman owned businesses.

Master institutional plan is another option Reports must be filed Material breach

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Certificate of Current Cost & Pricing Data

Discussed at 15.406 What is it?

A certification that, to the best of your knowledge, all cost & pricing data you have provided to the Contracting Officer are accurate and complete.

When is it required?Any contract entered into by negotiation that exceeds $500,000

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Higher Tier Flow-Downs What is a higher-tier? Direct flow-down

When the next higher tier flows down the clauses in their contract exactly as they received them.

Indirect flow-downWhen the next higher tier re-words flow-down clauses

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Publication Restrictions Most common clauses

52.227-17 “Special Works” 252.204-7000 “Disclosure of

Information”

Arguments against their use… 27.404(f)(2)&(3) NSDD-189 IRS Rev. Rul. 76-296

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Tips to Successful Negotiating

Explain why Link the prescription to your reasoning Argue on the basis of institutional policy Cite previous contracts If commercial, link back to federal

contracts Take a breather Switch negotiators Switch techniques

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Subcontracting under the FAR

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Basic Tenet

Do Unto Others As Was Done Unto

You

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Subcontractor Involvement

Bring subcontractor into the process as soon as possible.

Why???

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Privity Contractual relationship is only between

a contractor and subcontractor

Protects higher tiers from direct liability.

Exception is intellectual property

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Responsibilities You are the responsible authority,

without recourse to the Federal agencies regarding the settlement and satisfaction of all contractual and administrative issues. Includes: Payment Disputes Claims Performance

What about audit?

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Prior Consent/Notification Approval of a subcontract in your budget

is not approval of the subcontractor, only of the need to subcontract that effort.

ACO prior approval is required for subcontracting of research work, including negotiation memorandum and supporting documentation, if Fixed-Price.

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Prior Consent/Notification (cont.)

Required by 52.244-2 44.201-1: Consent 44.201-2: Notification

Determined by: Approved purchasing system (CPSR) Contracting Officer, in (e) of the clause; Type/Amount of subcontract to be

issued.

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CPSR Discussed at 44.3

Evaluates efficiency and effectiveness with which contractor spends gov’t funds, and complies with gov’t policy when subcontracting.

Provides ACO basis for granting, withholding, or withdrawing approval of contractor’s procurement system.

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CPSR (cont.)

Review for CPSR is triggered by contractor expecting to exceed $25,000,000 in federal contracts and contract flow-through during upcoming 12 months;

Need for CPSR takes into consideration: Past performance; Complexity and dollar value of subcontracts

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Hints If consent is required, you must notify

the gov’t reasonably in advance, and provide the documentation specified in (f)(1).

The CO can specify subcontracts for which consent is required, despite an approved system.

Inclusion of either Alternate may require advance notification of the CO, even if consent is not required. In which case, only the info in (f)(1)(i)-(iv) is required.

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Subcontractor Reliability A subcontractor’s performance and

financial reliability must be acceptable in order to issue a contract.

Administrative and performance requirements can be added to ensure completion.

Verify with federal debarred/suspended database (online).

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Request to Issue Must include:

Subcontractor name Period of Performance Dollar amount Statement of Work

Compliances Reporting Requirements Selection Process

Competitive bidding Sole Source

Small Business Concerns

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Subcontractor Qualifications

Subcontractor source Subcontractor classification Financial management system

Identify source and application of funds Accountability for property

Formal personnel policy Salary rates and benefits Time and attendance

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Subcontractor Qualifications (cont.)

Formal travel policy Formal purchasing procedure Comply with CAS Annual financial audit Legitimate business

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Subcontractor Selection When contracting under a federal

prime, contract documentation on selection must indicate the following: Whether small business concerns were

solicited and if not, why not; Whether veteran-owned small business

concerns were solicited and, if not, why not;

Whether HUBZone small business concerns were solicited and, if not, why not;

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Subcontractor Selection (cont.)

Whether small disadvantaged business concerns were solicited and, if not, why not;

Whether women-owned small business concerns were solicited and, if not, why not;

If applicable, the reason award was not made to a small business concern.

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Cost/Price Analysis Cost Analysis - the review of separate

elements of cost and supporting data. Normal for cost-reimbursement efforts.

Price Analysis - the review of the entire contract price without looking at individual items of cost. Appropriate when there is adequate price comparison.

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Price Analysis Techniques

Comparing proposed prices among bids received;

Comparison of previously proposed prices and previous Gov’t and commercial contract prices with current proposed prices for the same or similar item;

Parametric estimating; Published price lists; Comparison of proposed prices with

independent cost estimates; Market research

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Cost Analysis Techniques

Verification of cost data and evaluation of separate cost elements, including: Evaluation of the necessity and

reasonableness of costs, including contingencies;

Evaluation of cost trends and reasonableness of estimates;

Evaluation of the application of audited/negotiated F&A rates, labor rates, etc.

Evaluation of current practices on future cost objectives.

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Cost Analysis Techniques (cont.)

Comparison of proposed costs with: Actual costs previously incurred by

subcontractor; Previous cost estimates from the

subcontractor or other subcontractors for similar items;

Other cost estimates received in response to the solicitation; or

Independent estimates by technical personnel

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Technical Analysis Personnel having specialized knowledge

perform an analysis of the proposal costs. Goal is to determine whether the

resources proposed are required for the effort.

Technical analysis, at a minimum, should address the types and quantities of materials proposed and the quantity and mix of labor hours.

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Types of Subcontracts Cost-Reimbursement - Normal for

universities and non-profits performing R&D.

Fixed-Price - Normal for service and supply subcontracting. May be appropriate when greater control over subcontractor performance is desired.

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Determining Subcontract Type

Discussed at 16.104 Price Competition Price Analysis Cost Analysis Type & Complexity Urgency Period of Performance Technical Capability/Financial Responsibility Adequacy of Accounting System Concurrent Contracts Extent and Nature of Proposed Subcontracting Acquisition History

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Writing a Subcontract Defines relationship:

Clarifies expectations of both parties Period of performance Estimated costs Cost sharing Scope of work Reporting requirements Deliverables Incorporated flow-downs Compliances Authorized signatures

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Purpose of a Subcontract Provides for accountability

Evidence of accountability to sponsor Evidence of sub’s accountability to

prime Mechanism for payment

Resolves conflicts Preventing disputes by clearly stating

terms and conditions both parties must comply with

Offers protection for both parties should something unforeseen happen

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Flow-down Requirements Generally five different types of

clauses: Government clauses that must be incorporated in

subs exactly as written; Clauses that must have their substance

incorporated; Clauses which are silent regarding how they are to

be incorporated but are automatically applicable to subs due to the operation of law (see next slide);

Clauses that are not mandatory but are necessary because they impose obligations that we cannot fulfill effectively unless similar provisions are incorporated in the sub;

Clauses that we choose to flow down based on the circumstances of the sub agreement.

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Christian Doctrine

G.L. Christian & Associates vs. United States, 160 Ct. Cl. – Termination for Convenience Clause read into contract by operation of law, even though clause had been deliberately omitted.

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Christian Doctrine (cont.)

Important Implications Your gov’t contract may actually contain

clauses that are not listed… Flow-down these “invisible” clauses, or

you are at risk under your prime. By far the two most important clauses of

this type are Changes and Termination – you must have the ability to change and/or terminate your subcontract if those events occur on your prime.

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Substitution of Nomenclature

Flow-down clauses must accurately reflect the relationship between the parties.

Can be effected by using an introductory paragraph to the flow-down clauses.

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For-Profit Subcontractors Cost Principles = FAR 32.2 Administrative Requirements = FAR Rates to be verified with their DCAA

(but you will probably have to go through your ACO - confidentiality)

Profit needs to be scrutinized (7% excellent, 15% acceptable)

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Negotiation Memorandum Must include minimum FAR

requirements Principle elements of price negotiations; Most significant considerations controlling

establishment of initial or revised prices; Reason cost or pricing data were not

required; Extent to which contractor did not rely on

subcontractor’s cost or pricing data; Extent that contractor found subcontractor’s

data were not accurate, complete or current, and action taken;

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Negotiation Memorandum (cont.) Reasons for any significant difference

between price objective, and negotiated price;

Explanation of any incentives. Must be complete in order to

execute subcontract Must be signed by negotiator

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Reps and Certs

Make sure that subcontractor fills out the same set of Representations and Certifications that were required of you.

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Subcontracting Plan Required from subcontractor if it was

required of you, and if subcontract will exceed $500,000.

Review subcontractor’s plan to make sure they have prepared it correctly.

Incorporate their plan into subcontract.

Incorporate their reported data into yours.

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What is Needed to Close Out a Contract

The final technical report The final patent report A final, or “completion” invoice,

clearly marked as such (provided by the university)

A final inventory of property, if the contract involves property (provided by the university).

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Closeout (cont.) Risk Assessment

Audit Single audit verification Desk review Quick closeout

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Selected Clauses

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Classified Information

Purpose: Establishes protocols which will apply to the contract if it involves classified information.

Issue: Security controls; classified information. Action: Request Alternate I - provides educational

institutions opportunity to revise SOW or terminate if level of classification increases.

52.204-02 “Security Requirements”

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Defense Priorities

Purpose: Identifies contract as rated either "DX" or "DO." See 11.603(c) for requirements.

Issue: Requires contractor to prioritize government contracts based upon rating, and allocate resources and procurements accordingly.

Action: Determine whether rating is indicated in contract (or you don’t have to worry about it). May need to be invoked to meet contract delivery requirements.

52.211-15 “Defense Priorities and Allocations System”

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Commercial Acquisition

Purpose: Sets forth abbreviated set of fixed-price terms and conditions for the acquisition of commercial supplies and services.

Issue: Often used by contracting activities not accustomed to working with educational institutions. Includes warranty and default.

Action: Request the contract be changed to C/R R&D (or at least to 52.213-04); negotiate out unacceptable terms.

52.212-04 “Contract Terms and Conditions – Commercial Items”

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Simplified Acquisition

Purpose: Sets forth abbreviated set of fixed-price terms and conditions for the acquisition of non-commercial supplies and services.

Issue: Often used by contracting activities not accustomed to working with educational institutions. Includes warranty and default.

Action: Request the contract be changed to C/R R&D, otherwise, negotiate out unacceptable terms.

52.213-04 “Contract Terms and Conditions – Simplified Acquisitions”

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Audits and Record Retention

Purpose: Establishes government’s right to access and to audit contractor records; contractor’s requirements for retention of records.

Issue: Which audit requirements apply; how long to keep the records (3 years after final payment, or settlement…).

Action: Request Alternate II, which incorporates OMB A-133.

52.215-02 “Audit and Records - Negotiation”

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Order of Precedence

Purpose: Establishes the order of precedence for various sections of the contract when the Uniform Contract Format applies.

Issue: Will help determine precedence of conflicting clauses.

Action: None.

52.215-08 “Order of Precedence - Uniform Contract Format”

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Allowable Costs; Payment

Purpose: Establishes which cost principles will apply, and terms of payment.

Issue: Defaults to commercial cost principles (31.2). Action: Request that reference to 31.2 in first

paragraph be changed to 31.3 (which incorporates A-21).

52.216-07 “Allowable Costs and Payment”

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Fixed Fee

Purpose: To establish that a “fee” will be an allowable item of expense.

Issue: Although this clause only applies in the event you are charging a fee, the Sponsor is treating this contract as if it were issued to a commercial concern, which means there may be other commercially oriented clauses.

Action: Remove, if you are not asking for a fee. Look for other inappropriate commercial-oriented clauses.

52.216-08 “Fixed-Fee”

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Type of Contract

Purpose: To establish the type of contract (CR, FP, etc.), specifically that it is cost-based with no fee; also establishes a reserve to protect government’s interests.

Issue: Type of contract determines other contract requirements; reserve can be reduced (non-profits) or removed (educational R&D).

Action: Try to get the reserve removed (Alternate 1). Otherwise, try to get reserve reduced to $10,000.

52.216-11 “Cost Contract - No Fee”

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Subcontracting Plan

Purpose: To establish requirement for Contractor to submit a Subcontracting Plan.

Issue: Requires preparation and submission prior to award; requires reporting. Plan is incorporated into contract, so violation is a material breach.

Action: Coordinate with your purchasing department. If no plan was submitted, get clause removed.

52.219-09 “Small, Small Disadvantaged and Women-Owned Small Disadvantaged SubcontractingPlan”

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Service Contract Act

Purpose: Establishes minimum salary, benefits, and policies that will apply to project employees covered by the Act (clerical, data processing, etc).

Issue: Many smaller federal offices issue Service-type contracts for research effort. May impact application of institutional salaries, benefits, and policies to project personnel.

Action: If you cannot live with requirements of Act, try to get contract type changed to R&D.

52.222-41 “Service Contract Act of 1965 - as Amended”

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Patents

Purpose: Establishes patent terms.

Issue: Allows educational and non-profit institutions to elect ownership of patents developed under the contract. This is the preferred clause - implements Bayh-Dole Act.

Action: None.

52.227-11 “Patent Rights - Retention by the Contractor”

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Patents

Purpose: Establishes patent terms.

Issue: Allows commercial institutions to elect ownership of patents developed under the contract. This is inappropriate for non-profits and educational institutions.

Action: Request clause be changed to 52.227-11.

52.227-12 “Patent Rights - Retention by the Contractor”

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Data

Purpose: Establishes ownership of data and copyrights.

Issue: Allows contractors to establish copyright on publications first produced. For educational institutions, Alternate IV will allow ownership of all data.

Action: Request that Alternate IV be included.

52.227-14 “Rights in Data - General”

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Data - Special Works

Purpose: Establishes that contract deliverables are for sole use of the government (work-for-hire).

Issue: All data and deliverables are owned by the government. Contractor may not publish or release without prior approval; must request permission for ownership and/or use.

Action: The prescription is very clear about the few situations for which the government may invoke this clause – unless you intend this, get it removed.

52.227-17 “Rights in Data - Special Works”

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Cost Accounting Standards

Purpose: To establish which Cost Accounting Standards will apply to contracts with educational institutions (same as A-21).

Issue: Make sure this is the only CAS clause included, or you may find yourself subject to additional standards.

Action: Since these standards are already incorporated into the contract via 31.3 (A-21), don’t worry about getting this clause in, unless you see other clauses already there.

52.230-05 “Cost Accounting Standards - Educational Institutions”

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Funding?

Purpose: To allow government to finalize a contract with funding expected to be obligated from next federal FY;

Issue: You may have a contract but you don’t have any authority to spend.

Action: Wait for government to notify you that funds have been made available.

52.232-18 “Availability of Funds”

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Cost Limitation

Purpose: Establishes a notification system whereby the government is informed when contractor expenditures reach a specified threshold, and whether expenditures will be substantially more or less than total estimated cost.

Issue: Puts government on notice that contractor is coming to end of contract. Government must respond or contractor is no longer responsible to continue work.

Action: Provide notification.

52.232-20 “Limitation of Costs”

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Obligated Funds Limitation

Purpose: Establishes a notification system whereby government is informed when contractor expenditures reach a specified threshold or are expected to exceed total obligated funds.

Issue: Puts government on notice that contractor is coming to end of obligated funding. Also establishes 60 day deadline for supplemental or extension requests.

Action: Provide notification.

52.232-22 “Limitation of Funds”

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Stop-Work

Purpose: Establishes responsibilities of each party when government issues a stop-work order.

Issue: Contractor must stop work on date stated. Government has up to 90 days to cancel the order, extend it, or terminate the contract. Contractor will be reimbursed for allowable cost incurred prior to effective date and allowable, uncancellable obligations.

Action: Request reduction of 90-day suspension to 30 days.

52.242-15 “Stop-Work Order”

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Contract Changes

Purpose: Establishes conditions under which government may direct changes to SOW.

Issue: Only contract officer may direct changes. If changes increase cost and/or time, contract officer may make equitable adjustment to cost based upon contractor’s request for adjustment.

Action: Submit adjustment request within 30 days of change notice.

52.243-2 “Changes - Cost Reimbursement”

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Subcontracts

Purpose: Establishes prior approval requirements for issuance of subcontracts as well as contractor documentation requirements for same.

Issue: Prior ACO approval may be required (even if subcontract was in budget), especially if you don’t have an approved purchasing system.

Action: Document! Also, previous versions of this clause may apply depending on date of contract, with different requirements.

52.244-2 “Subcontracts”

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Property Management

Purpose: Defines property; establishes title and management standards.

Issue: Title vests in government unless stated elsewhere in contract (Section B). Alternate I allows educational institutions to retain title if under $5,000, provided prior approval was obtained. However, Alt. I also requires quarterly reporting. Default vesting is with government.

Action: Request Alternate I if you wish to, but remember reporting requirements. Request title upon termination.

52.245-5 “Government Property (Cost-Reimbursement, Time-and-Materials…)”

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Inspection

Purpose: Establishes conditions under which government may inspect/evaluate work.

Issue: This clause is only available for R&D, and when delivery of designs and reports is the objective. Other inspection clauses require establishment/maintenance of an inspection system and are much more onerous.

Action: Argue that contract is for basic R&D and only deliverables are technical reports.

52.246-9 “Inspection of Research and Development (Short Form)”

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Foreign Travel

Purpose: Imposes requirement to use only U.S-flag air carriers for government-funded travel.

Issue: Foreign travel becomes an unallowable cost if U.S. flag air carrier is not used, excepting certain predefined situations.

Action: Educate your researchers.

52.247-63 “Preference for U.S.-Flag Air Carriers”

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Termination

Purpose: Specifies actions contractor must take when it receives a termination notice from government (similar to Stop-Work Order.).

Issue: This is the only termination clause prescribed for use with universities performing R&D (either CR or FP). Termination for Default becomes a possibility on non- R&D contracts.

Action: Make sure contract is classified R&D.

52.245-9 “Termination for Convenience of the Government (Educational and other Non…)”

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Employment

Purpose: Establishes prohibition against employing to supervise or consult on a federal contract, allowing to act in management or on board of directors, anyone who within the last 5 years has been convicted of a felony arising out of a DoD contract.

Issue: Has far-reaching implications. Action: Central administration must be pro-

active.

252.203-7001 “Prohibition on Employment”

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Publication Restriction

Purpose: To safeguard classified information in industry.

Issue: Requires government prior approval to publish or disseminate. Purpose is not apparent from prescription.

Action: Refer to 27.404(g)(2)&(3) and NSDD-189 as justification for getting restriction removed. Also, note IRS Ruling 76-296.

252.204-7000 “Disclosure of Information”

102

Drug Testing

Purpose: Requires contractor to maintain certain anti-drug polices and procedures.

Issue: Intended for contracts utilizing classified information and to protect national security - unlike basic federal requirement, this clause adds random drug testing. May violate institutional policy; union contracts.

Action: Get it removed, or contact university counsel.

252.223-7004 “Drug-Free Workforce”

103

Invention Reporting

Purpose: Establishes reporting requirements for inventions disclosed under the contract, programmatic subcontracts issued and the patent clauses used.

Issue: Interim reports every 12 months, and a final report 90 days after completion.

Action: Complete DD form 882 “Report of Inventions and Subcontracts.”

Note recent legal issues concerning late invention reports.

252.227-7039 “Patents - Reporting of Subject Inventions”

104

Warranty of Data

Purpose: Requires contractor to warranty technical data for 3 years after end of contract. Gov’t may require correction of data; provides for remedies by gov’t.

Issue: Penalties include correction of data at contractor’s expense, or reimbursement to gov’t. Also, liability for any damages incurred by gov’t.

Action: Negotiate out on basis of inappropriate for basic research, and that university rates do not include the cost of deferred liability associated with warranties.

252.246-7001 “Warranty of Data”

105

Classified Information

Purpose: Establishes protocols that will apply to the contract if it involves classified information (similar to 52.204-02, Alt I).

Issue: Security controls; classified information. Action: Nothing

952.204-72 “Disclosure of Information”

106

Export Controls

Purpose: Establishes application of export regulations to contract.

Issue: Export controls will apply in accordance with regulations. Presumption for fundamental research is that export controls do not apply.

Action: Ensure that there are no publication restrictions or restrictions on access/dissemination of information.

1852.225-72 “Export Controls”

107

Questions?