USPS Procurement Manual Publication 41 Transmittal Letter 8, July 12, 1995 A. Explanation. The Procurement Manual is published and maintained by Policies, Planning and Diversity under the authority of the Vice President, Purchasing and Materials. It represents the Postal Service's official procurement policy. B. Material Transmitted. This Transmittal Letter 8 is a complete revision. It replaces all previous editions, although users are encouraged to retain copies of all transmittals for a complete history of PM policy changes. All changes recommended by the Procurement Policy Committee (PPC) and approved by the Vice President, Purchasing and Materials, since the last Transmittal Letter (TL-7, 6/30/93), including those published previously in the Postal Bulletin, are contained in this revision. This transmittal also contains a number of changes resulting from the Postmaster General's delegation of all contracting and policy-development authority to the Vice President, Purchasing and Materials, and administrative and editorial changes resulting from this consolidation of authorities. All substantive changes are described in the Summary of Changes and are indicated in the text by change bars. C. Other Directives. The changes in this Transmittal Letter 8 concern areas addressed in other purchasing-related directives such as handbooks AS-707, Procurement Handbook, RE-14, Design and Construction Handbook, and PO-513, Mail Transportation Procurement Handbook. If material in this transmittal letter conflicts with material in these handbooks, or any other purchasing-related directive, the material contained in this Transmittal Letter prevails. D. Distribution and Requisitioning 1. Initial Distribution. Procurement Manual Transmittal Letters are automatically distributed to all USPS purchasing offices. 2. Requisitioning Copies. Other USPS organizations, and purchasing organizations requiring additional copies, may submit requisitions in accordance with chapter 1, section 2. E. Sale to the Public. The PM is available to the public through the SUPERINTENDENT OF DOCUMENTS GOVERNMENT PRINTING OFFICE 941 N CAPITOL STREET NE WASHINGTON DC 20402-9371 Phone (202) 512-1800 F. Effective Date. The changes contained in this Transmittal Letter 8 are effective July 12, 1995. D. C. Porter Vice President Purchasing and Materials Summary of Changes Throughout Various authorities and responsibilities which had been vested in the vice presidents of Facilities and Transportation are now vested in the vice president of Purchasing and Materials. Many of these authorities and responsibilities have been delegated throughout Purchasing and Materials, and these are reflected throughout Transmittal Letter 8. Chapter 1 Part 1.1.2 (Responsibility for Procurement Policy) has been revised to state that the vice president of Purchasing and Materials is responsible for all procurement policy and procedures and that he has delegated that authority in certain limited areas, and to clarify various aspects of the Procurement Policy Committee's role and membership. Part 1.2.2 (Availability) has been revised to include Facilities Service and Network Distribution offices as purchasing organizations where the PM can be examined. A new exhibit 1.3.1 (PM Change Format) has been added to provide individuals with a means of suggesting changes to the PM. Paragraph 1.3.2.c (Types of Changes) has been revised to include nondiscretionary changes required by statutes or regulations as administrative/editorial changes. Paragraph 1.4.2.b (Authorizations of Deviations) has been revised to show individuals authorized to approve deviations from the PM. Part 1.5.1 (Vice President, Purchasing and Materials) has been revised to reference a new exhibit 1.5.1, Authorities and Responsibilities, VP, Purchasing and Materials; the exhibit has been added to chapter 1. A new Part 1.5.2 (Delegations of Authority) has been added. This new part contains the following changes: * Paragraph 1.5.2.a (Delegations of Authority - Contracting) states that an individual contracting officer's delegated authorities are enumerated in his or her letter of delegation. * Paragraph 1.5.2.b (Special Categories of Contracts) states that the vice president of Purchasing and Materials has delegated contracting authority for certain requirements to other Postal Service officials. * Paragraph 1.5.2.c (Local Buying Authority) states that in the Administrative Support Manual, the vice president of Purchasing and Materials has delegated local buying authority to various positions throughout the Postal Service. New exhibit 1.5.2.c, Local Buying Authority, shows these delegations. A new Part 1.5.3 (Contracting Officers) has been added. This new part contains the following changes: * Paragraph 1.5.3.a (Authority) describes the authority delegated to Postal Service contracting officers. * Paragraph 1.5.3.b (Entering into Contracts) states that contracting authority is delegated to qualified individuals (rather than positions) and that only these individuals may bind the Postal Service contractually. * Paragraph 1.5.3.c (Actions Exceeding a Contracting Officer's Authority) describes the steps to take when the contracting officer assigned responsibility for a contractual action finds that the contract amount exceeds his or her delegated authority. * Paragraph 1.5.3.d (Contracting Officer's Representative) discusses the duties and responsibilities of a contracting officer's representative. * Paragraph 1.5.3.e (Reviews and Approvals) states that certain high-dollar value contracts require the review and approval of the vice president of Purchasing and Materials. New exhibit 1.5.3.e, Review and Approval Thresholds, delineates the circumstances under which review and approvals are required. * Paragraph 1.5.3.f (Other Responsibilities) states that contracting officers are expected to seek the advice and assistance of technical specialists, assigned counsel and the Inspection Service in the course of their duties. New exhibits 1.5.3.f(1), Authorities and Responsibilities - General Counsel, and 1.5. 3.f(2), Authorities and Responsibilities - Inspection Service, delineate the contractually-related functions of those organizations. * Paragraph 1.5.3.g (Appointment and Selection) discusses contracting officer appointment authority and describes the qualification requirements for contracting officer levels I - IV. * Paragraph 1.5.3.h (Waivers and Interim Appointments) discusses procedures to waive contracting officer qualifications and to appoint short-term interim contracting officers when needed. * Paragraph 1.5.3.i (Continuing Professionalism) states that all contracting officer's appointments must be reviewed annually, and discusses steps contracting officers must take to maintain professional proficiency. * Paragraph 1.5.3.j (Termination) discusses termination of a contracting officer's appointment. * Paragraph 1.6.2.j (Definitions) replaces the term "local purchasing authority" with "local buying authority" and provides a new definition of the term. * Paragraph 1.6.2.q (Definitions) provides a new definition of the term "real estate and related services." Section 1.7 (General Policies) has been revised as follows: * A new subsection 1.7.1 (Background) has been added discussing the Postal Service's business goals and its exemption from most federal laws dealing with public or federal contracts. * A new subsection 1.7.2 (Competition) has been added to provide a new definition of "adequate competition" and discusses how a contracting officer may decide on the amount of competition necessary to a particular purchase. * Old subsections 1.7.2, 1.7.3, 1.7.4, 1.7.5, 1.7.6, 1.7.7, and 1.7.8 have been renumbered to 1.7.3, 1.7.4, 1.7.5, 1.7.6, 1.7.7, 1.7.8, and 1.7.9, respectively. * Paragraph 1.7.6.c (Progress Payments) has been revised to state that a contracting officer may approve the use of progress payments if the dollar value of the particular contract is within his or her contracting authority and is valued at less than $1 million. * Paragraph 1.7.7.a (Conflicts of Interest) has been revised as previously published in Postal Bulletin 21886. * Paragraph 1.7.7.b (Officials not to Benefit) has been revised to remove the reference to Clause 1-4, Officials not to Benefit. This clause has been deleted from appendix B. Chapter 3 Paragraph 3.1.4.d (Other Contracts/National and Area Contracts and Ordering Agreements) has been revised to state that a contracting officer may establish contracts on a Postal Service-wide or a limited geographical or organizational basis. Paragraph 3.1.6.c (Prequalified Contractors/Commercial Sources) has been revised to state that if the dollar value of a prospective contract is within his or her contracting authority, a contracting officer may decide to restrict the purchase to prequalified contractors. Chapter 4 A revised section 4.1 (Types of Purchasing Methods) delineates the different purchasing methods used in the Postal Service. A revised section 4.2 (Standard Purchasing) replaces the term "competitive purchasing" with "standard purchasing." As a result of these changes, all sections in chapter 4 have been recodified. Paragraph 4.3.1.b (Ceiling/Simplified Purchasing) has been revised to state that, while the general ceiling for simplified purchasing is $100,000, a contracting officer may decide to use simplified procedures if the dollar value of a prospective contract for standard commercial products or services is within his or her contracting authority. 4.3.1.b also states that simplified procedures may not be used if the dollar value of the prospective contract meets or exceeds $1 million. Paragraph 4.4.1.c (Applicability/Noncompetitive Purchasing) has been revised to state that contracts for advertisements and contracts with Federally Funded Research and Development Centers (FFRDCs) are not subject to competitive procedures. Chapter 5 Paragraph 5.1.1.c (General/Types of Contracts) has been revised to state that if the dollar value of a prospective contract is within a contracting officer's contracting authority, he or she may decide to use a type of contract not discussed in section 5.1, subject to certain approvals. Paragraph 5.1.7.c (Limitations/Letter Contracts) has been revised to state that use of a letter contract must be approved by the manager of Headquarters Purchasing, Field Customer Support, National Mail Transportation Purchasing, or Major Facilities Purchasing. Paragraph 5.1.7.d (Clauses/Letter Contracts) has been revised to state that when using Clause 5-18, Limitation of Postal Service Liability, the maximum liability amount may not exceed 50 percent of the estimated cost of the definitive contract unless approved by the manager of Headquarters Purchasing, Field Customer Support, National Mail Transportation Purchasing, or Major Facilities Purchasing. Paragraph 5.3.3.I (Clauses/Price Analysis) has been revised to state that Clauses 5-22, Price Reduction for Defective Cost or Pricing Data and 5-23, Subcontractor Cost or Pricing Data must be included in a contract when such data is required for the negotiation of a contract or a subsequent modification to the contract. Clauses 5-24, Price Reduction for Defective Cost or Pricing Data - Modifications, and 5-25, Subcontractor Cost of Pricing Data - Modifications, have been deleted from appendix B. Chapter 6 Subparagraph 6.4.5.d.5 (Administration/Progress Payments) has been revised to state that using any liquidation method other than the ordinary method must be approved by the manager of Headquarters Purchasing, Field Customer Support, National Mail Transportation Purchasing, or Major Facilities Purchasing. A new paragraph 6.9.1.b (Review and Approval/Contract Termination) has been added to state that no contract with a dollar value or potential termination liability exceeding $1 million, or any contract considered to be of a sensitive or highly visible nature, regardless of dollar value, may be terminated for convenience or default without the review and approval of the vice president of Purchasing and Materials. Following paragraphs in subsection 6.9.1 have been recodified. Chapter 8 Exhibit 8.1.2, Supplemental Policy and Procedural Authority, has been revised to show new policy-originating organizations and approving officials resulting from purchasing consolidation. Subparagraph 8.4.4.a.2.(b) (Research Announcements) has been revised to allow contracting officers the latitude to decide when to use the research announcement technique. Chapter 10 Paragraph 10.2.7.e (Poster, Equal Employment Opportunity is the Law) has been revised to state that Poster OFCCP-1420 now contains text in both English and Spanish and to direct contracting officers to its availability. Paragraph 10.2.12.a (Requirement/Veterans) has been revised to state that contractors must list all employment openings with appropriate local employment services. Chapter 11 Paragraph 11.5.2.a (Applicability/Minor Repairs and Alterations) has been revised as previously published in Postal Bulletin 21889. Appendix A Paragraph A.2.3.b (Solicitation Notices and Provisions) has been revised to state that if a contracting officer decides to include Provision A-16, Evaluation of Proposals for Multiple Awards, in a solicitation, and he or she decides to use an administrative cost factor of more than $500, the higher cost factor must be justified and placed in the solicitation file. Provision A-16, Evaluation of Proposals for Multiple Awards, has been revised to increase the administrative cost factor from $250 to $500. Appendix B Clause 1-4, Officials not to Benefit, has been deleted. Clause 5-22, Price Reduction for Defective Cost or Pricing Data, has been revised to add contract modifications to the type of contractual actions covered by the clause. Clauses 5-24, Price Reduction for Defective Cost or Pricing Data - Modifications, and 5-25, Subcontractor Cost or Pricing Data - Modifications, have been deleted. Paragraph b of Clause 10-16, Affirmative Action for Disabled Veterans and Veterans of the Vietnam Era, has been revised to state that contractors must list all employment openings with appropriate local employment services. Paragraph f has been revised to add new definitions to the clause. Appendix F The Procurement Manual Index has been revised to reflect the changes made in this Transmittal Letter. Chapter 1 Authority, Responsibility, and Policy Section 1 Authority and Responsibility 1.1.1 Procurement Manual 1.1.1.a Authority 1.1.1.b Applicability 1.1.2 Responsibility for Procurement Policy 1.1.2.a Vice President, Purchasing and Materials 1.1.2.b Procurement Policy Committee 1.1.2.c Membership 1.1.2.d Approval Authority 1.1.2.e Meetings 1.1.2.f Policies, Planning and Diversity Section 2 PM Publication 1.2.1 Issuance 1.2.2 Availability 1.2.3 Arrangement and Numbering 1.2.4 References 1.2.5 Provisions and Clauses Section 3 PM Changes 1.3.1 Proposed Changes 1.3.2 Types of Changes 1.3.3 Disposition 1.3.4 Issuance Section 4 PM Deviations 1.4.1 General 1.4.2 Authorization of Deviations 1.4.2.a Request for Authorization 1.4.2.b Approval 1.4.2.c Records Section 5 Purchasing Authority 1.5.1 Vice President, Purchasing and Materials 1.5.2 Delegations of Authority 1.5.2.a Contracting 1.5.2.b Special Categories of Contracts 1.5.2.c Local Buying Authority 1.5.3 Contracting Officers 1.5.3.a Authority 1.5.3.b Entering into Contracts 1.5.3.c Actions Exceeding a Contracting Officer's Authority 1.5.3.d Contracting Officer's Representatives 1.5.3.e Reviews and Approvals 1.5.3.f Other Responsibilities 1.5.3.g Appointment and Selection 1.5.3.h Waivers and Interim Appointments 1.5.3.i Continuing Professionalism 1.5.3.j Termination Section 6 Meaning of Words and Terms 1.6.1 General 1.6.2 Definitions 1.6.2.a Agreement 1.6.2.b Assigned Counsel 1.6.2.c Change Order 1.6.2.d Contract 1.6.2.e Contract Modification 1.6.2.f Contracting Officer 1.6.2.g Days 1.6.2.h Evaluation Factors 1.6.2.i Includes 1.6.2.j Local Buying Authority 1.6.2.k May 1.6.2.l Must 1.6.2.m Purchasing 1.6.2.n Proposal 1.6.2.o Purchasing Office 1.6.2.p Quotation 1.6.2.q Real Estate and Related Services 1.6.2.r Services 1.6.2.s Should 1.6.2.t Supplemental Agreement 1.6.2.u Supplies 1.6.2.v Vice President 1.6.2.w Will Section 7 General Policies 1.7.1 Background 1.7.2 Competition 1.7.3 Contracts with Postal Service Employees 1.7.4 Release and Exchange of Information 1.7.4.a General 1.7.4.b Release 1.7.4.c Exchange 1.7.5 Protection of Individual Privacy 1.7.6 Advance Payments and Progress Payments 1.7.6.a Policy 1.7.6.b Advance Payments 1.7.6.c Progress Payments 1.7.6.d Clauses 1.7.7 Conflicts of Interest 1.7.7.a Organizational Conflicts of Interest 1.7.7.b Participation by Members of Congress 1.7.8 Standards of Conduct 1.7.9 Gratuities or Gifts Section 8 Anticompetitive Practices 1.8.1 General 1.8.2 Reports Section 9 Contingent Fees 1.9.1 General 1.9.2 Representation and Clause 1.9.2.a General 1.9.2.b Exceptions 1.9.3 Bona Fide Employee or Agency 1.9.3.a Bona Fide Employee 1.9.3.b Bona Fide Agency 1.9.3.c Use of Improper Influence 1.9.4 Contractor's Statement of Contingent or Other Fees 1.9.5 Misrepresentation or Violation Section 10 Administrative Matters 1.10.1 Files 1.10.2 Document Numbering 1.10.2.a Basic Number 1.10.2.b Supplementary Numbers 1.10.3 Document Registers 1.10.3.a Contracts and Orders Register 1.10.3.b Modifications and Data Corrections Register. 1.10.3.c Indefinite-Delivery Contracts Register. 1.10.4 Commodity Codes 1.10.5 Socioeconomic Classification Codes PM Change Format Exhibit 1.3.1 Authorities and Responsibilities, Vice President, Purchasing and Materials Exhibit 1.5.1 Local Buying Authorities Exhibit 1.5.2c Review and Approval Thresholds Exhibit 1.5.3e Authorities and Responsibilities - General Counsel Exhibit 1.5.3f(1) Authorities and Responsibilities - Inspection Service Exhibit 1.5.3f(2) Ninth Character Categories for Document Numbering Exhibit 1.10.2a3 Character Element Breakdown for Document Numbering Exhibit 1.10.2a5 Socioeconomic Classification Codes Exhibit 1.10.5 Chapter 1 Authority, Responsibility, and Policy Section 1 Authority and Responsibility 1.1.1 Procurement Manual 1.1.1.a Authority. The Procurement Manual (PM) is authorized by Title 39, United States Code, and the delegation at 39 CFR 226.2(c)(1). 1.1.1.b Applicability. The PM applies to all purchasing activities. Procedural guidance necessary to implement the PM is contained in: 1. Handbook AS-707, Supplies, Services and Equipment Purchasing Handbook; 2. Handbook PO-513, Mail Transportation Purchasing Handbook; 3. Handbook RE-14, Design and Construction Purchasing Handbook; 4. Other publications and directives referenced or incorporated in the PM or these handbooks. 1.1.2 Responsibility for Procurement Policy 1.1.2.a Vice President, Purchasing and Materials. The vice president (VP) of Purchasing and Materials (P&M), is responsible for all purchasing policies and procedures. The VP has delegated that responsibility in some areas as follows: 1. Responsibility for policies and procedures unique to the acquisition, lease and disposal of real estate has been delegated to the vice president of Facilities (see 1.6.2.q for the definition of real estate and related services); and 2. Responsibilities for supplemental policies and procedural directives with respect to the requirement categories listed in Exhibit 8.1.2, Supplemental Policy and Procedural Authority, have been delegated to the positions described in that exhibit. 1.1.2.b Procurement Policy Committee. The Procurement Policy Committee (PPC) oversees the development of Postal Service purchasing policy. It reviews policy direction and evaluates proposed changes to the PM. The PPC provides its recommendations to the VP, P&M. 1.1.2.c Membership. The permanent members of the PPC are: 1. The manager of Policies, Planning and Diversity (the Chair). 2. The manager of Headquarters Purchasing. 3. The manager of Field Customer Support. 4. The manager of National Mail Transportation Purchasing. 5. A representative of Field Transportation Contracting. 6. The manager of Major Facilities Purchasing. 7. The manager of Facilities Program Management. 8. The senior counsel, Contract Protests and Policies. 9. The manager of Supplier Diversity (Diversity Development). 1.1.2.d Approval Authority. Only the VP, P&M, may approve or disapprove the recommendations of the PPC. 1.1.2.e Meetings. The PPC meets at least annually. The Chair may call meetings at any time upon 30 days written notice to the other members. Meetings may be held with less than 30 days notice if approved by a majority of the PPC members. 1.1.2.f Policies, Planning and Diversity. The staff of Policies, Planning and Diversity, P&M, prepares PM cases and other matters for the PPC's consideration. Section 2 PM Publication 1.2.1 Issuance The PM is issued and maintained by the VP, P&M, and is incorporated by reference in 39 CFR 601. It is published as Postal Service Publication 41. 1.2.2 Availability 1.2.2.a The PM may be purchased from: SUPERINTENDENT OF DOCUMENT GOVERNMENT PRINTING OFFICE WASHINGTON DC 20402-9317 1.2.2.b Within the Postal Service the PM may be obtained by submitting Form 7380, MDC Supply Requisition, to the servicing material distribution center. 1.2.2.c The PM may be examined during business hours at: USPS LIBRARY 475 L'ENFANT PLAZA SW WASHINGTON DC 20260-1641 and at the following purchasing organizations: PURCHASING AND MATERIAL SERVICE CENTER 7800 N STEMMONS FWY DALLAS TX 75266-7190 PURCHASING AND MATERIAL SERVICE CENTER 615 CHESTNUT STREET PHILADELPHIA PA 19197-0592 PURCHASING AND MATERIAL SERVICE CENTER 2 HUDSON PLACE HOBOKEN NJ 07030-5515 PURCHASING AND MATERIAL SERVICE CENTER 2051 KILLEBREW DRIVE MINNEAPOLIS MN 55425-1880 PURCHASING AND MATERIAL SERVICE CENTER 7029 ALBERT PICK ROAD GREENSBORO NC 27495-1102 PURCHASING AND MATERIAL SERVICE CENTER 433 WEST VAN BUREN STREET CHICAGO IL 60699-6260 PURCHASING AND MATERIAL SERVICE CENTER 225 NORTH HUMPHRIES BOULEVARD MEMPHIS TN 38166-6260 PURCHASING AND MATERIAL SERVICE CENTER 8 GRIFFIN ROAD NORTH WINDSOR CT 06095-1572 PURCHASING AND MATERIAL SERVICE CENTER 3300 SOUTH PARKER ROAD DENVER CO 80014-3500 PURCHASING AND MATERIAL SERVICE CENTER 850 CHERRY AVE SAN BRUNO CA 94099-6260 FACILITIES SERVICE OFFICE 255 HUMPHREYS BLVD MEMPHIS TN 38166-0300 FACILITIES SERVICE OFFICE 615 CHESTNUT STREET PHILADELPHIA PA 19197-0591 FACILITIES SERVICE OFFICE 4000 DEKALB TECHNOLOGY PKY ATLANTA GA 30340-2799 FACILITIES SERVICE OFFICE 222 S. RIVERSIDE PLAZA CHICAGO IL 60606-6150 FACILITIES SERVICE OFFICE 10500 LITTLE PATUXENT PKY COLUMBIA MD 21045-0701 FACILITIES SERVICE OFFICE 7800 N STEMMONS FREEWAY DALLAS TX 75266-7180 FACILITIES SERVICE OFFICE 8055 E TUFTS AVE PKY DENVER CO 80237-2881 FACILITIES SERVICE OFFICE 7029 ALBERT PICK ROAD GREENSBORO NC 27495-1103 FACILITIES SERVICE OFFICE 2 HUDSON PLACE HOBOKEN NJ 07030-5502 FACILITIES SERVICE OFFICE 6800 W 64TH ST OVERLAND PARK KS 66202-4171 FACILITIES SERVICE OFFICE 850 CHERRY AVE SAN BRUNO CA 94099-0300 FACILITIES SERVICE OFFICE 6 GRIFFIN RD N WINDSOR CT 06006-0300 DISTRIBUTION NETWORK OFFICE 5315 CAMBELLS RUN ROAD PITTSBURGH PA 15205-7070 DISTRIBUTION NETWORK OFFICE 500 EAST FULLERTON AVENUE CAROL STREAM IL 60199-5040 DISTRIBUTION NETWORK OFFICE 721 EMERSON ROAD SAINT LOUIS MO 63141-6748 DISTRIBUTION NETWORK OFFICE 2800 SHIRLINGTON ROAD ARLINGTON VA 22206-7071 DISTRIBUTION NETWORK OFFICE 421 8TH AVENUE NEW YORK NY 10199-9792 DISTRIBUTION NETWORK OFFICE BUCHANON OFFICE CENTER GUAYNABO PR 00965- DISTRIBUTION NETWORK OFFICE 6 GRIFFIN ROAD N WINDSOR CT 06006-7070 DISTRIBUTION NETWORK OFFICE 1000 MARINA BLVD BRISBANE CA 94005-1300 DISTRIBUTION NETWORK OFFICE 400 EMBASSY ROW NE ATLANTA GA 30328-7071 DISTRIBUTION NETWORK OFFICE 7800 STEMMONS FWY DALLAS TX 75247-4217 DISTRIBUTION NETWORK OFFICE 1745 STOUT STREET DENVER CO 80299-6200 DISTRIBUTION NETWORK OFFICE 34301 9TH AVENUE S FEDERAL WAY WA 98003-6797 1.2.2.d A copy of the PM is on file with: DIRECTOR OFFICE OF THE FEDERAL REGISTER NATIONAL ARCHIVES AND RECORDS SERVICES GENERAL SERVICES ADMINISTRATION WASHINGTON DC 20408-0001 1.2.3 Arrangement and Numbering The PM is divided into numbered chapters, sections, and parts, with appendices identified alphabetically and divided into numbered sections and parts. Subdivisions below the part level are paragraphs (lettered alphabetically, lower case) and subparagraphs (Arabic numbers), with further indented subdivisions (in parentheses) in the following order: lower case alphabet, Arabic numbers, and lower case Roman numerals. The numbering system for a chapter is illustrated in Exhibit 1.2.3. For an appendix, substitute a capital letter for the chapter number. LEVEL EXAMPLE chapter 4. section 2. part 3. paragraph a. subparagraph 1 subdivision 1 (a) subdivision 2 (1) subdivision 3 (i) Numbering System Exhibit 1.2.3 1.2.4 References References to the PM are by chapter or appendix, and part, followed by paragraph and further subdivision as needed. For example: 1.2.4.a Section 3 of chapter 7 is referred to as "7.3" and part 2 of that section is referred to as "7.3.2:" 1.2.4.b Paragraph k of part 2, section 3, chapter 3 is referred to as "3.3.2.k," and subparagraph 1 under that paragraph is "3.3.2k.1;" and 1.2.4.c Part 3 of section 1, appendix B, is referred to as "B.1.3." 1.2.5 Provisions and Clauses All solicitation provisions referenced in the text of the PM are located in appendix A; all contract clauses so referenced are in appendix B. Section 3 PM Changes 1.3.1 Proposed Changes Anyone may propose changes to the PM. Proposed changes should be submitted in the format contained in Exhibit 1.3.1, PM Change Format (along with supporting documentation, if necessary), and addressed to Policies, Planning and Diversity. 1.3.2 Types of Changes 1.3.2.a Proposed changes to the PM fall into one of two categories: substantive or administrative/editorial. 1.3.2.b Substantive changes are primarily changes in procurement policy.They may result from new legislation, legal decisions, new contracting methods,or other areas of opportunity. Proposed substantive changes are researched by Policies, Planning and Diversity, and sent to the PPC for its review. Proposed changes which do not have any merit are returned to the originator with an explanation. Following its review, the Committee recommends approval,disapproval or approval with changes to the vice president of Purchasing and Materials. If required, the PPC may obtain the advice of specialists or experts to assist in its deliberations. 1.3.2.c Administrative/editorial changes are changes in (1) the procurement process, (2) grammar, (3) syntax, or (4) are nondiscretionary changes required by statutes or regulations applicable to the Postal Service. Changes of this sort are reviewed by the Manager, Policies, Planning and Diversity and the Senior Counsel, Contract Protests and Policies. 1.3.3 Disposition Proposed PM changes are approved, disapproved, or approved as amended. Originators of disapproved changes are provided an explanation of the rationale. 1.3.4 Issuance Changes to the PM are published in the Postal Bulletin, in PM Circulars, and in numbered Transmittal Letters. Proposed PM Change 1. PM provision or provisions for which the proposed change is sought: Chapter # Section # Part # etc Title 2. State your proposed change (new wording): 3. Explain why the change is necessary or desirable: 4. Discuss the effect of the change on the Postal Service in terms of cost and personnel resources: 5. List other documents, if any, that will be affected by the proposed change: 6. If applicable, reference related procedures or experiences of other (postal or nonpostal) agencies or organizations: 7. Submitted by: Date submitted: PP&D use only: Case Number Assigned: Assigned to: spacer PM Change Format Exhibit 1.3.1 Section 4 PM Deviations 1.4.1 General 1.4.1.a Conformance with PM requirements promotes consistency and integrity throughout Postal Service purchasing. There are circumstances, however, when departures from PM requirements are necessary or desirable. Deviations may be authorized in such circumstances. 1.4.1.b The following are examples of deviations requiring authorization: 1. Omitting any required PM clause or using a clause that differs from a required PM clause covering the same subject. 2. Using a collateral clause or contract provision that modifies the substance or intent of a required clause. 3. Using a clause that is inconsistent with the substance or intent of a PM clause covering the same subject, or inconsistent with the PM coverage of the subject, even when the PM clause is not required to be used verbatim. 4. Any procedure, method, or practice which is inconsistent with the PM and any variance from PM limitations on the use of clauses, procedures or types of contracts. 1.4.1.c The following are not deviations from the PM: 1. Clauses drafted specifically to meet unique requirements when not inconsistent with the substance or intent of a PM clause covering the same subject. 2. Procedures or instructions developed to (1) meet specific operational needs or the needs of specialized commodity areas and (2) approved by the vice president of Purchasing and Materials. 3. Interim procedures or instructions to (1) test new purchasing techniques or methods, or (2) promote Postal Service efficiency. 1.4.2 Authorization of Deviations 1.4.2.a Request for Authorization. Deviations must be authorized in advance of their use. Contracting officers must forward a request through organizational levels to an individual authorized deviation approval authority (see paragraph c). Each request must include: 1. Identification of the PM requirement from which deviation is sought; 2. A full description of the deviation and the period of time and circumstances under which it will be used; 3. An explanation of why the deviation is necessary or desirable; and 4. Copies of any documents involved, such as forms, clauses, memoranda of negotiations, or correspondence. 1.4.2.b Approval 1. Deviations concerning matters unique to the purchase of supplies, services, or equipment may be approved by one of the following: (a) When only one contract is affected: (1) VP, P&M; (2) Manager, Purchasing Operations; (3) Manager, Policies, Planning and Diversity; (4) Manager, Headquarters Purchasing (this authority may be redelegated); (5) Manager, Field Customer Support (this authority may be redelegated). (b) When more than one contract is affected: VP, P&M. 2. Deviations concerning matters unique to the purchase of design and construction and related services may be approved by the following: (a) When only one contract is affected: (1) VP, P&M; (2) Manager, Purchasing Operations; (3) Manager, Policies, Planning and Diversity; and (4) Manager, Major Facilities Purchasing (this authority may be redelegated). (b) When more than one contract is affected: VP, P&M. 3. Deviations concerning matters unique to the purchase of mail transportation may be authorized by the following: (a) When only one contract is affected: (1) VP, P&M; (2) Manager, Purchasing Operations; (3) Manager, Policies, Planning and Diversity; and (4) Manager, National Mail Transportation Purchasing (this authority may be redelegated). (b) When more than one contract is affected: VP, P&M. 1.4.2.c Records. Contracting officers must provide copies of all correspondence requesting, authorizing, denying, or otherwise dealing with deviations to the manager of Policies, Planning and Diversity. Section 5 Purchasing Authority 1.5.1 Vice President, Purchasing and Materials The VP, P&M, has unlimited contracting authority. This authority includes the authority to award and administer contracts and to carry out all related responsibilities. Exhibit 1.5.1, Authorities and Responsibilities, VP, Purchasing and Materials, lists the various authorities and responsibilities vested in the VP, P&M. 1.5.2 Delegations of Authority 1.5.2.a Contracting. The VP, P&M, has delegated contracting authority, including redelegation authority, throughout P&M. An individual contracting officer's contracting and related authorities are enumerated in his or her letter of delegation. 1.5.2.b Special Categories of Contracts. The VP, P&M, has delegated contracting authority for certain specialized requirements to other Postal Service officials. Some of those delegations are set out in Chapter 8, Special Categories of Contracts. 1.5.2.c Local Buying Authority. In the Administrative Support Manual (ASM) the VP, P&M, has delegated local buying authority to various positions throughout the Postal Service. Exhibit 1.5.2c. Local Buying Authorities, shows these positions and their delegated local buying authority. Local buying authority is described in 1.6.2.j. 1.5.3 Contracting Officers 1.5.3.a Authority. Contracting officers have the authority to enter into, administer, and terminate contracts and to make related decisions. Information on the limits of contracting officers' authority must be readily available to the public and to Postal Service personnel. 1.5.3.b Entering into Contracts. Contracting authority is delegated to named individuals, rather than to positions, on the basis of the individual's education, experience and training. Only individuals with authority so delegated may bind the Postal Service contractually. Postal employees who have not been delegated contracting authority may not bind the Postal Service. See Management Instruction AS-710-90-2, Unauthorized Contractual Commitments. 1.5.3.c Actions Exceeding a Contracting Officer's Authority. The contracting officer assigned responsibility for a purchase signs the contract even when the contract amount exceeds his or her delegated contracting authority. In these circumstances, prior written approval of the proposed award by a contracting officer authorized to delegate the required amount of contracting authority constitutes the required delegation. This approval must be kept in the contract file. 1.5.3.d Contracting Officer's Representatives. Certain contracting officer responsibilities may be performed by individuals acting on behalf of the contracting officer, if so appointed by the contracting officer. These individuals are referred to as contracting officers' representatives. 1.5.3.e Reviews and Approvals. Certain high-dollar-value purchases require the review and approval of the VP, P&M, even though the contract amount may be within the contracting officer's delegated contracting authority. Exhibit 1.5.3e, Review and Approval Thresholds, delineates the dollar amounts at which this review and approval is required. 1.5.3.f Other Responsibilities. Contracting officers are responsible for ensuring the performance of all actions necessary for efficient and effective contracting, ensuring compliance with the terms of contracts and protecting the interests of the Postal Service in all of its contractual relationships. Contracting officers are given the latitude to exercise sound business judgment while adhering to the requirements of the PM and other applicable Postal Service directives. In carrying out their responsibilities, contracting officers are expected to consult specialists, assigned counsel or the Inspection Service for advice and assistance when appropriate. Exhibit 1.5.3.f(1), Authorities and Responsibilities - General Counsel, lists the authorities and responsibilities of that organization; Exhibit 1.5.3.f(2), Authorities and Responsibilities - Inspection Service, lists the same for the Inspection Service. Authorities and Responsibilities, Vice President, Purchasing and Materials PM Reference 1.1.1.b Issue selected directives containing procedural guidance necessary to implement the PM. 1.1.2.a Establish all purchasing policies and procedures except those unique to real property and related services; approve such policies relating to special categories of contracts. 1.1.2.d Approve or disapprove recommendations of the Purchasing Policy Committee (PPC). 1.2.1 Issue and maintain the PM. 1.4.2.b Authorize deviations to the PM in matters concerning more than one contract. 1.5.2 Delegate authority consistent with the PM. 1.5.3.e Review and approve various aspects of high dollar-value contracts. 1.5.3.g Appoint contracting officers (COs) and delegate authority to appoint COs. 1.5.3.j Terminate CO appointment and delegate authority to terminate COs. 1.8.2.a Receive reports of suspected anticompetitive practices; if there is evidence of violation of federal antitrust laws, forward reports to the Inspection Service. 1.9.2.b Designate individual contracts or classes of contracts as exempt from Provision 1-2, Contingent Fees and Clause 1-6, Contingent Fees. 1.9.5 Take appropriate action in cases of misrepresentation concerning contingent fees or violation or breach of Clause 1-6. 3.3.2.c Establish and maintain a consolidated list of contractors, debarred, suspended or ineligible for contracts or subcontracts. Ensure that the list is changed as necessary and distributed to all purchasing offices. Arrange to receive pertinent information from GSA, and notify GSA of any USPS debarment or suspension determination or any change in the status of contractors on the USPS list. 3.3.2.d Issue a written determination in cases where there is a compelling reason in the interest of the Postal Service to solicit proposals or quotes from, award contracts to, consent to subcontract with, or add new work to contracts held by debarred or suspended contractors. 3.3.2.e Debar a contractor with General Counsel concurrence. 3.3.2.g.2 Remove debarment or reduce the period of debarment, deny removal or reduction, or forward the application for removal or reduction to the Judicial Officer for hearing and final USPS determination. Transmit to the Judicial Officer, for filing, a notice and statement of the reasons for any removal or reduction or debarment that is approved. 3.3.2.h.1 Initiate a debarment proceeding by sending a written notice to the contractor, with a copy to the Chief Postal Inspector. 3.3.2.h.2 Forward to the Judicial Officer any request for a hearing received from a contractor who is served a notice of debarment. 3.3.2.i Suspend a contractor when in the interest of the USPS with General Counsel concurrence. 3.3.2.k.1 Cause a notice of suspension to be served, with a copy to the Chief Postal Inspector. 3.3.2.k.2 Answer inquiries concerning the suspension of a contractor, in coordination with the General Counsel. 3.3.2.k.3 Determine in writing that extension of a suspension is necessary. 4.6.5.a Determine that award should be made, in the interest of the Postal Service, without awaiting decision of a protest. 6.8.3.n Decide to pursue Court of Appeals review of a PSBCA decision that goes against the Postal Service, with the concurrence of the General Counsel or the General Counsel's designee. 6.9.1.b Review and approve the termination for convenience or default of any contractor with a face value or potential termination liability exceeding $1 million, or any termination considered to be of a sensitive or highly visible nature. 6.9.3.a.3 Decide, with the concurrence of the General Counsel, that liquidated damages be remitted in whole or in part. 8.3.2.a Concur in Information Systems technical standards for the acquisition of information systems. 10.2.7.b Determine that a contract is essential and must be awarded without complying with one or more requirements of EO 11246. 10.2.11.b.1 Exempt any contractor or subcontractor (or any group or category of contractor or subcontractor) from any provision of Clause 10-15, Affirmative Action for Handicapped Workers, in the interest of the Postal Service. 10.2.11.e Receive CO-forwarded complaints concerning the Rehabilitation Act of 1972 and give specific instructions on receiving them. 10.1.12.b.2 Submit CO justifications for proposed exemptions to Clause 10-18, Affirmative Action for Disabled Veterans and Veterans of the Vietnam Era, through channels to the Postmaster General and the Director, OFCCP. 10.2.12.d Receive CO-forwarded complaints concerning the Vietnam Era Veterans Readjustment Assistance Act of 1972 and give specific instructions on receiving them. 10.3.2.a Authorize deviations from Buy American Act policy and procedures. 10.3.2.c Determine that sufficient and reasonable available commercial quantities of satisfactory quality do not exist domestically, or that purchase of a domestic-source end product would be inconsistent with USPS interest or unreasonably costly. 10.3.3.c.2 Determine that the articles and materials listed in this subsection are not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities of satisfactory quality, or that it would be inconsistent with the interest of the Postal Service to apply Buy American policy to these articles or materials. Authorities and Responsibilities, Vice President, Purchasing and Materials Exhibit 1.5.1 Local Buying Authorities Amount Position Commodity $10,000 Officers/Vice Presidents at Headquarters Supplies, Services Capital Equipment $10,000 Vice Presidents Area Operations Supplies, Services Capital Equipment $10,000 Plant Managers, P&D Supplies, Services Capital Equipment $10,000 District Managers Customer Services Supplies, Services Capital Equipment $10,000 PCES Postmasters Supplies and Services $10,000 Inspectors in Charge Supplies and Services $2,000 Postmasters CAGs A-J, Vehicle Managers Supplies and Services $1,000 Postmasters CAGs K&L Supplies and Services Local Buying Authorities Exhibit 1.5.2c Review and Approval Thresholds Based on the commodity being purchased, and at various steps in the purchasing process, the following high-dollar value contracts require the review and approval of the VP, Purchasing and Materials. Supplies, Services, and Equipment If the estimated value of the contract exceeds $10 million, the VP must approve: The individual purchasing plan; The solicitation; and The proposed contract award. Facilities-related Contracts (excluding real estate acquisitions) If the estimated value of the contract exceeds $10 million, the VP must approve: The individual purchasing plan; The solicitation; and The proposed contract award. Mail Transportation Contracts Highway and domestic inland water contracts - If the estimated contract value exceeds $10 million, the VP must approve: The proposed contract award. Rail network contracts - If the estimated contract value exceeds $10 million, the VP must approve: The individual purchasing plan; The solicitation; and The proposed contract award. AMTRAK contract - The VP must approve the purchasing plan prior to commencement of negotiations, and The VP must approve the final contract price. International water contracts - If the estimated contract value exceeds $10 million, the VP must approve: The individual purchasing plan; The solicitation; and The proposed contract award. Air network contracts (including air system and hub contracts) - If the estimated contract value exceeds $10 million, the VP must approve: The individual purchasing plan; The solicitation; and The proposed contract award. spacer Review and Approval Thresholds Exhibit 1.5.3e Authorities and Responsibilities - General Counsel General Counsel 1.7.3.b (39 CFR 265.6.(b)) Approve Records Officer instructions concerning determination of whether the public interest is served by the release of records exempt from mandatory disclosure under the Freedom of Information Act. 1.7.3.b (39 CFR 265.7(b)(4)) Concur in an extension of the 10-working-day period for response to public requests for information (as requested by a custodian at Headquarters). 1.7.3.b (39 CFR 265.7(e)) Decide appeals when requests to inspect or copy information under the Freedom of Information Act are denied, when a timely determination is not made, or when requests for fee waiver are not granted. Review the correctness of custodian action or failure to act, even when no appeal is made. 1.7.4 (39 CFR 266.7(a)(1)) Decide appeals when requests to inspect, copy, or amend records under the Privacy Act are denied, or when no timely determination is made. 1.1.2.e.2 Serve as a permanent member of the Procurement Policy Committee (PPC). 3.3.2.e Concur in a VP's debarment of a contractor. 3.3.2.I Concur in a VP's suspension of a contractor. 3.3.2.k.2 Either answer, or coordinate with the VP who answers, any inquiry concerning suspension of a contractor. 4.6.7 Decide protests filed directly with the General Counsel, protests for which the primary addressee cannot be determined (4.5.3.b), and protests which contracting officers refer to the General Counsel for resolution. (Or decline to decide protests when the matter involved has been decided or is being decided in court; see 4.5.7.o.) 4.6.7.m Maintain a file of all protest decisions. 6.8.3.n Concur in a VP's decision to appeal to t he Court of Appeals for the Federal Circuit an adverse decision of the Board of Contract Appeals. Exhibit 8.1.2 Originate supplemental policy and procedure directives addressing legal services procurement requirements. Provide a copy to Policies, Planning & Diversity upon issuance and to the public upon request. Verify, at least annually, the currency and continuing applicability of each such directive, and issue changes. 8.2.1.c.1 Approve any modification of Clause 8-1, Nondisclosure (Professional Services), before inclusion in a contract for legal services. 9.3.7.c Concur in a contracting officer's decision to waive a contractual requirement to assign copyright to the Postal Service. 9.3.9.a Examine information on royalties and advise the contracting officer of any that are excessive or that USPS is not obligated to pay. 39 CFR 957.7 (App. D) Submit, on behalf of the VP who initiated the proceeding, a reply to a request for Judicial Officer hearing. 39 CFR 957.23 (App. D) File a written reply to a party who applies for modification or revocation of an order of debarment. 39 CFR 955.28 (App. E) Designate Postal Service counsel to represent USPS before the PSBCA. 3.3.2.h.2 (39 CFR 957.14 (App. D)) Represent the VP initiating a debarment proceeding in the Judicial Officer hearing and related proceedings. 10.2.10.e.8 Resolve questions about the applicability of the Service Contract Act when the DOL Wage and Hour Division requires retroactive application of a wage determination but the contracting officer at Headquarters questions the applicability. 4.5.6.c.2 Concur in a contracting officer's determination that a protest received by the contracting officer is obviously without merit. 7.3.1.b Consult with any contracting officer who seeks to negotiate with a tax authority to determine tax validity or applicability or to obtain a tax exemption or refund. Field Counsel 1.7.3.b (39 CFR 265.6(d)(4)) Advise postmasters concerning the release of the recorded names and addresses of post office box holders, when postmasters are unable to determine whether business use is involved. 1.7.3.b (39 CFR 265.7(b)(1)) Advise custodians who are not USPS officers concerning the denial of requests to inspect or copy records under the Freedom of Information Act. 1.7.3.b (39 CFR 265.7(b)(4)) Concur in an extension of the 10-working-day period for response to public requests for information. 1.7.3.b (39 CFR 265.10(a)(4)) Respond, with authorization from the employee, to a request from a non-federal source for medical information on the employee. 10.2.10.e.8 Resolve questions about the applicability of the Service Contract Act when the DOL Wage and Hour Division requires retroactive application of a wage determination but the contracting officer questions the applicability. 11.1.2.d (39 CFR 255.1(c)(3)) Advise local officials on whether particular complaints concerning handicapped access seek to end unlawful discrimination or to request special arrangements. Assigned Counsel 1.7.6.a.2 Consult with contracting officers who seek to develop solicitation provisions that restrict competition to offerors not subject to a conflict of interest, or that limit eligibility for future contracts or subcontracts. 4.6.6.c.2 Concur in a contracting officer's determination that a protest received by the contracting officer is without merit. 4.6.7.f Assist contracting officers in preparing reports concerning a protest received by the General Counsel. 6.4.5.b.1 Advise contracting officers on the amount of progress payment justified under a nonconstruction contract. 6.5.4.b.1 Advise contracting officers on whether to permit contract novation. 6.8.3.b Assist contracting officers in reaching decisions on claims by or against contractors that cannot be resolved by agreement. 6.9.3.b.2 Consult with contracting officers who seek to ensure that termination for default rather than termination for convenience is appropriate. 6.9.3.b.7 Advise contracting officers prior to their issuance of notices of termination for default. 7.1.11.a.3 Give contracting officers procedural assistance when sureties refuse to pay or do not respond to written notices. 7.1.11.c.4 Advise contracting officers on whether construction projects are substantially complete. 7.2.4.c Concur in contracting officer waivers, in whole or in part, of the requirement for errors and omissions issuance. 7.3 Assist contracting officers in dealing with all tax questions, and specifically: 7.3.1.c Questions concerning USPS constitutional immunity from State or local taxes. 7.3.2.a Questions on federal excise tax requirements. 7.3.3.b.2 Designation of prime contractors and subcontractors as USPS agents for the purpose of clarifying exemption from State or local taxes. 7.3.3.c.1 Assertion by a State or locality of its right to tax a contractor's possession or use of, or interest in, the property. 7.3.3.d Matters requiring special consideration - such as when the applicability of a tax is in litigation, depends on place and terms of delivery, etc. 8.5.2.b.4 Advise contracting officers on whether charges indicated as taxes on utility bills must be paid. 9.3.2.f.2 Concur in contracting officer approval of any variance from the contractor's obligation to grant USPS a paid-up, nonexclusive, irrevocable, worldwide license to copyrighted data. Patent Counsel 9.2.1.b Consult with contracting officers on whether an alternate arrangement, rather than acquiring title, is in USPS's best interest. 9.2.1.d Advise contracting officers prior to their negotiation of an alternate agreement on patent rights following award of a covered contract. 9.2.1.e Advise contracting officers concerning USPS acquisition of patent rights or solicitation of alternate agreements for contracts not covered by 9.2.1. 9.2.2.b.2 Respond to patent and copyright infringement claims. 9.2.3.c.1 Grant approval prior to a contracting officer's waiver or modification of USPS's right to patent indemnification. NOTE: PH 4.3.1-31d requires concurrence of legal counsel for payment of unauthorized supplies and/or services. Authorities and Responsibilities - General Counsel Exhibit 1.5.3f(1) Authorities and Responsibilities - Inspection Service Chief Postal Inspector 1.7.4.b.1 Authorize disclosure of records or information compiled for law enforcement purposes to persons outside the Postal Service. 1.7.4.b.2 Authorize the disclosure of address information that appears on pieces of mail to a contractor when such disclosure is required for contract performance. 1.7.9.c Review information or allegations concerning acceptance by a Postal Service employee of gratuities of any kind from contractors or persons seeking contracts or other business. Advise the contracting officer of findings. 1.8.2.a Refer reports of suspected violation of the federal antitrust laws to the Attorney General, if appropriate, for prosecution. 6.8.2.d Review contracting officer reports of unsupported contractor claims for which there is evidence of fraud or misrepresentation of fact on the contractor's part. 10.2.4.e.7(b) Review contracting officer reports of contractor, lessor, or subcontractor underpayments totalling $500 or more under USPS construction contracts or lease agreements. Forward reports to the Secretary of Labor. 10.2.4.e.7(c) Review contracting officer reports of contractor, lessor, or subcontractor underpayments (under construction contracts or lease agreements) that are willful and violate the False Affidavits Act or another criminal statute. Authorities and Responsibilities - Inspection Service Exhibit 1.5.3f(2) 1.5.3.g Appointment and Selection 1. Appointment Authority (a) Contracting officers are appointed by the VP, P&M, and by individuals delegated that authority by the VP. Appointees to the position of contracting officer levels I through IV must be career employees in good standing, and must meet the qualifications for the particular level (see 1.5.4). (b) Contracting officers must be appointed by letter and on Form 7378, Certificate of Appointment. The letter must state any limitations on the contracting officer's authority. Appointing officials must keep copies of all letters and certificates of appointment that have not been terminated. 2. Selection (a) General. Appointing officials must ensure that contracting officers are fully qualified by education, experience and training to solicit, negotiate, award and administer contracts on behalf of the Postal Service. (b) Contracting Officer Levels. Generally, contracting authorities are grouped by contracting officer level. There are four general levels of contracting officer: (1) Level I contracting officers. Generally, these contracting officers are delegated up to $100,000 of contracting authority, and up to the maximum limit for orders against Federal Supply Schedules and other indefinite delivery contracts and agreements. (2) Level II contracting officers. Generally, these contracting officers are delegated up to $1 million of contracting authority, and up to the maximum limit for orders against Federal Supply Schedules and other indefinite delivery contracts and agreements. (3) Level III contracting officers. Generally, these contracting offices are delegated up to $10 million of contracting authority, and up to the maximum limit for orders against Federal Supply Schedules and other indefinite delivery contracts and agreements. (4) Generally, level IV contracting officers are delegated unlimited contracting authority. (c) Qualifications. Appointment to a particular contracting officer level requires progressively more exacting qualifications. The following qualifications apply to contracting officers appointed by the VP, P&M: (1) Contracting Officer Level I: (2) Experience: One year of experience performing substantive purchasing tasks. (3) Duties: Performance or supervision of purchasing tasks for at least 25 percent of current work hours. (4) Education: A baccalaureate degree. The individual nominated must have earned at least 24 hours in subjects related to purchasing, such as accounting, business finance, commercial (business) law, economics, quantitative analysis, marketing, contracting or purchasing, organization, or management. The required 24 semester hours may have been earned during the individual's pursuit of a baccalaureate degree, or at any other time. NOTE: The following professional certifications may serve as a substitute for the baccalaureate degree: (i) Certified Professional Contract Manager from the National Contract Management Association; (ii) Certified Purchasing Manager from the National Association of Purchasing Management; and (iii) Certified Public Purchasing Officer from the National Institute of Governmental Purchasing. (5) Training: Satisfactory completion of the following purchasing courses: (i) Principles of Purchasing (ii) Simplified Purchasing. NOTE: Coursework and earned credits in subjects covering the same general topics taken at an accredited college or university may serve as a substitute for this training requirement. (6) Contracting Officer Level II: (7) Experience: Three years of current, progressively complex and responsible experience in performing competitive and noncompetitive purchasing (not including simplified purchasing). Generally, this experience must have been gained in intermediate level contracting positions. (8) Duties: Performance or supervision of purchasing tasks for more than half of current workload. (9) Education: A baccalaureate degree. The individual nominated must have earned at least 24 hours in subjects related to purchasing, such as accounting, business finance, commercial (business) law, economics, quantitative analysis, marketing, contracting or purchasing, organization, or management. The required 24 semester hours may have been earned during the individual's pursuit of a baccalaureate degree, or at any other time. (10) Training: Satisfactory completion of the following purchasing courses: (i) All level I courses (ii) Contract Formation (iii) Basic Contract Administration (iv) Negotiation Strategies and Techniques (v) Advanced Contract Administration. NOTE: Coursework and earned credits in subjects covering the same general topics taken at an accredited college or university may serve as a substitute for this training requirement. (11) Contracting Officer Level III (12) Experience: Five years of current, progressively complex and responsible experience in soliciting, negotiating, awarding and administering competitive and noncompetitive purchasing actions. Ordinarily, this experience must have been in higher-level purchasing positions. (13) Education: A baccalaureate degree. The individual nominated must have earned at least 24 hours in subjects related to purchasing, such as accounting, business finance, commercial (business) law, economics, quantitative analysis, marketing, contracting or purchasing, organization, or management. The required 24 semester hours may have been earned during the individual's pursuit of a baccalaureate degree, or at any other time. (14) Training: Satisfactory completion of the following courses: (i) All level II courses (ii) Contract Law (iii) Advanced Price Analysis (iv) Strategic Purchasing NOTE: Coursework and earned credits in subjects covering the same general topics taken at an accredited college or university may serve as a substitute for this training requirement. (15) Contracting Officer Level IV (16) A Level IV contracting officer must hold one of the following positions: (i) Manager, Purchasing Operations; (ii) Manager, Headquarters Purchasing; (iii) Manager, National Mail Transportation Purchasing; (iv) Manager, Major Facilities Purchasing; and (v) Manager, Field Customer Support. 1.5.3.h Waivers and Interim Appointments 1. Waivers. Waivers to the qualification requirements may be requested for individuals who, due to their extraordinary experience or extraordinary circumstances, should be granted contracting officer authority. Requests must be submitted through organizational levels to the VP, P&M. 2. Interim Appointments. Ordinarily, individuals will not be appointed as contracting officers if they do not meet the relevant qualification criteria. However, when necessary, appointing officials may grant an interim appointment to an individual who has not yet completed necessary training or education. No interim appointment may exceed one year, and no interim appointment may be granted to an individual more than once if the individual fails to complete the required training or education. 1.5.3.i Continuing Professionalism. All contracting officer appointments, regardless of level, must be reviewed annually by the appointing official in order to ascertain that the contracting officer has maintained professional proficiency and otherwise remains qualified. Therefore, contracting officers must: 1. Attend formal procurement training covering such areas as new requirements, techniques, or policies and procedures brought about by changes in statutes, regulations, business research or evaluations of postal purchasing practices; and 2. Maintain their professionalism through (1) attendance at seminars, conferences, meetings or other professional activities and (2) performing coursework in contracting and purchasing commensurate with their CO level and responsibilities. The appointing official will determine whether a particular CO's efforts in these areas meet the professional development requirements. 1.5.3.j Termination. Termination of a contracting officer appointment may be made by an appointing authority or by the VP, P&M. Terminations may be made for reasons such as reassignment, termination of employment, or unsatisfactory performance. The termination must indicate the effective date of termination. Termination of employment automatically terminates a contracting officer's appointment. Terminations may not be made retroactively. Section 6 Meaning of Words and Terms 1.6.1 General The words and terms defined in this section have the meanings given in this section whenever they are used in the PM, unless the context clearly indicates a different meaning or a different definition is given for a particular section, part, solicitation provision or contract clause. Definitions are in alphabetical order. 1.6.2 Definitions 1.6.2.a Agreement. A set of pre-established terms and conditions negotiated between the Postal Service and which only becomes a contract when an order is placed and accepted by the supplier. A contract is always an agreement; but an agreement is not always a contract. 1.6.2.b Assigned Counsel. The person or persons assigned by the General Counsel to provide legal advice to a VP or contracting officer. In general, contracting advice to Headquarters purchasing offices is provided by the Purchasing Law and Facilities Law organizations of the General Counsel, and advice to field purchasing offices is provided by Field Legal Services. 1.6.2.c Change Order. A written order signed by the contracting officer directing the contractor to make changes that the Changes clause authorizes the contracting officer to make without the specific consent of the contractor. 1.6.2.d Contract. Any understanding that can be legally enforced, formed by two or more parties who promise to perform or to refrain from performing some act. For purposes of this manual, a contract exists when there is a bilateral agreement, a unilateral order (such as a purchase order) by the Postal Service that becomes effective upon performance by the other party, or a binding order under an agreement that did not in itself bind the parties. 1.6.2.e Contract Modification. A written alteration in the specifications, delivery point, rate of delivery, contract period, price, quantity or other provisions of an existing contract whether made unilaterally under a provision in the contract or bilaterally by mutual parties to the contract. It includes such bilateral actions as supplemental agreements, and such unilateral actions as change orders, administrative changes, notice of termination, and exercise of options. 1.6.2.f Contracting Officer. A person who has direct purchasing authority or has been delegated purchasing authority (see 1.5.3). The term includes an authorized representative of a contracting officer acting within the limits of the authority delegated by the contracting officer. 1.6.2.g Days. This means calendar days unless working days are specified. 1.6.2.h Evaluation Factors. A standard by which the worth of a proposal is judged. Solicitations must state the factors that will be applied in evaluating proposals. The terms evaluation factors and evaluation criteria are used interchangeably. 1.6.2.i Includes. This means includes but is not limited to. 1.6.2.j Local Buying Authority. The authority to locally buy and pay for day-to-day operational needs. Local buying authority may not be used for certain commodities (see 4.1.3). 1.6.2.k May. This is permissive. May not and no (person or thing) may mean that the act described is prohibited. 1.6.2.l Must. This is imperative. 1.6.2.m Purchasing. All activities related to the purchase of supplies, services, equipment, design and construction and related services, and mail transportation, including planning, solicitation, source selection, contract award, and contract administration. It does not include activities related to the determination of requirements. 1.6.2.n Proposal. An offer that, if accepted, creates a contract. A proposal may be made in response to a solicitation, or may be unsolicited. 1.6.2.o Purchasing Office. An organizational element responsible for the purchase of supplies, services and equipment, real property, design and construction and related services, and mail transportation. 1.6.2.p Quotation. A response to a request for quotation; it is informational in character, and, unlike a proposal, it is not an offer that can be accepted by the Postal Service to form a binding contract. 1.6.2.q Real Estate and Related Services. The term real estate includes the acquisition of real property (including improvements on real property), and any interests in real property, by easement, license, purchase, lease, or exchange; the disposal of real property (including improvements on real property), and any interests in real property, by easement, license, sale, lease, or exchange; and the development and redevelopment of real property under lease agreements, including acquisition, disposal, or development and redevelopment by contract or agreement with government entities at any level. Related services includes professional services, planning efforts, studies, and the like, in support of the acquisition, disposal, or development and redevelopment of real estate (as defined above) including design/engineer, environmental, geo-technical, brokerage, legal, relocation, title, and similar services (other than services in connection with Postal Service-financed construction). 1.6.2.r Services. The performance of identifiable tasks. 1.6.2.s Should. This means desirable but not required. 1.6.2.t Supplemental Agreement. A contract modification that is mutually agreed to by the parties. 1.6.2.u Supplies. Property and rights or interest in property of any kind except real property. 1.6.2.v Vice President. When not otherwise specified, means the vice president of Purchasing and Materials. 1.6.2.w Will. This signifies intent or obligation. Section 7 General Policies 1.7.1 Background 1.7.1.a The United States Postal Service, an independent establishment of the Executive branch, has been established by the Postal Reorganization Act, Public Law 91-375 (codified at Title 39 of the United States Code), to provide postal services to bind the nation together. The Postal Service does so in an environment unique for a government entity; it operates almost entirely from its own revenues, and is subject to direct and indirect competition from businesses and competing communications technologies across its entire product line. As a result, the Postal Service's business operations are driven by concerns such as service need and market share. 1.7.1.b Consistent with these circumstances, the Postal Service has been granted broad power to determine the character of and necessity for its expenditures, and to enter into and perform contracts upon terms and conditions and in the manner it deems necessary to accomplish its purposes. In order that it may operate in a business-like fashion, the Postal Service has been exempted from most federal laws dealing with public or federal contracts, property, works, officers, employees, budgets, or funds, including specifically laws regarding the establishment, adjudication, and judicial review of administrative procedures and determinations. While the Postal Service has adopted, as a matter of policy, various federal procurement practices not otherwise applicable to it, it has also undertaken to integrate into its purchasing procedures the business-related objectives reflected in its enabling legislation, while retaining standards of fairness and openness regarding its transactions appropriate to its status as a public entity. 1.7.1.c The Postal Service has established this PM, reflecting its business purposes, with the objective of acting efficiently and effectively to obtain at reasonable cost goods and services of appropriate quality to support its operations as a service to the people of the United States. 1.7.1.d The policies and procedures established by the PM are intended to further the objectives expressed herein, but are not intended, and should not be construed, to create any right or benefit, substantive or procedural, enforceable by a party against the Postal Service or the United States, or their officers or employees, except to the extent expressly provided within the PM. 1.7.2 Competition 1.7.2.a Purchases must be made on the basis of adequate competition whenever feasible. Adequate competition means the solicitation and participation of a sufficient number of capable sources to ensure that the required quality and quantity of goods and services is obtained when needed, and that the price is fair and reasonable. 1.7.2.b Contracting officers, supported by such assistance as is necessary, must make a determination that adequate competition has been obtained in any instance in which it is required. In making that determination, contracting officers must act with reasoned discretion, taking into account both the business requirements of the particular procurement and the Postal Service's general interest in identifying new suppliers and in providing opportunities for its supplier base. 1.7.2.c The examples which follow are not necessarily inconsistent with the obtaining of adequate competition: 1. Rotation of source lists when there are a number of qualified suppliers (see A.3.3); 2. The failure to publicize, due to urgency, a procurement otherwise required to be publicized (see 3.2.1); 3. Purchases from approved sources or prequalified suppliers (see 3.1.6); and 4. Purchases from minority and woman-owned businesses (see 10.1.4). 1.7.2.d Adequate competition need not be obtained for purchases subject to noncompetitive procedures (see 4.3.1.d and 4.4). 1.7.3 Contracts with Postal Service Employees 1.7.3.a Except as provided in paragraphs b and c below, contracts may not be awarded to Postal Service employees, their immediate families, or business organizations substantially owned or controlled by Postal Service employees or their immediate families. Postal Service employees means all postal officers and employees, whether in full-time, part-time, career or noncareer positions, including specifically persons in temporary positions such as postmaster replacements and rural carrier reliefs. Immediate family means spouse, minor child or children, and individuals related to an employee by blood who are residents of the employee's household. 1.7.3.b The prohibition against contracting with Postal Service employees may be waived (all waivers must be in writing), by the contracting officer for: 1. New real estate leases of 3,000 square feet or less; 2. Renewals of existing highway contract routes with immediate family members of a postal employee, subject to review and concurrence by the Associate Ethical Conduct Officer; 3. Cleaning service contracts with immediate family members of nonsupervisory employees; and 4. The licensing of a patented invention that is the sole property of the employee (see Management Instruction AS-710-91-17, Unsolicited Proposals). 1.7.3.c The prohibition does not apply to vehicle leases with Postal Service employees, and renewals and extensions of leases of interior space of 3, 000 square feet or less. When to do so is in the best interests of the Postal Service, contracting officers may renew or extend existing leases of over 3,000 square feet from Postal Service employees or their immediate families, or business organizations substantially owned or controlled by them, with the concurrence of the Associate Ethical Conduct Officer (see 39 CFR 447.31). 1.7.4 Release and Exchange of Information 1.7.4.a General. The Postal Service makes records, data, and information available to the public to the maximum extent consistent with the Postal Service's interest, the privacy rights of individuals, ownership of rights in the data requested (see Chapter 9), and the need to protect Postal Service and other confidential business information (including information relating to the Postal Service's commercial operations) from disclosure. 1.7.4.b Release 1. Records properly identified and requested by any member of the public must be made available in accordance with subchapter 350, Administrative Support Manual, and 39 CFR 265, implementing the Freedom of Information Act (FOIA) (6 U. S.C. 552), unless exempt from disclosure. 2. When authorized by subchapter 115 of the Domestic Mail Manual (DMM), a contract requiring the contractor to have access to address information (i.e., addresses and return addresses) that appears on pieces of mail must include Clause 1-7, Nondisclosure of Address Information. 1.7.4.c Exchange. Subject to any restrictions on disclosure, the Postal Service exchanges information with other government agencies regarding the performance of contractors. 1.7.5 Protection of Individual Privacy Whenever a contractor will be required to design, develop, or operate a system of records on individuals to accomplish a Postal Service function, the contract must (a) require that the contractor comply with Postal Service policy and regulations (see 39 CFR 266-268) implementing the Privacy Act (5 U.S.C. 552a) and (b) must include Clause 1-1, Privacy Act. 1.7.6 Advance Payments and Progress Payments 1.7.6.a Policy. Normally, the Postal Service pays for supplies and services after delivery or performance. However, for some purchases, sources may be unavailable or competition too limited without the availability of advance payments or progress payments. 1.7.6.b Advance Payments. Approval to make advance payments must be obtained as required by Management Instruction FM-610-91-2, Advance Payments. 1.7.6.c Progress Payments 1. If the dollar value of a prospective contract is within the contracting officer's delegated contracting authority, he or she may approve the use of progress payments for the particular contract. For contracts over $1,000,000, progress payments must also be approved by the VP, Finance and Planning. 2. Before approving progress payments, the contracting officer must make a written determination establishing that: (a) Progress payments are in the Postal Service's best interests; (b) The contractor's accounting system and controls are adequate for proper administration of progress payments, or their adequacy will be ascertained before contract award; and (c) Monthly progress reports will be obtained from the contractor, showing progress of the work as related to progress payments made. 1.7.6.d Clauses. Any contract providing for advance payments must include Clause 1-2, Advance Payments. Any contract, other than a construction contract, providing for progress payments must include Clause 1-3, Progress Payments. (For construction contracts, see Clause 11-10, Payment (Construction)) 1.7.7 Conflicts of Interest 1.7.7.a Organizational Conflicts of Interest 1. An organizational conflict of interest exists when the nature of the work to be performed under a contract may give an offeror an unfair competitive advantage, or when an offeror has other interests that may impair its objectivity or ability to perform satisfactorily. Such conflicts are not limited to any particular type of purchase, but are more likely to occur in contracts involving: (a) Professional services (see 8.2.1); (b) Consultant services (see 8.2.2); or (c) Performance of or assistance in technical evaluations. (d) Projects that are procured in separate phases, such as design and then construction or research and development and then production (see 8.4.8 and 11.3.4). 2. As part of purchasing planning (see 2.1) contracting officers must attempt to identify potential conflicts of interest so that they may be avoided or mitigated. When a potential conflict is foreseen, the contracting officer should consult with assigned counsel and obtain the assistance of appropriate technical specialists to mitigate or avoid conflict. Such mitigation actions may include, but are not limited to, the development of solicitation provisions restricting competition to offerors not subject to a conflict of interest, or a contract clause limiting the contractor's eligibility for future contracts or subcontracts or other actions to mitigate or avoid an apparent conflict such as the adoption of measures to ensure as even a competition as possible, as may be in the interest of the Postal Service and the offerors. Any limit on future contracts must be for a reasonable period sufficient to avoid unfair competitive advantage or potential bias. See, for example, Clause 8-14, Organizational Conflict of Interest. 3. If it does not become apparent until proposals are received that participation by a particular offeror could lead to a conflict of interest and unfair competition, the offeror may be disqualified and its proposal rejected, or the contracting officer may take such other actions as deemed necessary in the interest of the Postal Service and the offerors to avoid or mitigate the situation, acting in the interest of the Postal Service, and in consultation with assigned counsel and appropriate technical specialists to ensure a fair competition. Disqualification of an offeror for such reasons is a matter of the contracting officer's discretion, and does not constitute debarment or suspension nor does it constitute a finding of nonresponsibility. 4. If the contracting officer determines to mitigate a situation that could lead to a conflict or which appears to constitute a conflict of interest, such determination should be reduced to a written analysis of the course of action chosen. Such analysis should include a consideration of benefits and detriments to the Postal Service and the offerors and may consider information provided by offerors in response to the solicitation or obtained during negotiations. 5. The provisions of this section may be waived as to any procedure or rule by determining that its application in a particular situation would not be in the Postal Service's interest. Any such waiver should be in writing by the contracting officer and processed in accordance with subchapter 1.4. 1.7.7.b Participation by Members of Congress. The participation of members of Congress in contracts or agreements made on behalf of the United States (including the United States Postal Service) is prohibited by 41 U.S.C. section 22. 1.7.8 Standards of Conduct Postal Service employees are held to the highest standard of conduct in the performance of their duties, and must conduct themselves so as to avoid even the appearance of any impropriety. All employees must adhere to the Standards of Ethical Conduct for Employees of the Executive Branch, 5 CFR 2635. 1.7.9 Gratuities or Gifts 1.7.9.a Postal Service employees are prohibited from accepting gratuities or gifts from contractors or persons seeking postal contracts or other business under detailed rules (which include limited exceptions) prescribed in 5 CFR 201 - 205. 1.7.9.b All contracts must include Clause 1-5, Gratuities or Gifts, which provides for termination of the contract for default upon a finding by the Postal Service Board of Contract Appeals that a contractor, or the contractor's agent or representative, offered or gave a gratuity or gift to a Postal Service employee to obtain a contract or favorable treatment under a contract. 1.7.9.c Information or allegations concerning unlawful gratuities or gifts must promptly be referred to the Inspection Service. If the Inspection Service finds evidence that an unlawful gratuity or gift was offered or given, the contracting officer must determine whether debarment proceedings under 3.2.2 are appropriate, in addition to actions taken under a specific contract. Section 8 Anticompetitive Practices 1.8.1 General 1.8.1.a An anticompetitive practice is designed to eliminate competition or restrain trade. Such practices include collusion, follow-the-leader pricing,rotated low price proposals, sharing of business, identical prices, and any other device intended to deprive the Postal Service of the benefits of competition. These practices may violate federal antitrust laws and be subject to prosecution by the Attorney General. Proposals suspected of reflecting anticompetitive practices may be rejected (see 4.1.5.e). 1.8.1.b All solicitations must include Provision 1-1, Certificate of Independent Price Determination. 1.8.2 Reports 1.8.2.a Any suspected anticompetitive practice must be reported promptly through normal management channels to the VP, P&M (or the VP, Facilities, if the matter involves real estate). Identical prices are not reported automatically, but only if there is reason to suspect an anticompetitive practice. If the VP believes that there is reasonable evidence of violation of federal antitrust laws, the report must be forwarded to the Inspection Service. The Inspection Service will refer the matter to the Attorney General for prosecution, if appropriate. 1.8.2.b Each report must include: 1. A copy of each suspect proposal; 2. A copy of the solicitation and any amendments; and 3. A record of all the proposals received for each item covered by the solicitation, showing the following: (a) The unit and total price offered. (b) The net price to the Postal Service after discounts and allowance for transportation, or other costs. (c) The name of the manufacturer of the item, or the source of supply if the offeror is a dealer or distributor, and the location from which shipment will be made. When identical proposals are made by dealers, distributors, or jobbers representing the same manufacturer or supplier, they frequently indicate adherence to the supplier's list or suggested price to the government. Unless there is some evidence that such identical proposals resulted from collusion or concerted action among the offerors, they need not be reported. (d) The destination of shipments, and whether the price quoted includes or excludes the cost of transportation to destination. (e) The identity of the successful offeror and, if identical low proposals were submitted by several offerors, an indication of how the award was made. 4. Copies of documents filed by suspect offerors as part of the submission or obtained by the contracting officer, such as: (a) Contracts with contingent-fee representatives who acted on behalf of one or more of the offerors that submitted identical proposals or assisted them in the preparation of their proposals; (b) Correspondence or other evidence of patent rights owned or licensed by offerors quoting identical prices; (c) Evidence of the existence of financial or other ties between offerors submitting suspect proposals; or (d) Any pertinent financial or corporate information concerning the suspect offerors that may be in financial statements or annual reports to stockholders. 5. Copies of reports containing findings of any special investigations concerning the proposals reported. 6. Copies of any correspondence revealing the factors responsible for the suspect proposals, or explaining the prices offered. 1.8.2.c In addition to the documents and information described above, each report should provide any available information indicating: 1. The annual dollar value of purchases of the item in each of the three years preceding the year in which the suspect proposals were received; 2. Any pattern of bidding in the three-year period preceding the receipt of the suspect proposals that appears to indicate practices such as bid rotation, sharing of the business, collusive bidding, or any other form of joint action; 3. Whether the specifications for the item were written so that only a limited number of sources are capable of meeting the specifications; or 4. Whether there are any known manufacturers or suppliers of the item that consistently avoid responding to Postal Service solicitations. Section 9 Contingent Fees 1.9.1 General A contractor may not pay a fee to an agent contingent upon the agent's soliciting or obtaining the award of a contract. Such a fee arrangement is improper because it may lead to the attempted or actual exercise of improper influence. The prohibition does not apply to contingent fee arrangements between contractors and bona fide employees or bona fide agencies employed by contractors to secure business. 1.9.2 Representation and Clause 1.9.2.a General. Except as provided in paragraph b below, solicitations must include Provision 1-2, Contingent Fee Representation, and all contracts must contain Clause 1-6, Contingent Fees. 1.9.2.b Exceptions. The representation and clause are not required for: 1. Simplified purchases (see 4.2); 2. Contracts for public utility services furnished by a public utility company when the utility company's rates for the services are subject to regulation by a federal, state, or other regulatory body and the public utility company is the sole source of supply; or 3. Other contracts, individually or by class, as designated by the VP, P&M. 1.9.3 Bona Fide Employee or Agency 1.9.3.a Bona Fide Employee. For the purpose of the representation and the clause, this means an individual employed by the concern in good faith and over whom the concern has the right to exercise supervision and control as to time, place, and manner of performance of work. A concern may employ an individual who represents other concerns, but the employment must have some continuity and may not be related just to the obtaining of one or more specific contracts. The employee's salary may be fixed or based on a commission, whichever is customary. 1.9.3.b Bona Fide Agency. In determining whether an agency is a bona fide established commercial selling agency employed by the contractor for the purpose of securing business, the factors below must be considered: 1. The fee must be commensurate with the nature and extent of the services and not excessive compared with the fees customarily allowed in the trade for similar services related to commercial business. In evaluating reasonableness of the fee, services of the agent other than actual solicitation should be considered, such as technical, consultant, or managerial services, and assistance in obtaining personnel, facilities, equipment, materials, or subcontractors for the performance of the contract. 2. The agency should be an established concern, with knowledge of the products and the business of the concern represented and other qualifications necessary to sell the products or services on their merits, and there should ordinarily be a continuity of relationship between the contractor and the agency. 1.9.3.c Use of Improper Influence. No employee or agency is bona fide if the employee or agency seeks to obtain or claims to be able to obtain a contract through the use of improper influence. 1.9.4 Contractor's Statement of Contingent or Other Fees Form 7319, Contractor's Statement of Contingent or Other Fees, must be obtained from successful offerors whenever either part of the required representation is answered in the affirmative. Refusal to furnish the statement requires rejection of the proposal. 1.9.5 Misrepresentation or Violation In case of misrepresentation concerning contingent fees, or violation or breach of Clause 1-6, Contingent Fees, the VP, P&M (or the VP, Facilities, for real estate related matters), must take one or more of the following actions, or other action, as is appropriate: 1.9.5.a If the award has not been made, determine whether the proposal should be rejected. 1.9.5.b If award has been made, take action to enforce the clause, either annulling the contract without liability or recovering the amount of the fee involved. 1.9.5.c Consider suspension or debarment. 1.9.5.d Consider referring the matter to the Attorney General, through the same channels as in 1.8.2.a. Section 10 Administrative Matters 1.10.1 Files A file must be established for every purchase action, solicitation, and contract. Every purchasing office or office making contract payments must keep records of all actions taken concerning solicitations and contracts. The head of the office is responsible for the maintenance and disposition of these records. Depending on the type of purchase, see the handbooks referenced in 1.1.1.b for disposition instructions. 1.10.2 Document Numbering This uniform numbering system must be used to identify all solicitations, contracts, and related purchasing documents (except those concerning real estate and mail transportation). 1.10.2.a Basic Number. The basic number consists of 13 characters (letters and numbers) arranged in four groups as follows: 1. The first six characters are the finance number of the purchasing office issuing the document. 2. The seventh and eighth characters are the last two numbers of the fiscal year in which the document is issued. 3. The ninth character designates the category of document, as listed in Exhibit 1.10.2a3. Use categories B, F, P, and Z only if no other category applies. 4. Characters 10 through 13 are the serial number of the document, except for indefinite-delivery contracts, for which see subparagraph 6 below. A separate series of serial numbers must be used for solicitation documents and for award documents. The contracts and orders register and the indefinite-delivery contracts register have their own series of serial numbers. 5. Dashes must be used to separate the four groups of characters, as in 104233-91-B-0001. This example breaks down as shown in Exhibit 1.10.2a5. 6. For indefinite-delivery contracts, the tenth character is a capital letter designating the purchasing office. 1.10.2.b Supplementary Numbers 1. Supplementary numbers must be used in conjunction with the basic number to identify: (a) Amendments to solicitations; (b) Modifications to contracts and orders; and (c) Task orders under Postal Service contracts. 2. The supplementary number must consist of a serial number directly following the basic number, using (separated by a dash) the following format: (a) (a) Amendments must be sequentially numbered A01 to A99. (b) Modifications must be sequentially numbered M01 to M99. (c) Task orders must be sequentially numbered T001 through T999. Ninth Character Categories for Document Numbering GROUP CHARACTER CATEGORY Solicitations A All solicitations Competitive B Over $100,000 Contract E Follow-on to competition Awards J Architect-engineering L Land acquisition M Delivery orders under USPS indefinite-delivery contracts N Delivery orders under government agency contracts (except required sources) O Research and development P $100,000 or less S Purchases from a public utility X Open market purchases $10,000 or less paid at ISCs Y Purchases $2,000 or less paid locally (not paid at ISC). (Use of this code is optional, and it is not recorded in the registers described in 1.10.3. A local purchase register is to be maintained for these purchases.) Noncompetitive C Research and development Awards Contract F $100,000 or less Awards I Consultant contracts K Land acquisition Z Over $100,000 9 Unauthorized commitments Other D Orders under USPS ordering agreements H Ordering agreements Q First production buys R Basic pricing agreements, Vehicle Maintenance Agreements, and Vehicle Washing and Polishing Agreements T Purchases from required sources (workshops for people who are blind and other severely disabled and Federal Prison Industries, and Defense Fuel Supply Center) U Revenue-producing contracts Ninth Character Categories for Document Numbering Exhibit 1.10.2a3 Character Element Breakdown for Document Numbering CHARACTER ELEMENT EXAMPLE 1 thru 6 Purchasing Office 104233 7 thru 8 Fiscal Year 91 9 Type of Purchase 8 10 thru 13 Serial Number 0001 Character Element Breakdown for Document Numbering Exhibit 1.10.2a5 1.10.3 Document Registers All contracts, orders, and modifications must be recorded by document number in the appropriate register 1.10.3.a Contracts and Orders Register. This register must be used to record all initial contract awards and orders, except indefinite-delivery contracts (see paragraph c below). 1.10.3.b Modifications and Data Corrections Register. This register must be used to record modifications of contracts and orders, and for correcting or updating data previously recorded. 1.10.3.c Indefinite-Delivery Contracts Register. This register must be used to record the award of indefinite-delivery contracts. 1.10.4 Commodity Codes Commodity codes are alphanumeric codes that describe the commodity or service being purchased. For delivery orders under USPS indefinite-delivery contracts, the commodity code is the fiscal year and serial number of the basic contract number (six characters without dashes, i.e., 88H001). 1.10.5 Socioeconomic Classification Codes The codes shown in Exhibit 1.10.5 are used to identify contracts and orders by socioeconomic classification. Socioeconomic Classification Codes CODE CLASSIFICATION A Small business B Small minority-owned business C Small woman-owned business D Small business labor surplus area E Small minority woman-owned business F Small minority-owned business, labor surplus area G Small woman-owned business, labor surplus area H Small minority woman-owned business, labor surplus area I Large business J Large minority-owned business K Large woman-owned business L Large business labor surplus area M Large minority woman-owned business N Large minority-owned business, labor surplus area P Large woman-owned business, labor surplus area R Large minority woman-owned business, labor surplus area S Nonprofit or educational institution, and other government agencies (use this category only if no other category applies) T National Industries for the Blind U National Industries for the Severely Handicapped V Food services contracts to people who are blind W Federal Prison Industries (UNICOR) Socioeconomic Classification Codes Exhibit 1.10.5 Chapter 2 Procurement Planning Section 1 Policy 2.1.1 General 2.1.1.a Definition 2.1.1.b Responsibilities 2.1.1.c Benefits 2.1.2 Market Research 2.1.2.a Importance 2.1.2.b Methods 2.1.3 Advance Planning 2.1.4 Annual Procurement Summary Plans 2.1.5 Individual Procurement Plans 2.1.6 Implementation Plans 2.1.7 Source Selection Plans 2.1.7.a General 2.1.7.b Evaluation Panels 2.1.7.c Evaluation Factors 2.1.7.d Decisional Logic Section 2 Planning Considerations 2.2.1 Quality Requirements 2.2.1.a General 2.2.1.b Types of Quality Assurance Requirements 2.2.1.c Quality Assurance at Origin 2.2.1.d Quality Assurance at Destination 2.2.1.e Simplified Purchasing 2.2.2 First Article Approval 2.2.2.a Definitions 2.2.2.b General 2.2.2.c Waiver 2.2.2.d Solicitation and Contract Requirements 2.2.3 Acceptance 2.2.3.a Place of Acceptance 2.2.3.b Delayed Acceptance 2.2.4 Warranties 2.2.5 Delivery or Performance Schedule 2.2.6 Liquidated Damages 2.2.7 Postal Service Property 2.2.7.a Policy 2.2.7.b Solicitations 2.2.7.c Special Tooling and Test Equipment 2.2.7.d Clauses 2.2.8 Options 2.2.9 Multiyear Procurement 2.2.10 Value Engineering 2.2.10.a General 2.2.10.b Definitions 2.2.10.c Sharing 2.2.10.d Noncompetitive Purchases 2.2.10.e Evaluation 2.2.10.f Withdrawal 2.2.10.g Acceptance 2.2.10.h Subcontracts 2.2.10.i Clause Section 3 Specifications and Statements of Work 2.3.1 Definitions 2.3.1.a Specifications 2.3.1.b Statements of Work 2.3.1.c Product Descriptions 2.3.2 Use 2.3.2.a Specifications 2.3.2.b Statements of Work 2.3.2.c Product Descriptions 2.3.3 Technical Data Packages 2.3.4 Component Parts 2.3.5 Construction Specifications Chapter 2 Procurement Planning Section 1 Policy 2.1.1 General 2.1.1.a Definition. Procurement planning is the process by which the efforts of the requirements and purchasing organizations are coordinated and integrated in a comprehensive plan to fulfill needs of the Postal Service in a timely manner and at a reasonable cost. 2.1.1.b Responsibilities 1. Requirements organization responsibilities include: (a) Determining the supply or service required; (b) Identifying potential sources; (c) Ensuring funds availability and authorization; (d) Preparing and providing adequate purchase descriptions; (e) Preparing the Postal Service price or cost estimate; (f) Defining the period of performance or delivery; (g) Establishing any contractor reporting requirements; (h) Assisting in the development of evaluation criteria, and (i) Participating in evaluation panels when requested; (j) Providing justification for noncompetitive purchases. 2. Purchasing organization responsibilities include: (a) Providing planning, advice and assistance; (b) Consulting with assigned counsel as needed; (c) Assisting the requirements organization in identifying new or competitive sources; (d) Maintaining source lists; (e) Preparing source selection plans; (f) Establishing evaluation panels as needed; (g) Determining appropriate contract type; and (h) Identifying suitable purchases for competition among minority-owned and woman-owned businesses. 2.1.1.c Benefits. Among the benefits of procurement planning are: 1. Allowing better workload planning; 2. Consolidating requirements for greater economy; 3. Providing lead time to select customer-responsive contract types or to develop innovative contracting methods; 4. Providing sufficient time to obtain required approvals before submission of requisitions; 5. Allowing for early identification and resolution of potential problems; 6. Ensuring the adequacy of specifications or statements of work; 7. Identifying sources to ensure adequate competition; 8. Providing lead time for approval of sources if competition will be limited to approved sources (see 3.1.6.b); 9. Preventing unrealistic delivery or performance schedules; and 10. Identifying necessary reviews and approvals. 2.1.2 Market Research 2.1.2.a Importance. Market research is central to any sound procurement plan. It should be addressed by both requisitioners and purchasers. Market research is performed to determine: 1. Which supplies or services are available to meet a requirement; 2. Which sources are available to furnish the supplies or perform the services; 3. How requirements can best be stated; and 4. Whether cost estimates are realistic. 2.1.2.b Methods. Market research methods may include: 1. Assessing the suitability and adaptability of commercially available products to Postal Service requirements; 2. Determining the status of applicable technology and the extent and success of its commercial application; 3. Conducting industry briefings or presolicitation conferences with potential contractors to discuss requirements and to obtain recommendations; 4. Publicizing new specifications and, when appropriate, issuing solicitations for informational or planning purposes (see A.1.3) far enough in advance to permit consideration of industry comments; 5. Checking with potential sources that did not respond to solicitations to determine their rationale for not submitting a proposal; 6. Attending industry and scientific conferences, and acquiring literature about commercial products, industry trends, product availability, reliability, and prices; 7. Testing and evaluating commercial products in a Postal Service operating environment to develop reliable performance data, determine any necessary modifications, and develop operational cost information; 8. Analyzing the purchase history of requirements to determine the level of competition, prices, and performance results; or 9. Publishing sources-sought notices in the Commerce Business Daily and other appropriate publications, especially for research and development projects (see 8.4.3). 2.1.3 Advance Planning 2.1.3.a Normally, requisitioners should plan their purchasing requirements on a fiscal year basis as part of their budget development process. This planning includes the development of annual procurement summary plans and individual procurement plans, as required. 2.1.3.b Procurement planning involves all the individuals responsible for significant aspects of the procurement, such as purchasing, budget, legal, and technical personnel. When developing procurement plans, requisitioners should involve purchasing personnel as early as possible. For procurements estimated over $5,000,000, advance planning should begin early in the concept development phase. Procurement plans should be reviewed periodically and revised when appropriate. 2.1.4 Annual Procurement Summary Plans 2.1.4.a Requisitioners develop annual procurement plans when they plan their organization's budget. The plans must briefly describe purchasing requirements estimated to cost over $100,000, and they should be given to the purchasing organization by the end of the third quarter preceding the fiscal year covered by the plan. These plans are used by the purchasing organization to forecast workload. 2.1.4.b Annual procurement summary plans should include: 1. Date requirement is needed, and if possible, when the requirement can be expected in the purchasing office; 2. Description of the requirement. 2.1.5 Individual Procurement Plans 2.1.5.a Except for unanticipated requirements, the requirements organization, with assistance from the purchasing organization, must develop an individual procurement plan for each requirement estimated over $250,000. The plan should be submitted to the purchasing organization with the requisition. 2.1.5.b Individual procurement plans must include: 1. The rationale for the requirement; 2. The statement of work which may include specifications or product description (see 2.3.1); 3. The purchase history, including previous contract numbers; 4. Pertinent considerations such as requirements for compatibility with other equipment; cost, schedule, or performance constraints; or environmental issues; 5. The cost estimate and availability of funds; 6. Suitability of purchases for using simplified procedures (see 4.2.1.b.2); 7. The estimated lifecycle cost (total cost of purchasing, operating, supporting, and - if applicable - disposal of the item); 8. Delivery or performance schedule requirements to include F.O.B destination/origin consideration (see 2.2.5); 9. Any potential risks (such as technical, cost and schedule), and any plans to reduce these risks, including contingency plans and alternatives, and bonds and performance guarantees; 10. Potential sources (see chapter 3); 11. Justification and approval for noncompetitive purchase (see 4.3.2); 12. Suggested evaluation factors and their order of importance (see 2.1.7.c); 13. Quality assurance and control requirements, including warranties (see 2.2); 14. Test and acceptance procedures and criteria; 15. Contractor reporting requirements; 16. Requirements for contractor data and data rights, their estimated cost, and the use to be made of the data (see chapter 9); 17. Potential for alternate agreements on intellectual property (see 9.2.1.c); 18. Postal Service property or facilities to be furnished to the contractor; and 19. Possible conflicts of interest (see 1.7.6). 2.1.5.c If any significant element is missing from the procurement plan, a delay in implementation of the associated requisition may result. 2.1.6 Implementation Plans The contracting officer will use the information provided in the individual procurement plan to develop an implementation plan. Except for purchases to be made using simplified procedures (see 4.2), the contracting officer must furnish an implementation plan to the requirements organization within 15 days after receiving a requisition. The implementation plan should cover all matters leading to contract award, including milestone dates for publicizing the requirement, issuance of a solicitation, receipt of proposals, evaluation, negotiations, and reviews and approvals. The contracting officer must inform the requirements organization when significant changes to the implementation plan occur. 2.1.7 Source Selection Plans 2.1.7.a General 1. The contracting officer must develop a source selection plan for each procurement subject to competitive procedures (see 4.1) whenever price and price-related factors will not be the sole basis for proposal evaluation and contractor selection. 2. The source selection plan is developed with the assistance of the evaluation panel, requirements organization, and other advisors as needed. The plan must focus on obtaining the best value for the Postal Service. It must outline the objective of the procurement, and must address operational requirements, the potential cost, and any special requirements for quality and reliability. The plan must also contain the evaluation factors, their order of importance, and the evaluation method and procedures that will be used. Factors must be tailored to the specific needs of each procurement, and must address all areas that will be considered in determining the best value. 2.1.7.b Evaluation Panels 1. For each procurement requiring a source selection plan, the contracting officer must establish an evaluation panel. Its size and membership depends upon the scope and complexity of the purchase. When necessary, persons from outside the Postal Service may be named to the evaluation panel or as advisors to the panel. Caution must be exercised when appointing persons outside the Postal Service to evaluation panels in order to prevent conflicts of interest. 2. The evaluation panel must efficiently and impartially evaluate the proposals received, in accordance with the source selection plan. 3. The evaluation panel's effort may be limited to review of proposals, with cost or price evaluated separately, or subpanels may be established for separate evaluation of the proposal and proposed price. 4. The evaluation panel must present its findings to the contracting officer in a written report containing narrative statements identifying the major strengths and weaknesses of the various proposals (see 4.1.5.b). This report will be used by the contracting officer to hold discussions, to select the contractor and to conduct any final negotiations. 5. In addition to evaluating proposals, the panel may be called upon by the contracting officer to assist in developing a source selection plan. 2.1.7.c Evaluation Factors 1. Sound evaluation factors and their proper weighting are essential to effective proposal evaluation. They should be established thoughtfully and in accordance with the objectives of the purchase. Use of too many factors should be avoided, as it can lead to an unintended leveling of the evaluation scores. This can occur when high scores in a less significant factor offset low scores in more important factors. Examples of factors that may apply in various situations are: (a) Understanding of the requirement; (b) Management plan; (c) Commitment to quality; (d) Key personnel (qualifications and experience); (e) Resources; (f) Experience; (g) Past performance; and (h) Excellence of design. 2. Subfactors may be established under any evaluation factor, for example, under "management plan," there could be subfactors for "organization" and "operational concepts." 3. Evaluation factors may cover areas which are also considered in determining an offeror's responsibility, such as experience, when the needs of the procurement warrant their comparative evaluation. When there is such an overlap, the evaluation of proposals in accordance with chapter 4 must be kept separate from the determination of contractor responsibility in accordance with 3.3. 4. Cost or price related factors must be treated separately and apart from the other evaluation factors, and they may not be weighted. Their use must be placed in proper perspective in the solicitation. They must be thoroughly examined and analyzed, particularly in cost-reimbursement contracting. At the same time, they can and should be used to assist in the evaluation of the weighted factors; for example, the makeup of a cost proposal can give added insight into an "understanding of the requirement" factor, by showing the numbers and caliber of people to be assigned to the various aspects of the proposed contract work. 5. Many forms of scoring systems are suitable for evaluation purposes, from adjectival ratings to various forms of numerical scoring. Depending on the specific procurement, one form of system may be preferable to another. However, the scoring system used should be both simple and practical. 6. Quality as an evaluation factor is appropriate for a best value analysis. Factors such as past performance, on-time deliveries, product enhancements, engineering savings, etc. are examples of quality considerations. 7. So that offerors may prepare proposals responsive to Postal Service needs, solicitations must indicate the relative importance of the evaluation factors and their overall relation to price. All evaluation factors must be clearly stated and in enough detail to provide offerors with a reasonable opportunity to understand the evaluation method. When there are known sources capable of meeting the Postal Service's requirements with products of sufficient quality, price will normally be the determining factor. When the requirement is such that factors other than price must be evaluated, these factors should be given importance corresponding to their value to the Postal Service. For example, when factors must be established to ensure technical acceptability, but technical superiority at additional cost would be of no benefit, the solicitation should provide for selection based on price from those proposals evaluated as technically acceptable. 2.1.7.d Decisional Logic 1. Use of a sound decisional logic helps ensure that the supplier offering the best value to the Postal Service is awarded the contract. In establishing this logic, the relative importance of the evaluation factors and their interrelationships in various combinations must be determined. 2. When evaluation factors other than price are used, the decisional logic must require that price differences be compared with the value of other differences to determine which proposal offers the best value to the Postal Service. Section 2 Planning Considerations 2.2.1 Quality Requirements 2.2.1.a General 1. The contracting officer must include the appropriate quality requirements in all solicitations and contracts. The type and extent of contract quality requirements needed depend on the particular purchase, and may range from inspection at time of acceptance to a requirement for the contractor's implementation of a comprehensive program for controlling quality. 2. Solicitations and contracts may provide for alternate inspection methods to promote competition and lower costs. The solicitation may also permit contractor-recommended alternatives. 3. Although contractors are normally responsible for performing inspection before delivering supplies, some contracts should provide for specialized inspections performed by the Postal Service, or by a third party on its behalf, such as when: (a) Tests require use of specialized test equipment or facilities not ordinarily available in suppliers' plants or commercial laboratories (for instance, mailhandling simulations and unusual environmental tests); or (b) Postal Service testing is required for first article approval (see 2.2. 2). 2.2.1.b Types of Quality Assurance Requirements. Quality assurance requirements fall into three general categories: 1. Postal Service Reliance on Inspection by Contractor (a) The Postal Service usually relies on the contractor to accomplish all inspection and testing needed to ensure that supplies or services purchased using simplified procedures (see 4.2) conform to contract quality requirements before they are delivered. (b) The Postal Service does not rely on inspection by the contractor if the contracting officer determines that the Postal Service needs to test the supplies or services before delivery, or to decide whether the contractor's internal work processes are adequate. In making these determinations, the contracting officer should consider: (1) The nature of the supplies and services being purchased and their intended use; (2) The potential losses in the event of defects; (3) The likelihood of uncontested replacement or correction of defective work; and (4) The cost of detailed inspection. 2. Standard Inspection Requirements. Clause 2-1, Inspection-Fixed-Price, or Clause 2-2, Inspection-Non-Fixed-Price, must be included in all contracts except those awarded using simplified procedures. These clauses: 3. Require the contractor to provide and maintain an inspection system that is acceptable to the Postal Service; (a) Give the Postal Service the right to make inspections and tests while work is in process; and (b) Require the contractor to keep and make available to the Postal Service complete records of its inspections. 4. Higher-Level Quality Requirements. If it is in the Postal Service's interest to require that higher-level quality requirements be maintained, the solicitation and contract must include Clause 2-3, Quality Assurance. This clause requires the contractor to maintain an inspection system in accordance with specification MIL-I-45208, Inspection System Requirements. Use of this clause is appropriate in solicitations and contracts for complex and critical items or when the technical requirements of the contract are such as to require: (a) Control of such things as work operations, in-process controls, and inspection; or (b) Attention to such factors as organization, planning, work instructions, and documentation control. 2.2.1.c Quality Assurance at Origin. Solicitations and contracts must require that quality assurance, including inspection, be performed at origin (supplier's site) if: 1. Performance at any other place would require uneconomical disassembly or destructive testing; 2. Considerable loss would result from the manufacture and shipment of unacceptable supplies, or from a delay in making necessary corrections; 3. Special required instruments, gauges, or facilities are available only at origin; 4. Performance at any other place would destroy or require the replacement of costly packing and packaging; 5. A higher-level contract quality requirement is included in the contract; 6. Postal inspection during contract performance is essential; or 7. It is determined to be in the Postal Service's interest. 2.2.1.d Quality Assurance at Destination. Quality assurance performed at destination is normally limited to inspection of the supplies or services. Inspection should be performed at destination if: 1. Supplies are purchased off-the-shelf and require no technical inspection; 2. Necessary testing equipment is located only at destination; 3. Products are purchased for authorized resale; 4. The contract is for services performed at destination; or 5. It is determined to be in the Postal Service's interest. 2.2.1.e Simplified Purchasing 1. Normally the procedures in 2.2.1.b.1(a) are followed, however, there may be special situations that require detailed quality assurance and the use of the standard inspection requirement, or where the higher-level quality requirement may be appropriate. 2. Detailed quality requirements should be limited to those characteristics that are special or likely to cause harm to personnel or property. When repetitive purchases of the same item are made from the same manufacturer with a history of defect-free work, inspection may be reduced to a periodic check of occasional purchases. 2.2.2 First Article Approval 2.2.2.a Definitions 1. A first article may include: (a) preproduction models; (b) initial production samples; (c) test samples; (d) first lots; (e) pilot models; and (f) pilot lots. 2. Approval means testing and evaluating the first article for conformance with specified contract requirements before or in the initial stage of production under a contract. 2.2.2.b General 1. Requiring first article approval ensures that the contractor furnishes a product satisfactory for its intended use, minimizing the risks for both the contractor and the Postal Service. In determining whether first article approval will be required, the contracting officer should consider the increased costs and time of delivery as a result of the tests, the risk to the Postal Service of foregoing the tests, and the availability to the Postal Service of other, less costly methods of achieving the desired quality. A first article approval requirement is particularly appropriate when an approved first article will serve as a manufacturing standard, or when a complex product: (a) Has not been previously furnished by the contractor to the Postal Service; (b) Has been previously furnished by the contractor to the Postal Service, but subsequent changes in processes or specifications have been made, or production has been discontinued for a long period of time; or (c) Is described by a performance specification. 2. Normally, first article approval should not be required in contracts for: 3. Research or development; (a) Prequalified products; (b) Standard commercial products; or (c) Products covered by complete and detailed technical specifications, unless the requirements are unique or exacting. 4. Before first article approval, purchase of materials or components and commencement of production is normally the contractor's sole risk. Therefore, the delivery schedule must allow enough time for purchase of materials and components and for production after first article approval. However, when a production delivery schedule does not allow for enough time, the contracting officer may authorize the contractor to purchase specific materials or components before first article approval to the extent essential to meet the schedule. 2.2.2.c Waiver. First article approval may be waived for fixed-price contracts if the required supplies are identical or similar to those previously provided by a supplier. When the contracting officer considers waiving first article approval, to ensure proper evaluation of the proposals, the solicitation may permit submission of alternate proposals - one with and one without first article testing. The delivery schedule for the production quantity may be the same whether or not approval is waived, or the solicitation may provide for a shorter delivery schedule when approval is waived and earlier delivery is in the best interest of the Postal Service. 2.2.2.d Solicitation and Contract Requirements 1. When the contractor is responsible for first article approval testing, the solicitation and resulting contract must contain or reference: (a) The performance factors or other characteristics that the first article must meet; (b) The detailed technical requirements for first article approval tests, including the necessary data to be submitted to the Postal Service in the first article approval test report; and (c) Clause 2-4, First Article Approval-Contractor Testing. 2. When the Postal Service is responsible for first article approval testing, the solicitation and resulting contract must contain or reference: 3. The performance factors or other characteristics that the first article must meet; (a) The test(s) to which the first article will be subjected; and (b) Clause 2-5, First Article Approval-Postal Service Testing. 2.2.3 Acceptance 2.2.3.a Place of Acceptance. The solicitation and contract must specify the place of acceptance. Contracts providing for quality assurance at origin ordinarily provide for acceptance at origin. Those providing for quality assurance at destination ordinarily provide for acceptance at destination. 2.2.3.b Delayed Acceptance. Contracting officers should consider using a special testing requirement after delivery and before acceptance (such as a preacceptance test) for purchases of complex equipment (such as computer, telecommunications and mail-handling equipment and building systems). Such a testing requirement should be designed to thoroughly test the equipment, and should be described in the solicitation. When a preacceptance test program is specified, the contract must include Clause 2-6, Delayed Acceptance. 2.2.4 Warranties 2.2.4.a A warranty clause should be used when it is in the Postal Service's interest to have the right to assert claims regarding defective supplies or services after acceptance. A warranty clause gives the Postal Service additional time following acceptance to require correction of deficiencies or defects, reperformance, an equitable adjustment in the contract price, or other remedies. Warranty coverage may begin with delivery or at the occurrence of a specified event. This coverage may continue for a given number of days or months or until the occurrence of another specified event. The value of a warranty clause depends upon the particular supplies or services procured. The clause, its use, terms, and conditions are influenced by many factors and should be tailored to fit the individual purchase or a specific class of purchase. It is important to remember that warranty clauses usually increase the purchase price. This potential increase in cost should be carefully weighed before using a warranty clause (see 2.2.4.c). 2.2.4.b A warranty clause does not limit any rights of the Postal Service under Clause 2-1, Inspection-Fixed Price, or Clause 2-2, Inspection-Nonfixed-Price. Because Clause 2-2 allows the Postal Service to have deficiencies corrected during and after contract performance, warranty clauses other than those related to computer software, technical data, and copyright (see chapter 9) should not be included in nonfixed-price contracts. 2.2.4.c The contracting officer decides whether to use a warranty clause or to include a warranty provision. The clause or provision may be used either for individual purchases or for classes of purchases. Before making this decision the contracting officer considers the following: 1. Cost of the warranty (including the effect of a warranty on price competition and the administrative cost and difficulty of enforcing the warranty); 2. Criticality of meeting specifications; 3. Potential damage to the Postal Service in the event of defective performance; 4. Cost of correction or replacement, either by the contractor or another source, in the absence of a warranty; 5. Ability to take advantage of the warranty, considering shipping time, distance of the user from the source, and other factors; 6. The effect of the warranty as a deterrent against deficiencies; 7. The extent to which acceptance is to be based upon contractor inspection or quality control; 8. Whether the inspection and acceptance system provides adequate protection against deficiencies; 9. Reliance on brand-name integrity; 10. Whether a warranty is regularly given for a commercial component of a more complex end item; 11. Whether the item or service is intended for the safety or protection of employees; 12. The stage of development of the item and the state of the art; and 13. Customary trade practices. 2.2.4.d Offerors normally include a price estimate for warranty work in their proposals. Because the cost charged for warranty work might not equal the benefits obtained, contracting officers should carefully evaluate the cost of a warranty by: 1. Requiring alternate price proposals with and without a warranty; 2. Comparing the cost of a separate service contract that provides similar protection against defects; and 3. Requiring separate pricing for warranties, when feasible. 2.2.4.e When a warranty clause is used, the contracting officer should consider requiring the warranted items to be marked or to furnish a warranty notice with the items. This informs those who store, stock, and use the items that they are warranted and encourages them to advise the contracting officer of any defects. The marking or notice need not state the complete warranty; a short statement that a warranty exists, its duration, and whom to notify if an item is found to be defective is usually sufficient. In deciding whether to require marking or a notice, the contracting officer should consider: 1. The feasibility of marking the items; and 2. The added cost of the marking or the notice in relation to probable benefit in the enforcement of the warranty. 2.2.4.f The terms of a warranty clause can vary with the particular item or service being purchased, but the following factors must be considered: 1. The Schedule must state the warranty's duration. It may provide that the contractor will be liable for defects or nonconformance with contract requirements (a) existing at the time of delivery or, (b) that develop before the expiration of a specified period or before the occurrence of a specified event. 2. The schedule must state the specified period during which a notice of any defects or nonconformance may be given to the contractor. Normally, the Postal Service will be protected if this "warranty period" starts at the time of delivery or upon acceptance of the service. However, in some cases, it may be necessary to start the warranty period at a later date. For example, if conformance of supplies cannot be determined until they are used, the warranty period should not begin until the items are actually used; or if supplies are purchased in lots under sampling procedures and delivered in increments for storage, the warranty period may begin when the supplies are actually used or from the date of the last delivery. 3. If the Postal Service specifies the item's design and precise measurements, tolerances, materials, tests, or inspection requirements, the contractor's liability for defects or nonconformance is usually limited to those in existence at the time of delivery. 4. If a contract contains performance specifications, and design is of minor importance, a contractor's liability may extend to defects that arise after delivery of the supplies or acceptance of the services. When appropriate, the warranty may be limited to defects or nonconformance existing at the time of delivery or acceptance. 5. The right to return nonconforming supplies for correction or replacement normally satisfies the Postal Service need under a warranty. However, when the supplies are of such a nature (for example, perishable items) that correction or replacement is not possible, the clause should provide that: (a) The contracting officer may return the supplies to the contractor, dispose of them in a reasonable manner, or replace them with similar supplies; and (b) The contractor is liable for any costs incurred by the Postal Service. 6. When it is foreseen that, due to the nature of its use, or the cost of return, it would be impracticable to return an article for correction or replacement, the clause should provide that the Postal Service, at the contractor's expense, may correct or require the contractor to correct the article in its place. 7. If a warranty for an entire item is not necessary, a warranty may be required for a particular aspect of the item that may need special protection (for example, components, accessories, parts, or packaging). 2.2.4.g For purchases of commercial supplies or services, or construction, the solicitation may include a warranty clause that is standard or customary in the trade, or one that is substantially similar to and not in excess of a standard or customary trade warranty, or may accept the contractor's standard warranty. If offerors are permitted to quote their own standard warranty, the solicitation may provide that the warranty's terms and conditions will be considered as an evaluation factor. When commercial supplies or services are purchased for a special Postal Service use (a use to which they would not normally be put), the contracting officer should consider them not to be commercial, but obtained according to performance specifications. The use of an item for a purpose other than the manufacturer had intended will normally void a standard warranty. 2.2.4.h Solicitations and contracts must include the following provisions and clauses: 1. When commercial supplies or services are being purchased and warranties are customary in the trade, the solicitation must include Provision 2-1, Warranty Information, and the contract must include Clause 2-7, Incorporation of Warranty. 2. When a warranty is to be required for noncommercial supplies or services, the contract must include Clause 2-8, Warranty, modified as needed (see, for instance, subparagraph f.6 above). 2.2.5 Delivery or Performance Schedule 2.2.5.a A realistic delivery or performance schedule is an essential element of a contract and must be clearly stated in the solicitation. 2.2.5.b If the Postal Service will suffer damage from late delivery or performance, liquidated damages may be included in the solicitation or contract (see 2.2.6). 2.2.5.c When the delivery or performance schedule is in terms of specific calendar dates, the solicitation must state that the schedule is based upon the contractor's receipt of notice of award or notice to proceed by a specific date. It must further state that the schedule will be extended by the number of days after that date that the contractor receives notice of award or notice to proceed. 2.2.5.d Include Provision 2-2, Time of Delivery, in all solicitations when: 1. Delivery is required by a certain date; 2. Delivery is required within a specified number of days after the date of award. 2.2.5.e Modify Provision 2-2 in solicitations when: 3. Delivery is desired, but not required, by a certain time; or 4. Delivery is desired earlier than the required delivery date. 2.2.5.f Delivery instructions will specify an f.o.b. (free on board) point, as follows: 1. F.o.b. destination means delivery, free of expense to the Postal Service, to a destination specified in the purchase document. Title to the goods passes to the Postal Service when they arrive at the contract's stated destination. The contractor pays the carrier and assumes the risk for loss or damage until delivery to the specified destination. 2. F.o.b. origin means that the Postal Service makes the arrangements for the pick-up, transportation and delivery to the required destination. Title passes to the Postal Service when delivery is made to the carrier. The contractor's risk is limited to loss or damage caused by improper marking or packing of the goods. The Postal Service normally uses Government Bills of Lading (GBL) to obtain and pay for transportation and related services from commercial carriers. 2.2.5.g The f.o.b. point is determined on the basis of overall cost. The contracting officer should consider that lower freight rates may be available to the Postal Service, and that Postal Service-controlled transportation may be available. Assistance in determining transportation costs is available by contacting Materials Management, Purchasing and Materials, Postal Service Headquarters, Washington, D.C. 2.2.5.h When acceptance of goods is at destination, the purchase document delivery terms must specify f.o.b. destination. 2.2.5.i Unless the delivery will be made by the contractor's own personnel/equipment, it is the policy of the Postal Service to require the delivery of contracted goods to postal facilities by the United States Postal Service, when such goods meet prescribed size, weight and physical properties (mailable), as indicated in the Domestic Mail Manual. A waiver of this requirement may be granted by the contracting officer. The waiver must clearly document why using other delivery services is considered to be in the best interest of the Postal Service. 2.2.5.j Large mailings that exceed 500 pieces must be coordinated with the area distribution network office. This must be done by the contracting officer or contracting officer's representative at least 30 days prior to the date of shipment. This coordination will ensure that potential problems will be minimized during receipt and processing of large mailings. 2.2.5.k Except for purchases made using simplified procedures, contracts specifying an f.o.b. point must include Clause 2-9, Definition of Delivery Terms and Contractor's Responsibilities. 2.2.6 Liquidated Damages 2.2.6.a Liquidated damages are a contractual remedy the Postal Service may use when there are delays in delivery or performance. They are estimates based on the anticipated amount of daily Postal Service losses directly resulting from delay in delivery or performance. It is important to remember that liquidated damages usually increase the contract price; therefore, their use should be carefully considered. 2.2.6.b Liquidated damages must be included in all construction contracts over $100,000. At the contracting officer's discretion, they may be included in new lease construction contracts, or in contracts in which the lessor performs construction under the terms of a lease. 2.2.6.c Liquidated damages should be included in other contracts when: 1. Due to a delay in delivery or performance, the Postal Service may suffer disruption of mail service or substantial financial loss; 2. Delivery or performance is so critical that the probable increase in contract price is warranted; and 3. The amount of actual damages would be difficult or impossible to prove. 2.2.6.d Liquidated damages may not be used as a penalty for failure to deliver or perform on time. 2.2.6.e The rate of liquidated damages must represent the best estimate of the daily damages that will result from delay in delivery or performance. A rate lower than the actual estimated rate may be used to avoid excessive price contingencies in proposals. The contracting officer must determine and document in each case that the rate is reasonable and is not punitive. The rate should, as a minimum, cover the estimated cost of inspection and superintendence for each day of delay. Whenever the Postal Service will suffer other specific damages due to a contractor delay, the rate should also include an amount for these damages. Examples of specific damages are: 1. The cost of substitute facilities; 2. The cost of lost workhours/productivity; or 3. The rental of buildings or equipment. 2.2.6.f If appropriate to reflect the probable damages, considering that the Postal Service may terminate for default or take other appropriate action, the assessment of liquidated damages may be in two or more increments with a declining rate as the delay continues. To prevent an unreasonable assessment of liquidated damages, the contract may also include an overall maximum dollar amount, a period of time during which liquidated damages may be assessed, or both. 2.2.6.g Whenever liquidated damages are to be assessed for contractor delay, the contract must include Clause 2-10, Liquidated Damages, modified as necessary. 2.2.7 Postal Service Property 2.2.7.a Policy. The Postal Service may provide materials or other property to contractors when doing so will result in significant economies, standardization, or expedited production, or when it is otherwise in the Postal Service's interest. 2.2.7.b Solicitations. Postal Service furnished property must be specified in the solicitation in sufficient detail (including requisitioning procedures) to enable offerors to evaluate it accurately. 2.2.7.c Special Tooling and Test Equipment 1. The contracting officer may provide Postal Service special tooling and test equipment to contractors for use in contract work, if doing so will not disrupt programs of equal or higher priority, or is otherwise in the Postal Service's interest. 2. Contracts authorizing the furnishing of special tooling or test equipment must contain: (a) A complete description of the tooling or equipment; (b) The terms and conditions of shipment; and (c) The terms covering the cost of adaptation and installation. 3. In competitive procurements when Postal Service special tooling or test equipment is not available, contractors ordinarily provide and retain title to special tooling and test equipment required for contract performance. Competition generally results in fair charges for amortizing the costs of such tooling and equipment. In noncompetitive situations, the Postal Service should obtain the special tooling or test equipment, or the rights to it, because it may facilitate competition in future procurements. 4. In deciding whether to purchase special tooling or test equipment, or the rights to it, when the tooling or equipment is provided by the contractor, the contracting officer must consider: (a) The Postal Service's future needs for the items (including in-house use); (b) The estimated residual value of the items; (c) The administrative burden incident to reporting, record-keeping, preparation, handling, transportation, and storage; (d) The feasibility and probable cost of making the items available to other offerors in future procurements; (e) The amount, if any, offered by the contractor for the right to keep the items; and (f) The effect on future competition and contract pricing; 5. When the Postal Service obtains identifiable special tooling or test equipment under a contract, the solicitation must specify each item or category as a contract line item. A category of items costing less than $1,000 may be grouped as a single contract line item. 6. When there is a possibility of future procurements for the same item and the contracting officer has determined not to obtain rights or title, the solicitation must indicate current estimates of such future requirements, in the interest of reducing amortization charges. Offerors must be cautioned that these are only estimates and not a guarantee to purchase future quantities. 2.2.7.d Clauses 1. When the Postal Service will furnish property for use under a contract, the contract must include one of the following clauses: (a) Clause 2-11, Postal Service Property-Fixed-Price, if a fixed-price contract will be awarded and the total value of Postal Service property is $50, 000 or more. If the contract provides for reimbursement of costs for certain materials, use the clause with its alternate paragraph c. (b) Clause 2-12, Postal Service Property-Short Form, if a fixed-price, time-and-materials, or labor-hour contract will be awarded and the total value of Postal Service property is less than $50,000. (c) Clause 2-13, Postal Service Property-Non-Fixed-Price, if a cost-reimbursement, time-and-materials, or labor-hour contract will be awarded with Postal Service property valued at $50,000 or more. If the contract is for basic or applied research at a nonprofit institution of higher education or nonprofit organization whose primary purpose is to conduct scientific research, use the clause with its alternate paragraph c. 2. When Postal Service property will be furnished "as is," the contract must also include Clause 2-14, Postal Service Property Furnished "As Is". 3. Clause 2-15, Special Tooling, or Clause 2-16, Special Test Equipment, must be included in solicitations for fixed-price contracts when the rights or title to special tooling or test equipment will be required but cannot be identified as a specific contract line item. Rights or title to special tooling or test equipment in a cost-reimbursement contract is obtained using Clause 2-13, Postal Service Property-Non-Fixed-Price. 4. When a contract is for repair of Postal Service property, and the property is valued under $10,000 no Postal Service property clause is required. 2.2.8 Options 2.2.8.a Option clauses may be included in contracts when increased requirements during the contract performance period are foreseeable, or when continuing performance past the original performance period is in the best interest of the Postal Service. Option clauses may require that additional quantities be priced the same as the basic quantities or at a different price. The clauses may also allow for unpriced options at the time of award. The price for these options are subject to negotiation at the time the option is exercised. Priced options may require offerors to guarantee prices for definite periods of time, with no guarantee that the option will be exercised. Therefore, their improper use may result in unfair prices to the Postal Service or the contractor. When additional requirements are foreseeable and subsequent competition would be impracticable because of such factors as production lead time and delivery requirements, the use of priced options may be preferable to later negotiating a price with the contractor at a time when it is the only practicable source. 2.2.8.b Option provisions and clauses may not be included in contracts when: 1. The contractor would be required to incur undue risks (as when the price or availability of necessary materials or labor is not reasonably foreseeable); 2. An indefinite quantity or requirements contract is appropriate, except that options for continuing performance may be used; 3. Market prices for the supplies or services involved are likely to change substantially; or 4. The option quantities represent known firm requirements for which funds have been budgeted and approved, unless (a) the basic quantity is a learning or testing quantity and there is some uncertainty as to contractor or equipment performance, and (b) realistic competition for the option quantity is impracticable once the initial contract is awarded. 2.2.8.c When options are evaluated for purposes of contract award (see Provision 2-3, Evaluation of Options), the total of the basic and option periods may not exceed five years in the case of services, and the total of the basic and option quantities may not exceed the requirements for five years in the case of supplies. 2.2.8.d The contract must limit the additional quantities of supplies or services that may be purchased or the duration of the period for which performance of the contract may be extended under the option, and must fix the period within which the option may be exercised. This period should be set to give the contractor adequate notice for performance under the option. In fixing the period, consideration should be given to the necessary lead time to ensure continuous production and the time required for additional funding and other approvals. The period for exercising the option should always be kept to a minimum. When a solicitation contains an option for additional quantities of supplies at prices no higher than those for the initial quantities, care should be taken to ensure that the option quantities are reasonable and do not cause the contractor financial hardship. The quantities or the period under option and the period during which the option may be exercised must be justified and documented in the contract file by the contracting officer. 2.2.8.e The solicitation may allow varying prices to be offered for the option quantities depending on the quantities actually ordered and the date(s) when ordered. If so, the solicitation must specify the price at which the options will be evaluated (for example, highest option price offered or option price for specified quantities or dates). 2.2.8.f An option for increased quantities may be expressed as (1) a percentage of specific contract line items; (2) a number of additional units of specific contract line items; or (3) additional numbered line items (identified as the option quantity) with the same nomenclature as the items initially included in the contract. An option for increased services (including construction) may similarly be expressed in terms of (1) percentages; (2) increases in specific line items; or (3) additional numbered line items expressed in the units of work initially used in the contract (for example labor hours, square feet, or pounds or tons handled). When exercise of the option would result in an extension of duration in the contract, the option may be expressed in terms of an extended completion date or an additional time period, such as days, weeks or months. 2.2.8.g When an option will be used, the solicitation must include Provision 2-3, Evaluation of Options, and the contract must include one of the following clauses, as applicable: 1. Clause 2-17, Option for Increased Quantity, must be used when the contract expresses the option quantity as a percentage of the basic contract quantity or as an additional quantity of a specific line item. 2. Clause 2-18, Option Item, must be used when the contract identifies the option quantity as a separately priced line item having the same nomenclature as a corresponding basic contract line item. 3. Clause 2-19, Option to Extend Services, must be used when it is intended to extend the services to be performed. 4. Clause 2-20, Option to Extend the Term of the Contract, must be used to provide for continuing performance of the contract beyond its original term. 2.2.8.h For information concerning the exercise of options, see 6.5.1.f. 2.2.9 Multiyear Procurement 2.2.9.a For procurements over $50,000, the contracting officer should analyze the marketplace and the Postal Service's recurring needs to determine whether benefits can be obtained from purchasing quantities greater than one year's needs. Savings may be obtained if the contractor can reduce overall prices by spreading start-up costs over the multiyear quantity or making similar commitments with major subcontractors. There is no limit on the duration of a multiyear contract, except that it must reflect reasonably foreseeable requirements. 2.2.9.b When the contracting officer determines multiyear savings are possible and recurring needs reasonably certain, the solicitation should include both a single and a multiyear quantity to see which price is most advantageous to the Postal Service. However, award must be made to the offeror proposing the best value to the Postal Service. 2.2.9.c Types of multiyear contracts are described in 5.1.10. 2.2.10 Value Engineering 2.2.10.a General. Value engineering is a method by which contractors are encouraged to independently develop and propose changes to improve either a contract end item or the way it is produced or performed. The change must reduce contract cost and may not impair the essential characteristics or functions of the service or product. Resultant savings are shared by both parties, and the contractor is paid allowable development and implementation costs. 2.2.10.b Definitions 1. Value Engineering Change Proposal (VECP). A proposal that: (a) Requires a change to the instant contract; (b) Results in savings to the instant contract; and (c) Does not involve a change in: (1) Deliverable end items only; (2) Test quantities due solely to the results of previous testing under the instant contract; or (3) Contract type only. 2. Instant Contract. The contract under which a VECP is submitted. It does not include additional contract quantities. 3. Additional Contract Quantity. An increase in quantity after acceptance of VECP due to contract modification, exercise of an option, or additional orders (except orders under indefinite-quantity contracts within the original maximum quantity limitations). 4. Postal Service Costs. Costs to the Postal Service resulting from developing and implementing a VECP, such as net increases in the cost of testing, operations, maintenance, logistics support, or property furnished. Normal administrative costs of processing the VECP are excluded. 5. Instant Contract Savings. The estimated cost of performing the instant contract without implementing a VECP minus the sum of (a) the estimated cost of performance after implementing the VECP and (b) Postal Service costs. 6. Additional Contract Savings. The estimated cost of performance or delivering additional quantities without the implementation of a VECP minus the sum of (a) the estimated cost of performance after the VECP is implemented and (b) Postal Service cost. 7. Contractor's Development and Implementation Costs. Contractor's cost in developing, testing, preparing, and submitting a VECP. Also included are the contractor's cost to make contractual changes resulting from the Postal Service acceptance of the VECP. 2.2.10.c Sharing. If a VECP is accepted, the contractor shares in the contract savings as follows: 1. Instant Contract Savings. The contractor and the Postal Service share equally in instant contract savings. Sharing is accomplished by a modification reducing the contract price by an amount equal to 50 percent of the instant contract savings minus the contractor's allowable VECP development and implementation costs. 2. Additional Contract Savings. Except for construction contracts, the contractor receives 25 percent of additional contract savings. Sharing is accomplished by negotiating a price for the additional contract quantity that reflects a reduction in price by 75 percent of additional contract savings. 3. Construction Contracts. Only instant contract savings are shared under construction contracts. Sharing is accomplished in accordance with subparagraph c.1 above. 2.2.10.d Noncompetitive Purchases 1. Subject to the requirements of Management Instruction AS-710-95-7, Noncompetitive Purchases, the contracting officer may negotiate a noncompetitive contract or contract modification for an additional quantity incorporating a VECP when: (a) An otherwise acceptable VECP is received too late during contract performance to provide a significant benefit to the Postal Service under the instant contract; (b) If additional quantities are required that are not provided for under the contract. 2. When a proposer who does not have a current contract submits an unsolicited proposal in the form of a VECP and it meets the requirements of Clause 2-22, Value Engineering Incentive, the contracting officer may negotiate a noncompetitive contract incorporating the VECP. 3. Sharing is accomplished in accordance with 2.2.10.c.2. 2.2.10.e Evaluation 1. The contracting officer must forward for evaluation any nonconstruction VECP to the requirements organization or other appropriate engineering source. Construction VECPs must be forwarded for evaluation to the resident engineer at the worksite, who may then have the evaluation performed by the architect-engineer. 2. The requirements organization or other appropriate engineering source or resident engineer must expedite the evaluation of the VECP and provide the contracting officer a written report including: (a) Recommendations as to whether the VECP should be accepted or rejected, in whole or in part; (b) A draft of any changes to be made in the specifications or statement of work; (c) A calculation of the estimated savings to the Postal Service from acceptance of the VECP; and (d) A calculation of the estimated costs to the Postal Service that will result from developing and implementing the VECP (see subparagraph b.3 above). 3. The requirements organization or other appropriate engineering source or resident engineer must advise the contracting officer if evaluation of the VECP will require more than 60 days. The contracting officer must notify the contractor of the expected decision date. 4. If a VECP is rejected, the contracting officer must notify the contractor and explain the reason for rejection. 2.2.10.f Withdrawal. The contractor may withdraw all or part of a VECP at any time before it is accepted by the Postal Service. 2.2.10.g Acceptance 1. Acceptance of all or part of a VECP and agreement on price reductions resulting from acceptance requires the agreement of both parties. See 4.4 concerning negotiation of price. Acceptance is accomplished by supplemental agreement to the contract. If agreement on price is reserved for a later supplemental agreement, and if such agreement cannot be reached, the disagreement must be treated as a dispute under Clause B-9, Claims and Disputes. 2. The contractor must perform in accordance with the existing contract until a VECP is accepted. 3. The contracting officer's decision to accept or reject all or part of a VECP is final and not subject to Clause B-9, or to litigation under the Contract Disputes Act of 1978 (41 U.S.C. 601-613). 2.2.10.h Subcontracts. If the contracting officer foresees a potential cost reduction through value engineering under subcontracts, additional paragraph j should be added to Clause 2-22. 2.2.10.i Clause. If there is a potential for cost reduction through value engineering, Clause 2-22 may be included in firm-fixed-price contracts of $100,000 or more, at any time during the term of the contract. However, the clause may not be used in: 1. Cost-reimbursement contracts (see 5.1.4); 2. Fixed-price incentive contracts (see 5.1.3.b); 3. Research and development contracts; 4. Contracts with nonprofit or educational organizations; 5. Contracts for professional or consultant services (see 8.2); 6. Contracts for product or component improvement; or 7. Contracts for standard or modified commercial products. Section 3 Specifications and Statements of Work 2.3.1 Definitions 2.3.1.a Specifications. Specifications describe the technical requirements of an end product. Specifications usually include qualitative and quantitative design and performance requirements, and the factors used to determine whether the contract requirements have been met. 2.3.1.b Statements of Work. Statements of Work (SOW) describe the work to be performed, rather than the end product. SOWs may contain specifications or other descriptions of requirements. SOWs are usually used in contracts for services or research and development. 2.3.1.c Product Descriptions. Product descriptions are usually described by a common generic description of the item. However, they are not as qualitative or quantitative as a specification, and usually describe the end product in terms of performance or standard commercial name (an example of a product description is a "copier"). 2.3.2 Use 2.3.2.a Specifications 1. Specifications are normally used when purchasing an end item rather than a service. Specifications must fully and completely state the Postal Service's needs, considering the nature of the commodities being purchased. 2. Specifications may be stated in terms of: (a) Function, so that a variety of commodities may be considered as qualified; (b) Performance, including the range of acceptable characteristics or the minimum acceptable standards; or (c) Design requirements, providing exact dimensions, materials or characteristics. 2.3.2.b Statements of Work 1. Statements of Work are normally used when purchasing a service rather than an end product. SOWs may include specifications or product descriptions. SOWs must describe the work as precisely as practicable and at a level of detail appropriate to ensure best value to the Postal Service. 2. After award SOWs are the standard for measuring performance, and are used by both parties to determine rights and obligations under the contract. 2.3.2.c Product Descriptions 1. Whenever standard or modified commercial products will meet Postal Service requirements, product descriptions must be used instead of specifications. 2. Product descriptions must include: (a) A common generic identification of the item; (b) Known acceptable brand-name products, identified by model or catalog number, and the commercial catalogs in which they appear; (c) The name and address of the manufacturer, or distributor of each brand-name product referenced; and (d) A description of any required modification. 3. If at least three acceptable brand names are specified, the solicitation may provide that only proposals for those products will be considered. 4. Except for construction specifications, if fewer than three acceptable brand-name products are specified, or if proposals for equivalent products other than those specified will be considered: (a) The product description must include a description of the item's essential characteristics, such as material, size or capacity, the equipment with which the items will be used, and any restrictive operating environmental conditions; (b) The brand names in the product description must be followed by the words "or equal;" (c) Space must be provided for offerors to identify the manufacturer's brand names and models or catalog numbers proposed (see A.2.3.b.8); (d) The solicitation must include Provision 2-4, Brand Name or Equal. 2.3.3 Technical Data Packages 2.3.3.a A Technical Data Package (TDP) is a complete set of documentation which may include a specification, engineering drawings, or associated lists required to build and provide support of an end item. Every TDP is under the control of a design-responsible organization (such as Engineering, Research and Development or the Mail Equipment Shops) which maintains the integrity of the end item design. 2.3.3.b When a purchase will be made using a TDP, the contracting officer must ensure that the most current version of the TDP is used. Any modifications to a TDP before or during solicitation or after contract award must, before implementation, be coordinated with the design-responsible organization as well as with the requirements activity. 2.3.3.c When a TDP will be purchased, the contracting officer must ensure that the design-responsible organization reviews all contractor submittals to ensure that the final product is in accordance with the Postal Service standards contained in the contract requirements. 2.3.4 Component Parts When component parts in a deliverable contract line item are described in the specifications by a brand or manufacturer's name, the contract must include Clause 2-21, Component Parts. 2.3.5 Construction Specifications The contractor may seek the contracting officer's approval after contract award to substitute equal products or processes for those specified by brand name (see Clause 11-5, Materials and Workmanship). Accordingly, the solicitation should identify any products or processes that may not be substituted after award. Chapter 3-Sources Section 1 Supplies and Services 3.1.1 Priority of Sources 3.1.1.a Existing assets 3.1.1.b Workshops for people who are blind or severely disabled 3.1.1.c Mandatory national and area contracts and ordering agreements 3.1.1.d Other Postal Service, government, and commercial sources (including educational and nonprofit institutions) 3.1.2 Existing Assets 3.1.3 Workshop for People who are Blind or Severely Disabled 3.1.3.a General 3.1.3.b Procurement Lists 3.1.3.c Ordering 3.1.3.d Exceptions 3.1.3.e Compliance with Orders 3.1.4 National and Area Contracts and Ordering Agreements 3.1.4.a Definitions 3.1.4.b General 3.1.4.c Systems Contracts 3.1.4.d Other Contracts 3.1.4.e Area Ordering Agreements 3.1.5 Other Government Sources 3.1.5.a Federal Prison Industries, Inc. (UNICOR 3.1.5.b General Services Administration (GSA) 3.1.5.c Defense Logistics Agency 3.1.5.d Defense Fuel Supply Center 3.1.5.e Veterans Administration 3.1.5.f Government Printing Office 3.1.6 Commercial Sources 3.1.6.a General 3.1.6.b Approved Sources 3.1.6.c Prequalified Contractors Section 2 Publicizing Purchase Actions 3.2.1 Policy 3.2.2 Methods of Publicizing 3.2.2.a Synopses of Solicitations 3.2.2.b Posting 3.2.2.c Announcements and Advertisements 3.2.2.d Synopses of Contract Awards Section 3 Contractor Qualifications 3.3.1 Responsible Prospective Contractors 3.3.1.a Policy 3.3.1.b General Standards 3.3.1.c Special Standards 3.3.1.d Subcontractor Responsibility 3.3.1.e Determining Responsibility and Nonresponsibility 3.3.1.f Disclosure of Information 3.3.2 Debarment, Suspension, and Ineligibility 3.3.2.a General 3.3.2.b Definitions 3.3.2.c Establishment and Maintenance of Lists 3.3.2.d Treatment of Contractors on Postal Service List 3.3.2.e Causes for Debarment 3.3.2.f Conditions for Debarment 3.3.2.g Period of Debarment 3.3.2.h Procedural Requirements for Debarment 3.3.2.i Causes for Suspension 3.3.2.j Conditions for Suspension 3.3.2.k Notice of Suspension 3.3.2.l Restrictions on Suspended Contractors 3.3.2.m Rules of Practice Chapter 3 Sources Section 1 Supplies and Services 3.1.1 Priority of Sources Supplies and services must be obtained from the sources described in this chapter in the following descending order of priority: 3.1.1.a Existing assets. 3.1.1.b Workshops for people who are blind or severely disabled. 3.1.1.c Mandatory national and area contracts and ordering agreements. 3.1.1.d Other Postal Service, government, and commercial sources (including educational and nonprofit institutions). 3.1.2 Existing Assets To the extent possible, supplies must be obtained from existing Postal Service assets. Procedures for identifying and obtaining Postal excess serviceable property, requisitioning supplies from inventory, requisitioning supplies from the material distribution centers and Mail Equipment Shops, and obtaining excess personal property from other government agencies are described in Handbook AS-701, Materiel Management. 3.1.3 Workshop for People who are Blind or Severely Disabled 3.1.3.a General. The Javits-Wagner-O'Day Act (41 U.S.C. 46-48), requires that federal government agencies, including the Postal Service, purchase certain supplies and services from qualified workshops employing people who are blind or severely disabled. The Committee for Purchase from People who are Blind or Severely Disabled determines what supplies and services are covered and their prices. 3.1.3.b Procurement Lists. Supplies and services provided by people who are blind or severely disabled are listed in the Committee's Procurement List. This is published annually in the Federal Register, and additions and deletions are published as they occur. It may be obtained by submitting GSA Form 457, FSS Publications Mailing List Application, to: GSA CENTRALIZED MAILING LISTS SERVICE 819 TAYLOR STREET PO BOX 17077 FORT WORTH TX 76102-0077 3.1.3.c Ordering 1. General. Except as provided in paragraph d below, the supplies and services must be ordered from the central nonprofit agency designated on the Procurement List, or from the workshops concerned (see subparagraph c.4 below). 2. Allocation. The ordering office must first submit a letter requesting an allocation (designation of a workshop to manufacture the supplies or perform the services). The allocation must be requested in time for the agency to reply, for the order to be placed, and for the workshop to produce the supplies or perform the services. The request for allocation must include the following: (a) Supplies. Name, stock number, specification, quantity, unit price, and place and time of delivery. Packing, packaging or marking instructions, if other than provided in the Procurement List, must be agreed to between the central nonprofit agency and the ordering office, and any cost difference must be set forth separately in the order. (b) Services. Type of services required, work to be performed, estimated volume, and time for completion. 3. Revision of Delivery Schedule. Any request by a central nonprofit agency for revision of the Procurement List delivery schedule should be granted if feasible. If the requested revision cannot be granted, the central nonprofit agency must be notified immediately and a purchase exception requested to purchase from commercial sources. 4. Waiver of Allocation. The designated agency may authorize the ordering office to order specified commodities directly from the workshops concerned without requesting an allocation for each order. The agency must be furnished a copy of any order issued directly to a workshop concerned. 5. Order. Upon receipt of an allocation or upon authorization to order without allocation, the ordering office may place an order. Orders must be recorded as obligations upon issuance. If the requirement is cancelled or issuance of an order is delayed more than 15 days, the ordering office must advise the central nonprofit agency and the workshop concerned. 3.1.3.d Exceptions. Supplies and services on the Procurement List may be purchased from commercial sources only if authorized in writing by the designated central nonprofit agency or the Committee for Purchase from People who are Blind or Severely Disabled. The Committee will grant a purchase exception when the central nonprofit agency cannot furnish the required supplies or services within the period specified, but commercial sources can. It may also grant a purchase exception when the quantity involved is insufficient for economic production by the workshop. If a purchase exception is granted because of required delivery time, the ordering office must initiate the purchase within 15 days, unless additional time is allowed by the central nonprofit agency. The ordering office must also send a copy of the solicitation to the agency. 3.1.3.e Compliance with Orders. If a workshop fails to comply with the terms of an order, and the problem cannot be resolved with the workshop, the order must be cancelled. Problems regarding quality that cannot be resolved with the workshop must be referred to the central nonprofit agency. When an order is cancelled, the central nonprofit agency must be notified and requested to reallocate the order if practicable. If reallocation is not practicable, a purchase exception will be given by the agency. 3.1.4 National and Area Contracts and Ordering Agreements 3.1.4.a Definitions 1. Postal Supply Schedule. A list of indefinite delivery contracts (see 5.1. 5) or ordering agreements (see 5.1.8) under which purchasing activities may place orders. A schedule identifies contractors, supplies and services available, contract and agreement numbers, ordering procedures and limitations, and other requirements. 2. Systems contract. A requirements contract (see 5.1.5.e) with a single source to provide a wide range of inexpensive items through catalog and telephoned orders. 3.1.4.b General 1. The Postal Service encourages the establishment of contracts and ordering agreements for use on a national or area basis in order to: (a) Reduce administrative effort; (b) Simplify the supply of common-use items; and (c) Obtain discounts for buying in volume. 2. Each such contract or ordering agreement, or accompanying instructions, must designate the activities authorized to place orders and state whether use is mandatory or optional. 3. Supplies and service available under mandatory contracts and ordering agreements must be ordered under those contracts and ordering agreements. 4. Flexibility in purchasing arrangements is needed in order to meet Postal Service customer service requirements through rapidly changing technologies. Therefore, use of national and area contracts and ordering agreements must not be made mandatory unless there are clear price or other advantages. 3.1.4.c Systems Contracts 1. Purchasing organizations establish systems contracts in order to provide local activities with a simple method of obtaining common-use items. 2. Systems contracts are awarded to qualified sources after competition. Purchasing and Material's Field Customer Support and Policies, Planning, and Diversity organizations provide guidance in the establishment of systems contracts. 3.1.4.d Other Contracts 1. Contracting officers may establish contracts for use Postal Service-wide or on a limited geographical or organizational basis. Under these contracts, contractors agree to provide supplies or services for stated periods of time. 2. Contract use may be made mandatory or optional. 3. Each contract must be awarded using competitive procedures (see 4.1) resulting in: (a) Award to single source; or (b) Award to multiple sources. 4. Because the contracts have been awarded through competition, there are no requirements for publicizing, obtaining competition, conducting cost or price analysis, or determining contractor responsibility before placing delivery orders. 5. Contract and ordering information must be published in Postal Supply Schedules. 3.1.4.e Area Ordering Agreements 1. Purchasing Service Centers are encouraged to negotiate ordering agreements with contractors that are frequent suppliers to the area but are not under a systems or other national contract. 2. Before entering into an area ordering agreement, the contracting officer must give Policies, Planning, and Diversity at least 15 days' notice. Policies, Planning, and Diversity may direct the contracting officer to negotiate an ordering agreement covering additional purchasing activities, or direct that negotiations be carried out at the national level. 3.1.5 Other Government Sources 3.1.5.a Federal Prison Industries, Inc. (UNICOR 1. Policy (a) It is Postal Service policy to use Federal Prison Industries, Inc. (FPI) as a source of supply for: (1) Mailbag requirements exceeding the capacity of the Mail Equipment Shops; and (2) Other products and services available from FPI. (b) Price and delivery terms must be reasonable and competitive with those of commercial sources (as determined by catalog or market prices or other means not involving obtaining competitive proposals). 2. Ordering. Supplies and services available from FPI are listed in their Schedule of Products brochure. This brochure and individual product and service catalogs (which provide detailed ordering instructions) are available from: UNICOR CORPORATE DIVISION FEDERAL PRISON INDUSTRIES INC 320 FIRST ST NW WASHINGTON DC 20534-0001 3.1.5.b General Services Administration (GSA) 1. GSA Supply System. GSA depots stock supplies commonly used by government agencies, as described in the GSA Supply Catalog and the GSA Stores Stock Catalog, which may be ordered by using GSA Form 457, Publications Mailing List Application. Ordering procedures are described in Handbook AS-701, Materiel Management. Price and delivery terms must be reasonable and competitive with commercial sources (as determined by market prices or other means besides obtaining competitive proposals). 2. Federal Supply Schedules (a) General. Federal Supply Schedules (FSSs) are summaries of ordering contracts negotiated by GSA's Federal Supply Service. They include Single-Award, Multiple-Award, and New Item Introductory Schedules. GSA (FSSs) terms and conditions, rather than those used by the Postal Service, apply to orders placed against FSSs. Purchasing organizations may order against FSSs when they meet their quality and delivery requirements. Additional competition is not required when using FSSs. (b) Types of Schedules (1) Single-Award Schedules. Single-award schedules cover contracts made with one supplier at a stated price for delivery to a geographic area as defined in the schedule. Most schedules contain all information necessary for placing orders. Some schedules specify that the contractor's catalog must be used for additional ordering information to aid in the selection of variables such as fabrics and colors. (2) Multiple-Award Schedules. Multiple-award schedules cover contracts made with more than one supplier for comparable supplies and services. Contracts are awarded to suppliers of the same generic type of items at varying prices for delivery within the same geographic area. Contractor catalogs and price lists must be used with the schedules to prepare delivery orders. The catalogs and price lists contain information such as item description, prices and discounts, order limitations, and delivery terms. (3) New Item Introductory Schedule. The New Item Introductory Schedule summarizes new or improved products, listing brand names of products available from various suppliers. Ordering offices must refer to contractor catalogs and price lists to prepare orders. (c) Information Available. The "Federal Supply Schedules Program" section of the GSA Supply Catalog provides a list of the supplies and services available on the schedules. Copies of schedules may be ordered by sending GSA Form 457, Publications Mailing List Application, to: GSA CENTRALIZED MAILING LISTS SERVICE DENVER FEDERAL CENTER BLDG 41 DENVER CO 80225-0001 GSA's Federal Supply Schedule Program Guide (which includes a list of schedules and information on their use) may be obtained from the same address. (d) Ordering. Orders are made directly from FSS contractors following the specific ordering instructions contained in the applicable schedule. (e) Oral Orders (1) of $100,000 or less may be made by oral order, provided that the contractor agrees to furnish, for each shipment, a delivery ticket containing the following information: (i) Contract number. (ii) Order number under the contract. (iii) Date of the order. (iv) Name and title of person placing the order. (v) Itemized list of supplies or services furnished. (vi) Signature of person receiving the item. (2) Invoices must be accompanied by receipted copies of related delivery tickets. (f) Administration of Orders. GSA is responsible for administering FSS contracts, and the Postal Service may not change, terminate, or otherwise undertake administration of an FSS contract. However, purchasing offices are responsible for contract administration functions on individual orders, in accordance with the terms and conditions of the GSA schedule contract, and must deal directly with the contractor. Such functions include: (1) Inspecting and accepting supplies and services; (2) Making or arranging for payment; (3) Modifying orders; (4) Terminating orders for default and charging contractors with resulting excess costs; (5) Terminating orders for the convenience of the Postal Service; and (6) Resolving disputes in accordance with the disputes clause of the schedule contract. 1. Information Resources Management Service (IRMS Nonmandatory Schedule Contracts for Federal Information Processing (FIP) Resources. Nonmandatory schedule contracts for Federal Information Processing (FIP) Resources are established by GSA's Information Resources Management Service (IRMS). FIP resources include telecommunications and FIP equipment, software, support services, maintenance, related supplies, and systems. GSA refers to these contracts as "Group 70 Schedule Contracts (ADP Equipment)" and "Group 58 Schedule Contracts (Telecommunications Equipment)." GSA contract terms and conditions, rather than those used by the Postal Service, apply to orders placed against these contracts. Orders must be competed, and orders above $50,000 must be synopsized. 3.1.5.c Defense Logistics Agency. Supplies available from the Defense Logistics Agency (DLA) are described in the Federal Supply Catalog for Civil Agencies, published by DLA and available upon written request from: COMMANDER DEFENSE LOGISTIC SERVICE CENTER (DLSC-APPP) BATTLE CREEK MI 49016-3412 Ordering procedures are discussed in Handbook AS-701, Materiel Management. 3.1.5.d Defense Fuel Supply Center. Under an interagency agreement between the Postal Service and the Defense Fuel Supply Center (DFSC), Postal activities must purchase fuel (gasoline, gasohol, diesel fuel, heating fuel, and kerosene) from DFSC contractors if their annual requirement is 20,000 gallons or more per product at any given location. See the relevant handbook for procedures. 3.1.5.e Veterans Administration. The Veterans Administration makes medical supplies and equipment available to designated Postal Service installations having health units headed by a physician or registered nurse. Ordering procedures are described in Handbook AS-701, Materiel Management. 3.1.5.f Government Printing Office. Printing not done in-house by the Postal Service may be purchased from the Government Printing Office (GPO), GPO's Regional Printing Procurement Offices, authorized printing plants of other government agencies, or commercial sources. See subchapter 370, Administrative Support Manual. 3.1.6 Commercial Sources 3.1.6.a General. Supplies and services may be obtained from commercial sources (including educational and nonprofit institutions) following the procedures in chapters 4, 8, 11, or 12, as applicable. 3.1.6.b Approved Sources. The approved sources purchasing program provides for prequalification of standard commercial products or modified commercial products offered by manufacturers or distributors. Supply categories included in the program are listed in the Postal Bulletin. Supplies in those categories may be ordered only from those firms whose products have been tested for compliance with Postal Service requirements and approved for purchase. Potential sources are periodically solicited through notice in the Commerce Business Daily and provide an opportunity to submit their products for qualification. When national agreements have been negotiated with approved sources, they are listed in Postal Supply Schedules (see 3.1.4); otherwise, contracts are negotiated using competitive purchasing procedures, but competition is restricted to approved sources. Procedures for defining requirements, qualifying sources, negotiating agreements, and ordering supplies are described in the relevant handbook. 3.1.6.c Prequalified Contractors 1. Prequalified contractors are firms or institutions that have previously demonstrated their ability to perform consistently to high standards of quality and reliability. 2. The consideration of proposals only from prequalified contractors ensures that selection for award can be made primarily on the basis of price proposals without undue performance risk. 3. The contracting officer may decide to restrict to prequalified contractors any purchase within his or her delegated authority. Section 2 Publicizing Purchase Actions 3.2.1 Policy 3.2.1.a All solicitations valued at over $100,000 must be publicized unless (1) precluded by urgency, (2) they fall within the exceptions dealing with leased space set out in chapter 11, (3) advance notice of services sought was previously published in the market research phase of the procurement, or (4) approval has been given to use simplified procedures for the procurement. 3.2.1.b To promote competition in subcontracting, the Postal Service publicizes awards of contracts, competitive or noncompetitive, having significant subcontracting opportunities. 3.2.2 Methods of Publicizing 3.2.2.a Synopses of Solicitations. Except for leases (see 11.4.2.b) and mail transportation procurements (see chapter 12), solicitations must be synopsized in the Commerce Business Daily, a Department of Commerce publication listing government agency solicitations and contract awards. The synopsis must be forwarded to the Commerce Business Daily as early as possible, but not later than the date of issuing the solicitation. See the relevant handbook for format and other guidance. 3.2.2.b Posting. Solicitations must be posted in the public area of the purchasing activity. 3.2.2.c Announcements and Advertisements. Announcements of proposed purchases may be made available to newspapers, trade journals, and magazines for publication. Paid commercial advertisements may be used when determined by the contracting officer to be in the Postal Service's interest. 3.2.2.d Synopses of Contract Awards. Contracts having significant subcontracting opportunities must be synopsized in the Commerce Business Daily. Although a matter of judgement, these are normally contracts over $100,000 with individual subcontract opportunities over $50,000. See the relevant handbook for format and other guidance. Section 3 Contractor Qualifications 3.3.1 Responsible Prospective Contractors 3.3.1.a Policy. Contracts may be awarded only to responsible prospective contractors. The award of a contract based on price alone can be false economy if there is subsequent default, late delivery,or other unsatisfactory performance. To qualify for award, a prospective contractor must affirmatively demonstrate its responsibility, including, when necessary, the responsibility of its proposed subcontractors. For joint ventures, each party to the venture must demonstrate its responsibility. 3.3.1.b General Standards. Certain key areas must be considered in determining an offeror's responsibility. (At times the same areas may be used as evaluation factors. In such instances, the factors must be clearly stated in the solicitation and evaluated in accordance with its terms and conditions; see 2.1. 7.c.3). To be determined responsible, a contractor must: 1. Have financial resources adequate to perform the contract; 2. Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commitments (including awards pending); 3. Have a good performance record; 4. Have a sound record of integrity and business ethics; 5. Have a sound quality control program that complies with solicitation requirements or the ability to obtain one; 6. Have the necessary organization, experience, accounting and operational controls, technical skills, and production and property controls, or the ability to obtain them; 7. Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them; and 8. Be otherwise qualified and eligible to receive an award under applicable laws and regulations. 3.3.1.c Special Standards. When they are considered necessary for a particular purchase or class of purchases, the contracting officer may develop, with the assistance of appropriate specialists, special standards of responsibility. Special standards may be particularly desirable when experience has demonstrated that unusual expertise or specialized facilities are needed for satisfactory contract performance. The special standards must be set forth in the solicitation and must apply to all offerors. 3.3.1.d Subcontractor Responsibility 1. Generally, prospective contractors are responsible for determining the responsibility of their prospective subcontractors (but see 3.3.2 regarding debarred, ineligible, or suspended firms). Matters of prospective subcontractor responsibility may affect the determination of the prospective prime contractor's responsibility. A prospective contractor may be required to provide written evidence of a proposed subcontractor's responsibility. 2. When it is in the Postal Service's interest to do so, the contracting officer may directly determine a prospective subcontractor's responsibility, using the same standards as used to determine a prime contractor's responsibility. 3.3.1.e Determining Responsibility and Nonresponsibility 1. Determination. The contracting officer must make an affirmative written determination of responsibility before awarding any contract, except contracts of $100,000 or less awarded using simplified procedures (see 4.2.3.e). In the absence of information clearly showing that a prospective contractor meets applicable standards of responsibility, the contracting officer must make a written determination of nonresponsibility. 2. Documentation. Documents and reports supporting a determination of responsibility or nonresponsibility, including any preaward survey reports, must be included in the contract file. 3. Obtaining Information. Before making a determination of responsibility, the contracting officer must possess or obtain information sufficient to be satisfied that a prospective contractor currently meets applicable standards of responsibility. Sources of information include: (a) The list of debarred, suspended, and ineligible contractors (see 3.3.2. c), and GSA's consolidated list of contractors debarred, suspended, or declared ineligible by other government agencies; (b) Records and experience data, including verifiable knowledge of personnel in purchasing offices, audit offices, and other contracting offices; (c) The prospective contractor-including proposal information, questionnaire replies, financial data, information on production equipment, and personnel information; and (d) Suppliers, subcontractors, and customers of the prospective contractor, financial institutions, government agencies, and business and trade associations. 4. Discussion. Communication with a prospective offeror for the purpose of obtaining or clarifying information needed to determine responsibility is not "discussion" as defined in 4.1.5, and does not require that discussions be held with all those in the competitive range (see 4.1.5.g.1). 5. Preaward Surveys (a) If available information does not provide an adequate basis for determining the responsibility or nonresponsibility of a prospective contractor, the contracting officer must perform a preaward survey, obtaining the assistance and participation of specialists as needed. The extent of the survey must be consistent with the dollar value and complexity of the purchase, and may include any or all of the following: (1) Data on hand or from other government agencies or commercial sources. (2) Examination of financial statements and records. (3) On-site inspection of plant and facilities to be used for contract performance. (b) Each participant in the survey must make a written report of his or her findings to the contracting officer, which must be retained with the contracting officer's determination. The contracting officer should require a consolidated survey report if there would otherwise be numerous individual reports. (c) The contracting officer may discuss preaward survey information with the prospective contractor being surveyed. 3.3.1.f Disclosure of Information. Information obtained for purposes of determining the responsibility of a prospective contractor must not be disclosed outside the Postal Service, unless disclosure is required by the Freedom of Information Act (see 1.7.4). 3.3.2 Debarment, Suspension, and Ineligibility 3.3.2.a General. Purchasing offices may not solicit proposals from, award contracts to, or consent to subcontracts with debarred, suspended, or ineligible contractors. 3.3.2.b Definitions 1. Vice President. The VP, P&M. 2. General Counsel. This includes the General Counsel's authorized representative. 3. Judicial Officer. This includes the acting Judicial Officer. 4. Debarment. An exclusion from contracting and subcontracting for a reasonable, specified period of time commensurate with the seriousness of the offense or failure, or the inadequacy of performance. 5. Suspension. A disqualification from contracting and subcontracting for a temporary period because a contractor is suspected upon adequate evidence of engaging in criminal, fraudulent, or other seriously improper conduct. 6. Ineligible. This means excluded from contracting and subcontracting under statutes, Executive orders, or regulations of government agencies, such as the Davis-Bacon Act and its related statutes and implementing regulations, the Service Contract Act, the Equal Employment Opportunity Acts and Executive orders, the Walsh-Healey Public Contracts Act, or the Environmental Protection Acts and Executive orders. 7. Affiliates. Contractors so related that one either directly or indirectly controls or has the power to control the other, or a third party controls or has the power to control both. 3.3.2.c Establishment and Maintenance of Lists 1. The VP, P&M, establishes, maintains, and distributes to purchasing offices a consolidated list of contractors debarred, suspended, or ineligible for contracts or subcontracts. 2. The list contains: (a) The names of debarred, suspended, and ineligible contractors, in alphabetical order, with cross-references when more than one name is involved in a single action; (b) The basis for each action; (c) The extent of restrictions imposed; and (d) The termination date for each listing. 3. Copies of debarment notices (3.3.2.h), suspension notices (3.3.2.k), and Judicial Officer decisions (appendix D, section 957.21), and any order removing a debarment or suspension, must be sent to the VP, Purchasing and Materials, through Policies, Planning, and Diversity. 4. The General Services Administration (GSA) compiles and maintains a consolidated list of all contractors debarred, suspended, or declared ineligible by the Executive agencies and the General Accounting Office. GSA revises and distributes the list monthly, and issues weekly supplements. Within the Postal Service, the GSA list is for information only, and does not replace or supplement the list maintained by the Postal Service. However, the listing of a contractor by GSA may be the basis for debarment or suspension by the Postal Service (see 3.3.2.e and 3.3.2.j.1). 5. In order to ensure that both the GSA and the Postal Service lists are accurate, current, and complete, the VP, Purchasing and Materials, must: (a) Arrange to receive contractor debarment, suspension, and ineligibility information from GSA; and (b) Furnish GSA notice of any debarment or suspension determination made by the Postal Service and any changes in the status of contractors on the Postal Service list. 3.3.2.d Treatment of Contractors on Postal Service List 1. Debarred or suspended contractors are excluded from receiving contracts, and contracting officers may not solicit proposals or quotations from, award contracts to, or (when the contract provides for such consent) consent to subcontracts with such contractors, unless the VP, P&M, determines in writing that there is a compelling reason for such action in the interest of the Postal Service. 2. Contractors listed as having been declared ineligible on the basis of statutory or other regulatory procedures are excluded from receiving contracts and, if applicable, subcontracts, under the conditions and for the period set forth in the statute or regulation. Contracting officers may not solicit proposals or quotations from, award contracts to, or (when the contract provides for such consent) consent to subcontracts with such contractors under those conditions and for that period. 3. The debarment, suspension, or ineligibility of a contractor does not of itself affect the rights and obligations of the parties to any existing contract. However, except for service changes under mail transportation contracts, the contracting officer may not add new work to the contract by supplemental agreement or by exercise of an option unless the VP, P&M, makes a determination as required under subparagraph d.1 above. 3.3.2.e Causes for Debarment. The VP, P&M, is authorized, with the concurrence of the General Counsel, to debar a contractor in accordance with procedures in this part for causes such as the following: 1. Conviction for commission of a criminal offense incidental to obtaining or attempting to obtain contracts or subcontracts, or in the performance of a contract or subcontract. 2. Conviction under the Federal antitrust statutes arising out of the submission of bids or proposals. 3. Violations of a Postal Service contract so serious as to justify debarment action, such as: (a) Willful failure to perform a Postal Service contract in accordance with the specifications or within the time limit provided in the contract; (b) A record of failure to perform or of unsatisfactory performance in accordance with the terms of one or more Postal Service contracts occurring within a reasonable period of time preceding the determination to debar, except that failure to perform or unsatisfactory performance caused by acts beyond the control of the contractor may not be considered a basis for debarment; (c) Violation of a contract clause concerning the maintenance of a drug-free workplace. (d) Violation of a contractual provision against contingent fees; or (e) Acceptance of a contingent fee paid in violation of a contractual provision against contingent fees. 4. Any other cause of such serious and compelling nature, affecting responsibility as a contractor, as may be determined by the Postal Service to warrant debarment. 5. Debarment by another Executive agency or department. 3.3.2.f Conditions for Debarment 1. The existence of any of the causes in paragraph e above does not necessarily require that a contractor be debarred. The decision to debar is within the discretion of the VP and must be made in the best interest of the Postal Service. All mitigating factors may be considered in determining the seriousness of the offense, failure, or inadequacy of performance, and in deciding whether debarment is warranted. 2. The existence of any of the causes in subparagraph e.1 or e.2 above must be established by criminal conviction in a court of competent jurisdiction. If appeal taken from such conviction results in a reversal of the conviction, the debarment must be removed upon the request of the contractor unless other causes for debarment exist. 3. The existence of any of the causes in subparagraph e.3 or e.4 above must be established by evidence that the Postal Service determines to be clear and convincing. 4. The criminal, fraudulent, or seriously improper conduct of an individual may be imputed to the firm with which he or she is or has been connected when a grave impropriety was accomplished within the course of his or her official duty or was effected by him or her with the knowledge or approval of the firm. Likewise, when a firm is involved in criminal, fraudulent, or seriously improper conduct, any person involved in the commission of the grave impropriety may be debarred. 5. Debarment for the cause set forth in subparagraph e.5 above (debarment by another agency) requires that one of the causes for debarment set forth in subparagraphs e.1 through e.4 above was the basis for debarment by the original debarring agency. 3.3.2.g Period of Debarment 1. When statutes, Executive orders, or controlling regulations of other agencies provide a specific period of debarment, they are controlling. In other cases, debarment by the Postal Service must be for a reasonable, definite, stated period of time, commensurate with the seriousness of the offense or the failure or inadequacy of performance. Generally, a period of debarment may not exceed three years, but consistent with the Congressional finding in the Drug-Free Workplace Act of 1988, a debarment for violation of Clause 10-20, Drug-Free Workplace, may not exceed five years. When debarment for an additional period is deemed necessary, notice of the proposed additional debarment must be furnished to the contractor as in the case of original debarment. 2. Except as precluded by statute, Executive order, or controlling regulations of another agency, debarment may be removed or the period may be reduced by the VP, P&M, upon submission of an application by the debarred contractor. The application must be supported by documentary evidence setting forth appropriate grounds for the granting of relief, such as newly discovered material evidence, reversal of a conviction, bona fide change of ownership or management, or the elimination of the causes for which debarment was imposed. The VP may, as a matter of discretion, deny any application for removal of debarment or for reduction of its period or may refer the application to the Judicial Officer for hearing and final Postal Service determination. In any case in which a debarment is removed or the debarment period is reduced, the VP approving the removal or reduction must transmit to the Judicial Officer, for filing, a notice and statement of the reasons for the removal of the debarment or the reduction of the period of debarment. 3.3.2.h Procedural Requirements for Debarment 1. The VP, P&M, must initiate a debarment proceeding by sending to the contractor a written notice of proposed debarment. The notice must be served by sending it to the last known address of the contractor by certified mail, return receipt requested. A copy of the notice must be furnished to the Inspection Service. The notice must state: (a) That debarment is being considered; (b) The reasons for the proposed debarment; (c) The period of debarment and the proposed effective date; (d) That the debarment will not become effective until after a hearing, if a hearing is requested within 20 days following the receipt of the notice of the proposed debarment; and (e) That any request for a hearing is to be accompanied by a statement setting forth the grounds upon which the proposed debarment will be contested, and that if no hearing is requested, the action of the VP, P&M, becomes the final Postal Service determination. 2. A contractor served with a notice of proposed debarment may request a hearing by addressing a request to the Judicial Officer through the VP, P&M. The hearing will be governed by rules of procedure promulgated by the Judicial Officer and set forth in appendix D. Except as provided in subparagraph h.3 below, the Judicial Officer must hear the matter and determine on the basis of the record whether the proposed debarment action should be sustained. The decision of the Judicial Officer is the final Postal Service decision. The VP, P&M,is represented by the General Counsel. 3. When the VP, P&M, proposes to debar a contractor already debarred by another government agency for a term concurrent with such debarment, the debarment proceedings before the Postal Service may be based entirely upon the record of facts obtained from the other agency or upon such facts and additional facts. In such cases the facts obtained from the other agency must be considered as established, but the party to be debarred must have an opportunity to present information to the Judicial Officer and to explain why debarment by the Postal Service should not be imposed. 3.3.2.i Causes for Suspension. The VP, P&M, may, when the interest of the Postal Service requires, with the concurrence of the General Counsel, suspend any contractor: 1. Upon adequate evidence of or indictment for: (a) Commission of fraud or a criminal offense incidental to obtaining, attempting to obtain, or performing a government contract; (b) Violation of the Federal antitrust statutes arising out of the submission of bids and proposals; or (c) Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, receipt of stolen property, or any other offense indicating a lack of business integrity or business honesty that seriously and directly affects present responsibility as a contractor; or 2. For other cause of such serious and compelling nature, affecting responsibility as a contractor, as may be determined by the VP, P&M, to warrant suspension. A pending hearing for debarment may be such a cause. 3.3.2.j Conditions for Suspension 1. A suspension invoked by another government agency may be the basis for the imposition of a concurrent suspension by the VP, P&M. 2. Any contractor suspended that believes its suspension has not been in accordance with these rules, or with applicable laws and regulations, may appeal to the Judicial Officer for a review of the suspension. The Judicial Officer must, upon the basis of the papers submitted or upon other appropriate opportunity to be heard, expeditiously rule upon the validity of the suspension. 3.3.2.k Notice of Suspension 1. The VP, P&M, must cause a notice of the suspension to be served upon the contractor to be suspended. The notice must be sent by certified mail, return receipt requested, within ten days after its effective date. A copy of the notice must be furnished to the Inspection Service. The notice must state that: (a) The suspension is based: (1) On information that the contractor has committed irregularities of a serious nature in business dealings with the Postal Service; or (2) On irregularities that seriously reflect upon the propriety of further dealings of the contractor with the Postal Service (the irregularities must be described in general terms without disclosing the Postal Service's evidence); (b) The suspension is for a temporary period pending the completion of an investigation and such other proceedings as may follow; and (c) Proposals will not be solicited from the contractor and, if received, will not be considered for award, unless it is determined by the Postal Service to be in its interest to do so. 2. Answers to all inquiries concerning the suspension of any contractor must be coordinated by the VP, P&M, with the General Counsel or must be made by the General Counsel. When a matter has been referred to the Department of Justice, the Postal Service will not furnish in answer to inquiries any more information than is contained in the notice until the Department of Justice has agreed to the furnishing of additional information. 3. No suspension may exceed 120 days. A suspension, while in effect, may be extended for an additional period of 120 days upon written determination of the reasons and necessity for the extension. Notice of any extension of suspension must be served upon the contractor in the manner set forth in subparagraph k.1 above. In no event may a suspension plus its extensions exceed in the aggregate a period of one year, unless a debarment proceeding or a prosecutive action is pending, in which case successive additional periods of suspension may be imposed until the proceeding in question has been completed. The termination of a suspension, however, may not prejudice a debarment proceeding that was pending or that may be brought for the same reasons that led to the suspension. 3.3.2.l Restrictions on Suspended Contractors. Suspended contractors are subject during the period of suspension to the restrictions, conditions, and penalties set forth in paragraphs a and d above. 3.3.2.m Rules of Practice. The Postal Service Rules of Practice in Proceedings Relative to Debarment and Suspension from Contracting are set forth in appendix D. Chapter 4 Purchasing Methods Section 1 Types of Purchasing Methods 4.1.1 Standard Purchasing 4.1.2 Simplified Purchasing 4.1.3 Local Buying 4.1.4 Noncompetitive Purchasing Section 2 Standard Purchasing 4.2.1 General 4.2.1.a Policy 4.2.1.b Applicability 4.2.2 Solicitations 4.2.2.a Preparation of Solicitations 4.2.2.b Proposal Time 4.2.2.c Telegraphic Proposals 4.2.2.d Method of Solicitation 4.2.2.e Posting and Synopsis 4.2.2.f Availability of Solicitations 4.2.2.g Voluminous Solicitations 4.2.2.h Preproposal Conference. 4.2.2.i Amendment of Solicitations 4.2.2.j Cancellation of Solicitations 4.2.2.k Disclosure and Use of Information 4.2.3 Receipt of Proposals 4.2.3.a Handling 4.2.3.b Opening and Recording 4.2.3.c Modification and Withdrawal 4.2.3.d Late Proposals and Modifications 4.2.3.e Failure to Acknowledge Amendments 4.2.3.f Mistakes in Proposals 4.2.4 Evaluation of Proposals 4.2.4.a General 4.2.4.b Price or Cost Evaluation 4.2.4.c Evaluation of Other Factors 4.2.4.d Only One Proposal 4.2.5 Contractor Selection Award 4.2.5.a Definitions 4.2.5.b General 4.2.5.c Discussions 4.2.5.d Cost-Reimbursement Contracts 4.2.5.e Rejection of All Proposals 4.2.5.f Award Without Discussions 4.2.5.g Award With Discussions 4.2.5.h Contract Award 4.2.5.i Award Notification 4.2.5.j Debriefing 4.2.5.k Synopsis Section 3 Simplified Purchasing 4.3.1 General 4.3.1.a Applicability 4.3.1.b Ceiling 4.3.1.c Limitations 4.3.1.d Competition 4.3.1.e Basis for Award 4.3.1.f Prequalification 4.3.2 Solicitations 4.3.2.a General 4.3.2.b Solicitations 4.3.2.c Standing Price Quotations 4.3.2.d Preparation of Solicitations 4.3.2.e Posting and Synopsis 4.3.2.f Availability of Solicitations 4.3.2.g Amending Solicitations 4.3.3 Receipt and Evaluation of Proposals and Quotations 4.3.3.a Receipt 4.3.3.b Evaluation 4.3.3.c Equal Proposals or Quotations 4.3.3.d Negotiation 4.3.3.e Contractor Responsibility 4.3.4 Ordering Methods 4.3.4.a Acceptance of Proposal 4.3.4.b Purchase Order 4.3.4.c Local Purchase Order 4.3.5 Basic Pricing Agreements 4.3.5.a General 4.3.5.b Types 4.3.5.c Use 4.3.5.d Sources 4.3.5.e Multiple BPAs 4.3.5.f Restrictions 4.3.5.g Establishing BPAs 4.3.5.h Ordering 4.3.5.i Review 4.3.6 Delivery Agreements 4.3.6.a General 4.3.6.b Authorization 4.3.6.c Use 4.3.6.d Restrictions 4.3.7 Unpriced Purchase Orders 4.3.7.a General 4.3.7.b Price Ceiling 4.3.7.c Examples 4.3.8 Debriefings 4.3.9 Administration 4.3.9.a General 4.3.9.b Cancellation Section 4 Noncompetitive Purchasing 4.4.1 General 4.4.1.a Definition 4.4.1.b Limitations on Use 4.4.1.c Applicability 4.4.2 Justification 4.4.2.a Circumstances 4.4.2.b Reference 4.4.3 Procedures Section 5 Price Negotiation 4.5.1 Prenegotiation Objectives 4.5.2 Negotiation 4.5.3 Memorandum of Negotiation Section 6 Protests 4.6.1 Applicability 4.6.2 Definitions 4.6.2.a Protest 4.6.2.b General Counsel 4.6.2.c Working days 4.6.3 Filing 4.6.4 Timeliness 4.6.5 Contract Award 4.6.6 Protests Received by Contracting Officers 4.6.7 Protests Received by the General Counsel Chapter 4 Purchasing Methods Section 1 Types of Purchasing Methods 4.1.1 Standard Purchasing Standard purchasing is the competitive procurement of goods and services made under procedures other than those applicable to simplified or local buying procedures. Further exceptions may be made for the categories of contracts described in chapters 8, 11, and 12, as provided in those chapters. 4.1.2 Simplified Purchasing Simplified purchasing procedures should be used as described in 4.3. 4.1.3 Local Buying Local buying is the local purchase of, and payment for, day-to-day operational needs. Local buying authorities are shown in exhibit 1.5.2.c. Procedures are discussed in Administrative Support Manual (ASM) 713. 4.1.4 Noncompetitive Purchasing Noncompetitive purchasing is the purchase of goods and services from one source without competition (see 4.4). Section 2 Standard Purchasing 4.2.1 General 4.2.1.a Policy. Purchases must be made on the basis of adequate competition whenever feasible (see 1.7.2). 4.2.1.b Applicability. This section applies to all purchases except those made using (1) simplified procedures (see 4.3); (2) using noncompetitive procedures (see 4.4); and (3) using local buying procedures (see ASM 713). 4.2.2 Solicitations 4.2.2.a Preparation of Solicitations. Solicitations must be prepared in accordance with appendix A. 4.2.2.b Proposal Time. Consistent with specific purchase requirements, all solicitations must allow sufficient time for offerors to prepare and submit proposals, normally not less than 15 days when purchasing standard commercial products and not less than 30 days in other cases. 4.2.2.c Telegraphic Proposals. When the date for receipt of proposals will not allow offerors sufficient time to prepare and submit proposals on the prescribed forms, or when prices are subject to frequent changes, telegraphic proposals may be authorized by including Provision A-17, Telegraphic Proposals, in the solicitation. 4.2.2.d Method of Solicitation. Solicitations must be mailed or otherwise provided to prospective offerors on the mailing list (see A.3), including, for a follow-on procurement, the incumbent contractor. 4.2.2.e Posting and Synopsis. Solicitations must be posted in the public area of the purchasing activity and synopsized in the Commerce Business Daily in accordance with 3.2.2. 4.2.2.f Availability of Solicitations. Except as provided in paragraph g below, the purchasing office must maintain a reasonable number of copies of solicitations to be provided to prospective offerors upon request as long as they are available. When competition is restricted (see 3.1.6.b and c), solicitations must be provided upon request, but firms not meeting the eligibility criteria must be informed of the restrictions on the competition. Solicitations must be furnished to publishers, trade associations, information services, and others upon request, as long as copies are available. 4.2.2.g Voluminous Solicitations. When a solicitation package is so voluminous that it is impracticable to reproduce copies for distribution to all those requesting it, a limited number of copies must be made available for sale for a fee amounting to the cost of reproduction. If the solicitation is synopsized, the synopsis must identify a location at which the solicitation package may be examined, and the fee to be paid to obtain a copy. 4.2.2.h Preproposal Conference. 1. Whenever circumstances suggest that it would be useful, such as when a solicitation has complicated specifications or requirements, a preproposal conference may be held to brief prospective offerors. 2. If the need for a preproposal conference is foreseen, notice of the conference should be given in the solicitation. Otherwise, all prospective offerors that received the solicitation must be given written notice of the time, place, nature, and scope of the conference. If time allows, prospective offerors should be instructed to submit written questions in advance, so that prepared answers can be distributed at the conference. 3. The contracting officer or a designated representative must conduct the conference, with the assistance and participation of technical and legal personnel as appropriate. 4. A record of the conference must be furnished to all prospective offerors that received the solicitation. 5. Conferees must be informed that statements and explanations at the conference do not change any terms, specifications, or other requirements of the solicitation, which may be changed only by a written amendment. 4.2.2.i Amendment of Solicitations 1. If it becomes necessary to make changes in a solicitation in matters such as quantity, specifications, delivery schedule, or date for receipt of proposals, or to clarify or correct ambiguities or defects, a solicitation amendment must be issued. As to amendments affecting a Technical Data Package (TDP), see 2.3.3. 2. An amendment must be issued in sufficient time to permit affected offerors to consider it in submitting or modifying their proposals. When it is necessary to give notification of a change by telephone or telegram, confirmation by written amendment must follow. 3. In deciding which offerors are affected by a change, the contracting officer must consider the stage of the procurement, as follows: (a) If proposals are not yet due, the amendment must be sent to all prospective offerors that received the solicitation, and posted in the same place as the solicitation. (b) If the time for receipt of proposals has passed but proposals have not yet been evaluated, the amendment must be sent to the responding offerors. (c) If the competitive range (see 4.2.5.g.2) has been established, and the amendment would have no effect on the basis for establishing the competitive range, only those offerors within the competitive range must be sent the amendment. 4.2.2.j Cancellation of Solicitations. Solicitations may not be cancelled unless circumstances make cancellation essential, such as when there is no longer a requirement for the supplies or services, or the solicitation requires amendments of such magnitude that a new solicitation is needed. Written notice of the cancellation must explain the reason for cancellation, and must be sent to all prospective offerors that received the solicitation. If the solicitation is cancelled before the date for receipt of proposals, any proposals received must be returned unopened to the offerors. 4.2.2.k Disclosure and Use of Information 1. Before Solicitation. Information concerning proposed purchases must not be released outside the Postal Service before solicitation of proposals, except for information publicized through briefings, announcements, or notices in accordance with 2.1.2. Within the Postal Service, such information must be restricted to those having a legitimate interest. 2. After Solicitation (a) After issuance of a solicitation, only the contracting officer, the contracting officer's superiors having contracting authority, and others specifically authorized may communicate or transmit information concerning the solicitation. (b) Any information given to a prospective offeror concerning a solicitation must be furnished promptly to all other prospective offerors as an amendment to the solicitation, if the information is needed for the preparation of proposals or if lack of it would be prejudicial to uninformed offerors. (c) General information that would not give any prospective offeror an advantage over others may be furnished upon request, such as an explanation of a clause, a procedural requirement, or a provision of the solicitation. If it becomes apparent that an ambiguity must be clarified or an error corrected, the solicitation must be amended. 3. After Receipt of Proposals (a) Information concerning the content of proposals or the number or identity of offerors must not be disclosed outside the Postal Service, except when necessary for proposal evaluation, or to anyone in the Postal Service not having a legitimate interest. (b) During the preaward period, only the contracting officer, the contracting officer's superiors having contracting authority, and others specifically authorized may transmit technical or other information and conduct discussions with offerors. Information must not be furnished to any offeror if, alone or together with other information, it may afford that offeror an advantage over others. However, general information that is not prejudicial to others may be furnished upon request. (c) Offerors may place restrictions on the disclosure and use of data in proposals, in accordance with Provision A-7, Restriction on Disclosure and Use of Data. The portions of the proposal that are so restricted (except for information obtainable from another source without restriction) must be used only for evaluation and must not be disclosed outside the Postal Service, except when necessary for proposal evaluation, without permission of the offeror. 4. Release of Solicitation Mailing Lists. When a procurement is deemed highly competitive (i.e., five or more potential offerors), and no harm to competition is anticipated from releasing the specific source list, the contracting officer may consider it advantageous to the Postal Service to release the source list to anyone who is sent a copy of that solicitation. If the source list has not been released and is requested under the Freedom of Information Act (FOIA), it is not necessary to release it to all prospective offerors, but only to the specific FOIA requestor. The source list, in this instance, is considered general information that should not give the recipient any advantage over other offerors. 4.2.3 Receipt of Proposals 4.2.3.a Handling. Proposals must be marked with the date and time of receipt, and kept secure until opened and recorded. 4.2.3.b Opening and Recording. After the time established for receipt, the contracting officer must open and record the proposals. The source selection plan (see 2.1.7) may require that separate cost or price proposals be kept unopened until after evaluation of technical proposals, then opened and recorded. 4.2.3.c Modification and Withdrawal. Proposals may be modified or withdrawn by written or telegraphic notice. A proposal modification must be received by the date and time set for receipt of proposals. Notice of withdrawal of a proposal must be received before award. 4.2.3.d Late Proposals and Modifications 1. Proposals and modifications of proposals are late if received after the date and time established in the solicitation for receipt of proposals. This does not include the normal revisions of proposals made during negotiations by the offerors selected for discussions. 2. Late proposals and modifications may be considered in accordance with Provision A-4, Late Submissions and Modifications of Proposals. It is normally in the interest of the Postal Service to consider a late proposal when doing so would cause no delay in the evaluation process, or the proposal was late because of mishandling after receipt, or the proposal offers a significant cost, quality, or technical benefit. It is not in the interest of the Postal Service to consider any proposal received so late that consideration of the proposal would jeopardize, or give the appearance of jeopardizing, the integrity of the competitive process. 3. When a late proposal or modification is not considered, the offeror must be given written notification that its proposal or modification was received late and was not considered. 4. Each late proposal and modification must be retained in the solicitation file with a statement as to whether it was considered, with the reasons. 4.2.3.e Failure to Acknowledge Amendments. If a solicitation has been amended (see 4.2.2.i), proposals lacking acknowledgement of the amendment, or clear indication of receipt of the amendment, must be disregarded if award is to be without discussions (see 4.2.5.f) and the amendment affects price, quantity, quality, or delivery. If discussions are held (see 4.2.5.g), uncertainties regarding the amendment may be resolved through discussions. 4.2.3.f Mistakes in Proposals. Contracting officers must examine proposals for mistakes. Communication with an offeror concerning mistakes is clarification, not discussion. However, if correction of a mistake requires reference to documents, worksheets, or other data outside the solicitation to establish the existence of the mistake or the intended proposal, the mistake may be corrected only through discussions. See 4.2.5.f.5 concerning mistakes in contracts awarded without discussions. 4.2.4 Evaluation of Proposals 4.2.4.a General. Proposal evaluation is an assessment of both the proposal and the offeror's ability, as demonstrated by the proposal, to perform the prospective contract successfully. Proposals must be evaluated in accordance with procedures established in the source selection plan (see 2.1.7) and the evaluation factors specified in the solicitation. 4.2.4.b Price or Cost Evaluation. Prices or estimated costs must be evaluated in accordance with chapter 5. Price or cost analysis is necessary to determine the reasonableness and validity of a proposed price or cost estimate, and to assist in determining an offeror's understanding of the work and ability to perform the contract. 4.2.4.c Evaluation of Other Factors. Each proposal must be examined to determine whether it meets the requirements of the solicitation. Beyond that, the specific purchase requirements, the evaluation factors, and the source selection plan determine the extent of the required analysis. The evaluation must be documented to include: 1. The basis for evaluation; 2. An analysis of the acceptable and unacceptable proposals, including an assessment of each offeror's ability to accomplish the solicitation requirements; 3. A narrative statement of the major strengths and weaknesses of the various proposals; 4. A summary, matrix, or quantitative ranking of each proposal in relation to the best rating possible; and 5. A summary of findings, as well as each evaluator's independent findings. 4.2.4.d Only One Proposal. If only one proposal is received in response to a competitive solicitation, it may be evaluated and considered for award. 4.2.5 Contractor Selection Award 4.2.5.a Definitions 1. Selection. The selection of an offeror for contract award, with or without discussion of proposals, or for final negotiations leading to contract award following discussion of proposals. 2. Clarification. Communication with an offeror for the sole purpose of eliminating minor irregularities, informalities, or apparent clerical mistakes in proposal. 3. Discussion. Any oral or written communication between the Postal Service and an offeror (other than communications conducted for the purpose of clarification) that is initiated by the Postal Service and (a) involves information essential for determining the acceptability of a proposal or (b) provides the offeror an opportunity to revise its proposal. 4. Negotiation. The process of reaching agreement on final contract terms and conditions with the offeror selected. 4.2.5.b General 1. The contract will be awarded to the offeror whose proposal offers the best value to the Postal Service, considering the price, price-related and other evaluation factors identified in the solicitation. 2. The contracting officer must make the contractor selection decision, and is responsible for trade-off judgments involving cost and other evaluation factors. Contractor selection must be made in accordance with the solicitation's stated evaluation factors and must be documented. The documentation must include a determination by the contracting officer that the price is fair and reasonable, and the basis for determination. 3. The contracting officer must consider any rankings and ratings, and any recommendations if specifically requested, prepared by evaluation and advisory groups. However, the findings of the technical and price evaluators are only guides for the final selection decision, and must be presented in sufficient depth to permit the intelligent weighing of alternatives and the making of trade-off judgements by the contracting officer. 4. The supporting documentation prepared for the selection decision must show the relative differences among proposals and their strengths, weaknesses, and risks in terms of the evaluation factors. The supporting documentation must include the basis and reason for the decision. 5. Award may be made only after the contracting officer makes an affirmative determination of responsibility (see 3.3.1). 4.2.5.c Discussions 1. A contractor may be selected and award made with or without discussing proposals with the offerors, depending upon the circumstances of the purchase, such as the complexity of the requirement, the extent of competition, and the quality of the proposals received (see paragraph f below). 2. Whenever price or price-related factors are the most important or the only evaluation factors, award will normally be made without discussions if adequate competition exists, to ensure that offerors submit their most favorable proposals at the outset. However, even when award will be based on price alone, discussions may be held as necessary to determine that the price is fair and reasonable. 3. The decision to make an award without discussions, based on initial proposals, or to make an award based on revised proposals following written or oral discussions, must be made by the contracting officer. 4.2.5.d Cost-Reimbursement Contracts. In awarding a cost-reimbursement contract, the cost proposal is not controlling, since advance estimates of cost may not be valid indicators of final actual costs. There is no requirement that cost-reimbursement contracts be awarded on the basis of lowest proposed cost, lowest proposed fee, or lowest total proposed cost plus fee. Proposed costs must be evaluated for realism in terms of the work to be done. The award of cost-reimbursement contracts primarily on the basis of estimated costs may encourage the submission of unrealistically low estimates and increase the likelihood of cost overruns. The primary consideration must be which offeror offers the best value to the Postal Service as determined by evaluation of proposals according to the established evaluation factors. 4.2.5.e Rejection of All Proposals. All proposals received must be rejected if the contracting officer determines that: 1. Prices proposed are unreasonable and discussions have not resulted in a reasonable price or prices; 2. All proposals are technically unacceptable; 3. Proposals were not independently arrived at in open competition, were collusive, or were submitted in bad faith (see 1.8.2 for required reports); or 4. The solicitation must be cancelled as provided in 4.1.2.j. 4.2.5.f Award Without Discussions 1. Award may be made without discussion of proposals whenever the existence of adequate competition or price analysis (see 5.3.3) makes it clear that acceptance of the most favorable initial proposal will result in a reasonable price. (See A.2.3, which requires that Provision A-9, Award Without Discussions, be included in all solicitations.) 2. Whenever there is uncertainty as to the pricing, technical, or other aspects of the most favorable initial proposal, award may not be made without discussions, unless the uncertainty can be resolved by clarification. Discussions must be held under such circumstance even if the solicitation contains Provision A-19, Notice of Intent to Award Without Discussions (see A.2. 3.b.4). 3. If the proposal offering the best value to the Postal Service involves a significant departure from the solicitation requirements, all offerors must be given an opportunity to submit new or revised proposals on a comparable basis, but only if that can be done without disclosing the solution proposed in the departure or any other information entitled to protection. 4. If equal low prices are proposed, and the solicitation specifies no other evaluation factors, selection of the proposal offering the best value to the Postal Service may be based on factors such as experience, record of performance, or other factors in the Postal Service's interest. Award may be determined by drawing lots only if there is no other basis for selection. 5. This procedure may be used to resolve mistakes without discussions: (a) The contracting officer informs the offeror of the suspected mistake, identifying the mistake and requesting verification. The contracting officer points out the circumstances giving rise to the suspicion of mistake (such as unusual solicitation requirements, changes from the requirements of previous purchases, or significant differences of the offeror's price from the Postal Service estimate or with other prices proposed) without disclosing other offers or the Postal Service estimate. If a mistake is alleged, the offeror may withdraw its proposal or seek its correction. (b) If the offeror verifies its proposal, the proposal is evaluated as submitted. (c) If the offeror requests correction of a mistake, the contracting officer, with the concurrence of assigned counsel, may permit the correction without discussion if both the existence of the mistake and the proposal actually intended are clearly ascertainable from the solicitation and the proposal. If there is insufficient evidence to permit the correction without discussions and discussions will not be held, the offeror must be given a final opportunity to withdraw its proposal. If not withdrawn, the proposal is evaluated as submitted. (d) Verification, withdrawal or correction under this procedure does not constitute discussion. Mistakes may also be resolved through discussions; see paragraph 2 above. 4.2.5.g Award With Discussions 1. Written or Oral Discussions. Whenever appropriate, written or oral discussions may be held with offerors to resolve uncertainties in their proposals, to give them an opportunity to correct deficiencies, and to give them an opportunity to revise their proposals. If discussions are held with one offeror, discussions must be held with all offerors in the competitive range. 2. Competitive Range (a) The competitive range must be determined by the contracting officer following evaluation of proposals. The competitive range must be determined on the basis of the evaluation factors stated in the solicitation and must include all proposals that have a reasonable chance of being selected for award, either as submitted or as revised following discussions. (b) The competitive range may not be established in advance on the basis of an arbitrary standard, but must reflect the chances of the competing proposals as evaluated, and the potential for improving the competitive position of the proposals through revision following discussions. Even if a proposal has a potential for significant improvement, it may be excluded from the competitive range if, relative to other proposals, it has no real chance of selection for award. When there is uncertainty as to whether a proposal is in the competitive range, it must be included. (c) The contracting officer must send prompt written notification to those offerors not in the competitive range and to those eliminated from the competitive range as a result of discussions. 3. Conduct of Discussions (a) The contracting officer is responsible for the conduct of discussions, with the assistance or participation of technical, accounting, or legal specialists as necessary or appropriate. The content, form, and extent of the discussions is a matter of the contracting officer's judgment. Discussions must be conducted so as to: (1) Advise the offeror of deficiencies in its proposal, in terms of Postal Service requirements, but not deficiencies relative to other proposals, nor deficiencies resulting from the offeror's lack of diligence or competence; (2) Attempt to resolve uncertainties concerning aspects of the proposal; (3) Resolve any suspected mistakes by calling them to the offeror's attention as specifically as possible without disclosing information concerning other offeror's proposals or the evaluation process (see 4.1.2.k); and (4) Provide the offeror a reasonable opportunity to submit any cost or price, technical, or other revisions to its proposal that may result from the discussions. (b) The contracting officer must ensure that no one involved in the discussions engages in: (1) Leveling (helping an offeror bring its proposal up to the level of other proposals by coaching or providing solutions or approaches described by the Postal Service); (2) Transfusion (disclosure of technical or other information pertaining to one proposal that results in improvement of a competing proposal); or (3) Auction techniques, such as: (i) Indicating to an offeror a cost or price that it must meet to obtain further consideration; or (ii) Furnishing information about other offerors' prices or advising an offeror of its price standing relative to another offeror. (However, it is permissible to inform an offeror that the Postal Service considers its cost or price too high or unrealistic.) 4. Best and Final Offers (a) Upon completion of discussions, the contracting officer must issue to all offerors still in the competitive range a request for best and final offers. Oral request for best and final offers must be confirmed in writing. (b) The request must include: (1) Notice that discussions are concluded; (2) Notice of the opportunity to submit best and final offers in the form of revisions to any aspect of the solicitation or original proposals; and (3) A common cutoff date and time that allows a reasonable opportunity for submission of written best and final offers. (c) After receipt of best and final offers, the contracting officer must not reopen discussions unless it is clearly necessary in the Postal Service's interest to do so, as when information available does not provide adequate basis for contractor selection and award. If discussions are reopened, the contracting officer must issue an additional request for best and final offers to all offerors still within the competitive range. 5. Selection and Negotiation (a) Following evaluation of best and final offers, the contracting officer must select for award the best and final offer offering the best value to the Postal Service, on the basis of the solicitation's stated evaluation factors. (b) Any uncertainties or deficiencies remaining in the proposal selected must be clarified or corrected through negotiations leading to a definitive contract. Negotiations must include the disclosure and resolution of all deficiencies and all unsubstantiated areas of cost and price, but no changes may be made in the Postal Service's requirements or in the proposal that, if made before contractor selection, would have affected the basis for selection. 4.2.5.h Contract Award 1. Contract award may be made by written acceptance of a proposal, or by execution of a contract by both parties. 2. If a proposed award requires higher-level approval or delegation of contracting authority, award may not be made until the approval or delegation has been obtained. 3. When more than one award results from any single solicitation, separate award documents must be executed, each suitably numbered. When an award is made to an offeror for fewer than all items that may be awarded to that offeror, and additional items are being withheld for subsequent award, the first award to that offeror must state that the Postal Service may make subsequent awards on additional items within the proposal acceptance period, if applicable. When two or more awards are made to a single offeror under a solicitation, the original copy of the proposal must be attached to the retained office copy of the first award, and duplicate copies attached to succeeding awards. 4.2.5.i Award Notification 1. Promptly after award, the contracting officer must send all offerors that submitted proposals a written notice including: (a) The number of proposals received; (b) The name and address of each offeror receiving an award; (c) The items, quantities, and unit prices of each award, or the total of estimated cost and fee for cost-reimbursement contracts; (d) If award was made without discussions, a statement to that effect; and (e) A brief statement of the basis for the selection decision. 2. If numerous multiple awards are made, the notice may state where award details may be reviewed. 4.2.5.j Debriefing 1. Unsuccessful offerors, upon their written request, must be debriefed and told the basis for selection decision and contract award. Prompt and forthright debriefings tend to reduce protests. 2. The contracting officer or a designated representative must conduct the debriefing, with the assistance and participation of technical and legal personnel, as appropriate. 3. Debriefing information must include the Postal Service's evaluation of the significant weak or deficient factors in the proposal, but point-by-point comparisons with other offerors' proposals must not be made. The identity and relative ranking of the offerors, the overall evaluation scores if proposals were scored, and the prices proposed may be disclosed if requested. 4. Information must not be disclosed to any offeror as to another offeror's: (a) Trade secrets; (b) Privileged or confidential manufacturing processes and techniques; (c) Business and financial information that is privileged or confidential, including cost breakdowns, profit, indirect cost rates, and similar information; or (d) Unique or innovative concepts contained in a proposal. 5. The contracting officer must include a summary of the debriefing in the solicitation file. 4.2.5.k Synopsis. Contract awards involving significant subcontracting opportunities must be synopsized in the Commerce Business Daily in accordance with 3.2.2. Section 3 Simplified Purchasing 4.3.1 General 4.3.1.a Applicability. The simplified purchasing procedures established in this section are for use in making fixed-price purchases up to the ceiling amount in paragraph b below, except: 1. Orders under indefinite-delivery contracts (see 5.1.5); 2. Orders under Postal Supply Schedules (see 3.1.4) or from other government sources (see 3.1.5); 3. Purchases from workshops for people who are blind or severely disabled (see 3.1.3); 4. Purchases from Federal Prison Industries, Inc. (see 3.1.5.a); 5. Procurement of mail transportation (see chapter 12); and 6. Purchases for which specific procedures are prescribed elsewhere in this manual. 4.3.1.b Ceiling. The general ceiling for simplified purchasing procedures is $100,000. If the dollar value of a prospective contract for standard commercial products or services is within a contracting officer's delegated contracting authority, he or she may decide to use simplified procedures for that particular contract when circumstances of competition and price reasonableness justify a higher ceiling. However, if the dollar value of the prospective contract equals or exceeds $1 million, simplified purchasing procedures may not be used. The suitability of a purchase for simplified procedures should be determined in the planning phase. Any special terms or clauses needed to protect the Postal Service or required by law or regulation must be added to the contractual document. 4.3.1.c Limitations. The ceilings are based on the requisition estimate, which must include all requirements that would properly be grouped together in a single solicitation. Requirements aggregating more than the ceiling may not be split or broken down into several purchasing procedures. 4.3.1.d Competition 1. The competitive threshold is ten percent of the simplified purchasing ceiling. 2. Competition must be sought to the extent practicable for purchases above the competitive threshold. Proposals or quotations must be solicited from a sufficient number of qualified sources (normally at least three) to ensure that the price is fair and reasonable. Adequate competition for simplified purchases can normally be obtained without soliciting outside the local trade area of the purchasing office or receiving activity. If sources outside the local trade area are solicited, source lists must be maintained in accordance with A.3. 3. Solicitations may be limited to one source if the contracting officer determines that only one source is available, subject to the requirements of section 4.4. 4. For purchases under the competitive threshold, competition is not required if the contracting officer determines that prices received are reasonable. Where practicable, noncompetitive purchases must be distributed equitably among qualified suppliers, and a quotation must be obtained from other than the previous supplier before placing a repeat order. 4.3.1.e Basis for Award 1. Policy. Simplified purchases are awarded to the proposer or quoter who offers the best value to the Postal Service. Depending on the product or service being purchased and the needs of the requiring organization, best value is obtained by basing the award on price or a combination of price with price-related factors, other evaluation factors, or both. 2. Price-based awards. Awards based solely on price are made to the responsible proposer or quoter who submits the lowest price. This method is normally used for standard commercial products or services of acceptable quality for which there is adequate competition (see also 4.3.2.c). 3. Awards based on price and price-related factors. Awards based on price and price-related factors are made to the responsible proposer or quoter whose submitted price, after taking into account stated price-related factors such as transportation charges (if appropriate), administrative costs associated with multiple awards, life cycle utility costs, etc., yields the lowest evaluated price. This basis may be only used when the price-related factors can be identified and quantified (assigned a cost) for the product or service being purchased. 4. Awards based on price and other evaluation factors (a) General. Awards based on price and other evaluation factors are made to the responsible proposer or quoter who submits the most advantageous proposal or quotation taking into account price and other stated evaluation factors which are of value or concern to the requiring organization, such as quality, experience, delivery schedule, maintainability, ease of operation, size, weight, etc. Award is determined by comparing differences in the evaluation of the other factors with differences in price to the Postal Service. This method should be used when price, or price and price-related factors, may not provide the best overall value to the Postal Service. Simplified procedures should not normally be used when the other evaluation factors are highly complex and will require lengthy or detailed submissions by the proposers or quoters. In such situations, standard purchasing procedures should be used (see 4.2). (b) Evaluation strategy. The use of other evaluation factors in simplified purchasing requires the development of an evaluation strategy. The evaluation strategy should be developed by the requirements organization or the procurement specialist, in close coordination with the requirements organization, and must be approved by the contracting officer prior to solicitation. The evaluation strategy must identify (1) the need to use other evaluation factors, (2) the evaluation factors to be used and their order of importance, (3) the relative overall importance of the other evaluation factors to price (i.e., greater than, equal to, less than), and (4) the individual or individuals who will perform the evaluation. 5. Awards based on price, price-related, and other evaluation factors (a) General. An award based on price, price-related, and other evaluation factors will be made on the basis of the most advantageous proposal or quotation, taking price-related factors into account in evaluating relative price, and taking other factors into account in relation to price in accordance with the pre-established evaluation strategy (see 4.3.1.e.4.(b)). (b) Evaluation strategy. An award based on this combination of factors requires an evaluation strategy (see 4.3.1.e.4.(b)). 4.3.1.f Prequalification. The contracting officer may restrict competition to approved sources or prequalified contractors (see 3.1.6) when necessary to ensure that quality requirements will be met. 4.3.2 Solicitations 4.3.2.a General. Solicitation of proposals or quotations may be done in writing or orally, at the discretion of the contracting officer. 4.3.2.b Solicitations 1. Written Solicitations. Because written solicitations provide a clearer understanding of the requirement, they should be used whenever practicable. 2. Oral Solicitations (a) General. An oral solicitation may be used when a written solicitation would be impracticable, as when processing a written solicitation would cause a delay detrimental to the Postal Service, or a standing price quotation is being verified. (b) Detailed specification or statement of work. Whenever an oral solicitation is used for a requirement with a detailed specification or statement of work, the specification or statement of work must be given, in writing, to each potential proposer or quoter. (c) Large number of items or tasks. Whenever an oral solicitation is used for a requirement with a large number of items or tasks, the detailed list of items or tasks must be given, in writing, to each potential proposer or quoter. (d) Price-related factors. Whenever price-related factors are used in an oral solicitation, they must be clearly identified for each potential proposer or quoter. Also, it must be made clear that the purchasing office will add any cost associated with a price-related factor to a proposal or quotation and that the proposer or quoter must not include that cost in their proposal or quotation. (e) Other evaluation factors. Whenever other evaluation factors are used in an oral solicitation, they must be clearly identified. These factors must be communicated to each potential proposer or quoter in descending order of importance and the proposer or quoter must be informed as to their overall relation to price (i.e., greater than, equal to, or less than). Proposers or quoters must then provide their response, either orally or in writing, to these evaluation factors. Procedures for communicating evaluation factors and receiving responses are in the relevant handbook. (f) Recording. The purchase file must clearly indicate the basis for award and any price-related or other evaluation factors that were used. 4.3.2.c Standing Price Quotations. When it is the practice for suppliers to furnish standing price quotations on supplies or services required on a recurring basis, this information may be used instead of issuing a written solicitation for each purchase. In such cases, the contracting officer must ensure that the price information is current and that the Postal Service obtains the benefit of the suppliers' trade discounts. Standing price quotations may be used only for price-based awards. 4.3.2.d Preparation of Solicitations. Detailed procedures for written and oral solicitations are in the relevant handbook. 1. For written solicitations, a combination solicitation, proposal, and award document is used. A signed proposal becomes a contract when the award portion is completed and signed by the contracting officer within the acceptance period specified. 2. A written request for quotations is used to solicit standing price quotations. 4.3.2.e Posting and Synopsis. Written solicitations for purchases over $100,000 must be posted in the public area of the purchasing activity and synopsized in the Commerce Business Daily in accordance with 3.2.2. 4.3.2.f Availability of Solicitations. Written solicitations, and information concerning oral solicitations, must be given to anyone requesting them. 4.3.2.g Amending Solicitations. If, after issuance of a written solicitation, changes must be made in quantity, specifications, or delivery schedule, or if corrections are needed, an amendment to the solicitation must be issued. The purchase file must be documented to show the reason for any amendment. As to amendments affecting Technical Data Packages (TDPs) see 2.3.3. 4.3.3 Receipt and Evaluation of Proposals and Quotations 4.3.3.a Receipt 1. Recording. Written and oral proposals or quotations must be clearly recorded in a format permitting ready comparison of prices and other details. The record must be placed in the purchase file. 2. Late Proposals and Quotations. Late proposals and quotations in response to written or oral solicitations may be considered when an award has not yet been made, if the contracting officer determines that doing so is in the Postal Service's interest. 4.3.3.b Evaluation. Evaluation must be made on the basis of best value to the Postal Service, taking into account price or a combination of price with price-related factors, or other evaluation factors, or both. Regardless of the basis of award, a price reasonableness determination must be made in accordance with section 5.3. 1. Price-based. Award will be made to the responsible proposer or quoter who submits the lowest price. 2. Price-related factors. Award will be made to the responsible proposer or quoter whose submitted price is lowest after the contracting officer's application of the stated price-related factors. 3. Other evaluation factors. Award will be made to the responsible proposer or quoter who submits the combination of price and other evaluation factors offering the best overall value to the Postal Service. This will be determined by comparing differences in the evaluation of other factors with differences in price to the Postal Service. The contracting officer must make the contractor selection decision and is responsible for trade-off judgments involving price and other evaluation factors. Contractor selection must be made in accordance with the evaluation strategy (i.e., price and other evaluation factors) and must be clearly noted in the purchase file. 4. Price-related and other evaluation factors. Award will be made to the responsible proposer or quoter who submits the combination of price, price-related, and other evaluation factors offering the best value to the Postal Service. Price-related factors will be taken into account in the evaluation of price, and other factors will be taken into account in relationship to price, as set out in paragraphs 2 and 3 above. 4.3.3.c Equal Proposals or Quotations. When two or more offerors meeting the requirements of the solicitation are evaluated as equally low, the contracting officer must select between them on the basis of performance record, experience, or other factors in the Postal Service's interest. Award may be determined by drawing lots only if there is no other basis for selection. 4.3.3.d Negotiation. The contracting officer may negotiate with offerors when necessary to ensure that prices are reasonable or to ensure that Postal Service requirements will be met. 4.3.3.e Contractor Responsibility. General standards of responsibility (see 3.3.1) apply, but the extent of review may be limited to readily available information. The contracting officer must make a determination of responsibility for purchases over $100,000, but a determination of nonresponsibility is required whenever the contracting officer finds that a prospective contractor is not responsible. 4.3.4 Ordering Methods Supplies and services may be ordered using any of the following methods, and by orders under basic pricing agreements (see 4.3.5): 4.3.4.a Acceptance of Proposal. When written solicitations are used (see 4.3.2.b.1 and 4.3.2.d), orders are issued by completing and signing the award portion of the solicitation. 4.3.4.b Purchase Order. A purchase order is used to place orders when quotations have been obtained in response to an oral solicitation or a request for quotations (see 4.3.2.d.2), and for unpriced purchase orders (see 4.3.7). Because a quotation is not a proposal subject to acceptance by the Postal Service, a purchase order issued in response to a quotation does not become a binding contract until the contractor either begins performance of the work or accepts the purchase order in writing (see 4.3.9.b). 4.3.4.c Local Purchase Order 1. Form 7444, Local Purchase Order, is a pocket-size purchase order form designed primarily for on-the-spot, over-the-counter purchases. It should be used only when a supplier requests it, and it may be used only for local purchase of supplies and services of $2,000 or less and when payment will be made locally (see the relevant handbook for local payment methods and procedures). 2. Form 7444 may not be used for: (a) Purchase of supplies or services for which there is an existing contract; (b) Communications services, fuel, and utility services, unless authorized; (c) Purchase of supplies and services for vehicle operations (except in emergencies described in Handbook PO-701, Fleet Management); or (d) Purchases of capital equipment items. 4.3.5 Basic Pricing Agreements 4.3.5.a General. A Basic Pricing Agreement (BPA) is an ordering agreement (see 5.1.8) which permits individuals designated by name or title to place orders by telephone, over-the-counter, or in writing. BPAs permit consolidated invoicing (usually monthly) for all purchases made. Establishing BPAs with suppliers from which frequent, repetitive purchases are made can significantly reduce paperwork and administrative costs. Although there is a ceiling for individual orders (see f.4) there is no limit on the aggregate value of orders under a BPA. 4.3.5.b Types 1. There are two types of BPA: priced and unpriced. 2. Prepriced BPAs establish prices for orders of supplies or services during the term of the BPA. 3. Unpriced BPAs do not establish prices. Prices are established when an individual order is made. 4.3.5.c Use. BPAs are used when: 1. A wide variety of items in a broad class of supplies (like hardware, electrical supplies or fuel) may be available from suppliers but quantities and delivery requirements are not known in advance and may vary considerably. BPAs may also be used for services. 2. The preparation of numerous written orders and processing of invoices can be avoided; or 3. There is a need to provide commercial sources of supply for ordering by offices that do not have other purchasing authority. 4.3.5.d Sources. BPAs should be established with suppliers from which numerous individual purchases will likely be made in a given period. For example, if past experience shows that certain suppliers are dependable and consistently lower in price than other suppliers, and if numerous small purchases are made from them, it would be advantageous to establish BPAs with them. BPAs should also be established with small, minority and woman-owned businesses. 4.3.5.e Multiple BPAs. Unpriced BPAs for the same class of supplies or services should be established concurrently with more than one supplier. This allows competition to be obtained before orders are placed. 4.3.5.f Restrictions. The following restrictions apply to BPAs: 1. BPAs may not be made for supplies or services required to be obtained or purchased from sources specified in 3.1. 2. BPAs may not be used for new construction or for repairs or alterations. 3. The term of a BPA may not exceed two years. 4. Individual orders may not exceed $10,000 (except for fuel, where the ordering limit is tank capacity). Local organizations may establish lower ceilings. 5. When using unpriced BPAs, competition must be obtained when placing orders over the competitive threshold (see 4.3.1.d); competition may be limited to suppliers holding BPAs. If competition is not obtainable, the purchase file must show the reason, and the order is subject to the requirements of 4.4. 6. Price reasonableness must be determined in accordance with 5.3.3.b. 4.3.5.g Establishing BPAs. BPAs, both priced and unpriced, are established in accordance with requirements for ordering agreements (see 5.1.8). For procedural guidance, see the relevant handbook. 4.3.5.h Ordering. Orders placed under BPAs are usually made orally. Written orders may be by letter or purchase order. Documentation of orders should be limited to essential information. 4.3.5.i Review. Contracting officers must review BPA files at least annually to ensure that authorized procedures are being followed and that continued use is justified. 4.3.6 Delivery Agreements 4.3.6.a General. A Delivery Agreement (DA) is an agreement under a Defense Fuel Supply Center (DFSC) contract, which allows the Postal Service to place delivery orders by telephone call, over-the-counter request, or letter instead of by written order. The DFSC contract generally describes the product which can be ordered, the prices or method for determining the prices, delivery terms and conditions, or specifies how they will be determined. 4.3.6.b Authorization 1. The DFSC contracting officer is the only person authorized to negotiate with the contractor to change or terminate the DFSC contract. 2. Individuals authorized to place orders pursuant to the DA are identified either by name or by position title. 4.3.6.c Use. The use of DAs should be considered when repetitive orders are anticipated since they can significantly reduce paperwork and administrative costs. 4.3.6.d Restrictions 1. The term of a DA cannot exceed the term of the DFSC contract. 2. Individual orders and maximum orders may not exceed the limits established in the DFSC contract. 4.3.7 Unpriced Purchase Orders 4.3.7.a General. An unpriced purchase order is an order for supplies or services issued before a price is established. Unpriced purchase orders may be used only when it is impossible to establish a reasonable price before issuing the order. If a price cannot be established before delivery or completion of work, the contracting officer must ensure that the amount invoiced is reasonable before approving payment. 4.3.7.b Price Ceiling. Any unpriced purchase order must contain Clause 4-1, Notice to Suppliers, filled in with a realistic monetary limitation. 4.3.7.c Examples. Examples of situations in which unpriced purchase orders may be used are as follows: 1. Repairs to equipment that must be disassembled to determine the nature and extent of repairs needed. The contracting officer should attempt to establish basic hourly labor rates, an estimate of total hours for the job, and a parts price limitation, in addition to the price ceiling. 2. Services that must begin before the extent or the exact scope of work is known. The contracting officer should attempt to establish basic hourly rates and an estimate of the total hours or days for the job, in addition to the price ceiling. 3. Supplies needed from a catalog that may not be current, when there is not enough time to verify current prices before ordering. 4.3.8 Debriefings There is no requirement to notify unsuccessful offerors or quoters. If an unsuccessful offeror or quoter requests an explanation of why it did not receive an award, a debriefing may be accomplished in person or by telephone. The contracting officer should: 4.3.8.a Explain the basis for award in a way that leaves no doubt that the award decision was made fairly, impartially, and objectively; and 4.3.8.b Take care not to disclose any offeror's confidential business data (the price offered by the successful offeror is not confidential business data). 4.3.9 Administration 4.3.9.a General. Purchases must be administered in accordance with the terms and conditions of the order or agreement. The requirements of chapter 6 are applicable except as qualified in this section 4.2. 4.3.9.b Cancellation 1. An order placed by accepting a proposal is a contract that may be cancelled or terminated by the parties only according to its terms unless the parties mutually agree to the action. See 6.9.2 (termination for convenience), 6. 9.3 (termination for default), and 6.9.1.c (no-cost cancellation). 2. A purchase order is an offer by the Postal Service to purchase that may be cancelled or withdrawn by the Postal Service in whole or part before acceptance by the contractor. Acceptance of a purchase order occurs when: (a) A written acceptance is mailed or otherwise furnished by the contractor; or (b) The contractor begins performance of the work called for by the purchase order.If a contractor does not accept a notice of cancellation and presents satisfactory evidence that acceptance of the purchase order had occurred before receipt of the notice, the contracting officer must either proceed to terminate the contract for convenience or allow performance to continue. 3. Examples of situations in which cancellation may be necessary include administrative error and changed requirements. 4. Cancellation must be done in writing, by letter or telegram, or by amendment of the solicitation. Section 4 Noncompetitive Purchasing 4.4.1 General 4.4.1.a Definition. A noncompetitive purchase is any purchase of supplies or services from one source without competition. 4.4.1.b Limitations on Use. Noncompetitive purchasing methods may be used only when competitive purchasing is not feasible or appropriate. 4.4.1.c Applicability. This section applies to all purchases except: 1. Orders placed against mandatory national and area contracts (see 3.1.4). 2. Purchases from a single approved source (where only one source is approved; see 3.1.6.b). 3. Orders placed under indefinite-delivery contracts (see 5.1.5). 4. Purchases not exceeding the competitive threshold (see 4.3.1.d). 5. Orders placed against GSA's Federal Supply Schedules and from other non-GSA government sources, including Federal Prison Industries (see 3.1.5). Group 70 and Group 58 IRMS FIPS schedule contracts (see 3.1.5.b.3) do not fall within this exception. 6. Purchases of supplies and services from qualified workshops (as determined by the Committee for Purchase from People who are Blind or Severely Disabled) who are employing people who are blind or severely disabled (see 3.1. 3). 7. Contracts with any federal, state, or local government agencies. 8. Contracts with firms that provide supplies or services (such as utilities and passenger or general freight transportation services, but not including the transportation of mail) subject to uniform tariff, government regulation or areawide rates. 9. Institutional memberships authorized by Employee and Labor Relations Manual (ELM) 750, exhibition fees, booth space, and attendance at outside conferences. 10. Subscriptions and renewals of subscriptions to periodicals and serial publications (includes electronic information service subscriptions). 11. Advertisements. 12. Certain repurchases against a defaulted contractor's account (see 6.10.1. b.3). 13. Modifications within the scope of a contract or the exercise of contractual options, such as lease extensions and renewal options. 14. Modifications, enhancements, upgrades, maintenance, and renewals of licenses or leases for previously purchased commercial computer software. 15. Architect-Engineering contracts (see 11.3). 16. Repairs and improvements to leased postal facilities when performed pursuant to provisions of the lease. 17. Acquisitions and sales of real estate. 18. Contracts with Federally Funded Research and Development Centers (FFRDCs) and similar nonprofit organizations, for theoretical analysis, exploratory studies, experiments in any field of science and technology, and for engineering or developmental work applying investigative findings and theories of a scientific or technical nature. 4.4.2 Justification 4.4.2.a Circumstances. Circumstances under which noncompetitive purchasing may be appropriate and justified include: 1. Demonstration, after adequate investigation, of the existence of only one source capable of meeting Postal Service requirements; 2. Spare parts or replacements of specified makes and models when required for standardization or when specifications or data needed for competition are lacking; 3. Unusual and compelling urgency, when delay would seriously harm the Postal Service; 4. Requirement of a brand-name commercial product for authorized resale; 5. Acceptance of an unsolicited proposal; and 6. When competitive purchasing would not be in the interest of the Postal Service. 4.4.2.b Reference. Every noncompetitive purchase must be justified in writing and approved in accordance with Management Instruction AS-710-95-7, Noncompetitive Purchases. 4.4.3 Procedures 4.4.3.a The same procedures as those required for award with discussions (see 4.2.5.g) are used, except that solicitation may be by letter, the restrictions on conduct of discussions do not apply, no best and final offer is required, and contractor selection will normally have been justified and documented in the procurement plan (see 2.1.4) or the requisition. 4.4.3.b Particular attention must be given to pricing in a noncompetitive purchase, and cost analysis may be required in addition to price analysis (see 5.3.3). Price negotiations must be fully documented (see 4.3.3), and the contracting officer must make a written determination of price reasonableness, fully explaining the basis for the determination. 4.4.3.c Contract awards must be synopsized in the Commerce Business Daily in accordance with 3.2.2.d. Section 5 Price Negotiation 4.5.1 Prenegotiation Objectives 4.5.1.a Whenever negotiations are to be held to reach agreement on price, fee, and contract terms and conditions (whether for an initial contract award or contract modification), the contracting officer must establish written prenegotiation objectives commensurate with the dollar value and complexity of the contract or contract modification. If the dollar value exceeds the contracting officer's authority, the prenegotiation objectives must be approved at the next higher level having the necessary authority. 4.5.1.b The process of determining prenegotiation objectives helps the contracting officer to judge the overall reasonableness of the price proposed and to negotiate a fair and reasonable price or cost fee. In setting the prenegotiation objectives, the contracting officer must analyze the offeror's or contractor's proposal, taking into account any advisory reports received and other pertinent data such as independent cost estimates and price histories. This process may include prenegotiation fact-finding sessions with the offeror or contractor when the contracting officer deems them appropriate. 4.5.1.c The scope and depth of the analysis supporting the objectives should be directly related to the dollar value, importance, and complexity of the pricing action. when cost analysis is required, the analysis must address: 1. The pertinent issues to be negotiated; 2. The cost objectives; and 3. A profit or fee objective. 4.5.2 Negotiation 4.5.2.a Price negotiation does not require that agreement be reached on every element of cost. Reasonable compromises may be necessary, and it might not be possible to negotiate a price that accords with all advisory opinions or with the contracting officer's prenegotiation objectives. The contracting officer is responsible for exercising the necessary judgment and is solely responsible for the final pricing decision. The recommendations of auditors and other specialists are advisory only; however, the contracting officer must include explanatory comment in the memorandum of negotiation when significant audit or other specialist recommendations are not adopted. 4.5.2.b The negotiation of contract type and price are related and should be considered together with the issues of risks and uncertainty to the contractor and the Postal Service. Therefore, the contracting officer should not become preoccupied with any single element, but should balance the contract type, cost, and profit or fee negotiated to achieve a total result and price fair and reasonable to both the Postal Service and the contractor. Because profit or fee is only one of several interrelated variables, the contracting officer must not agree on profit or fee without concurrent agreement on cost and type of contract. 4.5.2.c If the offeror or contractor insists on a price or demands a profit or fee that the contracting officer considers unreasonable, and no other source is available, the contracting officer must refer the matter to the VP, P&M, for resolution. 4.5.3 Memorandum of Negotiation Following any negotiation of an initial or revised price, the contracting officer must promptly prepare a memorandum of the principal elements of the price negotiation. The memorandum must be included in the contract file and must contain at least the following information: 4.5.3.a The purpose of the negotiation. 4.5.3.b A description of the purchase, or contract modification, with identifying number. 4.5.3.c The name, position, and organization of each person representing the offeror or contractor and the Postal Service in the negotiation. 4.5.3.d If cost or pricing data have been obtained, the extent to which the contracting officer: 1. Relied on the cost or pricing data submitted, and used them in negotiating the price; and 2. Recognized as inaccurate, incomplete, or noncurrent any cost or pricing data submitted; the action taken by the contracting officer and the offeror or contractor as a result; and the effect of the defective data on the price negotiated. 4.5.3.e A summary of the offeror's or contractor's proposal, any advisory report recommendations, and the reasons for any significant variances from the advisory recommendations. 4.5.3.f The most significant facts or considerations controlling the establishment of the prenegotiation price objective and the negotiated price, including an explanation of any significant differences between the two positions. 4.5.3.g The basis for determining the profit or fee prenegotiation objective and the profit or fee negotiated. Section 6 Protests 4.6.1 Applicability This section applies to all protests against Postal Service contracting procedures and awards, including special categories of contracts described in other chapters of this manual. The General Accounting Office (Comptroller General) does not have jurisdiction to consider protests arising out of Postal Service contracting practices. See 10.2.5.i for protests involving eligibility under the Walsh-Healey Public Contracts Act. 4.6.2 Definitions 4.6.2.a Protest. A written objection by any interested party concerning the terms of a solicitation, the award or proposed award of a contract, or any other action relating to the solicitation or award of a contract. 4.6.2.b General Counsel. The Senior Counsel, Contract Protests and Policies, who has been designated as the General Counsel's representative to consider and decide protests and to take any other action that this section requires to be done by the General Counsel. 4.6.2.c Working days. This excludes Saturdays, Sundays, and federal holidays. 4.6.3 Filing 4.6.3.a A protest must be in writing and filed with the contracting officer or with the General Counsel. It must identify the solicitation or contract protested and set forth a complete statement of the alleged defects or grounds that make the solicitation terms or the award or proposed award defective. Mere statement of intent to file a protest is not a protest. 4.6.3.b If an initial protest is sent both to the contracting officer and to the General Counsel, it will be considered to have been intended for consideration by the primary addressee. For example, if a protest is addressed to the contracting officer, and it indicates that a copy is being furnished to the General Counsel, the protest is for consideration by the contracting officer in accordance with 4.6.6 below. If the primary addressee cannot be determined, the protest will be considered to be intended for the General Counsel, and will be handled in accordance with 4.6.7 below. 4.6.4 Timeliness 4.6.4.a The Postal Service intends to complete its purchasing actions in a timely fashion while ensuring fair treatment to firms and individuals. A protester must furnish any protest to the contracting officer or the General Counsel in a manner that will ensure its timely receipt. Protests received by the contracting officer or the General Counsel after the time limits prescribed by this section 4.6 will not be considered. 4.6.4.b Protests based upon alleged deficiencies in a solicitation that are apparent before the date set for the receipt of proposals must be received by the date and time set for the receipt of proposals. 4.6.4.c Protests of alleged deficiencies in the solicitation after the receipt of initial proposals must be received not later than the next closing date and time for the receipt of proposals. 4.6.4.d In all other cases, protests must be received not later than ten working days after the information on which they are based is known or should have been known, whichever is earlier; provided that no protest will be considered if received more than 15 working days after award of the contract in question. 4.6.4.e If a protest has been filed initially with the contracting officer, any subsequent protest to the General Counsel received within ten working days of the protester's formal notification of, actual knowledge of, or constructive knowledge of initial adverse action by the contracting officer will be considered, provided the initial protest was received in accordance with the time limits in paragraphs b through d above. 4.6.5 Contract Award 4.6.5.a When a timely protest has been filed with either the contracting officer or the General Counsel before contract award, award may not be made until the matter has been resolved, unless the responsible VP, after consulting with counsel, determines that the Postal Service will be seriously injured, financially or otherwise, by delaying award until the protest has been resolved, and that the award should be made without awaiting the decision. When authorized to make an award before a protest is resolved, the contracting officer must, at the time of or before the award, give notification of the award to the protester, any other commenting parties, and the General Counsel (if the protest is before the General Counsel). 4.6.5.b When a protest filed after award is eligible for consideration under this section 4.6, the contracting officer must immediately furnish to the contractor a notice of the protest and the basis for it. The contracting officer, with the advice of assigned counsel, must determine whether it would be in the interest of the Postal Service to allow the contractor to proceed, seek a mutual agreement with the contractor to suspend performance on a no-cost basis, issue a unilateral stop-work order, or take other appropriate action. 4.6.6 Protests Received by Contracting Officers 4.6.6.a Contracting officers must consider all timely protests received, except any that are being considered by the General Counsel in accordance with 4. 6.3.b. The protester must be notified in writing of the contracting officer's decision. 4.6.6.b A contracting officer's decision on a protest must be issued within ten working days after receipt of the protest. If a contracting officer determines that a protest is obviously meritorious, the contracting officer may take such action as is appropriate. 4.6.6.c The contracting officer, if unable to conclude that a protest is obviously meritorious, may, within the time allowed for a decision: 3. Refer the protest to the General Counsel for resolution in accordance with 4.6.7 below; or 4. With the concurrence of assigned counsel, determine that the protest is obviously without merit and advise the protester in writing accordingly. 4.6.7 Protests Received by the General Counsel 4.6.7.a Promptly after receiving a protest filed with the General Counsel, the General Counsel must notify the contracting officer by telecommunication of its receipt and, unless a copy has been furnished, send the contracting officer a copy of the protest together with any accompanying documents other than those already in the contract file. Any additional statements or documents received by the General Counsel in the course of the protest must be furnished to the contracting officer unless it appears that the contracting officer has previously been furnished them. 4.6.7.b Within five working days after referring a protest to the General Counsel or receipt of notification that a protest has been filed with the General Counsel, the contracting officer must: 1. In the case of a protest against the terms of a solicitation, notify the known prospective offerors that a protest has been filed and of the basis for the protest; or 2. In case of any other protest, notify the offerors that might be affected that the protest has been filed and of the basis for the protest. 4.6.7.c The notices to the offerors must state that they may, if they wish, submit their opinions and relevant information on the protest if, within five working days of receipt of the notice, they advise the General Counsel (with a copy to the contracting officer) of their intention to make such a submission, and they make the submission within a reasonable time. 4.6.7.d Material submitted by a protester will not be withheld from any interested party that may be involved in the protest except to the extent that the withholding of information is permitted or required by law or regulation (see 1.7.4 and 4.2.5.j.4). If a protester considers that a protest contains material that should be withheld, a statement to that effect should be contained in the protest and the alleged proprietary information identified wherever it appears. If, because of such a claim or for other reasons, copies of the protest cannot be furnished to affected offerors, the contracting officer's notification of the basis for the protest will be as detailed as practicable in order to allow the offerors the opportunity to comment substantively on the protest. 4.6.7.e Within ten working days of referring a protest to or receiving notification of a protest from the General Counsel, the contracting officer must send the General Counsel a report that includes: 1. The contracting officer's statement of the circumstances relevant to the protest, including specific responses to each allegation in the protest and the contracting officer's findings, determinations, and conclusions; and 2. Copies (unless originals have been specifically requested) of any documents relevant to the protest, including as many of the following as might be applicable: (a) The solicitation (including the specifications or relevant parts); (b) The proposal submitted by the protester and the proposal against which the protest is directed; (c) The evaluation of proposals; and (d) Any other documents, statements, or materials necessary to determine whether the protest is valid. 4.6.7.f The contracting officer should seek the assistance of assigned counsel in preparing the statement and report. 4.6.7.g Concurrent with furnishing the report to the General Counsel, the contracting officer must also furnish a copy of the statement (see subparagraph e.1 above) and copies of any other documentation necessary to give a full and clear understanding of the issue to the protester and any interested party who has indicated a desire to comment on the protest. When the protester, or the interested party, indicates that the protester or the party is represented by counsel, a copy of the statement must be provided to that counsel. The contracting officer must include, in the material furnished to the General Counsel, a statement that this distribution has been made and must identify the parties to which they have been sent. 4.6.7.h The protester, or any interested party, may submit comments on the contracting officer's statement. Such comments will be considered timely if received within five working days of the commenter's receipt of the statement. Any rebuttal to any such comments a protester, other participant, or the contracting officer may care to make will be considered if received within five working days after the party's receipt of the comments to which the rebuttal is directed. The failure of a party to comply with these time limits may result in the resolution of the protest without consideration of the untimely comments. 4.6.7.i When it is necessary to obtain a clear understanding of the protest, the General Counsel may ask the contracting officer for additional information with respect to issues raised by the protest or by comments of other parties. Contracting officers must respond to such requests within ten working days. The contracting officer must distribute copies of such responses,as well as of any rebuttal submitted under paragraph h above, in the manner indicated in paragraph g above. 4.6.7.j The protester, or any interested party, may request a conference with the General Counsel in connection with any protest under consideration by the General Counsel. The requests must be received within the time allowed for commenting on the contracting officer's statement. When more than one party to a protest requests a conference, separate conferences will be held. Any written comments to be submitted as the result of a conference must be received within five working days of the date of the conference. 4.6.7.k If the time for acceptance of proposals may expire before a protest will be resolved by the General Counsel, the contracting officer should request an extension of the time for acceptance of proposals (with the consent of sureties, if any) from each offeror whose proposal may be eligible for acceptance. 4.6.7.l The General Counsel has established a goal of 15 working days after receipt of all information submitted by all parties and the conclusion of all conferences for issuing a decision on a protest. 4.6.7.m The General Counsel's decision on a protest disposes of the matter. Copies of the General Counsel's decision must be furnished to the contracting officer, the responsible VP, the protester, and any other participant in the protest. The General Counsel maintains a file of all protest decisions. Requests to be added to the mailing list for all protest decisions of the General Counsel should be directed to the Senior Counsel, Contract Protests and Policies. 4.6.7.n The protester, any interested party that submitted comments on the protest, or the contracting officer may request reconsideration of a protest decision. The request for reconsideration must contain a detailed statement of the factual and legal grounds upon which reversal or modification is deemed warranted, specifying any errors of law made or information not considered. A request for reconsideration of a decision must be received by the General Counsel not later than ten working days after the basis for reconsideration is known or should have been known, whichever is earlier, but in no case more than 20 working days after the issuance of the protest decision. 4.6.7.o The General Counsel may decline to decide any protest when the matter involved is the subject of litigation in any court of competent jurisdiction or has been decided on the merits in such a court. The foregoing does not apply when the court requests, expects, or otherwise expresses interest in the General Counsel's decision. 4.6.7.p Notwithstanding any other provision of this section, when a protest is clearly without legal merit or is not reviewable by the General Counsel under these procedures, the protest may be summarily denied or dismissed without a report from the contracting officer. When the propriety of summary denial or dismissal becomes clear only after information is provided by the contracting officer or otherwise obtained by the General Counsel, the protest may be denied or dismissed at that time. Chapter 5 Contract Pricing Section 1 Types of Contracts 5.1.1 General 5.1.2 Selection of Contract Type 5.1.3 Fixed Price Contracts 5.1.3.a Firm-Fixed-Price Contract 5.1.3.b Fixed-Price Incentive Contract 5.1.3.c Fixed-Price Contract with Economic Price Adjustment 5.1.3.d Clauses 5.1.4 Cost-Reimbursement Contracts 5.1.4.a General 5.1.4.b Limitations 5.1.4.c Cost Contract 5.1.4.d Cost-Sharing Contract 5.1.4.e Cost-Plus-Incentive-Fee Contract 5.1.4.f Cost-Plus-Fixed-Fee Contract 5.1.4.g Clauses 5.1.5 Indefinite-Delivery Contracts 5.1.5.a General 5.1.5.b Ordering 5.1.5.c Definite-Quantity Contract 5.1.5.d Indefinite-Quantity Contract 5.1.5.e Requirements Contract 5.1.5.f Clauses 5.1.6 Time-and-Materials and Labor-Hour Contracts 5.1.6.a Time-and-Materials Contract 5.1.6.b Labor-Hour Contract 5.1.6.c Clause 5.1.7 Letter Contracts 5.1.7.a Description 5.1.7.b Application 5.1.7.c Limitations 5.1.7.d Clauses 5.1.8 Ordering Agreements 5.1.8.a General 5.1.8.b Limitations 5.1.8.c Content of Agreement 5.1.8.d Ordering 5.1.8.e Pricing 5.1.9 Task Order Contracts 5.1.10 Multiyear Contracts 5.1.10.a Requirements 5.1.10.b Definite-Quantity Section 2 Cost Principles 5.2.1 General 5.2.2 Contract Cost 5.2.2.a Composition of Total Cost 5.2.2.b Direct Costs 5.2.2.c Indirect Costs 5.2.2.d Credits 5.2.3 Cost Allowability 5.2.3.a Determining Allowability 5.2.3.b Reasonableness 5.2.3.c Allocability 5.2.4 Advance Agreements 5.2.5 Unallowable Costs 5.2.5.a Categories of Unallowable Costs 5.2.5.b Exclusion of Unallowable Costs 5.2.6 Termination Costs 5.2.6.a General 5.2.6.b Common Items 5.2.6.c Costs Continuing After Termination 5.2.6.d Start-Up Costs 5.2.6.e Loss of Useful Value 5.2.6.f Rental Under Unexpired Leases 5.2.6.g Alterations of Leased Property 5.2.6.h Settlement Expenses 5.2.6.i Subcontractor Claims 5.2.7 Construction and Architect-Engineer Contracts 5.2.8 Facilities Contracts 5.2.9 Educational Institutions 5.2.10 Nonprofit Organizations 5.2.11 State, Local, and Indian Tribal Governments 5.2.12 Indirect Cost Rates 5.2.12.a General 5.2.12.b Definitions 5.2.12.c Billing Rates 5.2.12.d Determination Procedure 5.2.12.e Educational Institutions 5.2.12.f Nonprofit Organizations 5.2.12.g State, Local, and Indian Tribal Governments 5.2.12.h Cost-Sharing Rates 5.2.12.i Ceilings on Indirect Cost Rates Section 3 Price Evaluation 5.3.1 General 5.3.2 Definitions 5.3.3 Proposal Analysis 5.3.3.a Contracting Officer's Responsibility 5.3.3.b Price Analysis 5.3.3.c Adequate Price Competition 5.3.3.d Cost Analysis 5.3.3.e Technical Analysis 5.3.3.f Cost or Pricing Data 5.3.3.g Profit 5.3.3.h Defective Cost or Pricing Data 5.3.3.i Clauses Chapter 5 Contract Pricing Section 1 Types of Contracts 5.1.1 General 5.1.1.a The negotiation of contract type and price are closely related and must be considered together with the issues of risk, uncertainty, and responsibility for costs. 5.1.1.b The type of contract used should reflect the cost risk and responsibility assumed by the contractor. Full cost responsibility is assumed under a firm-fixed-price contract, while there is minimal cost responsibility under a cost-reimbursement contract. The profit or fee arrangement should also reflect the cost responsibility assumed. 5.1.1.c Any type of contract described in this section may be used, as appropriate to the procurement. When in the Postal Service's interest, the contracting officer may decide to use a type of contract not described in this section, subject to the approval of the manager of Headquarters Purchasing, Field Customer Support, Major Facilities Purchasing, or National Mail Transportation Purchasing. 5.1.1.d When a contract type other than firm-fixed-price is used, the contract file must include adequate documentation to support the choice. 5.1.2 Selection of Contract Type 5.1.2.a The contracting officer is responsible for negotiating the least costly contract type appropriate to the circumstances of the procurement. 5.1.2.b Although contract type is a matter for negotiation, competitive purchasing procedures require that the solicitation specify a particular type of contract (permitting alternatives, if appropriate) in order to provide a basis for comparing proposals. Provision 5-1, Type of Contract, must be included in all solicitations. Clause B-3, Contract Type, must be included in all contracts awarded without the issuance of a written solicitation. A cost-plus-a-percentage-of-cost contract may not be used. 5.1.2.c A firm-fixed-price contract is generally preferred because it makes the contractor fully responsible for cost control and minimizes the need for Postal Service monitoring of performance. But if no reasonable basis for firm pricing exists, requiring a firm-fixed-price contract may reduce competition and lead to higher prices because of allowances for contingencies added to protect contractors from perceived risks. Whenever the probable cost of contract performance cannot be realistically estimated, a firm-fixed-price contract should not be used. 5.1.2.d When a firm-fixed-price contract cannot be used, costs can still be controlled by using incentives. Efficient contract performance is promoted by relating the amount of profit or fee payable under the contract to the contractor's ability to manage costs effectively. 5.1.2.e Cost-reimbursement contracts are suitable for use when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract. 5.1.2.f Factors to be considered in deciding contract type include: 1. Realism of cost estimate; 2. Extent of competition; 3. Performance risks and uncertainties; 4. Complexity of the requirement; 5. Adequacy and firmness of specifications; 6. Likelihood of changes; 7. Prior experience (pricing and production); 8. Extent of subcontracting; 9. Adequacy of contractor's cost estimating and accounting system; and 10. Urgency of the requirement. 5.1.3 Fixed Price Contracts 5.1.3.a Firm-Fixed-Price Contract 1. Description. A firm-fixed-price contract establishes a price that is not subject to adjustment based on the cost of performance. It places upon the contractor full responsibility for all costs and the resulting profit and loss, maximizing the incentive to control costs and perform effectively. It is the least burdensome type of contract to administer if requirements are stable; if frequent changes are likely, administration will be difficult. 2. Application. A firm-fixed-price contract is suitable for purchasing standard or modified commercial products, or supplies or services having reasonably definitive specifications or statements of work, and whenever fair and reasonable prices can be established at the outset, such as when: (a) There is adequate price competition (see 5.3.3.c); (b) Price analysis (see 5.3.3.b) indicates price reasonableness; (c) In noncompetitive situations, cost or pricing data are adequate to permit realistic estimates of the costs of performance; or (d) The cost impact of performance uncertainties can be estimated closely enough to reach agreement on a reasonable price representing assumption of the risks involved. 5.1.3.b Fixed-Price Incentive Contract 1. Description. A fixed-price incentive contract is a fixed-price contract that provides for adjusting profit and establishing the final contract price by applying a formula based on the relationship of total final negotiated cost to total target cost. For each item subject to incentive price revision, the contract specifies a target cost, a target profit, a target price, a price ceiling, and a profit adjustment formula. The price ceiling is the maximum that may be paid to the contractor, except for adjustments specially provided for under contract clauses. When contract performance is completed, the parties negotiate the final cost, and the final price is established by applying the formula. When the final cost is less than the target cost, application of the formula results in a final profit greater than the target profit; when final cost is more than target cost, application of the formula results in a final profit less than the target profit. If the final negotiated cost exceeds the price ceiling, the contractor absorbs the difference as a loss. Because the profit varies inversely with the cost, this contract type provides a positive, calculable profit incentive for the contractor to control costs. Billing prices are established as an interim basis for payment; the billing prices may be adjusted if it becomes apparent that the final negotiated cost will be substantially different from target cost. 2. Application. A fixed-price incentive contract is appropriate when the parties can negotiate at the outset an initial target cost, target profit, and profit adjustment formula that will provide a fair and reasonable incentive and a ceiling that provides for the contractor to assume appropriate share of the risk. When the contractor assumes a considerable or major share of the cost responsibility under the adjustment formula, the target profit should reflect this responsibility. 3. Limitations. This contract type may be used only when: (a) A firm-fixed-price contract is not suitable; (b) There is an adequate basis for establishing reasonable firm targets at the time of initial contract negotiations; and (c) The contractor's accounting system is adequate for providing data to support negotiation of final cost and incentive price revision. 5.1.3.c Fixed-Price Contract with Economic Price Adjustment 1. Description. A fixed-price contract with economic price adjustment provides for the upward and downward revision of the stated contract price upon the occurrence of contingencies that are defined in the contract. Upward adjustments are limited by the establishment of a reasonable ceiling, and provisions are included for downward adjustments when prices or rates fall below the base levels provided in the contract. In establishing the base levels from which adjustments will be made, the contracting officer must ensure that the base does not include allowance for any of the defined contingencies. Economic price adjustments are of two types: (a) Adjustments Based on Actual Costs of Labor or Materials. These price adjustments are based on increases or decreases in specified costs of labor or material that the contractor actually experiences during contract performance. (b) Adjustments Based on Cost Indexes of Labor or Materials. These price adjustments are based on increases or decreases in labor or material cost standards or indexes specifically identified in the contract. 2. Application 3. General. This type of contract is appropriate when there is serious doubt as to the stability of market and labor conditions that will exist during an extended period of performance, and when contingencies that would otherwise be included in a firm-fixed-price contract are identifiable and can be covered separately. Its usefulness is limited by the difficulties of its administration. (a) Adjustments Based on Actual Costs of Labor or Material (1) A contract may provide for adjustments based on actual costs of labor or material when: (i) The contract is over $100,000 in amount and over six months in duration; (ii) There is no major element of design, engineering, or developmental work involved; (iii) One or more identifiable labor or material cost factors are subject to change; and (iv) Adjustments will be limited to contingencies beyond the contractor's control. (2) The schedule must describe in detail the types of labor and material subject to escalation, the labor rates (including fringe benefits) and unit prices of materials that may be increased or decreased, and the quantities of labor and specified materials allocable to each unit of supplies to be delivered under the contract. The percentage figure used in subparagraph c.6 of the clause may not exceed ten percent. In negotiating adjustments under the clause, the contracting officer must consider work in process and materials on hand at the time of changes in labor rates or materials prices, since these elements may have a significant impact on equitable price adjustments. (b) Adjustments Based on Cost Indexes of Labor or Material (1) A contract may provide for adjustments based on cost indexes of labor or material when: (i) The contract involves an extended period of performance with significant costs to be incurred beyond one year after performance begins; (ii) The contract amount subject to adjustment is substantial; and (iii) The economic variables for labor and materials are too unstable to permit a reasonable division of risk between the Postal Service and the contractor without providing for such adjustments. (2) The contracting officer must develop a clause tailored to the circumstances of the procurement, with the assistance of assigned counsel. 5.1.3.d Clauses 1. All fixed-price contracts must include Clause 5-1, Payment - Fixed-Price. 2. All fixed-price incentive contracts must also include Clause 5-2, Incentive Price Revision, properly filled in. 3. Fixed-price contracts providing for economic price adjustment based on actual costs of labor or material (see c.2(b) above) must include Clause 5-3, Economic Price Adjustment - Labor and Materials. 5.1.4 Cost-Reimbursement Contracts 5.1.4.a General. Cost-reimbursement contracts provide for payment of allowable incurred costs as prescribed in the contract. They establish an estimate of total cost for the purpose of committing funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer. Cost-reimbursement contracts are suitable for use only when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use a fixed-price contract. 5.1.4.b Limitations. A cost-reimbursement contract may be used only when: 1. The contractor's accounting system is adequate for determining costs applicable to the contract; and 2. Appropriate Postal Service monitoring during performance will provide reasonable assurance that efficient methods and effective cost controls are used. 5.1.4.c Cost Contract. A cost contract is a cost-reimbursement contract under which the contractor receives no fee. A cost contract may be appropriate for research and development work, particularly with nonprofit educational institutions or other nonprofit organizations. 5.1.4.d Cost-Sharing Contract. A cost-sharing contract is a cost-reimbursement contract under which the contractor receives no fee and is reimbursed only an agreed upon portion of its allowable costs. It is suitable for use where there is a high probability that the contractor will receive substantial commercial benefits as a result of contract performance. 5.1.4.e Cost-Plus-Incentive-Fee Contract 1. Description. A cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to target cost. This contract type specifies a target cost, a target fee, minimum and maximum fees, and a fee adjustment formula. After contract performance, the fee payable to the contractor is determined in accordance with the formula. The formula provides, within limits, for increases in fee above target fee when total allowable costs are less than target cost, and decreases in fee below target fee when total allowable costs exceed target cost. This increase or decrease is intended to provide an incentive for the contractor to manage the contract effectively. When total allowable costs are greater than or less than the range of costs within which the fee-adjustment formula operates, the contractor is paid total allowable costs, plus the minimum or maximum fee. 2. Application. A cost-plus-incentive-fee contract is suitable when a cost-reimbursement contract is appropriate and a target cost and fee adjustment formula likely to motivate the contractor to manage the contract effectively can be negotiated. The fee adjustment formula should provide an incentive effective over the full range of reasonably foreseeable variations from target cost. If a high maximum fee is negotiated, the contract must provide for a low minimum fee, or even a zero or negative fee. 5.1.4.f Cost-Plus-Fixed-Fee Contract 1. Description. A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee in a fixed amount. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes made in contract requirements. This contract type gives the contractor only a minimum incentive to control costs. 2. Application. A cost-plus-fixed-fee contract is suitable when a cost-reimbursement contract is necessary but the uncertainties and risks for the contractor are too great to permit negotiation of a reasonable cost-plus-incentive-fee arrangement. 3. Completion or Level-of-Effort Form. A cost-plus-fixed-fee contract must be in one of two basic forms - the completion form or the level-of-effort form. (a) Completion Form. The completion form describes the scope of work by stating a definite goal or target and specifying an end product. This form of contract normally requires the contractor to complete and deliver the specified end product within the estimated cost, if possible, as a condition for payment of the entire fixed fee. If the work cannot be completed within the estimated cost, the Postal Service may require more effort without increase in fee, but the estimated cost must be increased. (b) Level-of-Effort Form. The level-of-effort form describes the scope of work in general terms and obligates the contractor to devote a specified level of effort for a stated time period. Under this form, if performance is satisfactory, the fixed fee is payable at the expiration of the agreed upon period, upon contractor certification that the level of effort specified in the contract has been expended in performing the contract work. Renewal for further periods of performance requires new cost and fee arrangements, and is treated as a new purchase. (c) Preference. Because of the greater obligation assumed by the contractor, the completion form is preferred over the level-of-effort form whenever the work can be defined well enough to permit a reasonable cost estimate within which the contractor can be expected to complete the work. 5.1.4.g Clauses 1. All cost-reimbursement contracts must include the following clauses: (a) Clause 5-4, Allowable Cost and Payment. (b) Either Clause 5-5, Limitation of Cost, (if the contract is fully funded) or Clause 5-6, Limitation of Funds, (if the contract is incrementally funded). 2. Cost contracts must include Clause 5-7, Cost Contract - No Fee. 3. Cost-sharing contracts must include Clause 5-8, Cost-Sharing Contract - No Fee. 4. Cost-plus-incentive-fee contracts must include Clause 5-9, Incentive Fee. 5. Cost-plus-fixed-fee contracts must include Clause 5-10, Fixed Fee. 5.1.5 Indefinite-Delivery Contracts 5.1.5.a General. An indefinite-delivery contract may be used when it is known or anticipated that there will be requirements for supplies or services over a period of time, but quantities, times, or places of deliveries are not known at the time of contract award. The contracts establish firm fixed prices, with orders to be placed directly by using activities or by specified purchasing offices with deliveries made directly to using activities. 5.1.5.b Ordering. The period for placing orders and the activities authorized to place orders must be identified in the contract Schedule. Ordinarily, orders should be placed in writing or by written communication; when necessary, oral orders may be made if they are promptly confirmed in writing. Orders must contain: 1. Date of order, contract number, and order number; 2. Item number and description, and unit price; 3. Place and date of delivery or performance; 4. Packaging, packing, and shipping instructions, if any; 5. Accounting and fiscal data; and 6. Any other pertinent information. 5.1.5.c Definite-Quantity Contract. A definite-quantity contract provides for a definite quantity of specific supplies or services during the contract period, with deliveries to designated locations when ordered. 5.1.5.d Indefinite-Quantity Contract. An indefinite-quantity contract provides for an indefinite quantity of specific supplies or services, within stated minimum and maximum limits, to be delivered during the contract period to designated locations when ordered. It is for use when precise requirements for supplies or services during the contract period, above known minimum requirements, cannot be determined before contract award. 1. The contract must require the Postal Service to order, and the contractor to deliver, at least a stated minimum quantity of supplies or services as ordered during the contract period, and requires the contractor to deliver any additional quantities ordered, not to exceed a stated maximum. 2. The minimum quantity must not exceed known requirements, and the maximum quantity must be realistic. The contract may specify minimum or maximum quantities for individual delivery orders, and a maximum that may be ordered during a specified time. 5.1.5.e Requirements Contract. A requirements contract provides for filling all actual purchase requirements of designated activities for specific supplies and services to be delivered as ordered during the contract period. It is for use when recurring requirements are anticipated during the contract period, but precise quantities that designated activities will need cannot be determined before contract award. it may also be used to obtain supplies and services that may be required in excess of the quantities that the activities themselves can furnish within their own capabilities. 1. The solicitation and contract must state an estimated total quantity, and, if feasible, the maximum limit of the contractor's obligation to deliver and the Postal Service's obligation to order. The total quantity estimate must be as realistic as possible, based on records of previous requirements and current information. The contract may specify minimum or maximum quantities for individual delivery orders, and a maximum that may be ordered during a specified time. 2. When a requirements contract is for repair, modification, or overhaul of items of Postal Service property, the solicitation must state that failure of the Postal Service to furnish such items in the amounts described as "estimated" or "maximum" will not entitle the contractor to any price adjustment under the Postal Service Property clause of the contract. 5.1.5.f Clauses 1. All indefinite-delivery contracts must include the following clauses: (a) Clause 5-11, Ordering. (b) Clause 5-12, Delivery-Order Limitations. 2. All definite-quantity contracts must include Clause 5-13, Definite Quantity. 3. All indefinite-quantity contracts must include Clause 5-14, Indefinite-Quantity. 4. All requirements contracts must include Clause 5-15, Requirements. When obtaining requirements in excess of the quantities that the activities can furnish within their own capabilities (see paragraph e above), use the clause with its alternate paragraph c. 5.1.6 Time-and-Materials and Labor-Hour Contracts 5.1.6.a Time-and-Materials Contract 1. Description. A time-and-materials contract provides for the purchase of supplies or services on the basis of: (a) Direct labor hours at specified, fixed hourly rates (which include wages, overhead, general and administrative expense, and profit); and (b) Material at cost, and when appropriate, material-handling costs as a part of material costs. Material-handling costs may include all indirect costs, including general and administrative expense, allocated to direct materials in accordance with the contractor's usual accounting practices. Such material-handling costs may include only costs clearly excluded from the labor-hour rate. 2. Application. A time-and-materials contract is for use only when it is not possible to estimate in advance the extent or duration of the work or to anticipate costs with any reasonable degree of confidence. Because it does not encourage effective management control by the contractor, it may be used only when provision is made for adequate monitoring by Postal Service personnel during performance, to give reasonable assurance that inefficient or wasteful methods are not being used. Examples of situations in which this type of contract might be appropriate are: 3. Repair, maintenance, and overhaul work; (a) Work to be done in emergency situations; and (b) Engineering and design services in connection with the production of supplies. 4. Limitation. This type of contract may be used only if no other type of contract will meet the Postal Service's needs. The contract must establish a ceiling price which the contractor exceeds at its own risk. The contracting officer must document the contract file to show the basis for any change in the ceiling. 5. Optional Method of Pricing Material. When the work to be performed requires the contractor to furnish material that is regularly sold to the general public in the normal course of business by the contractor, the contract may provide for charging material on a basis other than at cost if: (a) The total estimated contract price does not exceed $50,000 or the estimated price of material so charged does not exceed 20 percent of the estimated contract price; (b) The material to be so charged is identified in the contract; (c) No element of profit on material so charged is included in the profit in the fixed hourly labor rates; and (d) The contract provides that the price to be paid for such material must be on the basis of an established catalog or list price, in effect when material is furnished, less all applicable discounts, and not exceeding the contractor's sales price to its most favored customer for the same item in like quantity, or the current market price, whichever is lower. 5.1.6.b Labor-Hour Contract. A labor-hour contract is a variant of the time-and-materials contract, differing only in that materials are not supplied by the contractor. All the requirements of paragraph a above, except those dealing with materials are applicable to labor-hour contracts. 5.1.6.c Clause. Time-and-materials and labor-hour contracts must include Clause 5-16, Payment (Time-and-Materials and Labor-Hour Contracts). 5.1.7 Letter Contracts 5.1.7.a Description. A letter contract is a written preliminary contractual instrument that authorizes the contractor to begin work immediately, before negotiation of a definitive contract. 5.1.7.b Application 1. A letter contract is for use when: (a) The requirement demands that the contractor be given a binding commitment so that work can be commenced immediately; and (b) Negotiation of a definitive contract in sufficient time to meet the requirement is not possible. 2. Each letter contract must be as complete and definitive as possible under the circumstances. When award is based on price competition, an overall price ceiling must be included in the letter. 3. Each letter contract must contain a negotiated definitization schedule including: (a) A date for submission of the contractor's price proposal; (b) A date for the start of negotiation; and (c) A target date for definitization, which must be the earliest practicable date. 4. Each letter contract must state the maximum liability of the Postal Service. This is the amount estimated to be needed to cover performance prior to definitization; it may not exceed 50 percent of the total estimated cost of the contract. 5. The definitization schedule must provide for definitization of the contract 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. However, the contracting officer may in extreme cases authorize an additional period. If, after exhausting all reasonable efforts, the contracting officer and the contractor cannot negotiate a definitive contract because of failure to reach agreement on price or fee, Clause 5-19, Contract Definitization (see paragraph d below) requires the contractor to proceed with the work and provides that the contracting officer may determine a reasonable price or fee subject to appeal as provided in Clause B-9, Claims and Disputes. 5.1.7.c Limitations 1. A letter contract may be used only if no other type of contract is suitable, and its use must be approved by the manager of Headquarters Purchasing, Field Customer Support, National Mail Transportation Purchasing, or Major Facilities Purchasing. 2. A letter contract may not commit the Postal Service to a definitive contract in excess of the funds available at the time the letter contract is executed. 3. A letter contract may not be modified to add new work unless the work added is inseparable from the work being performed under the letter contract. 5.1.7.d Clauses 1. A letter contract must include clauses required for the type of definitive contract contemplated, and any additional clauses known to be appropriate. 2. All letter contracts must include the following clauses: (a) Clause 5-17, Execution and Commencement of Work. (b) Clause 5-18, Limitation of Postal Service Liability. Insert in the clause as the maximum liability, the amount necessary to cover the contractor's performance before definitization. The maximum liability amount may not exceed 50 percent of the estimated cost of the definitive contract unless approved by the manager of Headquarters Purchasing, Field Customer Support, National Mail Transportation Purchasing, or Major Facilities Purchasing. (c) Clause 5-19, Contract Definitization, with the definitization schedule established in accordance with subparagraphs b.3 and b.5 above. If the contract is not awarded on the basis of price competition, omit paragraph d of the clause. (d) If a cost-reimbursement definitive contract is contemplated, Clause 5-20, Payment of Allowable Costs before Definitization. 5.1.8 Ordering Agreements 5.1.8.a General 1. An ordering agreement is not itself a contract. It is a written agreement negotiated between a purchasing activity and a contractor that contains terms and conditions applying to future contracts (orders) between the parties. 2. An ordering agreement is useful to expedite contracting for uncertain requirements for supplies or services when specific quantities and prices are not known at the time the agreement is signed, but substantial quantities of the supplies or services covered by the agreement are expected to be purchased from the contractor. The use of ordering agreements reduces administrative lead time and inventory investment. 5.1.8.b Limitations 1. An ordering agreement may not state or imply any obligation or agreement by the Postal Service to place future contracts or orders with the contractor. 2. An ordering agreement may be changed only by modifying the agreement itself and not by individual orders issued under it. Modifying an ordering agreement does not retroactively affect orders previously issued under it. 3. An ordering agreement extending for more than one year must be reviewed annually to determine whether it should be continued. 5.1.8.c Content of Agreement. An ordering agreement must: 1. Describe the supplies and services to be provided; 2. Describe the method for determining prices to be paid to the contractor for the supplies or services; 3. Include delivery terms and conditions or specify how they will be determined; 4. List the activities authorized to issue orders under the agreement; 5. Specify the point at which each order becomes a binding contract (for example, issuance of the order, acceptance of the order in a specified manner, or failure to reject the order within a specified number of days); 6. Provide that failure to reach agreement on price on any one order issued before its price is established (see paragraph e below) is a dispute under Clause B-9, Claims and Disputes included in the ordering agreement; and 7. Contain the clauses prescribed for the type of contract represented by the orders to be placed. (For clauses prescribed according to contract dollar amount, the aggregate value of orders expected to be placed must be estimated.) 5.1.8.d Ordering. A contracting officer representing any activity listed in an ordering agreement may issue orders for supplies or services covered by that agreement. Except for orders under mandatory ordering agreements (see 3.1.4. b), competition must be obtained before placing an order, unless precluded by compelling urgency or other good reason in the Postal Service's interest. Competition may be by oral or written solicitation among firms holding ordering agreements for the same supplies or services, or on the open market. If an order is placed without obtaining competition, the file must be documented to show the reason. 5.1.8.e Pricing. The contracting officer may not authorize the contractor to begin work on an order under an ordering agreement until prices have been established, unless urgency precludes advance pricing and the order establishes a ceiling price limiting the Postal Service's obligation. Pricing must be accomplished as soon as possible after issuance of an unpriced order. 5.1.9 Task Order Contracts Task order contracts are suitable for use when purchasing services that can only be described in general terms at the time of contract award, and must be ordered as specific requirements develop or can be defined. The contract describes the scope of the services to be provided, contains appropriate terms and conditions, and provides for the placement of task orders by the contracting officer. The contract must be for a specified period and must state the maximum liability of the Postal Service. Each task order describes and establishes a price for the task to be performed. If the price cannot be negotiated before issuance of the task order, the task order must have a ceiling price limiting the Postal Service's obligation. 5.1.10 Multiyear Contracts When a multiyear contract is appropriate (see 2.2.9), any authorized type of contract may be used, but one of the following will be suitable for most situations: 5.1.10.a Requirements. A multiyear requirements contract commits the Postal Service to purchase all of its requirements for the specified supplies or services from the contractor for the stated multiyear period. Offerors are required to propose a single unit price over the period of performance of the contract, but economic price adjustment provisions may be included in accordance with 5.1.3.c. The solicitation must include an estimate of the Postal Service requirements based on careful analysis of past purchases, current inventory, and projected need over the multiyear period. Because of the risk that requirements may not materialize, this type of contract is not appropriate if high start-up costs are involved. 5.1.10.b Definite-Quantity. A definite-quantity multiyear contract commits the Postal Service to buy specified quantities of supplies or services in each year covered by the contract. Offerors are required to propose level unit prices over all the years covered by the contract, and can be expected to spread start-up costs over all contract quantities. Options for additional quantities in each year (at prices not including start-up costs) may be included if it is expected that larger quantities may be needed. Economic price adjustment provisions may be included in accordance with 5.1.3.c. This type of multiyear contract is appropriate when high start-up costs are involved, since there will be an equitable adjustment for such costs under termination for convenience procedures (see 6.9.2) if the Postal Service does not purchase the entire multiyear quantity. Section 2 Cost Principles 5.2.1 General 5.2.1.a This section contains the principles for determining or negotiating the allowability of costs under Postal Service contracts. 5.2.1.b These principles apply to: 1. The determination of allowable costs under cost-reimbursement contracts and subcontracts; 2. The determination or negotiation of cost or price when required by a contract clause; and 3. The pricing or contracts and subcontracts, and contract and subcontract modifications, when cost analysis is performed (see 5.3.3.d). 5.2.1.c Cost Accounting Standards Board standards and regulations (4 CFR 331 et seq.) do not apply to the Postal Service. 5.2.2 Contract Cost 5.2.2.a Composition of Total Cost. The total cost of a contract is the sum of the allowable direct and indirect costs allocable to the contract, incurred or to be incurred, less any allowable credits. Any generally accepted method of determining or estimating costs that is equitable under the circumstances and consistently applied may be used. 5.2.2.b Direct Costs. Any cost that can be specifically identified with a contract is a direct cost of the contract. Costs are considered to be identified specifically with a contract, and are therefore direct costs, if they are segregated from other costs and recorded in accounts identifying the costs with the particular contract. 5.2.2.c Indirect Costs. Indirect costs are those costs that, because of their incurrence for common or joint objectives, are neither readily segregable nor subject to treatment as direct costs. Indirect costs may be allocated to contracts on the basis of necessity to the overall operation of the contractor's business. Allocation on this basis is permissible even if a direct or indirect relationship to a particular cost objective cannot be shown. 5.2.2.d Credits. A credit is the applicable portion of any income, rebate, allowance, or other credit relating to any allowable cost and received by or accruing to the contractor. 5.2.3 Cost Allowability 5.2.3.a Determining Allowability. To be allowable, costs must be: 1. Reasonable; 2. Allocable; 3. Consistent with generally accepted accounting principles; 4. Appropriate to the particular circumstances; 5. Consistent with the requirements and terms of the contract; and 6. Not unallowable (see 5.2.5). 5.2.3.b Reasonableness. A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business. In determining the reasonableness of a specific cost, matters to consider include: 1. Whether it is the type of cost generally recognized as ordinary and necessary for the conduct of the contractor's business or contract performance; 2. The restraints or requirements imposed by such factors as generally accepted sound business practices, arm's-length bargaining, and federal and state laws and regulations; 3. The action that a prudent business person, considering responsibilities to the owners of the business, employees, customers, the Postal Service, and the public at large, would take under the circumstances; and 4. Any deviations from the established practices of the contractor that may unjustifiably increase the contract costs. 5.2.3.c Allocability. A cost is allocable to a contract if it: 1. Is incurred specifically for the contract; 2. Benefits both the contract and other work, and can be distributed to them in reasonable proportion to the benefits received; or 3. Is necessary to the overall operation of the business, although a direct relationship to the contract cannot be shown. 5.2.4 Advance Agreements 5.2.4.a Because the reasonableness or allocability or costs may be hard to determine on some cases, the contracting parties should reach advance agreement on the treatment of special or unusual costs, to avoid later disputes and disallowances. 5.2.4.b Advance agreements may be negotiated either before or during a contract but should be negotiated before incurrence of the costs involved. The agreements must be in writing, signed by both parties, and incorporated into applicable current and future contracts. An advance agreement must contain a statement of its applicability and duration. 5.2.4.c Advance agreements may be negotiated with a particular contractor for a single contract, a group of contracts, or all the contracts of one or more purchasing activities. 5.2.4.d Advance agreements may not provide for treatment of costs inconsistent with this chapter. 5.2.4.e The absence of an advance agreement on any cost will not, in itself, affect the reasonableness or allocability of that cost. 5.2.4.f Examples of costs for which advance agreements may be particularly important are: 1. Compensation for personal service, including but not limited to allowances for off-site pay, incentive pay, location allowances, hardship pay, and cost-of-living differentials; 2. Use charges for fully depreciated assets; 3. Deferred maintenance costs; 4. Precontract costs; 5. Independent research and development and bid and proposal costs; 6. Royalties and other costs for use of patents; 7. Selling and distribution costs; 8. Travel and relocation costs; 9. Cost of idle facilities and idle capacity; 10. Costs of automatic data processing equipment; 11. Severance pay to employees on support services contracts; 12. Plant reconversion; 13. Professional services (for example, legal, accounting, and engineering); 14. General administrative costs (such as corporate, division, or branch allocations attributable to the general management, supervision, and conduct of the contractor's business as a whole, particularly in construction, job-site, architect-engineer, and facilities contracts); 15. Costs of construction plant and equipment; and 16. Costs of public relations and advertising. 5.2.5 Unallowable Costs 5.2.5.a Categories of Unallowable Costs. The following categories of costs, with the exceptions noted, are unallowable: 1. Public Relations and Advertising. Public relations and advertising costs, except for costs of: (a) Responding to inquiries concerning company policies and activities; (b) Essential communication with the public, press, stockholders, creditors, and customers, including communication on matters of public concern; (c) Participation in community service activities, such as blood bank drives, charity drives, and disaster assistance (but not contribution to civil defense funds and projects); (d) Recruitment of personnel needed for contract performance; (e) Acquiring scarce items for contract performance; and (f) Disposing of scrap or surplus materials acquired for contract performance. 2. Bad Debts. Bad debts, including actual or estimated losses arising from uncollectible accounts receivable due from customers and other claims, and any directly associated costs such as collection costs and legal costs. 3. Contributions or Donations. Contributions or donations, including cash, property, and services, except as provided in a.1(c) above. 4. Dividends. Dividend provisions or payments, and distribution of profits. 5. Entertainment. Costs of amusement, diversion, social activities, and directly associated costs such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities. Costs of membership in social, dining, or country clubs or other organizations having the same purposes, regardless of whether the cost is reported as taxable income to the employees. 6. Fines and Penalties. Costs of fines and penalties resulting from violations of, or failure of the contractor to comply with, federal, state, local, or foreign laws and regulations, except when incurred as a result of compliance with specific terms and conditions of the contract or written instructions from the contracting officer. 7. Life Insurance. Costs of insurance on the lives of officers, partners, or proprietors, unless the insurance represents additional compensation. 8. Interest and Other Financial Costs. Interest on borrowings (however represented), bond discounts, costs of financing and refinancing capital, and the costs of preparing and issuing prospectuses and stock rights. 9. Lobbying (a) Costs associated with the following activities: (1) Attempts to influence the outcome of any federal, state, or local election, referendum, initiative, or similar procedure through contributions, endorsements, publicity, or similar activities. (2) Establishing, administering, contributing to, or paying the expenses of a political party, campaign, political action committee, or other organization established for the purpose of influencing the outcomes of elections. (3) Any attempt to influence (i) the introduction of federal or state legislation, or (ii) the enactment or modification of any pending federal or state legislation through communication with any member or employee of the Congress or state legislature (including efforts to influence state or local officials to engage in similar lobbying activity), or with any government official or employee in connection with a decision to sign or veto enrolled legislation. (4) Any attempt to influence (i) the introduction of federal or state legislation, or (ii) the enactment or modification of pending federal or state legislation by preparing, distributing, or using publicity or propaganda, or by urging members of the general public to contribute to or participate in any mass demonstration, march, rally, fund-raising drive, lobbying campaign, or letter-writing or telephone campaign. (5) Legislation liaison activities, including attendance at legislative sessions or committee hearings, gathering information regarding legislation, and analyzing the effect of legislation, when such activities are carried on in support of or in knowing preparation for an effort to engage in unallowable activities. (b) The following activities are excepted from the coverage (a) above: (1) Providing a technical and factual presentation of information on a topic directly related to the performance of a contract through hearing testimony, statements, or letters to the Congress or state legislature, or subdivision, member, or cognizant staff member thereof, in response to a documented request (including a Congressional Record notice requesting testimony or statements for the record at a regularly scheduled hearing) made by the recipient member, legislative body or subdivision, or a cognizant staff member thereof; provided that costs under this subparagraph (1) for transportation, lodging or meals are unallowable unless incurred for the purpose of offering testimony at a regularly scheduled Congressional hearing in response to a written request for such presentation made by the Chair or Ranking Minority Member of the Committee or Subcommittee conducting such hearing. (2) Any lobbying to influence state legislation in order to directly reduce contract cost, or to avoid material impairment of the contractor's authority to perform the contract. (3) Any activity specifically authorized by statute to be undertaken with funds from the contract. 10. Losses on Other Contracts. An excess of costs over income under any other contract (including the contractor's contributed portion under cost-sharing contracts). 11. Taxes (a) Federal income and excess profits taxes. (b) Taxes in connection with financing, refinancing, refunding operations, or reorganizations. (c) Taxes from which exemptions are available to the contractor directly, or available to the contractor based on an exemption afforded the Postal Service, except when the contracting officer determines that the administrative burden incident to obtaining the exemption outweighs the corresponding benefits accruing to the Postal Service. The term "exemption" means freedom from taxation in whole or in part and includes a tax abatement or reduction resulting from mode of assessment, method of calculation, or otherwise. (d) Special assessments on land that represent capital improvements. (e) Taxes (including excises) on real or personal property, or on the value, use, possession or sale thereof, which is used solely in connection with work other than on Postal Service and other government contracts. (f) Taxes on accumulated funding deficiencies of, or prohibited transactions involving, employee deferred compensation plans pursuant to section 4971 or section 4975 of the Internal Revenue Code of 1954, as amended. (g) Income tax accruals designed to account for the tax effect of differences between taxable income and pretax income as reflected by the books of account and financial statements. 12. Defense of Fraud Proceedings (a) Costs incurred in connection with defense of any: (1) Criminal or civil investigation, grand jury proceeding, or prosecution; (2) Civil litigation; or (3) Administrative proceedings such as suspension or debarment, or any combination of the foregoing, brought by the government against a contractor, its agents or employees, are unallowable when the charges that are the subject of the investigation, proceedings, or prosecution involve fraud or similar criminal offenses (including filing of a false certification) on the part of the contractor, its agents or employees, and result in conviction (including conviction entered on a plea of nolo contendere), judgment against the contractor, its agents or employees, or decision to debar or suspend, or are resolved by consent or compromise. (b) When the charges of fraud are resolved by consent or compromise, the parties may agree on the extent of allowability of such costs as a part of such resolution. 5.2.5.b Exclusion of Unallowable Costs. Costs that are expressly unallowable or mutually agreed to be unallowable, including unallowable directly associated costs, must be identified and excluded from any billing, claim, or proposal applicable to a Postal Service contract. A directly associated cost is any cost which is generated solely as a result of incurring another cost, and which would not have been incurred had the other cost not been incurred. When an unallowable cost is incurred, its directly associated costs are also unallowable. 5.2.6 Termination Costs 5.2.6.a General. Contract terminations generally give rise to the incurrence of costs or the need for special treatment of costs that would not have arisen had the contract not been terminated. This part 5.2.6 describes the cost principles peculiar to termination situations, to be used in conjunction with the other cost principles in this section. 5.2.6.b Common Items. The costs of items reasonably usable on the contractor's other work are not allowable unless the contractor submits evidence that the items could not be retained at cost without sustaining a loss. The contracting officer should consider the contractor's plans and orders for current and planned production when determining if items cab reasonably be used on other work of the contractor. 5.2.6.c Costs Continuing After Termination. Costs that cannot be discontinued immediately after the effective date of termination are generally allowable. However, any costs continuing after the effective date of the termination because of the negligent or willful failure of the contractor to discontinue them are unallowable. 5.2.6.d Start-Up Costs. Reasonable start-up and preparatory costs are generally allowable. When included in the settlement proposal as a direct charge, they must not also be included in overhead. Start-up costs for one contract must not be allocated to others. 5.2.6.e Loss of Useful Value. Loss of useful value of special tooling and special machinery and equipment is generally allowable, provided: 1. The special tooling or special machinery and equipment is not reasonably capable of use in the other work of the contractor; 2. The Postal Service's interest is protected by transfer of title or by other means deemed appropriate by the contracting officer; and 3. The loss of useful value for any one terminated contract is limited to that portion of the equipment cost which bears the same ratio to the total cost as the terminated portion of the contract bears to the entire terminated contract and other Postal Service contracts for which the special tooling or special machinery and equipment were acquired. 5.2.6.f Rental Under Unexpired Leases. Rental costs under unexpired leases, less the residual value of such leases, are generally allowable when shown to have been reasonably necessary for the performance of the terminated contract, if: 1. The amount of rental claimed does not exceed the reasonable use value of the property leased for the period of the contract and such further period as may be reasonable; and 2. The contractor makes all reasonable efforts to terminate, assign, settle, or otherwise reduce the cost of such lease. 5.2.6.g Alterations of Leased Property. The cost of alterations and reasonable restorations required by the lease may be allowed when the alterations are necessary for performing the contract. 5.2.6.h Settlement Expenses 1. Settlement expenses, including the following, are generally allowable: (a) Accounting, legal, clerical, and similar costs reasonably necessary for: (1) The preparation and presentation, including supporting data, of settlement claims to the contracting officer; and (2) The termination and settlement of subcontracts. (b) Reasonable costs for the storage, transportation, protection, and disposition of property acquired or produced for the contract. (c) Indirect costs related to salary and wages incurred as settlement expenses under (a) and (b); normally, such indirect costs must be limited to payroll taxes, fringe benefits, occupancy costs, and immediate supervision costs. 2. If settlement expenses are significant, a cost account or work order must be established to separately identify and accumulate them. 5.2.6.i Subcontractor Claims. Subcontractor claims, including the allocable portion of the claims common to the contract and to other work of the contractor, are generally allowable. An appropriate share of the contractor's indirect expenses may be allocated to the amount of settlements with subcontractors, provided that the amount allocated is reasonably proportionate to the relative benefits received and is otherwise consistent with the principles of this chapter. The indirect expense so allocated must exclude the same and similar costs claimed directly or indirectly as settlement expenses. 5.2.7 Construction and Architect-Engineer Contracts 5.2.7.a The cost principles of this section apply to contracts for construction (including alteration or repair) of buildings and other kinds of real property, and to architects-engineer contracts related to construction, except as provided in this part 5.2.7. 5.2.7.b Because of widely varying factors such as the nature, size, duration, and location of construction projects, advance agreements (see 5.2.4) for such items as home office overhead, partner's compensation, employment of consultants, and equipment use costs are particularly important in construction and architect-engineer contracts. 5.2.7.c Allowable ownership and operating costs of construction equipment must be determined as follows: 1. Actual cost data must be used when they can be determined for both ownership and operating costs from the contractor's accounting records. When such costs cannot be determined, the contract may specify the use of a schedule of predetermined rates to determine ownership and operating costs of construction equipment, such as the Construction Ownership and Operating Expense Schedule published by the U.S. Army Corps of Engineers. 2. Predetermined schedules of construction equipment use rates provide average ownership and operating rates for construction equipment. The allowance for ownership costs should include the cost of depreciation and may include costs facilities capital cost of money. The allowance for operating costs may include costs for such items as fuel, filters, oil, and grease; servicing, repairs, and maintenance; and tire wear and repair. Costs of labor, mobilization, demobilization, overhead, and profit are generally not reflected in schedules, and separate consideration may be necessary. 3. When a schedule of predetermined use rates for construction equipment is used to determine direct costs, all costs of equipment that are included in the cost allowances provided by the schedule must be identified and eliminated from the contractor's other direct and indirect costs charged to the contract. If the contractor's accounting system provides for site or home office overhead allocations, all costs included in the equipment allowances may need to be included in any cost input base before computing the contractor's overhead rate. In periods of work suspension pursuant to a contract clause, the allowance for equipment ownership may not exceed an amount for standby cost as determined by the schedule or contract provision. 5.2.7.d Reasonable costs of renting construction equipment are allowable as follows: 1. Minor repair and maintenance costs incident to operating such rented equipment not included in the rental rate are allowable. 2. Costs incident to major repair and overhaul of rental equipment are unallowable. 3. Charges for construction equipment rented from any division, subsidiary, or organization under common control are allowable if such rental is the contractor's established practice, and if no part of such costs duplicates any other allowed cost. 5.2.7.e Costs incurred at the job site incident to performing the work, such as the cost of superintendence, timekeeping and clerical work, engineering, utility costs, supplies, material handling, and restoration and cleanup are allowable as direct or indirect costs. provided the accounting practice used is in accordance with the contractor's established and consistently followed cost accounting practices for all work. 5.2.7.f Rental and other costs, less any applicable credits, incurred in acquiring the temporary use of land, structures, and facilities are allowable. Costs, less any applicable credits, incurred in constructing or fabricating structures and facilities of a temporary nature are allowable. 5.2.8 Facilities Contracts 5.2.8.a The cost principles of this section apply to facilities contracts (under which Postal Service facilities are provided to a contractor or subcontractor for use in performing one or more related contracts for supplies or services), except as provided in this part 5.2.8. 5.2.8.b Advance agreements (see 5.2.4) should be made between the contractor and the contracting officer as to indirect cost items to be applied to the facilities purchase. When necessary to produce an equitable result, the contractor's usual method allocating indirect cost may be varied and appropriate adjustment may be made to the pool of indirect cost and the bases of their distribution. 5.2.8.c Indirect manufacturing and plant overhead costs primarily incurred or generated by reason of direct labor or maintenance labor operations are not allocable to the purchase of existing facilities. 5.2.8.d Contracts providing for the installation of new facilities or the rehabilitation of existing facilities may involve the use of the contractor's plant maintenance labor, as distinguished from direct labor engaged in the production of the company's normal products. In such instances, only those types of indirect manufacturing and plant operating costs related to or incurred by reason of the expenditures of the classes of labor needed for the performance of the facilities work may be allocated to the facilities contract. Thus, a facilities contract involving the use of plant maintenance labor only would not be subject to an allocation of such cost items as direct productive labor supervision, depreciation, and maintenance expense applicable to productive machinery and equipment, or raw material and finished goods storage costs. 5.2.8.e When a facilities contract calls for the construction, production, or rehabilitation of equipment or other items involved in the regular course of the contractor's business by the use of the contractor's direct labor and manufacturing processes, the indirect costs normally allocated to all that work may be allocated to the facilities contract. 5.2.8.f If facilities constituting the contractor's usual commercial products (or only minor modifications thereof) are acquired by the Postal Service under the contract, the Postal Service must not pay more than the contractor's most-favored-customer price or the price of other suppliers for like quantities of the same or substantially the same items, whichever is lower. 5.2.9 Educational Institutions In determining contract costs applicable to research and development, training, and other work performed by educational institutions, it is Postal Service policy to adopt the cost principles of Office of Management and Budget (OMB) Circular No. A-21, Cost Principles for Educational Institutions, as in effect on the date of the contract. 5.2.10 Nonprofit Organizations 5.2.10.a A nonprofit organization is a business: 1. Exempt from federal income taxation under section 502 of the Internal Revenue Code; 2. Organized and operated exclusively for charitable, scientific, or educational purposes; 3. No part of whose net earnings inure to the benefit of any private shareholder or individual; and 4. No substantial part of whose activities is carrying on propaganda or otherwise attempting to influence legislation or participating on any political campaign on behalf of any candidate for public office. 5.2.10.b In determining costs applicable to contracts performed by nonprofit organizations, it is Postal Service policy to adopt the cost principles of Office of Management and Budget (OMB) Circular No. A-122, Cost Principles for Nonprofit Organizations, as in effect on the date of the contract. 5.2.11 State, Local, and Indian Tribal Governments In determining allowable costs under contracts with state, local, and federally recognized Indian tribal governments, it is Postal Service policy to adopt the cost principles of Office of Management and Budget (OMB) Circular No. A-87, Cost Principles for State and Local Governments, as in effect on the date of the contract. 5.2.12 Indirect Cost Rates 5.2.12.a General. This part describes procedures for establishing billing rates and final indirect cost rates for use in: 1. Reimbursing indirect costs under cost-reimbursement contracts; 2. Determining progress payments under fixed-price contracts; and 3. Negotiating the final price of fixed-price incentive contracts. 5.2.12.b Definitions 1. "Billing rate" means an indirect cost rate established temporarily for reimbursement of incurred indirect costs. It may be adjusted as necessary pending establishment of final indirect cost rates. 2. "Final indirect cost rate" means the indirect cost rate established and agreed upon by the Postal Service and the contractor as not subject to change. It is usually established after the close of the contractor's fiscal year (unless the parties decide upon a different period) to which it applies. In the case of cost-reimbursement research and development contracts with educational institutions, it may be predetermined; that is, established for a future period on the basis of cost experience with similar contracts, together with supporting data. 3. "Indirect cost rate" means the percentage or dollar factor that expresses the ratio of indirect expense incurred in a given period to direct labor cost, manufacturing cost, or another appropriate base for the same period. 5.2.12.c Billing Rates 1. A billing rate is established on the basis of information resulting from recent review, previous audits or experience, or similar reliable data or experience. It should be as close as possible to the final indirect cost rate anticipated for the contractor's fiscal period, as adjusted for any unallowable costs. When the dollar value of contracts requiring use of a billing rate does not warrant submission of a detailed billing rate proposal, the billing rate may be established by making appropriate adjustments from the prior year's indirect cost experience to eliminate unallowable and nonrecurring costs and to reflect new or changed situations. 2. Once established, billing rates may be prospectively or retroactively revised by mutual agreement of the parties, at either party's request, to prevent substantial overpayment or underpayment. 3. The elements of indirect cost and the base or bases used in computing billing rates are determinative of the indirect costs to be distributed or of the bases of distribution to be used in the final settlement. 5.2.12.d Determination Procedure 1. In accordance with Clause 5-4, Allowable Cost and Payment, the contractor must submit to the contracting officer or the contracting officer's representative a final indirect cost rate proposal reflecting actual cost experience during the covered period, together with supporting cost or pricing data. 2. On the basis of analysis of the proposal, with audit assistance and advise if needed, the contracting officer or the contracting officer's representative will negotiate an indirect cost rate agreement and prepare a negotiation memorandum showing the basis for the agreement. 3. The indirect cost rate agreement, when signed by the contractor and contracting officer, is considered to be incorporated into the contract. 5.2.12.e Educational Institutions 1. Under cost-reimbursement contracts with educational institutions, the Postal Service uses indirect cost rates established in accordance with Office of Management and Budget (OMB) Circular No. A-88, Indirect Cost Rates, Audit, and Audit Follow Up at Educational Institutions, which assigns each educational institution to a single government agency for the negotiation of indirect cost rates. Cognizant government agencies and educational institutions are listed in the Directory of Federal Contract Audit Offices, available from: ATTENTION OTD DEFENSE CONTRACT AUDIT AGENCY CAMERON STATION ALEXANDRIA VA 22314-6178 2. Payment for reimbursable indirect costs may be made on the basis of predetermined final indirect cost rates, if predetermined rates have been established by the cognizant agency. If predetermined rates are used, the rates and bases must be included in the contract's schedule, and the contract must include Clause 5-21, Predetermined Indirect Cost Rates. 5.2.12.f Nonprofit Organizations. See 5.2.10. 5.2.12.g State, Local, and Indian Tribal Governments. See 5.2.11. 5.2.12.h Cost-Sharing Rates. Cost-sharing contracts (see 5.1.4.d) may call for the contractor to participate in the costs of the contract by accepting indirect cost rates lower than the anticipated actual rates. In such cases, a negotiated indirect cost rate ceiling may be incorporated into the contract for prospective application. 5.2.12.i Ceilings on Indirect Cost Rates 1. Some situations make it prudent to provide a final indirect cost rate ceiling in a contract. Examples of such circumstances are when the proposed contractor: (a) Is a new or recently organized company, and there is no past or recent record of incurred indirect costs; (b) Has a recent record of rapidly increasing indirect cost due to a declining volume of sales without a commensurate decline in indirect expenses; (c) Seeks to enhance its competitive position in a particular circumstance by basing its proposal on indirect costs rates lower than those that may reasonably be expected to occur during contract performance, thereby causing a cost overrun. 2. In such cases, a ceiling covering the final indirect cost rates may be negotiated and specified in the contract. 3. When ceiling provisions are utilized, the contract must also provide that: (a) The Postal Service will not be obligated to pay any additional amount if the final indirect cost rates exceed the negotiated ceiling rates; and (b) If the final indirect cost rates are less than the negotiated ceiling rates, the negotiated rates will be reduced to conform with the lower rates. Section 3 Price Evaluation 5.3.1 General 5.3.1.a This section describes policies and procedures for evaluating initial contract prices and subcontract prices, and for pricing contract modifications. 5.3.1.b Contracting officers are responsible for ensuring that contract prices are fair and reasonable. To carry out this responsibility, contracting officers must: 1. Evaluate proposed prices using the methods of price and cost analysis described in this section; 2. Price each contract separately and independently, and not consider proposed price reductions under other contracts or losses or profits on other contracts; and 3. Not include in a contract any amount for a specified contingency if the contract provides for price adjustment based upon the occurrence of that contingency. 5.3.2 Definitions 5.3.2.a "Cost analysis" means the review and evaluation of the separate cost elements and proposed profit of an offeror's or contractor's cost or pricing data, and the judgmental factors applied in projecting from the data to the estimated costs, in order to form an opinion on the degree to which the proposed costs represent what the contract should cost, assuming reasonable economy and efficiency. 5.3.2.b "Cost or pricing data" means all facts as of the time of price agreement that prudent buyers and sellers would reasonably expect to affect price negotiations significantly. Cost or pricing data are factual, not judgmental, and are therefore verifiable. While they do not indicate the accuracy of the prospective contractor's judgment about estimated future costs or projection, they do include the data forming the basis for that judgment. Cost or pricing data are more than historical accounting data; they are all the facts that can be reasonably expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred. They also include such factors as: 1. Supplier quotations; 2. Nonrecurring costs; 3. Information on changes in production methods and in production or purchasing volume; 4. Data supporting projections of business prospects and objectives and related operating costs; 5. Unit-cost trends such as those associated with labor efficiency; 6. Make-or-buy decisions; 7. Estimated resources to attain business goals; 8. Information on management decisions that could have a significant bearing on costs; and 9. Historical actual costs for the same or similar items. 5.3.2.c "Price" means cost plus any fee or profit applicable to the contract type. 5.3.2.d "Price analysis" means the process of examining and evaluating a proposed price without evaluating its separate cost elements and proposed profit. 5.3.2.e "Technical analysis" means that examination and evaluation of a proposal by engineering, management, or other personnel having specialized knowledge in order to determine and report on the need for and reasonableness of the proposed resources. 5.3.3 Proposal Analysis 5.3.3.a Contracting Officer's Responsibility. The contracting officer, exercising sole responsibility for the final pricing decision, must obtain advice and assistance appropriate to the complexity and dollar value of the proposals to be analyzed. As circumstances warrant, the contracting officer must obtain and evaluate the advice of specialists in contracting, finance, law, contract audit, quality assurance, engineering, traffic management, and contract pricing, coordinating the team effort involved. If assistance in analyzing cost or pricing data is not available within the contracting officer's organization, it may be obtained from the Inspection Service. The contracting officer should have appropriate specialists attend the negotiations when complex problems involving significant matters will be addressed. The contracting officer may assign responsibility to a negotiator or price analyst for: 1. Determining the extent of specialists' advice needed and evaluating that advice; 2. Coordinating a team of experts; 3. Consolidating pricing data and developing a prenegotiation objective; and 4. Conducting negotiations. 5.3.3.b Price Analysis 1. Price analysis is the preferred method of proposal analysis. Price analysis must always be performed, and should be relied on entirely in all but a few situations. Even when cost analysis is performed to evaluate individual cost elements of a contractor's proposal, some form of price analysis must always be performed to ensure that the overall price is fair and reasonable, and that there is no need for further evaluation. 2. The contracting officer is responsible for selecting and using whatever price analysis techniques will ensure a fair and reasonable price. One or more of the following techniques may be used to perform price analysis: (a) Comparison of proposed prices received in response to the solicitation. (b) Comparison of prior proposed prices and contract prices with current proposed prices for the same or similar end items in comparable quantities. (c) Application of rough yardsticks (such as dollars per pound or per horsepower, or other units) to highlight significant inconsistencies that warrant additional pricing inquiry. (d) Comparison with competitive published catalogs or lists, published market prices or commodities, similar indexes, and discount or rebate arrangements. (e) Comparison of proposed prices with independent Postal Service cost estimates (see 2.1.5). (f) Ascertaining that the price is set by law or regulation. 3. Whenever adequate price competition has been obtained, comparison of proposed prices and Postal Service estimates will ordinarily suffice to meet price analysis requirements. 5.3.3.c Adequate Price Competition 1. Price competition exists if: (a) Proposals are solicited; (b) Two or more independent and responsible offerors submit priced proposals meeting the solicitation's requirements; and (c) The solicitation identifies price as a significant evaluation factor for contract award. 2. If price competition exists, it is presumed adequate, unless: 3. The solicitation is made under conditions that unreasonably deny to one or more known and qualified offerors an opportunity to compete; (a) The low offeror has such a decided advantage that it is practically immune from competition; or (b) The contracting officer determines that the lowest price is not fair and reasonable. 5.3.3.d Cost Analysis 1. Cost analysis is normally appropriate only when there is not adequate price competition and no method of price analysis will ensure a fair and reasonable price. Cost analysis should be limited to those cost elements that the contracting officer decides needs close analysis in the Postal Service's interest. When limited analysis of specific cost elements or factors will provide a reasonable pricing result, the contracting officer should obtain only the date needed to support the limited cost analysis required. 2. Cost analysis involves the following techniques and procedures, as appropriate: (a) Verification of cost or pricing data and evaluation of cost elements, including: (1) The necessity for and reasonableness of proposed costs, including allowances for contingencies; (2) Projection of the offeror's cost trends, on the basis of current and historical cost or pricing data; (3) A technical appraisal of the estimated labor, material, tooling, and facilities requirements and of the reasonableness of scrap and spoilage factors; and (4) The application of audited or negotiated indirect cost rates and labor rates. (b) Evaluating the effect of the offeror's current practices on future costs. In conducting this evaluation, the contracting officer must ensure that the effects of inefficient or uneconomical past practices are not projected into the future. In pricing production of recently developed, complex equipment, the contracting officer should make a trend analysis of basic labor and materials even in periods of relative price stability. (c) Comparison of costs proposed by the offeror for individual cost elements with: (1) Actual costs previously incurred by the same offeror; (2) Previous cost estimates from the offeror or from other offerors for the same or similar items; (3) Independent Postal Service cost estimates; and (4) Forecasts or planned expenditures. (d) Analysis of contractor make-or-buy decisions in evaluating subcontract costs. (e) Verification that the offeror's cost submissions are in accordance with the cost principles in 5.2. (f) Review to determine whether any cost or pricing data necessary to make the contractor's proposal accurate, complete, and current have not been either submitted or identified in writing by the contractor. If there are such data, the contracting officer must attempt to obtain them. If they cannot be obtained, satisfactory allowance for the incomplete data must be made in negotiations. 5.3.3.e Technical Analysis. Technical analysis should be performed as necessary to assist in price analysis or cost analysis. Technical analysis of proposals may range from evaluating technical proposals in accordance with evaluation factors specified in the solicitation to extensive analysis of materials, labor hours and labor mix, special tooling and facilities, and other factors pertinent to a cost analysis effort. 5.3.3.f Cost or Pricing Data 1. Consistent with subparagraph d.1 above, cost or pricing data must be obtained before the award of any noncompetitive contract or contract modification when the contracting officer requires them for analysis to determine reasonableness of price. Only the data needed to make that determination should be obtained. Before agreement on price, the contracting officer must require the contractor to update the data as of the latest dates for which information is reasonably available. Data within the contractor's or a subcontractor's organization on matters significant to contractor management and to the Postal Service will be treated as reasonably available. What is significant depends upon the circumstances of each procurement. 2. The contracting officer must require offerors or contractors to obtain cost or pricing data for proposed subcontracts or subcontract modifications when necessary to determine the reasonableness of the proposed contract or subcontract price, including negotiated final pricing actions (such as termination settlements and total final price agreements for fixed-price incentive contracts). The offeror or contractor is responsible for performing price analysis or cost analysis on subcontract proposals, and including the results of subcontract reviews and analyses as part of its cost or pricing data. In unusual circumstances, to ensure that adequate analysis is performed, the contracting officer may require the offeror or contractor to submit to the Postal Service, along with its own cost or pricing data, the subcontract cost or pricing data obtained. This in no way diminishes the offeror's or contractor's responsibility to perform subcontract cost or price analysis and negotiate fair and reasonable subcontract prices. 3. If cost or pricing data are needed and the offeror or contractor refuses to provide necessary data in spite of a repeated request, the contracting officer must withhold the award or contract modification and refer the matter to the next higher lever of contracting authority. The ultimate disposition of the matter must be documented. 5.3.3.g Profit 1. Except for architect-engineer contracts (see 11.3.3), it is Postal Service policy that predetermined percentages or limitations on profit or fee not be used. 2. When adequate price competition is obtained, or price analysis techniques are sufficient to ensure a fair and reasonable price, analysis of profit is not appropriate. 3. When cost analysis is required for price negotiations, profit must be analyzed as well. Profit should be analyzed with the objective of rewarding contractors for financial and other risks they assume; resources they use; and organization, performance, and management capabilities they employ. Due consideration should be given to the complexity of materials requirements, the extent of subcontracting, the ratio of indirect costs to direct costs, and the contribution of capital investments to contract performance. 4. If the pricing action involves a contract change or modification that requires essentially the same type and mix of work as the basic contract, and is of relatively small dollar value compared to the total contract amount, the profit or fee may be established on the basis of the basic contract's profit or fee rate. 5.3.3.h Defective Cost or Pricing Data 1. If, before agreement in price, the contracting officer learns that any cost or pricing data required by paragraph f above are inaccurate, incomplete, or noncurrent, the contracting officer must immediately bring the matter to the attention of the offeror or contractor, whether the defective data increase or decrease the contract price. The contracting officer must then negotiate using any new data submitted or making allowance for the incorrect data, documenting the file accordingly. 2. If, after award, cost or pricing data are found to be inaccurate, incomplete, or noncurrent as of the date of final agreement on price, the Postal Service is entitled to a price adjustment, including profit or fee, of any significant amount by which the price was increased because of the defective data. This entitlement is ensured by including in the contract the appropriate clause prescribed in paragraph i below, which gives the Postal Service the right to a price adjustment for defects in cost or pricing data submitted by the contractor, a prospective contractor, or an actual subcontractor. In arriving at a price adjustment under the clause, the contracting officer must consider: (a) The time by which the cost or pricing data became reasonably available to the contractor; (b) The extent to which the Postal Service relied upon the defective data; and (c) Any understated cost or pricing data submitted in support of price negotiations, up to the amount of the Postal Service's claim for overstated pricing data arising out of the same pricing action (the initial pricing of the same contract or the pricing of the same change order). Such offsets need not be in the same cost groupings (such as materials, direct labor, or indirect costs). 3. If, after award, the contracting officer learns or suspects that the data furnished were not accurate, complete, and current, the contracting officer must obtain an audit to evaluate the accuracy, completeness, and currency of the data. The contracting officer may not reprice the contract solely because the profit was greater than forecast or because some contingency specified in the submission failed to materialize. 4. For each advisory audit received based on a postaward review that indicates defective pricing, the contracting officer must determine if the data submitted were defective and relied upon. Before making such a determination, the contracting officer should give the contractor an opportunity to support the accuracy, completeness, and currency of data in question. The contracting officer must prepare a memorandum indicating the contracting officer's determination if the submitted data were accurate, complete, and current as of the date of final agreement on price, if the contracting officer relied on the data, and the results of any contractual action taken. The contracting officer must send one copy of this memorandum to the Inspection Service, one copy to the auditor if the audit was not performed by the Inspection Service, and one copy to the contractor. 5. If both contractor and subcontractor submitted cost or pricing data, the Postal Service has the right, under the clauses prescribed in paragraph i below, to reduce the prime contract price if it was significantly increased because a subcontractor submitted defective data. This right applies whether these data supported subcontract cost estimates or supported firm agreements between subcontractor and contractor. 6. If audit discloses defective subcontractor cost or pricing data, the information necessary to support a reduction in prime contract and subcontract prices may be available only from within the Postal Service. To the extent necessary to secure a prime contract price reduction, the contracting officer should make this information available to the prime contractor or appropriate subcontractor upon request. If release of the information would compromise Postal Service security or disclose trade secrets or confidential business information, the contracting officer may release it only under the conditions that will protect it from improper disclosure. Information made available under this subparagraph h.6 must be limited to that used as the basis for the prime contract price reduction. In order to afford an opportunity for corrective action, the contracting officer should give the prime contractor reasonable advance notice before determining to reduce the prime contract price. (a) When a prime contractor includes defective subcontract data in arriving at the price but later awards the subcontract to a lower priced subcontractor (or does not subcontract for the work), any adjustment in the prime contract price due to defective subcontract data is limited to the difference (plus applicable indirect cost and profit markups) between (1) the subcontract price used for pricing the prime contract and (2) either the actual subcontract price or the actual cost to the contractor, if not subcontracted, provided the data on which the actual subcontract price is based are not themselves defective. (b) Under cost-reimbursement contracts and fixed-price incentive contracts, payments to subcontractors that are higher than they would be had there been no defective subcontractor cost or pricing data will be the basis for disallowance or nonrecognition of costs under the clauses prescribed in paragraph i below. 5.3.3.i Clauses. Whenever cost or pricing data may be required for the negotiation of a contract, or for the negotiation of a subsequent modification of a contract, the contract must include the following clauses: 1. Clause 5-22, Price Reduction for Defective Cost or Pricing Data. 2. Clause 5-23, Subcontractor Cost or Pricing Data. Chapter 6 Contract Administration Section 1 General 6.1.1 Responsibilities 6.1.1.a Contracting Officer 6.1.1.b Contracting Officer's Representatives 6.1.1.c Relationship Between Postal Service and Contractor Representatives 6.1.2 Contract Administration Functions Section 2 Contract Performance 6.2.1 Postaward Orientation 6.2.2 Record Keeping 6.2.2.a Policy 6.2.2.b Organization 6.2.2.c Records in the Possession of Other Postal Service Employees 6.2.3 Contract Monitoring 6.2.3.a Personnel 6.2.3.b Use of Contractors to Monitor Contract Performance 6.2.3.c Review of Contractor Submittals 6.2.4 Delivery 6.2.4.a Transportation 6.2.4.b Variation in Quantity 6.2.5 Right to Adequate Assurance of Performance 6.2.5.a General 6.2.5.b Failure to Provide Adequate Assurance 6.2.5.c Repudiation 6.2.6 Anticipatory Repudiation 6.2.6.a Postal Service Rights 6.2.6.b Retraction of Repudiation 6.2.7 Bankruptcy 6.2.7.a General 6.2.7.b Procedures 6.2.7.c Consultation with Assigned Counsel 6.2.7.d Clause Section 3 Quality Assurance 6.3.1 Inspection and Testing 6.3.1.a General 6.3.1.b Nonconforming Supplies or Services 6.3.2 Acceptance 6.3.2.a General 6.3.2.b Responsibility 6.3.2.c Place of Acceptance 6.3.2.d Certificate of Conformance 6.3.2.e Revocation of Acceptance in Whole or in Part 6.3.2.f Transfer of Title and Risk of Loss 6.3.3 Receiving Reports 6.3.3.a General 6.3.3.b Responsibility Section 4 Payments and Financing 6.4.1 General 6.4.2.a Payment 6.4.2.b Submission 6.4.2 Invoices 6.4.3 Payment 6.4.3.a Means of Payment 6.4.3.b Time of Payment 6.4.3.c Payment of Interest 6.4.3.d Calculation of Interest 6.4.3.e Alternate Provisions 6.4.3.f Final Payment 6.4.4 Withholding of Payments 6.4.4.a General 6.4.4.b Actions by the Contracting Officer 6.4.4.c Disallowing Costs 6.4.4.d Setoffs and Recoupments 6.4.4.e Third-Party Claims 6.4.4.f Withholding Payment Under Contract Clauses 6.4.5 Progress Payments 6.4.5.a General 6.4.5.b Method of Computation 6.4.5.c Supervision 6.4.5.d Administration 6.4.6 Limitation of Cost or Funds 6.4.6.a Administration 6.4.6.b Effect of a Modification 6.4.7 Assignment of Claims 6.4.7.a Policy 6.4.7.b Approval 6.4.7.c Assignments by Law Section 5 Contract Modifications 6.5.1 General 6.5.1.a Definitions 6.5.1.b Policy 6.5.1.c Types of Modifications 6.5.1.d Notification of Contract Changes 6.5.1.e Availability of Funds 6.5.1.f Exercise of Options 6.5.1.g Correction of Mistakes 6.5.2 Change Orders 6.5.2.a General 6.5.2.b Accounting 6.5.2.c Administration 6.5.3 Equitable Adjustments for Delays 6.5.3.a General 6.5.3.b Excusable Delays 6.5.3.c Compensable Delays 6.5.3.d Concurrent Causes 6.5.3.e Acceleration 6.5.4 Novation and Change of Name Agreements 6.5.4.a Definitions 6.5.4.b Responsibility 6.5.4.c Novation Policy 6.5.4.d Change of Name Section 6 Postal Service Property 6.6.1 Contractor's Property Control Systems 6.6.2 Records Section 7 Subcontracting Policies and Procedures 6.7.1 General 6.7.1.a Definitions 6.7.1.b Requirements 6.7.1.c Considerations 6.7.2 Limitations Section 8 Claims and Disputes 6.8.1 General 6.8.1.a Contract Disputes Act 6.8.1.b Policy 6.8.1.c Definitions 6.8.2 Claim Initiation 6.8.3 Decision and Appeal Section 9 Contract Termination 6.9.1 General 6.9.1.a Applicability 6.9.1.b Review and Approval 6.9.1.c Definitions 6.9.1.d General Principles 6.9.1.e Termination Notice 6.9.2 Termination for Convenience 6.9.2.a General 6.9.2.b Contractor's Duties 6.9.2.c Settlement of Subcontractor Claims 6.9.3 Termination for Default 6.9.3.a General 6.9.3.b Fixed-Price Contracts 6.9.3.c Non-Fixed-Price Contracts Section 10 Remedies and Damages 6.10.1 Remedies 6.10.1.a Postal Service's Security Interest 6.10.1.b Repurchase Against Contractor's Account 6.10.2 Damages 6.10.2.a Default 6.10.2.b Breach Damages for Accepted Supplies 6.10.2.c Incidental and Consequential Damages 6.10.2.d Deduction of Damages from the Price 6.10.2.e Damages for Nondelivery or Repudiation Chapter 6 Contract Administration Section 1 General 6.1.1 Responsibilities 6.1.1.a Contracting Officer. While contract administration requires the efforts and skills of many people, the contracting officer is ultimately responsible for all contract administration functions. 6.1.1.b Contracting Officer's Representatives 1. The contracting officer may appoint in writing one or more representatives to perform any administrative function that does not involve a change in the cost or duration of contract performance (see 1.6.2.e). 2. Representatives of the contracting officer may not themselves appoint representatives without the prior written approval of the contracting officer. 3. Representatives of the contracting officer may not perform any function or exercise any authority not specifically delegated by the contracting officer. 4. The contracting officer must notify the contractor in writing of the appointment of any representative or representatives, specifying the authority delegated and cautioning the contractor to notify the contracting officer any time the contractor believes the representative is exceeding the authority granted by the delegation. 6.1.1.c Relationship Between Postal Service and Contractor Representatives 1. The objective of any purchase action is performance of the contract objectives, not control of the contractor's business. Postal Service administrative personnel should devote their efforts to tasks associated with that objective, such as quality assurance, cost monitoring, and other activities intended to ensure compliance with contract terms. Except when required by contract terms, they may not direct the contractor's management activities or intervene to supervise, train, or discipline contractor personnel. 2. Disputes with contractors are an obstacle to contract performance. Contracting officers and their supporting staffs should seek to resolve contract disputes through a businesslike approach that promotes efficiency and cost-effectiveness and enforces the Postal Service's interests. 6.1.2 Contract Administration Functions 6.1.2.a The contracting officer is responsible for: 1. Ensuring timely contract performance in accordance with the contract specifications and clauses, with due regard to the need for quality and the legal rights of the parties; 2. Ensuring that the contractor is compensated promptly and in proper amount consistent with the protection of Postal Service interests; 3. Making changes, carrying out terminations, and taking other necessary actions outside the normal course of contract performance; 4. Making decisions and determinations that affect contract performance fairly, impartially, and in accordance with Postal Service policy and applicable law; and 5. Maintaining complete documentation of contract performance or nonperformance to protect the Postal Service's rights. 6.1.2.b The specific functions required to be performed under any contract are determined by the contract clauses and the particular contract situation, as well as the policies in this manual. The contracting officer and each representative should together carefully review the contract immediately after award to determine the functions to be performed and the person or persons responsible for performance. Section 2 Contract Performance 6.2.1 Postaward Orientation 6.2.1.a The contracting officer should hold a postaward orientation when such a session will be useful in enabling contractor and Postal Service personnel to: 1. Achieve a clear, mutual understanding of all contract requirements; and 2. Identify and resolve potential problems. 6.2.1.b In deciding whether a postaward orientation is necessary, the contracting officer should consider the: 1. Nature and extent of any preaward survey or other previous discussions with the contractor; 2. Contract type, value, and complexity; 3. Procurement history of the required supplies or services; 4. Requirements for spare parts and related equipment; 5. Urgency of the delivery schedule and relationship of the supplies or services to critical programs; 6. Length of the planned production cycle; 7. Extent of subcontracting; 8. Contractor's performance history and experience with the supplies or services; 9. Contractor's status as a small or minority business concern; 10. Safety precautions required for hazardous materials or operations; 11. Financing arrangements contemplated, such as progress payments; and 12. Whether changes are anticipated that will require special accounting for change orders (see 6.5.2.b). 6.2.1.c When a postaward orientation is conducted, it should be held promptly after contract award. The contracting officer must prepare an agenda before the orientation, and summarize by memorandum the actual topics covered in the orientation session. Whenever possible, all representatives (for example, inspectors) must attend any orientation session. 6.2.1.d A postaward orientation may not be used to change the contract. Any change resulting from a postaward orientation must be made by a contract modification. 6.2.2 Record Keeping 6.2.2.a Policy. Maintenance of complete records on contract performance is essential for proper contract administration. All actions taken must be documented. 6.2.2.b Organization. Records must be maintained in an official contract file (see 1.10.1). 6.2.2.c Records in the Possession of Other Postal Service Employees. Records relating to contract performance may be generated and maintained by offices not under the contracting officer's authority (for example, records on repair and maintenance of equipment under warranty). The contracting officer should alert each such office to the contractual significance of such records and request any organization, retention, or transfer of records necessary to comply with paragraphs a and b above. 6.2.3 Contract Monitoring 6.2.3.a Personnel 1. In addition to appointing representatives (see 6.1.1.b) to monitor contract performance, the contracting officer may name one or more representatives with authority to coordinate the activities of other representatives, such as inspectors or reviewers. 2. The contracting officer may authorize one or more representatives to provide technical direction, but the authorization must specifically alert them to the prohibition on ordering changes in the work affecting schedule, price, or quality. 3. Personnel from federal government agencies may be delegated audit and inspection and testing responsibilities. 6.2.3.b Use of Contractors to Monitor Contract Performance 1. Facilities Contracts. For contracts covered by chapter 11, contracting officers may contract with architects, engineers, or real estate management professionals to perform any contract administration task that could be delegated to a Postal Service contracting officer's representative. 2. Other Contracts. Contracting officers may contract with third parties to perform only those contract administration responsibilities related to testing for conformance (but not acceptance), reviewing contractor submittals, shop drawings, and requests for design approval. 6.2.3.c Review of Contractor Submittals 1. Review of contractor submittals such as materials lists, shop drawings, catalog cuts, or samples is an important method of enforcing contract requirements, and contract terms requiring submission and approval should be strictly enforced. The contracting officer must ensure that contractor submittals are disapproved only for failure to meet a material requirement of the contract. If a contractor submittal indicates that the specifications are inadequate, the contracting officer should use the applicable changes clause to achieve necessary quality. As to submittals affecting procurements for Technical Data Packages (TDPs), see 2.3.3. 2. Contracting officers and their representatives must approve, conditionally approve, or disapprove contractor submittals promptly and in accordance with any time limits set forth in the contract. Disapprovals and conditional approvals must clearly indicate what the contractor must do to comply with the contract requirements. 6.2.4 Delivery 6.2.4.a Transportation. The contracting officer is responsible for ensuring that supplies purchased by the Postal Service are transported in accordance with: 1. The solicitation provision prescribed in appendix A; 2. Chapter 4 of Handbook AS-701, Materiel Management; and 3. All policies, procedures, and technical guidance issued by the Manager, Materials Distribution. 6.2.4.b Variation in Quantity. Contractors are responsible for delivering the quantity specified in the contract within the tolerances allowed (see Clause B-4, Variation in Quantity). Excess quantities totaling no more than $100 in value may be retained without compensating the contractor. Excess quantities worth more than $100 may be returned at the contractor's expense, or kept and paid for at the contract price. 6.2.5 Right to Adequate Assurance of Performance 6.2.5.a General. A contract imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired. When reasonable concerns arise with respect to performance, the contracting officer may, in writing, demand adequate assurance of due performance. The concerns need not arise from or be directly related to the contract. 6.2.5.b Failure to Provide Adequate Assurance. The contracting officer may treat the contract as defaulted if the contracting officer's concerns are not resolved within 30 days of the demand for adequate assurance. 6.2.5.c Repudiation. Failure to provide adequate assurance of performance results in a contract breach by repudiation. The contractor may retract the repudiation under 6.2.6.b below unless the contracting officer has acted on the default. 6.2.6 Anticipatory Repudiation 6.2.6.a Postal Service Rights. If the contractor repudiates the contract with respect to performance not yet due, the contracting officer may: 1. Await performance for a reasonable time; or 2. Result to any remedy provided by this manual or the contract, even though the contractor has been notified that the Postal Service will await performance and the contracting officer has urged retraction; and 3. In either case suspend the Postal Service's own performance or proceed in accordance with the provisions of the contract's Default clause. 6.2.6.b Retraction of Repudiation 1. Until the contractor's next performance is due, it can retract a repudiation unless the Postal Service has, since the repudiation, changed its position or otherwise indicated that the repudiation is considered final. 2. Retraction may be by any method that clearly indicates that the contractor intends to perform, but must include any assurance justifiably demanded under 6.2.5.a. 3. Retraction reinstates the contractor's rights under the contract with due excuse and allowance to the Postal Service for any delay caused by the repudiation. 6.2.7 Bankruptcy 6.2.7.a General. Once a contractor declares bankruptcy, the right of the Postal Service to take unilateral action with respect to the contractor is limited. Contracting officers should monitor the financial strength of the contractor in order to anticipate possible problems which could arise in this area and must take prompt action to protect the interests of the Postal Service upon notification of a contractor's bankruptcy. 6.2.7.b Procedures. Upon notification that a contractor is in bankruptcy proceedings, the contracting officer must: 1. Furnish the notice of bankruptcy to assigned counsel and other appropriate agency offices. 2. Determine the amount of any claims which the Postal Service may have against the contractor on any contracts which have not been closed out. 3. Take actions necessary to protect the Postal Service's financial interests and safeguard Postal Service property. 4. Furnish pertinent contract information to assigned counsel. 6.2.7.c Consultation with Assigned Counsel. The contracting officer must consult with assigned counsel prior to taking any action regarding the contractor's bankruptcy proceedings. 6.2.7.d Clause. The contracting officer must insert Clause 6-1, Bankruptcy, in all solicitations and contracts not awarded using simplified procedures. Section 3 Quality Assurance 6.3.1 Inspection and Testing 6.3.1.a General 1. Quality assurance requirements, including inspection and testing, acceptance, and first article approval, are treated in 2.2.1 and 2.2.2. This section focuses on the administration of such requirements during contract performance. 2. Inspection and testing must be performed in accordance with contract requirements, and must be documented. 3. Unless there are special requirements (see 2.2.1.e), the Postal Service inspects purchases made using simplified procedures (see 4.3) at destination and only for type and kind; quantity; damage; operability (if readily determinable); and preservation, packaging, packing, and marking, if applicable. 6.3.1.b Nonconforming Supplies or Services 1. General (a) Contracting officers must normally reject supplies or services not conforming in all respects to contract requirements. (b) Contracting officers should discourage the repeated tender of nonconforming property or services, including those with only minor nonconformances. In such cases, the contracting officer should take appropriate action, such as rejection and documentation of the contractor's performance record. 2. Correction or Replacement 3. Contractors must be given an opportunity to correct or replace nonconforming supplies or services when that can be accomplished within the delivery schedule. (a) Unless the contract specifies otherwise (as in some cost-reimbursement contracts), correction or replacement must be without additional cost to the Postal Service. (b) Except under non-fixed-price contracts, the Postal Service reserves the right to charge the contractor the cost of reinspection and retesting needed because of prior rejection. 4. Rejection (a) Determination. When correction within the delivery schedule is not possible, the contracting officer must ordinarily reject supplies or services whose nonconformance adversely affects safety, health, reliability, durability, performance, interchangeability of parts or assemblies, weight, appearance, or any other basic objective of the contract (see, however, subparagraph b.4 below). The contracting officer should consult with technical personnel as necessary in making this determination. (b) Notice. Contractors must be given prompt notice of rejection, including the reasons for rejection. If prompt notice is not given, acceptance may be implied as a matter of law. Notice must be in writing when: (1) The supplies or services have been rejected at a place other than the contractor's plant; (2) The contractor persists in offering nonconforming supplies or services for acceptance; or (3) Delivery or performance was late without excusable cause. 5. Substitute Performance (a) When replacement or correction is not possible within the contract period of performance, and the contracting officer has rejected performance under subparagraph b.3 above, the contracting officer should provide the contractor an opportunity to provide acceptable substitute performance if: (1) Substitute performance will best mitigate the damage suffered by the Postal Service; and (2) Performance is still required. (b) When substitute performance is accepted, the contracting officer must modify the contract to provide for an equitable price adjustment or other consideration. 6. Acceptance of Defective Performance (a) Minor Defects. If a nonconformance is minor, in that it does not adversely affect satisfaction of a basic contract objective (see 3.a above), and correction within the delivery schedule is not possible, the contracting officer may accept nonconforming supplies and services. (b) Other Defects. The contracting officer may not accept supplies or services whose nonconformance adversely affects satisfaction of a basic contract objective unless acceptance is clearly in the Postal Service's interest. The contracting officer's determination to accept the supplies or services must be in writing and must be based on: (1) Information on the nature and extent of the nonconformance; (2) Advice of the technical activity that material is safe to use and will perform its intended purpose; (3) Contractor request for acceptance of the supplies or service; (4) A recommendation for acceptance by the intended user, with supporting rationale; and (5) Appropriate monetary or other consideration. (c) Consideration for Acceptance of Defective Performance (1) When nonconforming supplies or services are accepted under (a) above, the contracting officer need not modify the contract to provide for an equitable price adjustment or other consideration, unless: (i) It appears that the savings to the contractor in fabricating the nonconforming supplies or performing the nonconforming services exceed the cost to the Postal Service of processing and enforcing a modification; or (ii) The Postal Service's interests otherwise require a contract modification. (2) When nonconforming supplies or services are accepted under (b) above, the contracting officer must modify the contract to provide for an equitable price adjustment or other consideration. 6.3.2 Acceptance 6.3.2.a General 1. Acceptance constitutes acknowledgment that supplies or services conform with quality, quantity, and packaging requirements set forth in the terms and conditions of the contract. 2. Acceptance may take place before delivery, at delivery, or after delivery, depending on the contract's provisions. 3. Supplies and services should not ordinarily be accepted before completion of Postal Service inspection and other quality assurance actions. Acceptance should be evidenced by execution of an acceptance certificate on an inspection form, receiving report, or commercial shipping document or packing list. 6.3.2.b Responsibility. Acceptance is the responsibility of the contracting officer. When this responsibility is assigned to a contracting officer's representative or another postal employee, acceptance by that person is binding on the Postal Service. 6.3.2.c Place of Acceptance. Each contract must specify the place of acceptance. Contracts providing for Postal Service inspection at source ordinarily provide for acceptance at source; those providing for inspection at destination ordinarily provide for acceptance at destination. Supplies accepted at a place other than destination may not be reinspected at destination for acceptance purposes, but should be examined for quantity, damage in transit, and possible substitution or fraud. 6.3.2.d Certificate of Conformance. A contractor certificate of conformance may be substituted for Postal Service inspection, whether acceptance is at source or destination, at the contracting officer's discretion (see Clause B-5, Certificate of Conformance). Acceptance based on such a certificate may be in the Postal Service's interest when: 1. Only small losses will be incurred in the event of a defect; or 2. The contractor's reputation or past performance suggests that the supplies or services furnished will be acceptable, and any defective work will be replaced, or corrected, or repaired without contest. 6.3.2.e Revocation of Acceptance in Whole or in Part 1. If the value of performance has been substantially impaired, the contracting officer may revoke acceptance of nonconforming performance if acceptance has: (a) Resulted from the reasonable assumption that the nonconformance would be cured and it is not cured; or (b) Taken place because the nonconformance has not been discovered before acceptance, as a result of the difficulty of discovery, or because of the contractor's assurances. 2. Revocation of acceptance must occur within a reasonable time after the contracting officer discovers or should have discovered the ground for it and before any substantial change not caused by their own defects takes place in the condition of the goods. It is not effective until the contracting officer notifies the contractor. 3. The Postal Service has the same rights and duties upon revocation as upon rejection. 6.3.2.f Transfer of Title and Risk of Loss 1. Title to supplies passes to the Postal Service upon formal acceptance, regardless of when or where the Postal Service takes physical possession, unless the contract specifically provides for earlier passage of title. 2. Unless the contract specifically provides otherwise, risk of loss of or damage to supplies remains with the contractor until: (a) Delivery of the supplies to a carrier if transportation is free on board (f.o.b.) origin; (b) Placement in the U.S. mail, when the Postal Service has provided permit labels for the contractor's use; or (c) Acceptance by the Postal Service or delivery to the Postal Service at the destination specified in the contract, whichever is later, if transportation is f.o.b. destination. 3. The provisions of subparagraph f.2 above do not apply to supplies that are rejected. The risk of loss of or damage to such supplies remains with the contractor until cure or acceptance. After cure or acceptance, subparagraph f.2 above applies. 4. Under f.2(b) above, the contractor is not liable for loss or damage caused by the negligence of officers, agents, or employees of the Postal Service acting within the scope of their employment. 6.3.3 Receiving Reports 6.3.3.a General 1. Completed receiving reports should be submitted to the information service center (ISC) within five days of receipt of the supplies or services. 2. Receiving activities whose reports are regularly received at the ISC more than ten days after receipt of supplies or services will be reported by the ISC to the appropriate purchasing office for remedial action. 6.3.3.b Responsibility 1. As required by Clause B-6, Receiving Reports, the contracting officer must provide the proper forms to the contractor. Payment may not be made for shipments not accompanied by receiving reports. 2. The contracting officer must ensure that receiving activities get proper notification of contract awards, including appropriate receiving report forms with instructions for prompt completion and submission. 3. Day-to-day responsibility for monitoring the completion and submission of receiving reports may be delegated to purchasing personnel, or, as necessary, to other responsible managers within the receiving installations. 4. Each installation head must: (a) Designate in writing an individual (or individuals) responsible for receiving and accepting all delivered supplies and services; (b) Provide the appropriate purchasing activities with a copy of the designation; and (c) See that procedures are established to ensure that the individual responsible for receipt and acceptance of supplies is notified promptly when a shipment arrives. 5. Individuals responsible for receipt and acceptance must follow procedures detailed in Management Instruction AS-710-87-15, Receiving Reports and Payments to Vendors for Supply and Service Contracts. 6. When partial shipments are certified for payment, a copy of the certified receiving report must be kept for use in receiving the balance of the shipment. Section 4 Payments and Financing 6.4.1 General 6.4.1.a Nonpayment and delays in payment have harmful effects. Contracting officers and financial personnel must ensure that payments legitimately due are made promptly. If a dispute arises regarding the contractor's entitlement to payment, the contracting officer must pay the contractor any amount not in dispute, except for withholding as allowed under 6. 4.4.f. 6.4.1.b The contracting officer should generally approve requests for partial payment upon delivery of goods or services that partially fulfill contract requirements. When the contract does not provide unit prices, the contracting officer may determine an appropriate formula for payment. 6.4.1.c Requests for payment under non-fixed-price contracts must be reviewed by the contracting officer, with the assistance of technical personnel, to determine that such requests comply with the requirements for allowability, allocability, and reasonableness (see 5.2.3). 6.4.2 Invoices 6.4.2.a Payment will be made only after receipt of an invoice (see Clause B-20, Invoices), except for: 1. Regularly scheduled payment under real estate leases and contracts for cleaning services, vehicle hire, and contract postal units; 2. Payments under mail transportation contracts; 3. Over-the-counter transactions using simplified purchasing procedures; or 4. Advance payments, when authorized. 6.4.2.b Submission. Invoices must be sent to the office specified in the contract or order, with a copy to the contracting officer if necessary. Invoices sent to any other person or office are not considered properly submitted. Invoices submitted before performance or delivery are in violation of the certification provision of the Invoices clause. 6.4.3 Payment 6.4.3.a Means of Payment. Payments may be made by check or electronic funds transfer (if available), as requested by the contractor and approved by the contracting officer. 6.4.3.b Time of Payment. Payment must be made as close as possible to, but not later than, the 30th day after receipt of an invoice or acceptance, whichever occurs later, except as follows: 1. In those limited circumstances when a specified payment date is provided for in the contract, payment will be made as close as possible to, but not later than, that date. 2. When a time discount is taken, payment must be made as close as possible to, but not later than, the discount date. Discounts must be taken from the date on which the invoice is received by the office specified in the contract, or the date on which supplies or services are delivered or performed, whichever is later, to the discount date. Discounts should be taken whenever economically justified, but only after acceptance. 6.4.3.c Payment of Interest 1. Interest will be automatically paid, whether or not a contractor has requested payment of interest, when all of the following conditions have been met: (a) Acceptance has occurred and there is no disagreement over quantity, quality, or other contract provisions; (b) A proper invoice has been received, except when no invoice is required for payment (see 6.4.2.a) or the contracting officer fails to give notice within 7 days after receipt of an improper invoice. 2. When a prompt payment discount is taken after the discount period has expired, the Postal Service has 10 days after expiration of the discount period to correct the underpayment. Failure to do so will result in the automatic payment of interest, whether or not the contractor has requested payment. 6.4.3.d Calculation of Interest 1. Except where the interest is prescribed by other governmental authority (e.g., tariffs), it will be calculated using the rate set by the Secretary of the Treasury under section 12 of the Contract Disputes Act of 1978 (41 U.S.C. 611) and in effect on the day after the due date. The rate will be published semi-annually in the Postal Bulletin, in January and July. The rate will remain fixed during the period for which interest is calculated. The interest will accrue daily on the invoice payment amount approved by the Postal Service. The interest will be compounded in 30-day increments, starting with and including the first day after the due date through the payment date. Interest accrued at the end of any 30-day period will be added to the approved invoice payment amount and be subject to interest if not paid in the succeeding 30-day period. 2. For the sole purpose of computing interest under this policy, acceptance will have constructively occurred on the 7th day after the contractor has delivered the supplies or performed services in accordance with the terms and conditions of the contract, unless there is a disagreement over quantity, quality, or contractor compliance with the contract. If actual acceptance occurs within 7 days of delivery, the calculation of interest will be based on the actual date of acceptance. When necessary to inspect and test the supplies furnished or to evaluate the services performed, the contracting officer may specify a longer period for constructive acceptance in the solicitation and resulting contract. The justification for extending the constructive acceptance period beyond 7 days must be documented in the contract file. 3. If the office specified in the contract for receipt of invoices fails to date stamp the invoice, the invoice due date will be the 30th day after the date of the invoice, provided that a proper invoice was received and there is no disagreement over the quantity, quality, or contractor compliance with the contract. 4. The interest amount, interest rate and the period for which the interest was computed, will be separately stated on the check or accompanying remittance advice. If requested by the contractor, adjustments will be made for errors in calculating interest. 5. For contracts awarded on or after October 1, 1989, a penalty amount (calculated, as a matter of policy, in accordance with Office of Management and Budget regulations) will be paid, in addition to the interest, if the contractor: (a) Is owed interest; (b) Is not paid the interest within 10 days after the date the invoice amount is paid; and (c) Makes a written demand that the Postal Service pay such a penalty not later than 40 days after the date the invoice amount is paid. 6. When a prompt payment discount is taken after the discount period has expired, interest will be calculated on the amount of discount improperly taken. The interest will be calculated for the period beginning with the first day after the end of the discount period through the date when the contractor is paid. 7. If the office specified in the contract for receipt of invoices fails to notify the contractor of a defective invoice within 7 days after its receipt, the due date on the corrected invoice will be adjusted. The number of days taken beyond the 7-day period will be subtracted from payment due date. Any interest owed the contractor will be based on this adjusted due date. 6.4.3.e Alternate Provisions. The provisions on time of payment may be changed by agreement of the parties, but no interest may be paid by the Postal Service except as provided in paragraph c above. 6.4.3.f Final Payment. Final payment under any contract involving progress payments, retainage, payment or performance guarantees, or construction may not be made until the contracting officer receives a release from the contractor. 6.4.4 Withholding of Payments 6.4.4.a General. The contracting officer may refuse to pay a contractor or may withhold payments otherwise due, in whole or in part, when: 1. The contract provides for withholding (for instance, when retainage is authorized); 2. Elements of the amount invoiced by the contractor are not allowable (see 5.2.3); 3. The contractor has been overpaid or otherwise owes the Postal Service money as a result of the contractor's actions or inactions under the contract; 4. The contractor owes the Postal Service money for reasons unrelated to the contract under which payment will be withheld; or 5. As a result of judicial action or applicable law, parties other than the contractor have made claims against the Postal Service, or have not waived rights exercisable against the Postal Service. 6.4.4.b Actions by the Contracting Officer 1. Nonpayment may be damaging to a contractor's business and may jeopardize performance. Therefore, the contracting officer must carefully consider the reasons for withholding or refusing payment, and must process disputes regarding payment expeditiously. 2. The contracting officer must notify the contractor of any intended withholding and must provide an opportunity for the contractor to object. If time permits, notice should be in writing. 6.4.4.c Disallowing Costs 1. At any time during the performance of a non-fixed-price contract, the contracting officer may issue the contractor a written notice of intent to disallow specified costs incurred or planned (see Clause B-17, Disallowance of Costs). However, before issuing the notice, the contracting officer should make a reasonable effort to reach a satisfactory settlement though discussions with the contractor. 2. If the contractor disagrees with the deduction from current payments, the contractor may: (a) Request in writing that the contracting officer consider whether the unreimbursed costs should be paid and discuss the matter with the contractor; (b) File a claim under Clause B-9, Claims and Disputes, which the cognizant contracting officer will process in accordance with the procedures in 6.8; or (c) Do both of the above. 3. Contractor discounts, rebates, and refunds voluntarily offered or provided for by contract clauses are not subject to this part and may be taken by adjustments to invoices or other procedures acceptable to the information service center. 6.4.4.d Setoffs and Recoupments 1. Definitions (a) A setoff is a deduction from payments due to the contractor under one contract for sums due the Postal Service under one or more other contracts. (b) Recoupment is a deduction of sums due the Postal Service (damages for delay or defective performance, warranty costs, repair costs, and the like) from the payment due the contractor under a single contract. 2. Procedures 3. At any time during performance of a contract, the contracting officer may issue the contractor a written notice of intent to set off or recoup amounts due the Postal Service from payments otherwise due the contractor. However, before issuing the notice, the contracting officer should make a reasonable effort to reach a satisfactory settlement through negotiation. (a) If no settlement is reached, the contracting officer may withhold the amounts due the Postal Service by setoff or recoupment. (b) If the contractor disagrees with the intended setoff or recoupment, the provisions of subparagraph c.2 above apply. (c) When contract payments have been assigned (see 6.4.7), the contracting officer may use setoff or recoupment in accordance with paragraph d only with the concurrence of assigned counsel. 6.4.4.e Third-Party Claims. The Postal Service may be subject to claims by third parties for moneys otherwise due a contractor. When a claim is filed with the contracting officer, assigned counsel must be notified immediately. Assigned counsel will provide instructions for handling the claim, for disposition of the fund, and for notice required to be given to the contractor. 6.4.4.f Withholding Payment Under Contract Clauses. Some contract clauses, such as Clause 2-10, Liquidated Damages, and Clause 2-8, Warranty, provide for withholding payment in certain circumstances. In addition, some contract clauses provide for withholding a percentage or portion of payments otherwise due to induce continued acceptable performance. The contracting officer must strictly enforce such clauses and must maintain a complete record of the amounts withheld under any clause, the basis for withholding, and the disposition of funds withheld. 6.4.5 Progress Payments 6.4.5.a General. The Postal Service makes progress payments, when provided for by the contract, only in return for demonstrated progress toward completion of performance. 6.4.5.b Method of Computation 1. Progress payments for nonconstruction contracts must be based on costs incurred in performance. However, as provided in Clause 1-3, Progress Payments, the contracting officer may reduce or suspend payments in cases where costs incurred are substantially at variance with progress under the contract. In such cases, the contracting officer should obtain the advice of technical personnel and assigned counsel in computing the amount of payment justified. 2. Progress payments for construction contracts are made in accordance with Clause 11-10, Payment (Construction). 6.4.5.c Supervision. The extent of progress payments supervision should depend upon the adequacy of the contractor's accounting system and controls and the contractor's experience, performance record, reliability, quality of management, and financial strength. 6.4.5.d Administration 1. The contracting officer must obtain monthly progress reports from the contractor, showing progress of the work as related to progress payments made. 2. The contracting officer may, in approving progress payment requests, rely on the contractor's accounting system and certification without prepayment review. However, postpayment reviews (including audits when considered necessary) must be made periodically, or when considered necessary in determining the validity of progress payments already made and expected to be made. 3. Clause 1-3, Progress Payments, gives the Postal Service the right to reduce or suspend progress payments, or to increase the liquidation rate, under specified conditions. The contracting officer may take such actions only in accordance with the contract terms and only after: (a) Notifying the contractor of the intended action and providing an opportunity for discussion; (b) Evaluating the effect of the action on the contractor's operations, on the basis of the contractor's financial condition, projected cash requirements, and existing or available credit arrangements; and (c) Considering what is equitable in the particular situation. 4. The contracting officer may take immediate unilateral action only if warranted by circumstances such as overpayments or unsatisfactory contract performance. In all cases, the contracting officer must: (a) Act fairly and reasonably; (b) Base decisions on substantial evidence; and (c) Document the contract file. 5. Progress payments are recouped through the deduction of liquidations from payments that would otherwise be due the contractor for completed performance. The usual method is that the liquidation rate is the same as the progress payment rate; at the beginning of a contract, only this method may be used. Any liquidation method other than the ordinary method must be approved by the manager of Headquarters Purchasing, Field Customer Support, National Mail Transportation Purchasing, or Major Facilities Purchasing. 6.4.6 Limitation of Cost or Funds 6.4.6.a Administration 1. When a contract contains Clause 5-5, Limitation of Cost, or Clause 5-6, Limitation of Funds, and the contractor has given notice that costs incurred are approaching the estimated cost of the contract or the limit of the funds allotted, the contracting officer must promptly obtain funding and programming information pertinent to the contract's continuation and notify the contractor in writing that: (a) Additional funds have been allotted, or the estimated cost has been increased, in a specified amount; (b) The contract is not to be further funded, and the contractor should submit a proposal for an adjustment of fee, if any, based on the percentage of work completed in relation to the total work called for under the contract; or (c) The contract is to be terminated. 2. The contractor is entitled by the contract terms to stop work when the funding or cost limit is reached, and any work beyond the funding or cost limit is at the contractor's risk. 6.4.6.b Effect of a Modification. The contracting officer may issue a change order, a direction to replace or repair defective items or work, or a termination notice without immediately increasing the funds available. Since a contractor is not obligated to incur costs in excess of the estimated cost in the contract, the contracting officer must ensure availability of funds for directed actions. The contracting officer may direct that any increase in the estimated cost or amount allotted to a contract be used for the sole purpose of funding termination or other specified expenses. 6.4.7 Assignment of Claims 6.4.7.a Policy. A contractor may assign monies coming due under a Postal Service contract to a single bank or other financial institution, with the approval of the contracting officer (see Clause B-8, Assignment of Claims). Any other attempted assignment may be treated as a breach of contract. 6.4.7.b Approval. Contracting officers may approve any authorized assignment that does not jeopardize contract performance. See also the discussion of novation agreements in 6.5.4. 6.4.7.c Assignments by Law. This part does not govern assignments ordered by a court or by operation of law. Contracting officers should consult assigned counsel in such cases. Section 5 Contract Modifications 6.5.1 General 6.5.1.a Definitions 1. Administrative change. This is a unilateral contract change, in writing, that does not affect the substantive rights of the parties (for example, a change in the paying office). 2. Effective date. This has one of the meanings given below, depending on the circumstances in which it is used: (a) The effective date of an administrative change, change order, or other unilateral modification issued by the Postal Service under a contract is any effective date established therein, or, if none, the date of the modification. (b) The effective date of any bilateral modification under a contract, such as a supplemental agreement, is any effective date established therein, or, if none, the date agreement is reached (usually evidenced by the date signed by the last agreeing party). (c) Modifications issued in connection with previous directions or agreements - such as settlements of the cost of changes, confirmations of terminations, or conversions of terminations for default to terminations for convenience - ordinarily take the effective date of the underlying action. (d) For a modification converting a termination for default to a termination for convenience, the effective date will be the same as the effective date of the termination for default. 6.5.1.b Policy 1. Only contracting officers acting within the scope of their authority are authorized to sign contract modifications on behalf of the Postal Service. Other Postal Service personnel may not: (a) Sign contract modifications; (b) Act in such a manner as to cause the contractor to believe that they have authority to bind the Postal Service; or (c) Direct or encourage the contractor to perform work that should be the subject of a contract modification. 2. Contract modifications, including changes that can be issued unilaterally, must be priced before their execution if this can be done without adversely affecting the interest of the Postal Service. If a significant cost increase could result from a contract modification and time does not permit negotiation of a price, at least a maximum price must be negotiated whenever practicable. As to modifications affecting Technical Data Packages (TDPs), see 2.3.3. 6.5.1.c Types of Modifications. Contract modifications are of the following types: 1. Bilateral. A bilateral modification (supplemental agreement) is a contract modification that is signed by the contractor and the contracting officer. Bilateral modifications are used, for example, to: (a) Make equitable adjustments under Clause B-2, Changes, Clause 11-26, Changes (Construction), or other clauses providing for equitable adjustment; and (b) Reflect other agreements of the parties modifying contract terms. 2. Unilateral. A unilateral modification is a contract modification that is signed only by the contracting officer in accordance with a contract clause. Unilateral modifications are used, for example, to: 3. Make administrative changes; (a) Issue change orders; (b) Make changes authorized by specific clauses or contract provisions (such as exercise of an option or a suspension of work); and (c) Issue termination notices. 6.5.1.d Notification of Contract Changes. Under the Changes clause, when a contractor considers that any written or oral order (including direction, interpretation, instruction, or determination) from the contracting officer causes a change in the contract, the contractor must notify the contracting officer in writing that the contractor regards the order as a change order. The contracting officer must then evaluate the order and: 1. Confirm that it is a change, direct the mode of further performance, and plan for its funding; 2. Countermand the alleged change; or 3. Notify the contractor that no change is considered to have been ordered. 6.5.1.e Availability of Funds 1. The contracting officer may not execute a contract modification that causes or will cause an increase in funds without having first obtained a certification of funds availability, except for modifications to contracts that: (a) Are conditioned on availability of funds; or (b) Contain a limitation of cost or funds clause. 2. A certification of funds availability should be based on the negotiated price. Modifications executed before agreement on price may be based on the best available estimate. 6.5.1.f Exercise of Options 1. Before exercising an option, the contracting officer must determine that (a) funds are available, (b) the Postal Service has a need for the supplies or services covered by the option, and (c) exercise of the option is the most advantageous alternative, price and other factors considered. "Other factors" includes any need for continuity of operations and potential costs to the Postal Service of disrupting operations. 2. A determination that the option price is the most advantageous must be based on one of the following: (a) An informal investigation of prices, or other examination of the market, indicates clearly that a better price than that offered by the option cannot be obtained. (b) The time between the award of the contract containing the option and the exercise of the option is so short that it indicates the option price is the lowest price obtainable, considering such factors as market stability and a comparison of the time since award with the usual duration of contracts for such supplies and services. (c) A new solicitation fails to produce a better price than that offered by the option. (This method of testing the market should be used only if neither of the methods described in 2(a) and (b) is satisfactory.) 3. If the contract provides for economic price adjustment, the effect of such adjustment on prices under the option must be ascertained in determining whether to exercise the option. 4. When an option is to be exercised, the contracting officer must: (a) Make a written determination that the option may properly be exercised in accordance with subparagraph f.1 above; (b) Give written notification to the contractor within the time period specified in the contract; and (c) Give the contractor written notification of the exercise of the option and execute a contract modification as needed, citing the option clause as authority for the purchase. 6.5.1.g Correction of Mistakes 1. A contract may be modified to correct or mitigate the effect of a mistake such as the following: (a) A mistake or ambiguity consisting of the failure to express, or express clearly, in a written contract, the agreement as both parties understood it. (b) A contractor's mistake so obvious that it was or should have been apparent to the contracting officer. (c) A mutual mistake as to a material fact. 2. A claim of mistake asserted after award is a claim subject to the procedures of Clause B-9, Claims and Disputes. A decision to deny, in whole or in part, a claim of mistake asserted after award is a final decision under the clause (see 6.8.3). 6.5.2 Change Orders 6.5.2.a General 1. The Changes clause permits the contracting officer to make unilateral changes, as specified in the clause, within the general scope of the contract. These changes are accomplished by issuing written change orders. 2. The contractor must continue performance of the contract as changed, except that in non-fixed-price or incrementally funded contracts the contractor is not obligated to continue performance or incur costs beyond the limits established in Clause 5-5, Limitation of Cost, or Clause 5-6, Limitation of Funds. 6.5.2.b Accounting 1. Contractor's accounting systems are seldom designed to segregate the costs of performing changed work. Clause B-21, Change-Order Accounting, requires them to do so. 2. The following categories of direct costs normally are segregable and accountable under the terms of the Change-Order Accounting clause: (a) Nonrecurring costs (for example, engineering costs and costs of reperformed work). (b) Costs of distinct tasks added by the change order (for example, new subcontract work, new prototypes, or new retrofit or backfit kits). (c) Costs of recurring work (for example, labor and material costs). 6.5.2.c Administration 1. When change orders are not priced before performance, they usually require two documents - the change order and a supplemental agreement reflecting a resulting equitable adjustment. If an equitable adjustment in the contract price or delivery terms, or both, can be agreed upon in advance, only a supplemental agreement need be issued. If the change order has no effect on price or delivery, no equitable adjustment is needed and there will be no related supplemental agreement. Administrative changes and changes issued pursuant to a clause giving the Postal Service a unilateral right to make a change (such as an option clause) require only one document. 2. Contracting officers must promptly negotiate equitable adjustments resulting from change orders, and must follow up when claims for equitable adjustment are not received within 30 days after the order. 3. Before negotiating an equitable adjustment, the contracting officer must ensure that price and cost analyses, as appropriate, are made and must consider the contractor's segregable costs of the change, if available. If additional funds are required as a result of the change, the funds must be available before the supplemental agreement is executed. 4. To avoid controversies that may result from a supplemental agreement making an equitable adjustment, the contracting officer should: (a) Ensure that all elements of the equitable adjustment have been presented and resolved; and (b) Include a release in the supplemental agreement. 6.5.3 Equitable Adjustments for Delays 6.5.3.a General. In determining the consequences of events that delay performance, the United States Court of Federal Claims and the Postal Service Board of Contract Appeals have applied general risk allocation principles. These have been supplemented by standard contract clauses under which the time and cost effect of delays are dealt with separately. Clause B-19, Excusable Delays, deals with the types of events that protect the contractor from sanctions for late performance. Other clauses, such as Clause B-16, Suspensions and Delays, cover the recovery of costs associated with delays. The contractor bears the risk of schedule and cost effects for delays it causes or for delays within its control. Generally, the contractor is excused from nonperformance because of delays caused by factors for which neither the contractor nor the Postal Service is responsible. However, the contractor must bear the cost impact of such delays. The Postal Service is responsible for the schedule and cost effects of delays it causes, delays that are under its control, or delays for which it has agreed to compensate the contractor. Clause B-15, Notice of Delay, requires the contractor to notify the contracting officer of problems that might delay performance. 6.5.3.b Excusable Delays 1. A contractor may be granted an extension of the delivery or performance schedule for an excusable delay. 2. A contractor's failure to perform may be considered an excusable delay when it arises out of either of the following types of causes: (a) Causes beyond the control and without the negligence of the contractor - including acts of God or the public enemy; acts of the government in its sovereign capacity or the Postal Service in its contractual capacity; and fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, and unusually severe weather. (b) A subcontractor default due to causes beyond the control and without the fault or negligence of both the contractor and the subcontractor, unless the supplies or services were obtainable from other sources in time to permit the contractor to meet the delivery schedule. 6.5.3.c Compensable Delays 1. A contractor may be granted an extension of the contract delivery or performance schedule, a price adjustment, or both, as the contracting officer deems appropriate, when an unreasonable delay in performance is caused by the Postal Service or is under its control, or when it has agreed to pay the contractor for the delay. Situations that may entitle the contractor to an equitable adjustment (schedule, cost, or both) include: (a) Delay in issuing the notice to proceed; (b) Delay in availability of the site; (c) Differing site conditions; (d) Actual or constructive changes or delays; (e) Delay in providing funding; (f) Delay in inspections; (g) Delay in issuing changes; (h) Delay in providing Postal Service-furnished equipment; and (i) Failure of performance of other Postal Service contractors. 2. The contractor has the burden of proof in establishing the basis for the equitable adjustment required to overcome the delay. 6.5.3.d Concurrent Causes. When a delay is attributable to both the Postal Service and the contractor, a contract delivery or performance schedule adjustment should not normally be granted for a period of delay caused at least in part by actions or failures on the part of the contractor. (But damages may not be assessed against the contractor in such situations.) 6.5.3.e Acceleration 1. The Postal Service has the right to require accelerated performance under Clause B-2, Changes. This right should be exercised only when required to maintain the operational capability of the Postal Service. 2. Contracting officers must document the specific facts that require acceleration of performance and the estimated impact on contract price. Whenever possible, the contracting officer must negotiate acceleration actions in advance. 3. Contracting officers should be alert to constructive acceleration situations. Constructive acceleration occurs when the Postal Service does not agree to a contract delivery or performance schedule extension to which the contractor is entitled, or is later determined to be entitled, and that has the effect of causing the contractor to accelerate performance. Such acceleration may form the basis for a claim against the Postal Service for an increase in contract price. 6.5.4 Novation and Change of Name Agreements 6.5.4.a Definitions 1. Change-of-name agreement. This is an agreement signed by the contractor and the Postal Service that recognizes a legal change of the contractor's name without altering the original contractual rights and obligations of the parties. 2. Novation agreement. This is an agreement signed by (a) the contractor (transferor), (b) the successor in interest (transferee), and (c) the Postal Service, by which, among other things, the transferor guarantees performance of the contract, the transferee assumes all obligations under the contract, and the Postal Service recognizes the transfer of the contract and related assets. 6.5.4.b Responsibility 1. The contracting officer is responsible for: (a) Determining, in consultation with assigned counsel, whether to permit contract novation; and (b) Processing and signing novation and change-of-name agreements. 2. When multiple contracts of one contractor or transfers from several transferors to one transferee are involved, the contracting officer responsible for executing a novation or change-of-name agreement is the contracting officer responsible for the largest unsettled (unbilled plus billed but unpaid) contract dollar balance. 6.5.4.c Novation Policy 1. The Postal Service generally prohibits contract novation (see Clause B-8, Assignment of Claims). However, the Postal Service may recognize a third party as the successor in interest when that party's interest arises out of the transfer of: (a) All the contractor's assets; or (b) The entire portion of the assets involved in performing the contract. 2. Situations in which novation may be permitted include but are not limited to: 3. Sale of the contractor's assets with a provision for assuming liabilities; (a) Transfer of assets as part of a merger or corporate consolidation; and (b) Incorporation of a proprietorship or partnership, or formation of a partnership. 4. Before concurring in a contract novation, the contracting officer must determine that the successor in interest is a responsible contractor (see 3.3.1). 5. When it is not in the Postal Service's interest to concur in a contract novation, the original contractor remains responsible for contract performance, and the contract may be terminated for default for failure to perform. 6.5.4.d Change of Name. A change-of-name agreement is appropriate when only a change of the contractor's name is involved, and the rights and obligations of the parties remain unaffected. The agreement must be executed by the contracting officer and the contractor modifying all existing contracts between the parties to reflect the change of name. Section 6 Postal Service Property 6.6.1 Contractor's Property Control Systems 6.6.1.a The contracting officer or the representative assigned to act as property administrator should review contractors' property control systems to ensure compliance with the contract's property clauses. 6.6.1.b The property administrator should notify the contractor in writing when its property control system does not comply with the contract requirements, requesting prompt correction of deficiencies. If the contractor does not correct the deficiencies within a reasonable period, the property administrator should request action by the contracting officer. The contracting officer may: 1. Notify the contractor in writing of any required corrections and establish a schedule for completion; 2. Caution the contractor that failure to take the required corrective action within the time specified will result in withholding or withdrawing system approval; and 3. Advise the contractor that its liability for loss of or damage to Postal Service property may increase if approval is withheld or withdrawn. 6.6.2 Records 6.6.2.a Contractor records of Postal Service property, established and maintained under the terms of the contract, are the Postal Service's official records. Duplicate official records should be furnished to or maintained by Postal Service personnel, except as provided in subparagraph b.2 below. 6.6.2.b Contracts may provide for the official records to be maintained by the Postal Service when the contracting officer retains contract administration and Postal Service property is furnished to a contractor: 1. For repair or servicing and return to the shipping organization; 2. For use at a Postal Service installation; 3. Under a local support service contract; 4. Under a contract with a short performance period or involving Postal Service property having an acquisition cost of $50,000 or less; or 5. When otherwise determined by the contracting officer to be in the Postal Service's interest. Section 7 Subcontracting Policies and Procedures 6.7.1 General 6.7.1.a Definitions 1. Contractor. The contractor organization and each separate entity, such as an affiliate, division, or plant, that performs its own purchasing. 2. Subcontract. Any contract to furnish property or services for the performance of a prime contract or higher-tier subcontract. It includes but is not limited to purchase orders and modifications of purchase orders. 3. Subcontractor. Any firm that furnishes supplies or services to or for a prime contractor or higher-tier subcontractor. 6.7.1.b Requirements 1. When a contract contains Clause B-18, Subcontracts, the contractor must give the contracting officer advance notice of its intent to subcontract. The contractor may enter into a subcontract unless notice of disapproval is received from the contracting officer within 15 days from the date the contracting officer was notified. 2. The contracting officer must: (a) Promptly evaluate contractor notices of intent to subcontract; (b) Obtain assistance in this evaluation, as necessary, from subcontracting, audit, pricing, technical, or other specialists; and (c) Notify the contractor in writing if the subcontract is disapproved. 6.7.1.c Considerations 1. The contracting officer must review the notice of intent to subcontract and any supporting data and must consider the following: (a) Is the subcontractor to acquire special test equipment or facilities that are available from Postal Service sources? (b) Is the selection of the particular supplies, equipment, or services technically justified? (c) Was adequate price competition obtained or its absence justified? (d) Did the contractor adequately assess its subcontractor's alternate proposals? (e) Does the contractor have a sound basis for selecting and determining the responsibility of the subcontractor? (f) Has the contractor performed adequate price or cost analysis? (g) Is the proposed subcontract type appropriate for the risks involved and consistent with current policy? (h) Service-furnished facilities? (i) Has the contractor adequately and reasonably translated prime contract technical requirements into subcontract requirements? (j) Is the proposed subcontractor on the Postal Service's consolidated list of debarred, suspended, and ineligible contractors? 2. Particularly careful and thorough consideration is necessary when: 3. The prime contractor's purchasing system or performance is inadequate; (a) Close working relationships or ownership affiliation between the prime and subcontractor may preclude free competition or result in higher prices; (b) Subcontracts are proposed on a noncompetitive basis, at prices that appear unreasonable, or at prices higher than those offered the Postal Service in comparable circumstances; or (c) Subcontracts are proposed on other than a fixed-price basis. 6.7.2 Limitations 6.7.2.a Lack of disapproval of a subcontract does not constitute a determination of the acceptability of the subcontract terms or price, or of the allowability of costs. 6.7.2.b Contracting officers should not disapprove a subcontract merely because it gives the subcontractor the right to appeal a dispute to the Board of Contract Appeals in the name of the prime contractor. Section 8 Claims and Disputes 6.8.1 General 6.8.1.a Contract Disputes Act. This section and Clause B-9, Claims and Disputes, implement the Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613). 6.8.1.b Policy. It is the policy of the Postal Service to resolve contractual issues by mutual agreement at the level of the contracting officer. The contracting officer should consider holding informal discussions between the parties to resolve differences before issuing a final decision on a claim. 6.8.1.c Definitions 1. Claim. A written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of a specified sum of money, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract. A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim. 2. Certified claim. A contractor's claim exceeding $50,000 that is accompanied by the certification required by Clause B-9, Claims and Disputes. 6.8.2 Claim Initiation 6.8.2.a Contractor claims must be submitted in writing to the contracting officer for final decision. The contracting officer must document the contract file with evidence of date of receipt of any submission that the contracting officer deems to be a claim. 6.8.2.b The contracting officer must issue a written decision on any Postal Service claim against a contractor. 6.8.2.c Each contractor claim exceeding $50,000 must be a certified claim. 6.8.2.d When the contracting officer determines that the contractor is unable to support any part of the claim and there is evidence that the inability is attributable to either misrepresentation of fact or fraud on the contractor's part, the contracting officer must deny the claim and refer the matter to the Inspection Service. 6.8.3 Decision and Appeal 6.8.3.a Contracting officers are authorized to decide or settle all claims arising under or relating to a contract subject to the Contract Disputes Act, except for: 1. Claims or disputes for penalties or forfeitures prescribed by statues or regulation that a federal agency is to administer; or 2. Claims involving fraud 6.8.3.b When a claim by or against a contractor cannot be resolved by agreement and a decision under Clause B-9, Claims and Disputes is necessary, the contracting officer must review the facts pertinent to the claim, obtain assistance from legal and other advisors, and issue a final decision in writing. The decision must include a description of the claim or dispute with references to the pertinent contract provisions, a statement of the factual areas of agreement and disagreement, and a statement of the contracting officer's decision with supporting rationale. 6.8.3.c When the contracting officer cannot issue a decision because the contractor has not provided sufficient information, the contracting officer must promptly request the required information. Further failure to provide the requested information is an adequate reason to deny the claim. 6.8.3.d The contracting officer must furnish a copy of the decision to the contractor by certified mail, return receipt requested, or by any other method that provides evidence of receipt. 6.8.3.e If the contractor has asked for a decision within 60 days, the contracting officer must issue a final decision on a submitted claim of $50,000 or less within 60 calendar days of its receipt. The contractor may consider the contracting officer's failure to issue a decision within the applicable time period as a denial of its claim, and may file a suit or appeal on the claim. 6.8.3.f For certified claims over $50,000, contracting officers must either issue a final decision within 60 calendar days of their receipt or notify the contractor within the 60-day period of the time when a decision will be issued. The time period established must be reasonable, taking into account the size and complexity of the claim, the adequacy of the contractor's supporting data, and any other relevant factors. 6.8.3.g The contracting officer's final decision must contain the following paragraph: "This is the final decision of the contracting officer pursuant to the Contract Disputes Act of 1978 and the clause of your contract entitled Claims and Disputes. may appeal this decision to the Postal Service Board of Contract Appeals by mailing or otherwise furnishing written notice (preferably in triplicate) to the contracting officer within 90 days from the date you receive this decision. The notice should identify the contract by number, reference this decision, and indicate that an appeal is intended. Alternatively, you may bring an action directly in the United States Court of Federal Claims within 12 months from the date you receive this decision." 6.8.3.h When the claim or claims denied total $10,000 or less, the contracting officer must add the following to the paragraph prescribed in paragraph g above: In taking an appeal to the Board of Contract Appeals, you may include in your notice of appeal an election to proceed under the Board's Small Claims (expedited) procedure, which provides for decision within approximately 120 days, or an election to proceed under the Board's Accelerated procedure, which provides for a decision within approximately 180 days. If you do not make an election in the notice of appeal, you may do so by written notice anytime thereafter. 6.8.3.i When the claim or claims denied total $50,000 or less, but more than $10,000, the contracting officer must add the following to the paragraph prescribed in paragraph g above: In taking an appeal to the Board of Contract Appeals, you may include in your notice of appeal an election to proceed under the Board's Accelerated procedure, which provides for a decision within approximately 180 days. If you do not make an election in the notice of appeal, you may do so by written notice anytime thereafter. 6.8.3.j Contracting officers must have sufficient information available at the time a final decision is issued on a claim so as not to delay the resolution of appeals within the period set for an expedited or accelerated disposition. Once an appeal is docketed and expedited or accelerated disposition is elected, contracting officers must devote sufficient resources to the appeal to ensure that the schedule for resolution is met. 6.8.3.k Purchasing offices may seek to settle the controversy after an appeal has been filed. However, processing of the appeal must not be suspended during the efforts to settle the controversy, unless the Board of Contract Appeals directs a suspension. 6.8.3.l Any amount determined in a final decision to be payable, less any portion previously paid, normally should be promptly paid the contractor without prejudice to either party in the event of appeal or action on the claim. In the absence of appeal by the Postal Service, a board or court decision favorable in whole or in part to the contractor must be implemented promptly by payment by the appropriate information service center. In cases when only the question of entitlement has been decided and the matter of amount has been remanded to the parties for negotiation, a final decision of the contracting officer must be issued if agreement is not reached promptly. 6.8.3.m Interest on the amount found due on the contractor's claim must be paid from the date the contracting officer received the claim (properly certified, if required, in accordance with Clause B-9, Claims and Disputes), or from the date payment would otherwise be due, if that date is later, until the date of payment. Simple interest will be paid at the rate established by the Secretary of the Treasury for each six-month period in which the claim is pending. Information on the rate at which interest is payable is announced from time to time in the Postal Bulletin. 6.8.3.n The Postal Service will seek review of an adverse decision of the Board of Contract Appeals in the Court of Appeals for the Federal Circuit, if the responsible VP, with the concurrence of the General Counsel or the General Counsel's designee, decides to pursue an appeal. Section 9 Contract Termination 6.9.1 General 6.9.1.a Applicability 1. This section applies to contracts that contain clauses permitting termination for the convenience of the Postal Service or for contractor default, and to those contracts with clauses that provide for termination on notice. It establishes uniform policies for the complete or partial termination of such contracts. 2. The provisions of this section must be used by the contracting officer as a guide in evaluating settlement of a subcontract terminated for the convenience of a contractor whenever the settlement could be the basis of a contractor claim for reimbursement by the Postal Service. 3. The contracting officer may follow the provisions of this section in determining any equitable adjustment resulting from modification of a contract, other than a non-fixed-price contract, under the Changes clause. 6.9.1.b Review and Approval. No contract with a face value or potential termination liability exceeding $1 million may be terminated for convenience or default unless the VP, P&M, has reviewed and approved the proposed termination. In addition, no contract, regardless of the face value, which is considered to be of a sensitive or highly visible nature may be terminated for convenience or default unless the VP, P&M, has reviewed and approved the proposed termination. 6.9.1.c Definitions 1. Amount of proposal or amount of claim. The gross settlement proposed by the contractor, less amounts acceptable for the completed articles or work at the contract price and amounts for any subcontractor settlement proposals. 2. Claim. Defined in 6.8.1.c. 3. Continued portion of the contract. That part of a partially terminated contract which the contractor must continue to perform. 4. Effective date of termination. The date on which the notice of termination requires the contractor to stop performance under the contract. If the contractor receives the termination notice after the date fixed for termination, then the effective date of termination means the date the notice is received. 5. Other work. Any current or scheduled work of the contractor, whether Postal Service or commercial, other than work related to the terminated contract. 6. Partial termination. The termination of a part, but not all, of the work that has not been completed and accepted under a contract. 7. Settlement proposal or proposal. A request for payment submitted by a contractor or subcontractor in the form, and supported by the data, required by this section. A settlement proposal is included within the meaning of the word "claim" under the False Claims acts (18 U.S.C. 2807 and 31 U.S.C. 3729). 8. Terminated portion of the contract. The part of a terminated contract that relates to work or end items not completed and accepted on the effective date of termination. For construction contracts that have been completely terminated for convenience, it means the entire contract notwithstanding completion of and payment for individual items of work before termination. 9. Unadjusted contract change. Any contract change or contract term for which a definitive modification is required but has not been executed. 6.9.1.d General Principles 1. Contracts may be terminated - whether for default, convenience, or upon notice - only when such action is in the interest of the Postal Service. 2. The contracting officer may effect a termination on notice or a no-cost settlement agreement in lieu of issuing another form of termination, upon determination that: (a) The contractor will accept a no-cost settlement or the contract allows termination on notice; (b) Postal Service property was not furnished or will be returned; and (c) All outstanding payments, claims, and contractor obligations are or will be resolved. 6.9.1.e Termination Notice 1. General (a) The contracting officer may terminate contracts only by written notice to the contractor. (In termination of a fixed-price contract for default for a cause other than failure to make timely delivery, the termination notice discussed in this paragraph d must be preceded by the notice or notices discussed in 6.9.3.b.5 and 6.) (b) Notice must be by: (1) Certified mail, return receipt requested; (2) Telegraphic notice; or (3) Hand delivery with written acknowledgment by the contractor. (c) The notice must state: (1) The type of termination contemplated and the contract clause authorizing the termination; (2) The effective date of termination; (3) The extent of the termination and, if a partial termination, the portion of the contract to be continued; and (4) Any special instructions. 2. Distribution. When the termination notice is sent to the contractor, the contracting officer must simultaneously send a copy to the information service center and to any known assignee, guarantor, or surety of the contractor. 3. Amendment. The contracting officer may amend a termination notice to: (a) Correct nonsubstantive mistakes in the notice; (b) Add supplemental data or instructions; (c) Rescind the notice if the items of work terminated have been completed or shipped before the contractor receives the notice; and (d) Reinstate the terminated portion of a contract. 4. Reinstatement. The contracting officer may, with the consent of the contractor, reinstate the terminated portion of a contract in whole or in part by amending the notice of termination when: (a) Circumstances clearly indicate a requirement for the terminated items; or (b) Reinstatement is otherwise advantageous to the Postal Service. 6.9.2 Termination for Convenience 6.9.2.a General 1. Applicability. The provisions of this part 6.9.2 apply to all fixed-price contracts containing Clause B-11, Termination for Convenience, and all non-fixed-price contracts containing Clause B-12, Termination for Convenience or Default. 2. Type of Settlement (a) The contracting officer may settle contracts terminated for convenience by: (1) Negotiated agreement; (2) Contracting officer determination; (3) Costing out under vouchers, if the contract is a cost-reimbursement contract; or (4) A combination of these methods. (b) When possible, the contracting officer should negotiate a fair and prompt settlement with the contractor. 6.9.2.b Contractor's Duties. After receiving a termination notice and except as otherwise directed by the contracting officer, the contractor must comply with the contract clause and the termination notice, which generally require that the contractor: 1. Stop work immediately on the terminated portion of the contract and stop placing subcontracts under that portion; 2. Terminate all subcontracts related to the terminated portion of the contract; 3. Immediately advise the contracting officer of any special circumstances precluding the stoppage of work; 4. Perform the continued portion of the contract and promptly submit any request for an equitable adjustment of price with respect to the continued portion, supported by evidence of any increase in the cost; 5. Take necessary action to protect and preserve property in which the Postal Service has or may acquire an interest, and, as directed by the contracting officer, deliver the property to the Postal Service or otherwise dispose of it; 6. Promptly notify the contracting officer in writing of any legal proceedings growing out of a subcontract or other commitment related to the terminated portion of the contract; 7. Settle outstanding liabilities and claims arising out of subcontract terminations, with prior approval or ratification as required by the contracting officer; 8. Promptly submit a settlement proposal, supported by appropriate schedules; and 9. Dispose of any termination inventory, as the contracting officer directs or authorizes. 6.9.2.c Settlement of Subcontractor Claims 1. Subcontractor Rights. A subcontractor has no contractual rights (privity of contract) against the Postal Service but may have rights against the Postal Service contractor or the immediate subcontractor with which it has contracted. Upon termination of a Postal Service contract, or a change that necessitates subcontract termination, the contractor and each subcontractor are responsible for prompt settlement of the termination claims of their immediate subcontractors. 2. Prime Contractor Rights and Obligations (a) The termination clauses provide that, upon contract termination, the contractor must, except as otherwise directed by the contracting officer, terminate all subcontracts to the extent that they relate to performance of the work terminated. (b) The reasonableness of the contractor's settlement with a subcontractor should be measured by the aggregate amount that would be due under an equivalent Postal Service termination clause. The contracting officer may allow reimbursement in excess of that amount only in unusual cases, and then only when satisfied that the subcontract terms were negotiated in good faith and did not unreasonably increase the subcontractor's rights. 3. Delay in Settlement of Subcontractor Claims. When a contractor's inability to reach settlement with a subcontractor delays the settlement of the Postal Service contract, the contracting officer may settle with the contractor for all amounts except the subcontractor settlement proposal, and reserve Postal Service and contractor rights as to the proposal. 4. Assistance in Subcontract Settlements. In unusual cases, the contracting officer may determine that it is in the interest of the Postal Service to offer to assist the contractor in the settlement of a particular subcontract. The Postal Service, the contractor, and the subcontractor may then enter into an agreement covering settlement of the subcontract. In such case, the subcontractor must be paid through the contractor as part of the overall settlement. 5. Direct Settlement by the Postal Service. The Termination for Convenience clause gives the Postal Service the right, but not the obligation, to settle and pay any claims arising out of subcontract terminations. Direct settlements with subcontractors are not encouraged, since the Postal Service contractor is obligated to settle and pay subcontractor termination claims. However, when the contracting officer determines that it is in the interest of the Postal Service to settle a subcontractor claim directly, the contracting officer may, after notifying the contractor, direct the assignment of all contractor rights to the Postal Service, and settle the subcontractor claim using the termination procedures for settlement of Postal Service contracts. An example in which the interest of the Postal Service would be served is when a subcontractor is the sole source of a product and it appears that a delay by the contractor in settling the subcontractor's claim will jeopardize the subcontractor's financial position. 6.9.3 Termination for Default 6.9.3.a General 1. Termination for default is the exercise of the Postal Service's contractual right to completely or partially terminate a contract by reason of the contractor's actual or anticipated failure to perform its contractual obligations. When the contracting officer has the right to terminate a contract for default, the total undelivered contract quantity, whether delinquent or not, may be terminated for default. 2. If the contractor can establish that its failure to perform arose out of causes beyond its control and without its fault or negligence, the default termination clause provides that a termination for default will be deemed a termination for the convenience of the Postal Service, and the rights and obligations of the parties will be governed accordingly. 3. When a contract provides for liquidated damages, the contracting officer must mitigate damages when grounds for termination for default exist by obtaining performance by the contractor or terminating the contract for default. Liquidated damages, once incurred, may be remitted in whole or in part as may be just and equitable, by a vice president with procurement authority, with the advice of counsel, upon the recommendation of the VP, P&M. 4. When the contracting officer determines in writing that the supplies or services are still required and that reinstatement is advantageous to the Postal Service, the contracting officer may reinstate the terminated portion of a contract, but only with the contractor's written consent. 5. For termination for default of orders placed under Federal Supply Schedule (FSS) contracts, see 3.1.5.b.2(f). 6.9.3.b Fixed-Price Contracts 1. Postal Service Rights and Obligations (a) Under the Termination for Default clause, the Postal Service has the right, subject to the notice requirements of the clause, to terminate all or any part of a contract without regard to severability of contract obligations when the contractor: (1) Fails to complete any material requirement of the contract within the time specified in the contract (including any extensions); (2) Fails to make progress to a degree that this failure endangers performance of the contract; (3) Fails to perform any other contract provision; or (4) Fails to give adequate assurances as required by 6.2.5. (b) The Postal Service is not liable for the contractor's costs on undelivered work and is entitled to repayment of any progress payments for undelivered work. (c) The contracting officer may direct the contractor to transfer title and deliver to the Postal Service completed supplies and manufacturing materials. The completed supplies and manufacturing materials may be acquired for use in continuing the terminated contract work or for use under another contract. (d) Subject to the provisions of (e)(4) below, the Postal Service must pay the contractor the contract price for any supplies completed and delivered, and the amount agreed upon by the contracting officer and the contractor for any manufacturing materials acquired by the Postal Service. (e) The Postal Service must be protected from failure to make provision for the Postal Service's potential liability to laborers and material suppliers for lien rights. The contracting officer must take one or more of the following measures before making the payment referred to in (d) above: (1) Ascertain whether the payment bonds, if any, furnished by the contractor are adequate to satisfy all claims, or whether it is feasible to obtain similar bonds to cover outstanding liens. (2) Require the contractor to furnish appropriate statements from laborers and material suppliers disclaiming any lien rights they may have in the supplies and materials. (3) Obtain appropriate agreement between the Postal Service, the contractor, and any claimants to ensure release of the Postal Service from any potential liability to the contractor or claimants. (4) Withhold from the amount otherwise due for the supplies or materials an amount the contracting officer determines necessary to protect the Postal Service's interest, in accordance with 6.4.4. (5) Take any other action that is appropriate in view of the contractor's degree of solvency and other circumstances. (f) The contractor is liable to the Postal Service for any excess costs the Postal Service incurs in acquiring supplies and services similar to those terminated for default, and any other damages, whether or not repurchase is made. 2. Determination of Appropriateness. When a default termination is being considered, the contracting officer should ensure that termination for default rather than for convenience is appropriate. The contracting officer should consult with purchasing personnel, technical personnel, and assigned counsel, and may consider the following factors: 3. The provisions of the contract, and applicable laws and regulations. (a) The specific failure of the contractor and, unless time does not permit, the excuses for the failure. (b) The availability of the supplies or services from other sources. (c) The urgency of the need for the supplies or services, and whether or not they can be obtained sooner from sources other than the delinquent contractor. (d) The degree to which the contractor is essential to the Postal Service, and the effect of a termination for default on the contractor's capability as a supplier under other contracts. (e) The effect of a termination for default on the ability of the contractor to liquidate progress payments. (f) Any other pertinent facts and circumstances. 4. Surety Notification and Arrangements (a) When a termination for default appears imminent, the contracting officer must send a written notification of that fact (not an actual notice of default) to any surety, at both its main and local offices. (b) If requested by the surety, and agreed to by the contractor and any assignees, arrangements may be made to have future checks mailed to the contractor in care of the surety. In this case, the contractor must forward a written request to the designated disbursing officer, specifically directing a change in address for mailing of checks. 5. Initiation of Termination - Failure to Make Timely Delivery (a) When a contractor fails to make timely delivery, the contracting officer has a reasonable time after the delivery date to determine whether the contract should be terminated for default. When the contractor is continuing performance of the contract, a reasonable time for the contracting officer to make a decision is 30 working days. Delay beyond that date may result in a waiver of the right of the Postal Service to terminate for default. (b) When the contracting officer determines that termination for default is proper, the contracting officer should issue a termination notice at once, following the procedures in subparagraph b.7 below. No demand for adequate assurances should be issued. However, the contracting officer may allow the contractor to assert any alleged excusable delay. (c) If contracting officer delay in issuing a notice of termination for default results in a waiver of that right, a new delivery date must be established by bilateral or unilateral modification of the contract. The new delivery date must be reasonable considering all the circumstances of contract performance. When the new date is established, the right to terminate for default is reinstated. 6. Notice of Impending Termination - Causes Other Than Failure to Make Timely Delivery. When the contracting officer makes a preliminary determination that termination for default is appropriate in cases other than failure to make timely delivery, the contracting officer should, if practicable, notify the contractor in writing of the possibility of termination. This notice may: (a) Call the contractor's attention to its liabilities in the event that the contract is terminated for default; (b) Request the contractor to show cause why the contract should not be terminated for default; (c) State that failure of the contractor to explain why the contract should not be terminated may be taken as an admission that no valid explanation exists; (d) When appropriate, invite the contractor to discuss the matter at a conference. 7. Demand for Adequate Assurance - Causes Other Than Failure to Make Timely Delivery (a) A written notice must be issued when the contracting officer determines that the contractor is failing to make satisfactory progress to a degree that this failure endangers contract performance, or determines that some other failure, under the contract or otherwise (other than failure to make timely delivery) is cause for concern. However, no demand is required when there is anticipatory repudiation of the contract, that is, when the contractor positively states, by work or action, that it will not or cannot perform its contractual obligations (see 6.2.6.). (b) The demand must specify the failure and give the contractor ten days (or longer, if necessary) to assure the Postal Service of steps that will be taken to cure the failure. (c) When the time remaining in the contract delivery schedule does not permit a response period of ten days or longer, a demand may be made part of the notice described in subparagraph b.5 above. 8. Termination Notice (a) Immediately upon determination that termination is proper under subparagraph b.4 above, or upon expiration of the ten-day or longer period allowed by a notice under subparagraph b.6 above, the contracting officer may issue a notice of termination for default, unless it is determined that the nonperformance will be cured. (b) When a demand for adequate assurance has been issued, the notice of termination must be coordinated with assigned counsel before issuance. (c) The notice of termination for default must meet all the general requirements set forth in 6.9.1.d as well as: (1) Set forth the contract number and date; (2) Describe the acts or omissions constituting the default; (3) State that the contractor's right to proceed with performance of the contract (or a specified portion of the contract) is terminated; (4) State that the supplies or services terminated may be procured against the contractor's account, and that the contractor will be held liable for any excess repurchase costs; (5) State that the Postal Service reserves all rights and remedies provided by law or under contract, in addition to charging excess costs; and (6) Inform the contractor that the termination is subject to Clause B-9, Claims and Disputes. (d) When the contracting officer has determined that the failure to perform is not excusable, the termination notice must also state that it reflects that decision, and that the contractor has the right to appeal as specified in Clause B-9, Claims and Disputes. (e) The contracting officer must make the same distribution of the termination notice as was made of the contract, and any surety must be furnished a copy and asked to advise whether it desires to arrange for completion of the work. (f) The contracting officer must notify the information service center to withhold further payments under the terminated contract. 9. Procedure in Lieu of Termination. When the contracting officer determines that the contractor's failure to perform arose from causes beyond its control and without its fault or negligence, the contracting officer may not terminate the contract for default. When it is in the interest of the Postal Service to do so, the contracting officer may, in lieu of termination for default: (a) Terminate the contract for convenience; (b) Permit the contractor, its surety, or its guarantor to continue performance of the contract under a revised delivery schedule; (c) Permit the contractor to continue performance of the contract by means of a subcontract or other business arrangement with an acceptable third party, if the rights of the Postal Service are adequately preserved; or (d) Execute a no-cost termination settlement agreement (or terminate on notice if allowed under the contract) if the requirement for the supplies and services specified in the contract no longer exists and the contractor is not liable to the Postal Service for damages, as provided below. 10. Determination Following Termination Notice. When the contracting officer is unable to determine, before issuing the notice of termination, whether the contractor's failure to perform arose from causes beyond its control and without its fault or negligence, the contracting officer must make a written decision on that point as soon as practicable after issuing the notice. This decision must be delivered promptly to the contractor, with a notification of the right to appeal as specified in Clause B-9, Claims and Disputes. 11. Contracting Officer Memorandum. When a contract is terminated for default, or when a procedure authorized by subparagraph b.8 above is followed, the contracting officer must prepare a memorandum for the contract file that fully explains the action taken. 6.9.3.c Non-Fixed-Price Contracts 1. Postal Service Rights and Obligations. The right to terminate a non-fixed-price contract for default is provided under Clause B-12, Termination for Convenience or Default. In the event of termination, the contractor must be reimbursed costs allowable under the clause; the costs of preparing the contractor's settlement proposal are not allowable. Any fee payable under the contract must be reduced as directed by the clause. The clause does not give the Postal Service the right to recover excess repurchase costs, but it does give the Postal Service continuing rights when the contractor fails to replace or correct defective supplies. 2. Determination and Notice. The contracting officer must consider the factors in subparagraph b.2 above in determining whether termination for default is appropriate. Under Clause B-12, Termination for Convenience or Default, the contractor must be given the notice or notices required by subparagraphs b.5 and b.6 above, before termination for default. Section 10 Remedies and Damages 6.10.1 Remedies 6.10.1.a Postal Service's Security Interest. On rightful rejection or justifiable revocation of acceptance, the Postal Service has a security interest in supplies delivered under the contract for any payments and expenses reasonably incurred in inspection, receipt, transportation, care, and custody. 6.10.1.b Repurchase Against Contractor's Account 1. When supplies or services are still required after termination for default, the contracting officer may repurchase the same or similar supplies or services against the contractor's account as soon as practicable. The repurchase must be at as reasonable a price as possible considering the quality required by the Postal Service and the time within which the supplies or services are required. Whenever practicable, the contracting officer should make necessary repurchase decisions before issuing the termination notice. 2. The contracting officer may repurchase a quantity larger than the quantity terminated for default when needed, but the defaulting contractor may be charged for no more than the terminated quantity (including any variations in quantity permitted by the terminated contract). 3. If the repurchase is for a quantity not larger than the terminated quantity, the contracting officer may use any terms and procurement methods deemed appropriate for the repurchase, following normal approval or deviation procedures. If the repurchase is for a quantity larger than the terminated quantity, the entire quantity must be treated as a new purchase, adhering to all applicable policies and procedures. 4. If repurchase is made at a price higher than the price of the terminated supplies or services, the contracting officer must - after final payment of the repurchase contract - make a written demand on the contractor for the excess amount, taking into account any increases or decreases in cost due to transportation charges, discounts, and other factors. 6.10.2 Damages 6.10.2.a Default. If a contract is terminated for default, or if a procedure in lieu of termination for default is followed, the contracting officer must ascertain and demand any damages to which the Postal Service may be entitled. These damages are in addition to any excess repurchase cost. 6.10.2.b Breach Damages for Accepted Supplies 1. When the contracting officer has accepted defective supplies under 6.3.1. b.5, the Postal Service may recover as damages for any nonconformity the loss resulting in the ordinary course of events from the contractor's breach as determined in any reasonable manner. 2. The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the supplies or services accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount. 3. In a proper case, any incidental and consequential damages may also be recovered. 6.10.2.c Incidental and Consequential Damages 1. Incidental damages resulting from the contractor's breach include expenses reasonably incurred in inspection, receipt, transportation, and care and custody of supplies rightfully rejected; any commercially reasonable charges; expenses in connection with repurchase; and any other reasonable expense incident to the delay or other breach. 2. Consequential damages resulting from the contractor's breach include: (a) Any loss resulting from general or particular requirements and needs of which the contractor at the time of contracting had reason to know and which could not reasonably be prevented; and (b) Injury to person or property proximately resulting from any breach of warranty. 6.10.2.d Deduction of Damages from the Price. The contracting officer, on notifying the contractor, may deduct all or any part of the damages resulting from any breach of the contract, or from late delivery or delay not subject to liquidated damages (see 2.2.6), from any part of the price still due. 6.10.2.e Damages for Nondelivery or Repudiation 1. The measure of damages for nondelivery or repudiation by the contractor when repurchase is not possible is the difference between the market price at the time when the contracting officer learned of the breach and the contract price, together with any incidental and consequential damages, but less expenses saved as a consequence of the contractor's breach. 2. Market price is to be determined as of the place of acceptance or, in cases of rejection after arrival or revocation of acceptance, as the place of arrival. Chapter 7 Bonds, Insurance, and Taxes Section 1 Bonds 7.1.1 General 7.1.1.a Policy 7.1.1.b Definitions 7.1.2 Proposal Guarantees 7.1.2.a General 7.1.2.b Amount 7.1.2.c Solicitation Provision 7.1.2.d Failure to Submit Required Proposal Guarantee 7.1.3 Performance Bonds 7.1.3.a Construction Contracts 7.1.3.b Other than Construction Contracts 7.1.3.c Annual Performance Bonds 7.1.4 Payment Bonds 7.1.4.a Construction Contracts 7.1.4.b Other than Construction Contracts 7.1.4.c Annual Payment Bonds 7.1.4.d Furnishing Information to Subcontractors and Suppliers 7.1.5 Patent Infringement Bonds 7.1.6 Fidelity Bonds 7.1.7 Contract Postal Unit Bonds 7.1.8 Other Types of Bonds 7.1.9 Execution of Bonds 7.1.9.a Prescribed Formats 7.1.9.b Other Formats 7.1.9.c Original Copy 7.1.9.d Authority of Agents 7.1.9.e Partnership as Principal 7.1.9.f Date 7.1.9.g Contract Modifications 7.1.10 Sureties 7.1.10.a Acceptable Sureties 7.1.10.b Corporate Sureties 7.1.10.c Individual Sureties 7.1.10.d Deposit of Assets Instead of Surety Bonds 7.1.11 Contract Administration 7.1.11.a Information and Notice to Sureties 7.1.11.b Surety Takeover Agreements 7.1.11.c Contract Completion Section 2 Insurance 7.2.1 Policy 7.2.1.a General 7.2.1.b Fixed-Price Contracts 7.2.1.c Non-Fixed-Price Contracts 7.2.2 Types of Insurance 7.2.2.a Workers' Compensation and Employers' Liability Insurance 7.2.2.b General Liability Insurance 7.2.2.c Automobile Liability Insurance 7.2.3 Self-Insurance 7.2.4 Errors and Omissions Insurance 7.2.4.a Professional Services 7.2.4.b Amount 7.2.4.c Waiver 7.2.4.d Other Professional Services 7.2.5 Insurance Policies 7.2.6 Contract Clauses 7.2.7 Notice of Cancellation or Change Section 3 Taxes 7.3.1 General 7.3.2 Federal Excise Taxes 7.3.2.a Applicability 7.3.2.b General Exemptions from Federal Excise Taxes 7.3.2.c Solicitations 7.3.3 State and Local Taxes 7.3.3.a Definition 7.3.3.b Applicability 7.3.3.c Exemption from Tax 7.3.3.d Matters Requiring Special Consideration 7.3.4 Contract Clauses Chapter 7 Bonds, Insurance, and Taxes Section 1 Bonds 7.1.1 General 7.1.1.a Policy. Except for performance and payment bonds required by the Miller Act (40 U.S.C. 270a-270f) for construction contracts (see 7.1.3.a and 7.1. 4.a), bonds and performance guarantees must be obtained only when needed to protect the interest of the Postal Service. Procurement plans (see 2.1.5) must describe and explain any requirements for bonds and performance guarantees. 7.1.1.b Definitions 1. Annual bond or annual proposal guarantee. A single bond or proposal guarantee in place of separate bonds or guarantees to secure all of an offeror's or contractor's obligations under proposals submitted or contracts entered into during a specific fiscal year. 2. Bond. A written instrument executed for the benefit of the Postal Service as security for the offeror's or contractor's obligations, and to assure payment of any bond loss. A bond is executed by an offeror or contractor identified in the instrument as the principal, together with a second party identified as the surety. (The term "surety bond" is used in 7.1.9 for clarification. No distinction between "bond" and "surety bond" is intended.) 3. Consent of surety. An acknowledgment by a surety that its bond continues to apply to the contract as modified. 4. Construction contract. Any contract for construction (see 11.5.1.a). 5. Fidelity bond. A bond to assure the faithful performance of an employee's duties to his or her employer and the employer's clients. The bond is used to cover losses such as employee thefts or embezzlements. 6. Patent infringement bond. A bond given as security for a contractor's obligations under a patent clause. 7. Payment bond. A bond to assure payment of all persons supplying labor and material under a contract. 8. Penal amount. The amount specified in a proposal guarantee or bond (expressed in terms of dollars or a percentage of the proposal price) as the maximum payment for which the surety is obligated. 9. Performance bond. A bond given as security for the contractor's obligations under a contract. 10. Proposal guarantee. A firm commitment, such as a proposal bond, a postal money order, a certified check, a cashier's check, an irrevocable letter of credit, or certain bonds or notes of the United States, accompanying a proposal as assurance that the offeror will, upon acceptance of the proposal, execute required contractual documents and promptly provide necessary bonds. 11. Proposal bond, also known as bid bond. A bond given to serve as an offeror's proposal guarantee in connection with an individual proposal or with proposals submitted during a specific fiscal year. 12. Surety. An individual or corporation legally liable for another's debt, default, or failure to satisfy a contractual obligation. 7.1.2 Proposal Guarantees 7.1.2.a General. A proposal guarantee may be required only when a performance bond is required, and only for purchases over $25,000. A proposal guarantee is normally used only in construction contracts. Annual proposal guarantees, such as annual proposal bonds, are not acceptable under solicitations for construction contracts but may be used for supplies or services. 7.1.2.b Amount. The penal amount of a proposal guarantee must be sufficient to protect the Postal Service from loss caused by a failure of the contractor to sign the contract or to get performance or payment bonds. The amount must be not less than 20 percent of the proposal price but may not exceed $3,000,000. If the amount is expressed as a percentage of the proposal price, a maximum dollar limit may also be stated. For indefinite-delivery contracts, the amount of any guarantee must be a specific amount equal to the largest single order that the contracting officer estimates will be placed under the contract. 7.1.2.c Solicitation Provision. Include Provision 7-1, Proposal Guarantee, in the solicitation when a proposal guarantee is required. 7.1.2.d Failure to Submit Required Proposal Guarantee. When a solicitation requires a proposal guarantee, a proposal failing to comply is unacceptable. However, if discussions are held (see 4.2.5.g) and the proposal is otherwise acceptable and in the competitive range, failure to furnish a proposal guarantee is a deficiency that may be corrected during discussions. If a proposal guarantee submitted with a proposal is less than the amount specified in the solicitation but is equal to or greater than the difference between the proposal price and the price of the next-higher acceptable proposal, the proposal may be accepted. 7.1.3 Performance Bonds 7.1.3.a Construction Contracts 1. Requirement (a) The Miller Act, made applicable to the Postal Service by 39 U.S.C. 410(b)(4)(B), requires a performance bond for any construction contract exceeding $25,000. (b) The requirement for performance bonding may be waived by the contracting officer as authorized by the Miller Act or other law. 2. Amount. The penal amount of a performance bond must equal 100 percent of the contract price, unless the contracting officer determines that a lesser percentage would adequately protect the Postal Service. 3. Solicitation Provisions. Include Provision 7-2, Performance Bond Requirements, in solicitations for construction contracts over $25,000 unless the requirement for performance bonding is waived. If the penal amount is less than 100 percent of the contract price, the provision must be modified accordingly. 7.1.3.b Other than Construction Contracts 1. Requirement. Performance bonds may be required only if the contracting officer determines that performance bonding is essential to the interest of the Postal Service. Examples of situations in which a performance bond may be needed include times when: (a) A contract provides for the use of Postal Service property or funds in contract performance; (b) A contractor has sold all its assets to, or merged with, another firm and the Postal Service needs assurance of the new firm's responsibility; or (c) The product or service is not scheduled for first delivery until at least 12 months after contract award, and substantial progress payments are contemplated. 2. Amount. The penal amount must be the minimum needed to protect the Postal Service's interest. 3. Solicitation Provision. Include Provision 7-2, Performance Bond Requirements, in solicitations for nonconstruction contracts if it is determined that performance bonding is essential to the interest of the Postal Service. If the penal amount is less than 100 percent of the contract price, the provision must be modified accordingly. 7.1.3.c Annual Performance Bonds. Annual performance bonds may be used only for contracts other than construction contracts. The penal amount of such a bond may not be more than the total amount of all contracts secured by the bond. 7.1.4 Payment Bonds 7.1.4.a Construction Contracts 1. Requirement (a) The Miller Act, made applicable to the Postal Service by 39 U.S.C. 410(b)(4)(B), requires a payment bond for any construction contract exceeding $25,000. (b) The requirement for payment bonding may be waived by the contracting officer as authorized by the Miller Act or other law. 2. Amount. The penal amount of a payment bond must equal: (a) 50 percent of the contract price when the contract price is not more than $1,000,000; (b) 40 percent of the contract price when the contract price is more than $1, 000,000 but not more than $5,000,000; or (c) $2,500,000 when the contract price is more than $5,000,000. 3. Solicitation Provision. Include Provision 7-3, Payment Bond Requirements, in solicitations for construction contracts over $25,000 unless the requirement for payment bonding is waived. 7.1.4.b Other than Construction Contracts 1. Requirement. Payment bonds may be required only if the contracting officer determines that payment bonding is essential to the interest of the Postal Service. Examples of situations in which a payment bond may be needed include times when: (a) A contract is for supplies or services unique to the Postal Service that can be obtained only from a source that is not the producer of the supplies or services; (b) A contractor has sold all its assets to, or merged with, another firm and the Postal Service needs assurance of the new firm's responsibility; (c) Supplies requiring substantial production costs are not scheduled for first delivery until several months after contract award, and no progress payments are contemplated; or (d) Uninterrupted provision of the supplies or services is essential to the continued operation of Postal Service functions. 2. Amount. The penal amount must be the minimum needed to protect the Postal Service's interest. 3. Solicitation Provision. Include Provision 7-3, Payment Bond Requirements, in solicitations for nonconstruction contracts if it is determined that payment bonding is essential to the interest of the Postal Service. 7.1.4.c Annual Payment Bonds. Annual payment bonds may be used only for contracts other than construction contracts. The penal amount of such a bond must be sufficient to cover the bonded portions of the contracts awarded. 7.1.4.d Furnishing Information to Subcontractors and Suppliers. When a payment bond has been provided, the contracting officer may furnish the name and address of the surety or sureties to persons who have furnished, or have been requested to furnish, labor or materials for use in performing the contract. The contracting officer may furnish additional general information on such matters as the progress of the work, the payments made, and the estimated percentage of completion. 7.1.5 Patent Infringement Bonds A patent infringement bond may be required under a contract containing a patent indemnity clause if a performance bond is not obtained. The penal amount must be the minimum necessary to protect the Postal Service's interest. Clause 7-1, Patent Infringement Bond Requirements, must be included in the contract if the contractor may be required to submit a patent infringement bond. 7.1.6 Fidelity Bonds A fidelity bond in an amount sufficient to protect the interest of the Postal Service may be required for any contract that requires contractor employees to handle Postal Service funds. When a fidelity bond is required, Provision 7-4, Fidelity Bond Requirements, must be included in the solicitation, and the amount must be reviewed periodically to ensure that the Postal Service's interest is adequately protected. 7.1.7 Contract Postal Unit Bonds Contract postal unit bonds impose obligations on a contractor similar to those required under performance, payment, and fidelity bonds. Generally, contract postal unit bonds are required before a contract postal unit contract may be awarded, but in certain circumstances this requirement can be waived by the contracting officer. See the relevant handbook for details. 7.1.8 Other Types of Bonds Bonds other than those discussed in this chapter may be required when the contracting officer considers them in the Postal Service's interest. In these cases, appropriate solicitation provisions and contract clauses must be drafted with the assistance of assigned counsel. 7.1.9 Execution of Bonds 7.1.9.a Prescribed Formats. See the relevant handbook for guidance and procedures. 7.1.9.b Other Formats. When there is no prescribed format for a bond (as when a patent infringement or fidelity bond is required), a suitable commercial bond form may be used, or an appropriate format may be prepared with the assistance of assigned counsel. 7.1.9.c Original Copy. An original signed copy of any bond must be retained in the solicitation or contract file. 7.1.9.d Authority of Agents. Bonds signed by persons acting in a representative capacity must be accompanied by proof that the agent is authorized to act in that capacity. Proof may be a notarized power of attorney, or a properly executed corporate certificate or resolution, attested to by the corporate secretary. 7.1.9.e Partnership as Principal. When a partnership is a principal, the names of all members of the firm must be listed in the bond, following the trade name of the firm (if any) and the phrase "a partnership composed of." When a corporation is a principal, the state of incorporation must be listed. 7.1.9.f Date. Unless an annual bond is accepted, performance or payment bonds must be dated after the date of the contract. (See 11.5.1.p for award procedures for construction contracts.) 7.1.9.g Contract Modifications 1. When a contract modification changes the contract scope or increases the contract price by ten percent or more, or when the contracting officer determines that the amount of the original bond must be increased, the contractor and the surety must execute a consent of surety and increase of penal amount, and submit it to the contracting officer. When more than one surety's consent is required, each surety must execute the form. 2. When an increased bond amount is obtained from a party other than the original surety, the original surety must execute a consent of surety. 3. Novation agreements (see 6.5.4.a.2) require the execution of a consent of surety. 7.1.10 Sureties 7.1.10.a Acceptable Sureties 1. Bonds must be supported by acceptable corporate sureties, or by assets acceptable as security for the contractor's obligation. 2. Clause 7-2, Additional Bond Security, must be included in all contracts for which a bond is required. 7.1.10.b Corporate Sureties. Any corporate surety offered for a bond furnished the Postal Service must appear on the list contained in Treasury Department Circular 570. The amount of the bond may not exceed the underwriting limit stated for the surety in that list. 7.1.10.c Individual Sureties. The Postal Service does not accept individual sureties. 7.1.10.d Deposit of Assets Instead of Surety Bonds 1. In lieu of any bond (other than a payment bond for a construction contract), the contractor may deposit certain kinds of assets with the Postal Service instead of furnishing a bond. 2. The only assets acceptable in place of a surety bond are described below: (a) United States bonds or notes with a maturity date less than five years from the date of the contract, together with an agreement authorizing collection or sale in the event of default. The par value of the bonds or notes must be at least equal to the penal amount of the bond. (b) A certified check, cashier's check, bank draft, postal money order, currency, or an irrevocable, unconditional letter of credit issued by a federally insured financial institution. The deposit must be at least equal to the penal amount of the surety bond, and payable solely to the order of the Untied States Postal Service. Letters of credit must indicate that the financial institution may not cancel the letter of credit before 90 days following the scheduled contract completion date. 3. The contracting officer must deposit currency, checks, and drafts with the information service center, with instructions to hold the funds for the benefit of the contractor. A perpetual inventory of all deposited items must be kept by the senior contracting official at the purchasing office. 4. When the contractor pledges assets instead of providing a surety bond, the contractor must complete the bond form as principal, and the bond form must describe the assets pledged. 5. For all procurements involving the furnishing of bonds (other than payment bonds for construction contracts), include Provision 7-5, Deposit of Assets Requirements, in the solicitation. 6. Include Clause 7-3, Deposit of Assets Instead of Surety Bonds, in every contract requiring a bond for which assets may be deposited in lieu of bonds. 7.1.11 Contract Administration 7.1.11.a Information and Notice to Sureties 1. Correspondence. A copy of all correspondence relating to contract modification, termination, renewal, or nonperformance must be provided to each surety, with proof of delivery requested. Additional information on contract performance and payment must be provided to sureties upon request. 2. Failure to Perform. The contracting officer must send each surety a copy of any notice of impending termination, demand for adequate assurances, assessment of liquidated or other damages, or other formal notice of failure to perform under the contract, with a notice that the surety may be liable for damages suffered by the Postal Service. 3. Claims Against Sureties. If a contractor's failure to perform necessitates a claim against a surety, the contracting officer must give the surety written notice of the amount of and reasons for the claim. If the surety refuses to pay or does not respond, the contracting officer must obtain procedural assistance from assigned counsel. 7.1.11.b Surety Takeover Agreements 1. Because of the surety's liability for damages resulting from a contractor's default, the surety has certain rights and interests in the completion of the contract work and the application of any undisbursed funds. Before terminating a contract for default, the contracting officer must consider any proposal by the surety for completion of the work. The surety should be permitted to complete the work unless the contracting officer has reason to believe that the persons or firms proposed by the surety to complete the work are not competent or qualified. 2. Because of the possibility of conflicting demands for the defaulting contractor's unpaid earnings (including retained percentages and unpaid progress payments), the surety may condition its offer of completion upon the execution of a takeover agreement establishing the surety's right to payment from the unpaid earnings. If so, with the concurrence of the appropriate VP, the contracting officer may enter into such an agreement with the surety in writing after the effective date of contract termination. The contracting officer should consider including the defaulting contractor as a party to the agreement in order to preclude any disagreement on the contractor's residual rights. 3. The agreement must provide that the surety will complete the work according to all contract terms and conditions, and that the Postal Service will pay the surety the balance of the contract price unpaid at termination, but not more than the surety's costs and expenses, subject to the following conditions: (a) Any unpaid earnings of the defaulting contractor, including retained percentages and progress payments for work accomplished before termination, are subject to debts owed the Postal Service by the contractor, except to the extent that the unpaid earnings are required to pay the completing surety the actual costs and expenses it incurs in completing the work, exclusive of the surety's payments and obligations under the payment bond given in connection with the contract. (b) The agreement may not waive or release the Postal Service's right to liquidated damages for any delay in completion of the work that is not excusable under the contract. (c) If the contract proceeds have been assigned to a financing institution, the surety may not be paid from unpaid earnings unless the assignee consents to the payment in writing. (d) The surety may be reimbursed for discharging its liabilities under the payment bond of the defaulting contractor only when: (1) There is mutual agreement among the Postal Service, the defaulting contractor, and the surety; (2) The Postal Service Board of Contract Appeals makes a final determination of the amount due; or (3) A court of competent jurisdiction orders payment. 7.1.11.c Contract Completion 1. Upon contractor completion of all contract obligations, the contracting officer must issue a Certificate of Completion to any surety. The certificate's terms may not release the surety from any obligation under a payment bond. 2. When the contractor has deposited assets instead of providing a surety on a payment bond, the contracting officer must refund the assets, with accrued interest, within 90 days after final completion of contract performance, unless notice of a claim is received during the 90-day period. If a claim is received, the assets may be released only with the agreement of the claimant or by order of a court of competent jurisdiction. 3. Assets deposited to secure any other bond may be refunded, with accrued interest, upon final completion and receipt of the contractor's release (see 6.4.3.c). 4. Upon request, the contracting officer will furnish a Certificate of Substantial Completion to sureties of a construction contractor if the project is substantially complete (usable for the purpose intended). If the contracting officer is uncertain whether the project is substantially complete, the advice of assigned counsel must be obtained. Section 2 Insurance 7.2.1 Policy 7.2.1.a General. Contractors may be required to carry insurance only when necessary to protect the interest of the Postal Service. Examples of situations that may warrant insurance are when: 1. It is desirable to use the facilities and service of the insurance industry (for example, safety protection and claim services); 2. Insurance is necessary or desirable in connection with contract performance (for example, in transportation of valuable Postal property); or 3. Commingling of property or other contract conditions makes insurance reasonably necessary for protection of the parties' interests. 7.2.1.b Fixed-Price Contracts 1. The Postal Service is not usually concerned with the insurance carried by fixed-price contractors, except in special circumstances such as the following: (a) The contractor, or a segregated operation of the contractor, is engaged primarily in work for the Postal Service. (b) Postal Service property of substantial value is involved. (c) The contract work required is performed within a Postal Service facility. (d) The Postal Service agrees to assume risks for which the contractor ordinarily obtains commercial insurance. 2. In circumstances such as those described in subparagraph b.1 above, the types and amounts of liability insurance prescribed in 7.2.2 may be required. However, a qualified program of self-insurance (see 7.2.3) may be substituted for any of those types of insurance. 3. Professional services contractors must be required to carry errors and omissions insurance in accordance with 7.2.4. 7.2.1.c Non-Fixed-Price Contracts 1. The types of insurance referred to in 7.2.2, with limits of liability as prescribed in 7.2.2, are required under non-fixed-price prime contracts and any non-fixed-price subcontracts under them. However, a qualified program of self-insurance (see 7.2.3) may be substituted for any such type of required insurance. 2. Professional services contractors must be required to carry errors and omissions insurance in accordance with 7.2.4. 3. The contracting officer may waive a requirement for insurance with the advice of assigned counsel. 7.2.2 Types of Insurance 7.2.2.a Workers' Compensation and Employers' Liability Insurance. Compliance with applicable workers' compensation and occupational disease statutes is required, and employers' liability coverage must be obtained when available. In jurisdictions where occupational disease is not compensable by law, the contractor must carry insurance for occupational disease under the employers' liability section of the insurance policy. 7.2.2.b General Liability Insurance 1. The contractor must carry bodily injury liability insurance, with minimum limits of $100,000 per person and $500,000 per accident, on a comprehensive form of policy. 2. The contractor must carry property damage liability insurance in an amount determined by the contracting officer when the nature of the contract operations warrants it, or when those operations are not separable from the contractor's commercial operations. 7.2.2.c Automobile Liability Insurance. The contractor must carry automobile liability insurance on a comprehensive form of policy that provides for bodily injury and property damage liability covering the operation of all automobiles used in contract performance. Minimum limits of $100,000 per person and $500,000 per accident for bodily injury and $10,000 per accident for property damage must be carried. 7.2.3 Self-Insurance A qualified program of self-insurance covering any kind of liability may be approved in place of any type of insurance discussed in 7.2.2 when found to be in the interest of the Postal Service. However, in a jurisdiction where workers' compensation does not completely cover employers' liability to employees, a program of self-insurance for workers' compensation may be approved only if: 7.2.3.a The contractor also maintains an approved program of self-insurance for any employer's liability that is not covered; or 7.2.3.b The contractor has shown that the combined cost to the Postal Service of self-insurance for workers' compensation and commercial insurance for employers' liability will not exceed the cost of covering both kinds of risks by commercial insurance. 7.2.4 Errors and Omissions Insurance 7.2.4.a Professional Services. Contractors providing the following categories of services must carry errors and omissions (malpractice) insurance: 1. Accountants. 2. Architects. 3. Engineers. 4. Fiscal agents. 5. Medical doctors and dentists. 7.2.4.b Amount. Insurance coverage should be at least $200,000, unless the contracting officer determines that a different limit is needed in the interest of the Postal Service. 7.2.4.c Waiver. The contracting officer may waive the requirement for errors and omissions insurance in whole or in part, with the concurrence of assigned counsel. 7.2.4.d Other Professional Services. The contracting officer may require other professional services contractors to carry errors and omissions insurance when in the interest of the Postal Service. 7.2.5 Insurance Policies When insurance is required, it may be provided either by specific insurance policies or by the contractor's existing insurance policies. When existing policies are used, they must be amended to make the Postal Service a loss payee. 7.2.6 Contract Clauses Include Clause 7-4, Insurance, when a contractor is required to carry insurance. Include Clause 7-5, Errors and Omissions, when errors and omissions insurance is required in accordance with 7.2.4. 7.2.7 Notice of Cancellation or Change When insurance (other than errors and omissions insurance issued on an occurrence basis) is required by the contract, the insurance policy must contain an endorsement to the effect that a cancellation of or material change in the policy that adversely affects the interest of the Postal Service will not be effective until at least 30 days after written notice of the cancellation or change is given to the contracting officer. Section 3 Taxes 7.3.1 General 7.3.1.a Contract tax problems are essentially legal in nature and vary widely. Specific tax questions must be resolved by reference to the applicable contract terms and pertinent tax laws and regulations. Therefore, when tax questions arise, contracting officers must request assistance from assigned counsel. 7.3.1.b To ensure consistent treatment within the Postal Service, the Senior Counsel, Contract Protests and Policies must be consulted before negotiating with any taxing authority for the purpose of: 1. Determining whether a tax is valid or applicable; or 2. Obtaining exemption from, or refund of, a tax. 7.3.1.c Normally, as discussed in 7.3.3.c.2, contractors are responsible for settling tax applicability questions in consultation with authorities, independent of Postal Service involvement. When the constitutional immunity of the Postal Service from state or local taxation is at issue, however, contractors should be discouraged from negotiating independently with taxing authorities, and assigned counsel should be consulted, if the contract is either: 1. A cost-reimbursement contract; or 2. A fixed-price contract containing a tax escalation clause. 7.3.1.d See 8.5.2.b.4 regarding taxes in connection with utility contracts. 7.3.2 Federal Excise Taxes 7.3.2.a Applicability. Federal excise taxes are levied on the sale or use of particular supplies and services. Subtitle D of the Internal Revenue Code of 1954, Miscellaneous Excise Taxes, 26 U.S.C. 4041 et seq., and its implementing regulations, 26 CFR 40 through 299, cover miscellaneous federal excise tax requirements. Questions on federal excise taxes should be directed to assigned counsel. The most common excise taxes are: 1. Manufacturers' excise taxes imposed on certain motor vehicle articles, tires and inner tubes, gasoline, lubricating oils, coal, firearms, shells, and cartridges sold by manufacturers, producers, or importers; and 2. Special fuels excise taxes imposed at the retail level on diesel fuel and special motor fuels. 7.3.2.b General Exemptions from Federal Excise Taxes. No federal manufacturers' or special fuels excise taxes are imposed when the supplies are for any of the following: 1. Shipment to a United States possession or Puerto Rico, or for export. Shipment or export must occur within six months of the time when title passes to the Postal Service. When the exemption is claimed, the words "for export or shipment to a possession" must appear on the contract or purchase document, and the contracting officer must furnish the seller proof of export or shipment to a possession (see 26 CFR 48.4041-12). 2. Further manufacture, or resale for further manufacture (this exemption does not include tires and inner tubes, however) (see U.S.C. 4221). 3. Emergency vehicles (see 26 U.S.C. 4064(a) and 4064(b)(1)(c)). 7.3.2.c Solicitations. Contracting officers must solicit price proposals on a tax-exclusive basis when it is known that the Postal Service is exempt from federal excise taxes and the exemption is at least $100. Proposals must be solicited on a tax-inclusive basis when no exemption exists or the exemption is less than $100. 7.3.3 State and Local Taxes 7.3.3.a Definition. State and local taxes means taxes levied by the states, the District of Columbia, Puerto Rico, possessions of the United States, or their political subdivision. 7.3.3.b Applicability 1. Although the Postal Service, as an establishment of the federal government, is constitutionally immune from state and local taxes imposed directly on it, the applicability of particular taxes is a legal question often requiring the advice and assistance of assigned counsel. The applicability of a tax in a Postal transaction may depend on the nature of the tax and whether its legal incidence, as opposed to its economic burden, is on the Postal Service as purchaser. In many instances in which the Postal Service is not constitutionally exempt, it may take advantage of statutory exemptions provided by state or local law. 2. Prime contractors and subcontractors may not normally be designated as agents of the Postal Service for the purpose of claiming exemption from state and local taxes. Such designation, when appropriate, must be accomplished in the solicitation, and only after coordination with assigned counsel. 7.3.3.c Exemption from Tax 1. Whenever a state or locality asserts its right to tax Postal Service property directly or to tax a contractor's possession or use of, or interest in, Postal Service property, the contracting officer must obtain advice from assigned counsel concerning the appropriate course of action. 2. If the contract includes Clause 7-6, Federal, State and Local Taxes, Clause 7-7, Federal, State, and Local Taxes (Short Form), or Clause 7-8, Federal, State, and Local Taxes (Noncompetitive Contract) (see 7.3.4), it is the offeror's responsibility to determine to what extent state and local taxes are applicable to its proposal. The contracting officer should make no representations concerning the applicability of any state or local tax, and except as provided in subparagraph 3 following, the Postal Service should have no involvement in resolving any dispute between the contractor and a taxing authority concerning tax applicability. 3. Consistent with the clauses cited in subparagraph 2 preceding for fixed-price contracts, the Postal Service must, upon the contractor's request, furnish the contractor evidence to establish exemption from any specified tax if a reasonable basis for the exemption exists. When requested, the contracting officer may furnish such evidence under cost-reimbursement contracts. Evidence may also be furnished upon request under other contracts that contain no tax provision if the contractor (a) certifies that the contract price does not include the tax or, if the transaction or property is granted an exemption, (b) consents to a reduction in the contract price. 4. Evidence of exemption may include: (a) A copy of the contract. (b) Copies of other documents (such as purchase orders, shipping documents, or invoices) identifying the Postal Service as the buyer. (c) A U.S. Tax Exemption Certificate (Standard Form 1094). (d) A state or local form indicating that the supplies or services are for the exclusive use of the Postal Service or the federal government. (e) Any other state or locally required document for establishing exemption. (f) Shipping documents indicating that shipments are in interstate or foreign commerce. 7.3.3.d Matters Requiring Special Consideration. The resolution of tax issues requiring special consideration must be coordinated with assigned counsel in the course of solicitation preparation. The following are examples of state and local tax issues that may require special contract treatment. 1. When there is a reasonable question of the applicability or allocability of a tax, or when the applicability of a tax is in litigation, the contract may: (a) State that the contract price includes or excludes the particular tax and is subject to adjustment upon resolution of the tax question; or (b) Require the contractor to take specific actions regarding payment, non-payment, refund, protest, or other treatment of the tax. 2. When the applicability of state and local taxes depends on the place and terms of delivery, and the effect of tax on the contract price will be substantial, alternative places of delivery and contract terms should be considered in light of tax consequences. 3. When leased equipment is to be obtained under an indefinite-delivery contract, the contractor's property may be subject to a wide variety of state and local property, use, or other taxes. Because these taxes can vary considerably from jurisdiction to jurisdiction, use Clause 7-9, State and Local Taxes (Indefinite Delivery Equipment Rental), to relieve the contractor of uncertainty about tax consequences in this situation. 7.3.4 Contract Clauses 7.3.4.a Include Clause 7-6, Federal, State and Local Taxes, in competitively awarded fixed-price contracts, other than those (1) for real property or (2) awarded using simplified purchasing procedures. 7.3.4.b Include Clause 7-7, Federal, State, and Local Taxes (Short Form), in fixed-price contracts, other than those for real property, awarded using simplified purchasing procedures. 7.3.4.c Include Clause 7-8, Federal, State and Local Taxes (Noncompetitive Contract), in fixed-price noncompetitive contracts, other than those (1) for real property or (2) awarded using simplified procedures, when the contract price does not include any contingency for state or local taxes. 7.3.4.d Include Clause 7-9, State and Local Taxes (Indefinite Delivery Equipment Rental), when leased equipment is to be obtained under a contract for indefinite delivery. Chapter 8 Special Categories of Contracts Section 1 Supplemental Policy and Procedure 8.1.1 General 8.1.2 Other Policy and Procedure Directives 8.1.2.a Authority 8.1.2.b Issuance 8.1.2.c Applicability 8.1.3 Contract Formation Considerations 8.1.3.a Evaluation of Technical Factors 8.1.3.b Recurring Requirements Section 2 Professional and Consultant Services 8.2.1 Professional Services 8.2.1.a Definition 8.2.1.b Licenses 8.2.1.c Clauses 8.2.2 Consultant Services 8.2.2.a Definition 8.2.2.b Use 8.2.2.c Approval Section 3 Information Systems 8.3.1 Definitions 8.3.1.a Commercial software 8.3.1.b Computer 8.3.1.c Computer software 8.3.1.d Hardware 8.3.1.e Information systems 8.3.1.f System life cost 8.3.2 Policy 8.3.2.a General 8.3.2.b Information Systems Guidance 8.3.2.c Sources 8.3.3 Solicitation Provisions 8.3.4 Clauses Section 4 Research and Development 8.4.1 Definitions 8.4.1.a Applied research 8.4.1.b Basic research 8.4.1.c Research announcement 8.4.1.d Development 8.4.1.e Educational institution 8.4.1.f Engineering 8.4.1.g Nonprofit organization 8.4.2 General Policy 8.4.3 Source Development 8.4.3.a Source Identification 8.4.3.b Source Review 8.4.3.c Publicizing 8.4.4 Contracting Procedures 8.4.4.a Solicitation 8.4.4.b Evaluation of Price or Cost 8.4.4.c Types of Contracts 8.4.4.d Master Agreements 8.4.5 Short Form Research Contracts (SFRCs) 8.4.5.a Authorization 8.4.5.b Contracting Procedures 8.4.6 Limitations on Subcontracting. 8.4.7 Educational Institutions and Nonprofit Organizations 8.4.8 Organizational Conflict of Interest Section 5 Utility Services 8.5.1 Definitions 8.5.1.a Utility services 8.5.1.b Connection charge 8.5.1.c Termination liability 8.5.2 Policy 8.5.2.a Orders Under GSA Contracts 8.5.2.b Postal Service Contracts Section 6 Structured Contracts and Controlled Contracts 8.6.1 Definitions and Examples 8.6.1.a Structured contract and structured contracting 8.6.1.b Controlled contract and controlled contracting 8.6.2 Policies and Procedures Supplemental Policy and Procedural Authority Exhibit 8.1.2 Chapter 8 Special Categories of Contracts Section 1 Supplemental Policy and Procedure 8.1.1 General Certain Postal Service requirements must by nature receive distinctive treatment. This chapter identifies those requirements and addresses some of them in detail, providing policy and procedures that supplement those contained in the other chapters of the Procurement Manual. This chapter may in turn be supplemented by other policy and procedural issuances discussed in 8.1.2. 8.1.2 Other Policy and Procedure Directives 8.1.2.a Authority. Exhibit 8.1.2 shows, by requirement category, the Postal Service policy-originating officials authorized to issue policy and procedural directives that supplement this manual, subject to approval by the approving officials designated in the exhibit. 8.1.2.b Issuance 1. A copy of each directive issued under paragraph a above must be provided, upon issuance, to Policies, Planning, and Diversity. 2. Copies of each directive issued under paragraph a above must be made available to the public upon request, consistent with any restriction on disclosure (see 1.7.4). 8.1.2.c Applicability. Policy-originating officials must verify, at least annually, the currency and continuing applicability of each supplemental policy and procedural directive issued under this part 8.1.2. Any changes to a directive must be issued and distributed in the same manner as the original directive. Supplemental Policy and Procedural Authority Requirement Category Policy-Originating Organization Approving Official Accounting and Financial Audit Services Finance & Planning VP Purchasing & Materials Advertising Marketing & Sales VP Purchasing & Materials Appraisal Services Facilities VP Facilities Arbitration Services Labor Relations VP Purchasing & Materials Architect-Engineer Services Purchasing & Materials VP Purchasing & Materials Banking Services Finance & Planning VP Finance & Planning Brokerage Services Facilities VP Facilities Construction Purchasing & Materials VP Purchasing & Materials Fiscal Services Finance & Planning VP Purchasing & Materials Fuel Policies, Planning & Diversity VP Purchasing&Materials Information Services Information Systems VP Purchasing & Materials International Postal Agreements International VP Purchasing & Materials Law Enforcement Chief Inspector VP Purchasing & Materials Leasing Facilities VP Facilities Legal Services General Counsel VP Purchasing & Materials Licensing of Non-Postal-Owned Rights for Postal Use Policies, Planning & Diversity VP Purchasing & Materials Licensing of Postal Rights Marketing & Sales VP Purchasing & Materials Literary and Artistic Works Corporate Relations VP Purchasing & Materials Mail Transportation Services Purchasing & Materials VP Purchasing & Materials Medical Services Employee Relations VP Purchasing & Materials Postal Rate Commission Purchases Postal Rate Commission Postal Rate Commission Printing Printing Procurement VP Purchasing & Materials Research & Development Engineering VP Purchasing & Materials Revenue-Producing Contracts Policies, Planning& Diversity VP Purchasing & Materials Stamp Design Customer Service Support VP Purchasing & Materials Structured Contracts Policies, Planning& Diversity VP Purchasing & Materials Surveying Services Facilities VP Facilities Title Abstracting Services Facilities VP Facilities Title Insurance Purchases Facilities VP Facilities Uniforms Labor Relations VP Purchasing & Materials Exhibit 8.1.2 8.1.3 Contract Formation Considerations 8.1.3.a Evaluation of Technical Factors. The need for technical excellence is an important consideration in many of the procurements covered in this chapter, such as professional services and research and development. In such procurements, the contracting officer must establish technical evaluation factors that will result in the selection of superior performers at reasonable prices. Although price must be evaluated, it should not be the principal award factor for such procurements, unless the solicitation is restricted to approved sources or prequalified contractors (see 3.1.6). 8.1.3.b Recurring Requirements. In many instances, the requirements listed in exhibit 8.1.2 are needed in small quantities on a recurring basis. Therefore, the contracting officer should consider the use of ordering agreements under which supplies or services may be purchased by oral or written delivery order. Section 2 Professional and Consultant Services 8.2.1 Professional Services 8.2.1.a Definition. Professional services means services performed by members of professions of recognized status, such as accounting, architecture, engineering, law, medicine, the sciences, and teaching. 8.2.1.b Licenses. When purchasing professional services for which individuals are normally required to be licensed (such as medical, legal, accounting, and architecture), the solicitation must require a license as a prerequisite to award. Acceptable licenses may be limited to those issued by a particular state or entity, but only when local expertise is necessary to successful performance. 8.2.1.c Clauses 1. All contracts for professional services must include the following clauses: (a) Clause 8-1, Nondisclosure (Professional Services). The clause may be modified with the approval of the policy-originating official designated in exhibit 8.1.2. (b) Clause 8-2, Conflict of Interest. (c) Clause 8-3, Inspection of Professional Services. The clause provides for inspection of the professional's work product and acceptance of only those products that meet reasonable professional standards. It is to be used in lieu of, not in addition to, the standard inspection clauses prescribed in 2.2.1.b.2. (d) Clause 8-5, Records Ownership. The clause gives the Postal Service ownership of contract files, including copies of all contractor work papers. 2. In addition to the clauses prescribed in subparagraph c.1 preceding, Clause 8-4, Invoices (Professional Services), must be included in all non-fixed-price contracts for professional services. The clause requires presentation of invoices showing who performed the services, the hours and partial hours of service provided each day, and the services provided each hour or partial hour. Contractors may be allowed to set minimum charges for partial hours or days. 3. The contracting officer should consider including Clause 8-6, Key Personnel, in contracts for professional services. The clause requires use of the key personnel identified in the contractor's proposal, unless the contracting officer approves substitution. It provides for contract termination for failure to comply. 8.2.2 Consultant Services 8.2.2.a Definition. Consultant services are services provided by expert individuals or firms possessing exceptional qualifications in a particular technical or professional field. 8.2.2.b Use. Consultant services are used to enhance the understanding of complex issues and to provide new insights into alternate solutions to, or recommendations on, business or decision-making functions of a postal organization. Consultants do not involve themselves in the day-to-day operations of postal organizations except for the purpose of studying them, nor do they work under the immediate direction and control of postal employees. 8.2.2.c Approval. All contracts for consultant services must be approved in accordance with Management Instruction AS-710-92-3, Contracting for Consultant Services. Section 3 Information Systems 8.3.1 Definitions 8.3.1.a Commercial software. Computer software used regularly for other than government purposes by the general public. 8.3.1.b Computer. Defined in 9.3.1. 8.3.1.c Computer software. Defined in 9.3.1. 8.3.1.d Hardware. Computers and peripheral machines. 8.3.1.e Information systems. All types and categories of computer and telecommunication systems, hardware, software, and services. 8.3.1.f System life cost. All costs associated with acquiring, operating, and maintaining an information system, including conversion, environmental (such as heating, ventilation, air conditioning), training, and support service costs from the date the system is acquired until it is no longer needed for Postal Service use. 8.3.2 Policy 8.3.2.a General. Even small-dollar information systems procurements may involve questions of system compatibility, expansion potential, and other complex issues. Information Systems researches, tests, and evaluates information systems and components to ensure quality and intersystem communication capability. Purchasing & Materials's Policies, Planning, and Diversity develops and implements procurement strategies and standards for information systems and components. Therefore, it is the policy of the Postal Service to acquire information systems in accordance with those technical standards established by Information Systems and concurred in by the VP, Purchasing & Materials. 8.3.2.b Information Systems Guidance 1. Technical Standards. Information Systems conducts market research and technical evaluations of information systems suppliers, as part of or before solicitation and contract award. Companies interested in having their products or services evaluated by Information Systems must submit a request to Information Systems. 2. Technical Bulletins. Information Systems periodically issues standards and policy interpretation in the form of Technical Bulletins. These bulletins are supplements to the procedures in the relevant handbook. 8.3.2.c Sources 1. Postal Services Sources. Postal Service sources are described in 3.1.2 (existing assets) and 3.1.3 (national and area contracts and ordering agreements). In considering the use of existing assets, benefits must be weighed against maintenance and repair costs, and risks associated with malfunctions. Even when use of national and area contracts or ordering agreements is not mandatory, information systems must be obtained from such sources when the supplies or services available will meet user requirements. 2. General Services Administration (GSA) Sources (a) GSA makes multiple-award schedule contracts (MASCs) (see 3.1.5.b. 2(b)(2)) annually in three categories: Schedule A for general-purpose hardware and commercial software, Schedule B for general-purpose (off-line) peripherals, and Schedule C for end-user hardware and software. All three schedules contain maximum order limitations based on price and quantity. Current schedules are available from GSA SCHEDULE DIVISION (KESA) 18th AND F STREETS NW WASHINGTON DC 20405-0001 Purchasing offices may place orders against MASCs when: (1) The requirement cannot be met by a Postal Service source; (2) The MASC meets the user's quality and delivery requirements; and (3) The price is reasonable and competitive with commercial sources. (b) In addition to MASCs, GSA maintains national requirements contracts and area contracts. Current schedules for teleprocessing services may be obtained from GSA TELECOMMUNICATIONS PROCUREMENT DIVISION (KET) 18TH AND F STREETS NW WASHINGTON DC 20405-0001 Lists for other requirements are available from GSA REGIONAL INFORMATION SERVICES OFFICE (KEC) 18TH AND F STREETS NW WASHINGTON DC 20405-0001 Purchasing offices may place orders against these contracts when: (1) The requirement cannot be met by a Postal Service source; (2) The GSA contract meets the user's quality and delivery requirements; and (3) The price is reasonable and competitive with other commercial sources. 3. Commercial Sources (a) Information systems may be purchased using simplified procedures, subject to the applicable ceiling (see 4.3.1.b) and to technical standards contained in Information Systems Technical Bulletins. (b) Information Systems must approve in advance, for compatibility and other technical considerations, any proposed purchase over $50,000, whatever the purchasing method. Evaluation for contract award must include a system life cost basis analysis. 8.3.3 Solicitation Provisions 8.3.3.a Provision 8-1, Demonstrability, must be included in solicitations for commercial hardware or software when a system test using Postal Service test data is required. 8.3.3.b Provision 8-2, Functional Demonstration, must be included in solicitations for commercial hardware or software when a functional demonstration of one or more products is required. 8.3.3.c Provision 8-3, System Integrity, must be included in contracts for third-party software installed on all computer systems in the possession of the Postal Service, with the exception of personal computers. 8.3.4 Clauses 8.3.4.a Clause 8-7, Inspection and Acceptance - Systems, must be included in contracts for computers with a unit price greater than $50,000. This clause is to be used in lieu of, not in addition to, the inspection clauses prescribed in 2.2.1.b.2. If a computer contract covers other supplies or services also, one of the standard inspection clauses prescribed in 2.2.1.b.2 must be included for the other supplies or services. 8.3.4.b Clause 8-8, Liquidated Damages - Industrial Supply or Service Items Not Ready for Use, filled in appropriately, must be included in systems contracts when the use of this clause is justified as prescribed by 2.2.6. 8.3.4.c Clause 8-9, Use of Hardware or Software Monitors, must be included in contracts whenever monitors will be attached to a computer system. 8.3.4.d Clause 8-10, Site Preparation, must be included in contracts whenever the Postal Service must specially prepare a site for installation of an information system. 8.3.4.e Clause 8-11, Software License Warranty and Indemnification, must be included in contracts whenever software is procured by license from the contractor. 8.3.4.f Clause 8-12, Software Development Warranty, must be included in contracts for customized software. 8.3.4.g Clause 8-13, Warranty Exclusion and Limitation of Damages, must be included in all contracts for information systems. Section 4 Research and Development 8.4.1 Definitions 8.4.1.a Applied research. A study concentrated on limited areas and directed toward specific practical ends. 8.4.1.b Basic research. A systematic, intensive study directed toward fuller scientific knowledge or understanding and prompted primarily by the desire to pursue knowledge for its own sake rather than for any immediate practical application. 8.4.1.c Research announcement. A general announcement of the Postal Service's research interests, including criteria for selecting proposals and soliciting participation of all offerors capable of satisfying the Postal Service's needs. 8.4.1.d Development. Reduction to a useful form - such as a material, device, system, or method - of the findings and understandings derived from research. It includes the design and testing of prototypes and new processes to achieve specific functional requirements and characteristics. 8.4.1.e Educational institution. Any corporation, foundation, trust, or state or local government entity operated primarily as an institution of higher learning that offers a course of general studies leading to the granting of academic degrees. 8.4.1.f Engineering. The effort to refine the materials, devices, systems, methods, prototypes, and processes derived from research and development, in order to apply them to specific uses and technologies. 8.4.1.g Nonprofit organization. Any corporation, foundation, trust, or other entity that is operated for scientific, educational, or medical purposes and is not organized for profit. No private shareholder or individual may profit from such a corporation's net earnings. 8.4.2 General Policy 8.4.2.a It is the policy of the Postal Service to encourage participation of the broadest possible base of contractor sources in solving technological problems and advancing postal technology. 8.4.2.b When in the interest of the Postal Service, appropriate incentives may be provided to the industrial community to develop new products or equipment through its own resources. 8.4.2.c The use of educational institutions and nonprofit organizations as contractors is encouraged, when appropriate, to further scientific and technological advancements that will modernize and streamline postal operations. University research organizations should be considered a primary source for basic research; they should also be solicited, whenever feasible, for applied research requirements. 8.4.2.d Contracts for research, engineering, and development may be entered into with individuals under the same general terms and conditions governing contracting with business organizations. When contracting with individuals, prices or pay rates must be determined on a case-by-case basis, taking into account the importance of the contract, the individual's status and professional reputation, and the prices or rate paid previously for similar work. Postal Service or federal pay rates are not an appropriate guide. 8.4.3 Source Development 8.4.3.a Source Identification 1. Technical and purchasing personnel are responsible for cooperating in an ongoing effort to identify the sources best qualified to meet the Postal Service's research and development (R&D) needs. 2. Data furnished by sources seeking R&D work should be reviewed jointly by technical and purchasing personnel. 3. Special R&D solicitation mailing lists should be established when warranted. 8.4.3.b Source Review. Depending on the type of R&D sought, potential sources may range from only a few to several hundred. When sources in a particular R&D area are numerous, technical and purchasing personnel must periodically review source qualifications with a view to retaining only those sources that are demonstrably qualified. 8.4.3.c Publicizing. Postal Service R&D goals may be publicized using appropriate methods described in 2.1.2.b. 8.4.4 Contracting Procedures 8.4.4.a Solicitation 1. Competitive (a) Sources. Unless the contracting officer determines that unrestricted solicitation of sources is in the Postal Service's interest, solicitation must be limited to prequalified contractors (see 3.1.6). (b) Formats. When the standard solicitation format prescribed in appendix A is not suitable and use of a short form research contract (see 8.4.5) is not authorized, the contracting officer may use individually addressed letters, circulars, or notices, provided that they contain the terms, conditions, and other provisions required by this Procurement Manual. (c) Proposal Evaluation Factors. Since an offeror's approach to the statement of work requirements is the primary consideration in awarding an R&D contract, the solicitation must state the factors that will be used in comparing proposed approaches. While assigned numerical weights need not be shown, the relative importance of the factors must be made clear. The following factors should be included in the solicitation as applicable: (1) Understanding of the statement of work, as shown by the scientific, technical, or analytical approach proposed; (2) Competence and experience of proposed professional personnel; (3) Innovative ideas pertinent to the requirement; (4) Availability and planned use of facilities; (5) Willingness to devote resources to the proposed work; (6) Proposed management and organizational structure; and (7) Experience and record of past performance. 2. Research Announcements 3. The Postal Service uses research announcements with peer or scientific review for the procurement of basic and applied R&D. Research announcements may be used to fulfill requirements for scientific study and experimentation directed toward advancing the state of the art or increasing knowledge or understanding, as well as R&D focused on a specific system or hardware solution. (a) Contracting Officers may use the research announcement technique when meaningful proposals with varying technical/scientific approaches can be reasonably anticipated. The research announcement, together with any supporting documents, must: (1) Describe the Postal Service's research interest, either for an individual program requirement or for broadly defined areas of interest covering the full range of requirements; (2) Describe the factors for acceptance of proposals, their relative importance, and the method of evaluation; (3) Specify the period of time during which proposals submitted in response to the research announcement will be accepted; and (4) Contain instructions for the preparation and submission of proposals. (b) Notice of availability of the research announcement must be published in the Commerce Business Daily and may also be published in scientific, technical, or engineering periodicals. The notice must be published no less frequently than annually. (c) Proposals received as a result of the research announcement must be evaluated in accordance with the stated evaluation factors through a peer or scientific review process under the procedures set forth in the relevant handbook. Written evaluation reports on individual proposals are required, but proposals should not be evaluated against each other, since they are not submitted in accordance with a common work statement. (d) The primary bases for acceptance of proposal must be technical excellence, importance to Postal Service programs, and fund availability. Cost realism and reasonableness must also be considered to the extent appropriate. (e) Once a proposal is received, communication between scientific or engineering personnel and the principal investigator is permitted for clarification purposes only. (f) Synopsis of contract awards based upon proposals received under the research announcement is not required. (g) Proposals may be evaluated under this subparagraph a.2 even though designated as unsolicited by the offeror. 4. Noncompetitive (a) Solicitation may be noncompetitive when there is no substantial question concerning the choice of source, as in the following examples: (1) The Postal Service wants to take advantage of a contractor's unique and significant industrial accomplishment, and the establishment of specifications for the solicitation of others may defeat this purpose. (2) A contractor is conducting exploratory or advance development of a new product or idea of specific interest to the Postal Service, and the Postal Service wants to ensure that the effort is given financial support. (3) The Postal Service wants to accept an unsolicited proposal that cannot be evaluated under research announcement procedures, offers significant scientific or technological promise, represents the product of original thinking, and was submitted in confidence by one source. (4) Thorough technical evaluation reveals that only one source is fully qualified to perform the proposed work. (b) When solicitation is limited to a single source, the contracting officer may: (1) Discuss the desired work with the contractor; (2) Encourage submission of a proposal; and (3) Negotiate directly with the contractor, without a formal solicitation. 8.4.4.b Evaluation of Price or Cost. Although price or cost is not the controlling factor in selecting an R&D contractor, it may not be disregarded. An offeror's price or cost estimate must be evaluated using procedures stated in 5. 3.3, not only to determine whether the estimate is reasonable but also to assess the offeror's understanding of the work and ability to organize and perform it. 8.4.4.c Types of Contracts. Contract type must be selected in accordance with 5.1. R&D specifications are usually not sufficiently definitive to permit the use of fixed-price contracts. However, when appropriate, a firm-fixed-price level-of-effort contract may be used, describing the scope of work in general terms and requiring a specified level of effort over a stated period of time for a fixed dollar amount, and a report of results achieved. 8.4.4.d Master Agreements. Master agreements are task order contracts (see 5.1.9). 1. Use (a) Basic Research. A master agreement may be used for basic research when: (1) Several related projects within a program or area are planned; (2) The objective is support of an in-house R&D program; or (3) More than one activity will have R&D requirements within the general scope of the agreement. (b) Applied Research and Engineering. A master agreement is particularly useful when applied research or engineering services not related to a program currently under contract are needed quickly, and a continuing need for such services is anticipated but the exact extent or scope of services is not known. (c) Other. A master agreement may be used for other types of R&D work at the discretion of the contracting officer. 2. Price. The solicitation must require submission of current or projected labor, overhead, and general and administrative rates for the type of services to be provided during the agreement period, and task orders must be priced in accordance with 5.1.9. 8.4.5 Short Form Research Contracts (SFRCs) 8.4.5.a Authorization. The procedures contained in this part may be used only for procurement of basic or applied research when: 1. A research announcement is used (see 8.4.4.a.2); 2. It is determined at a level above the contracting officer that these procedures are in the Postal Service's interest; or 3. A noncompetitive award is approved (see 4.4.2). 8.4.5.b Contracting Procedures 1. Solicitation (a) The contracting officer must solicit sources in accordance with 8.4.4.a. 1 or 2, using a short form research contract format, which states a research problem and requires offerors to propose a statement of the work to be done. (b) The solicitation must require that the statement of work include a breakdown showing the amount of effort to be devoted to the contract by each principal investigator and any associate. (c) The solicitation must require that proposals describe any property to be furnished by the Postal Service or acquired by the contractor for performance of the work. Offeror must state the estimated or known cost of each item; items costing less than $1,000 may be grouped by category. When facilities are to be acquired using contract funds, offerors must explain why that is necessary. All descriptions must be sufficiently detailed to enable the contracting officer to determine whether the property should be furnished by the Postal Service or whether the contractor should be authorized to acquire it. (d) The solicitation must include the following applicable solicitation provisions (see appendix A): (1) Provision A-2, Submission of Proposals. (2) Provision A-7, Restriction on Disclosure and Use of Data. (3) Provision A-20, Type of Business Organization. (4) Provision A-21, Parent Company and Taxpayer Identification Number. (5) Provision 1-2, Contingent Fee Representation. (6) As applicable: (i) Provision 9-2, Representation of Rights in Data (see 9.3.4.a.1); (ii) Provision 10-3, Certification of Nonsegregated Facilities (see 10.2.7.i); (iii) Provision 10-4, Equal Opportunity Affirmative Action Program (see 10.2.7.i); (iv) Provision 10-5, Preaward Equal Opportunity Compliance Review (see 10.2.7.i); or (v) Provision 10-9, Clean Air and Water Certification (see 10.4). 2. Contract Award 3. When a proposal is acceptable, either as submitted initially or as revised in writing by the offeror, a contract may be awarded by written acceptance of the proposal. (a) When acceptance of an entire proposal is not advantageous to the Postal Service, the contracting officer may accept parts of the proposal either by attachment or incorporation by reference. (b) Options to extend the research effort beyond the initially proposed program may be included in the contract. The cost and period of performance for such options must be separately identified. (c) If incrementally funded, the contract must specify the total estimated cost for the full term of the research program, both funded and unfunded, and the amount of funds currently obligated. Clause 5-6, Limitation of Funds, must be included in the contract. (d) SFRCs awarded to institutions and organizations authorized to receive advance payments (see Management Instruction FM-610-91-2, Advance Payments) must be clearly marked "Advance Payment Authorized." 8.4.6 Limitations on Subcontracting. R&D contractors are selected for their scientific and technological expertise. Therefore, they may not subcontract work without the prior written consent of the contracting officer. In negotiating the contract, the contracting officer must ascertain any plans to subcontract any portion of the work. 8.4.7 Educational Institutions and Nonprofit Organizations In addition to the cost principles in 5.2.9 and 5.2.10, R&D contracts with educational institutions and nonprofit organizations are subject, as a matter of Postal Service policy, to the requirements of OMB Circular No. A-110, Administrative Requirements. 8.4.8 Organizational Conflict of Interest Organizational conflicts of interest (see 1.7.7.a) can occur when applied research follows basic research, when development follows applied research, when production follows R&D, or when a study is followed by another study of similar scope or emphasis. Contracting officers must take care to prevent actual or apparent organizational conflicts of interest in these situations. If it appears that an organizational conflict of interest might arise, the contracting officer must include Clause 8-14, Organizational Conflict of Interest, in the solicitation and include it or a negotiated alternative in the resulting contract. Section 5 Utility Services 8.5.1 Definitions 8.5.1.a Utility services. Refers primarily to electricity, gas, water, steam, sewerage, and regulated telecommunications services available to the general public and performed by governmental agencies or by private companies ordinarily subject to regulation. Other services, such as trash removal, may also be considered utility services when performed by governmental agencies or by private companies subject to regulation. 8.5.1.b Connection charge. A payment for facilities that are needed in order to make connection with a point of supply and that are installed and owned by the utility supplier. 8.5.1.c Termination liability. An obligation to pay a portion of the cost of connecting facilities with a point of supply installed and owned by the utility supplier, if the Postal Service terminates the contract before its term expires. The initial amount of the obligation is not more than the agreed cost of connecting the facility, less net salvage when material costs are included. This amount decreases under an amortization formula stated in the contract, until it ultimately reaches zero. 8.5.2 Policy 8.5.2.a Orders Under GSA Contracts. Utility services should be obtained under available GSA areawide contracts, unless they can be obtained more efficiently or at a lower cost under Postal Service contract. 8.5.2.b Postal Service Contracts 1. Forms (a) The terms and conditions under which utility suppliers will agree to furnish services vary from area to area. Flexibility in the use of contract forms and provisions is therefore necessary. (b) If a utility supplier refuses to execute a formal contract with the Postal Service, the contracting officer may purchase the utility services in accordance with (c) below, provided that: (1) A definite refusal is received in writing from a corporate officer of the supplier; and (2) The Manager, Policies, Planning, and Diversity, is given notice and documentation of the refusal, including the record of negotiations. (c) When a utility supplier refuses to execute a contract, the services may be obtained by purchase order or by use of the utility supplier's commercial forms and clauses. When the utility supplier's commercial forms and clauses are used, the contracting officer must delete any language contrary to federal law and Postal Service regulation. 2. Clauses. The clauses prescribed in this manual must be included in all Postal Service utility contracts, unless the utility supplier objects to their inclusion and the procedures outlined in b.1(b) above are followed. 3. Applicable Rules and Procedures. When a federal, state, or local governmental agency has issued regulations or established procedures affecting cost allowability, pricing, rates, and other matters, it is Postal Service policy, as a matter of comity rather than law, to comply with those regulations or procedures, subject to judicial appeal. When no regulations or procedures of a regulatory agency are applicable, Postal Service rules and the general practices of the utilities industry must be followed. 4. Taxes (a) Utility contracts do not contain any of the tax clauses prescribed in 7. 3.4, and utility invoices often identify taxes as separate line items. Postal Service exemption from such taxes, if any, must be determined on a case-by-case basis. (b) Questions on tax charges must be referred to assigned counsel. (c) Charges indicated as taxes on utility bills must be paid until assigned counsel advises that payment is not necessary. Refunds may be claimed for amounts improperly paid. 5. Connection Charges (a) A connection charge may be paid only when reasonable attempts to negotiate the contract without the charge have failed. (b) When some obligation is necessary to secure the required facilities, a termination liability is ordinarily to be preferred over a connection charge. (c) When the supplier's rules and procedures require payment of an unrefundable fee for connection, in addition to or in lieu of a connection charge, the contracting officer may pay the fee. 6. Applicability of Construction Standards. Ordinarily, the work performed by a utility in installing connecting facilities is not considered construction work for purposes of the policies in 10.2.4. However, such work may be considered construction if the contract also calls for other construction work, such as installation of utility distribution leins and equipment within a facility. When such additional work is required, a construction contract (see 11. 5) should be used. Section 6 Structured Contracts and Controlled Contracts 8.6.1 Definitions and Examples 8.6.1.a Structured contract and structured contracting. A contract and its associated solicitation, award, and administration process using special procedures, forms, solicitation provisions, and clauses, under the authority of 8.6.2.a. Structured contracts are used for such things as cleaning services, food services, elevator maintenance, vehicle leasing, and coin-operated photocopiers. 8.6.1.b Controlled contract and controlled contracting. A contract and its associated solicitation, award, and administration process for which authority is restricted and special procedures, forms, solicitation provisions, and clauses are used, under the authority of 8.6.2.b. Controlled contracts are used in such areas as law enforcement, international postal agreements, and revenue production. 8.6.2 Policies and Procedures 8.6.2.a Policy-originating officials may, with the approval of the Manager, Policies, Planning, and Diversity, establish structured contract policies and procedures for any category of contracts under their authority as described in exhibit 8.1.2. 8.6.2.b The Manager, Policies, Planning, and Diversity, may designate any category of contract as controlled. 8.6.2.c Policies, procedures and formats unique to these types of contracts are found in individual handbooks. Chapter 9 Patents and Data Rights Section 1 General Policies 9.1.1 Acquiring Intellectual Property Rights 9.1.1.a General 9.1.1.b Non-Impairment of Private Rights 9.1.1.c Commercial Application 9.1.1.d Indemnification for Use of Private Patents for Commercial Items 9.1.1.e Claims Against USPS Section 2 Acquisition of Rights 9.2.1 General 9.2.2 Acquisition of Patent Rights 9.2.2.a Covered Contracts 9.2.2.b Postal Service Title 9.2.2.c Less than Postal Service Title 9.2.2.d Alternate Proposals 9.2.2.e Alternate Agreements after Award 9.2.2.f Other Contracts. 9.2.2.g Clauses 9.2.3 Use of Private Patents 9.2.3.a Authorization and Consent 9.2.3.b Notice and Assistance 9.2.4 Patent Indemnification 9.2.4.a Indemnification by Postal Service. 9.2.4.b Indemnification by Contractor 9.2.4.c Waiver or Modification of Patent Indemnity Section 3 Rights in Data 9.3.1 Definitions 9.3.1.a Computer 9.3.1.b Computer data base 9.3.1.c Computer program 9.3.1.d Computer software 9.3.1.e Computer software documentation 9.3.1.f Data 9.3.1.g Firmware 9.3.1.h Form, fit, and function data 9.3.1.i Limited rights 9.3.1.j Limited rights data 9.3.1.k Restricted computer software 9.3.1.l Restricted rights 9.3.1.m Technical data 9.3.1.n Unlimited rights 9.3.2 Data Rights Acquisition Policy 9.3.2.a General 9.3.2.b Unlimited Rights in Data 9.3.2.c Acquisition of Rights in Data 9.3.2.d Privately Developed Data 9.3.2.e Unmarked or Improperly Marked Technical Data or Software 9.3.2.f Copyrighted Data 9.3.2.g Acquisition of Additional Rights in Data 9.3.2.h Manuals and Instructional Materials 9.3.2.i Technical Data Necessary to Procure Repair Parts 9.3.2.j Subcontracts 9.3.3 Data Ordering 9.3.3.a Basic Policy 9.3.3.b Additional Ordering of Data 9.3.4 Solicitations 9.3.4.a Contractor's Representation 9.3.4.b Data Offered with Restrictions 9.3.4.c Alternate Proposals 9.3.5 Technical Data Contract Clauses 9.3.5.a Basic Clauses 9.3.5.b Alternate Arrangements 9.3.5.c Computer Software 9.3.6 Acquisition of Rights in Computer Software 9.3.6.a Covered Contracts 9.3.6.b Computer Software Developed at Private Expense 9.3.6.c Marking of Computer Software 9.3.6.d Clauses 9.3.7 Special Works 9.3.7.a Covered Contracts 9.3.7.b Restrictions on Release 9.3.7.c Assignment of Copyrights 9.3.7.d Indemnification 9.3.7.e Clauses 9.3.8 Existing Works 9.3.8.a Covered Contracts 9.3.8.b Clause 9.3.9 Royalties 9.3.9.a Reporting Royalties 9.3.9.b Refunds of Royalties 9.3.10 Professional Services Chapter 9 Patents and Data Rights Section 1 General Policies 9.1.1 Acquiring Intellectual Property Rights 9.1.1.a General. Patents, copyrights, and other rights in data are valuable intellectual property. The Postal Service acquires patents, copyrights, and other rights in data as necessary to: 1. Enhance the competitive purchasing process; 2. Ensure the ability to use, maintain, repair, and modify equipment or products procured under Postal Service contracts; 3. Recoup development costs of, and fund improvements in, Postal products and equipment; 4. Develop products and equipment for Postal Service and public use; and 5. Protect its position in the competitive market place. 9.1.1.b Non-Impairment of Private Rights. The Postal Service's efforts directed toward competition (4.1) must not improperly demand or use data relating to privately developed intellectual property rights. The Postal Service complies with applicable laws regarding intellectual property rights. The Postal Service, however, will not refuse to award a contract on the grounds that the prospective contractor might infringe a patent. See 9.2.3. 9.1.1.c Commercial Application. The Postal Service encourages commercial application of inventions made under its contracts consistent with its expressed policies for acquisition of data rights and inventions. 9.1.1.d Indemnification for Use of Private Patents for Commercial Items. The Postal Service seeks indemnification for a contractor's use of private patents when the supplies or services procured are sold in the commercial open market. 9.1.1.e Claims Against USPS. Contractors must protect the Postal Serviceagainst claims resulting from contractors' use of data not supplied by the Postal Service. Section 2 Acquisition of Rights 9.2.1 General 9.2.1.a The Postal Service acquires patent rights, rights in data, and rights in software to the degree necessary to protect the Postal Service's interests. Those rights can include: 1. Postal Service title to patents. 2. Less than Postal Service title to patents, such as nonexclusive licenses. 3. Unlimited rights or title to technical data and software. 4. Limited rights to technical data and restricted rights in software. These rights may be exclusive or nonexclusive. 9.2.1.b Because the Postal Service is charged with behaving in a businesslike way, it is appropriate for it to consider acquiring these rights in manners consistent with its business purpose. Determinations in this regard are to be made by the contracting officer, with the advice of the requiring activity and counsel, giving full consideration to the costs and benefits of the chosen approach. Thus, for example, decisions to acquire Postal Service title to patents or unlimited rights to technical data developed by the contractor at private expense must take into account the impact of the decision on the cost of the contract and the extent to which prospective offerors may not wish to part with such rights. Conversely, determinations to take only lesser rights must consider the effect on the Postal Service of the exploitation of those rights by the contractor or others. 9.2.2 Acquisition of Patent Rights 9.2.2.a Covered Contracts. This part 9.2.2 applies to all contracts and subcontracts for research, experimental, developmental, or engineering work or for initial production of products or equipment developed under a Postal Service contract. 9.2.2.b Postal Service Title. Postal Service title must be acquired to subject inventions under a covered contract unless the contracting officer, after consultation with the requiring activity and the patent counsel, determines that an alternate arrangement is in the best interests of the Postal Service. The determination concerning alternate arrangements may be made at the time of solicitation (see c., or d. and e., below). 9.2.2.c Less than Postal Service Title. When appropriate, the Postal Service may acquire less than title to subject inventions under covered contracts. However, in no case may the Postal Service acquire less than a non-exclusive royalty-free license to make, use and sell each subject invention throughout the world on behalf of the Postal Service. If the Postal Service takes less than title, it may allow the contractor to retain title to all subject inventions, or may allow the contractor to elect whether to retain title on an invention-by-invention basis. When contractors are allowed to retain title, the contract must provide adequate provisions allowing the Postal Service to control the contractor's sale of the invention to competitors of the Postal Service. As an alternative, the contracting officer may consider providing for a sharing of revenue for all commercial sales of the invention, subject to a requirement that any sale of a subject invention to an organization which provides postal or parcel delivery services in competition with the Postal Service requires the advance written approval of the contracting officer. Any such alternative must be coordinated with the patent counsel. 9.2.2.d Alternate Proposals 1. The contracting officer may consider any alternate proposal giving a contractor greater rights in an invention made in the performance of a contract than the solicitation contemplates if it will yield a net benefit to the Postal Service. 2. Provision 9-1, Alternate Intellectual Property Rights Proposals, may be included in all solicitations for covered contracts, and alternate proposals may be considered as part of the evaluation process. 9.2.2.e Alternate Agreements after Award. An alternate agreement on patent rights for inventions developed at contractor expense but intended for delivery under a covered contract may be negotiated after award when in the interest of the Postal Service. Before initiating negotiations, the contracting officer must seek the advice of patent counsel. 9.2.2.f Other Contracts. The contracting officer may provide for Postal Service acquisition of patent rights or may solicit alternate agreements for contracts not covered by this part with the concurrence of patent counsel. Particular consideration should be given to including such provisions in non-covered contracts if it appears likely that the contractor will make an invention in performing the contract. 9.2.2.g Clauses. Clause 9-1, Patent Rights, must be included in contracts in which the Postal Service will take title to inventions. Clause 9-15, Patent Rights - Contractor Retention, must be included in contracts providing for the contractor's election to retain invention rights. If an alternate patent proposal is accepted, the clause must be appropriately modified, with the concurrence of counsel, to reflect the specific rights in subject inventions that will be acquired by the Postal Service. The modified clause must clearly state that all other Postal Service rights in subject inventions remain in effect with full force. When Clause 9-15 is included in contracts, Clause 9-16, Postal Service Title in Technical Data and Computer Software, must also be included. 9.2.3 Use of Private Patents 9.2.3.a Authorization and Consent 1. When the government has authorized or consented to the manufacture or use of an invention described in and covered by a U.S. patent, suit for recovery of the reasonable and entire compensation for the manufacture or use of the invention by or for the United States by a contractor (including a subcontractor at any tier) can be maintained only against the government in the United States Court of Federal Claims and not against the contractor or subcontractor (28 U.S. C. 1498). To ensure that work by a contractor or subcontractor under a Postal Service contract may not be enjoined by reason of patent infringement, the Postal Service provides its authorization and consent to the use of private patents by its contractors and subcontractors in certain situations. Broad authorization and consent is provided in the conduct of research and development activities so that the contractor or subcontractor need not avoid or invent around particular technology areas. In contracts for supplies or construction, a more limited authorization and consent is provided. 2. The liability of the Postal Service for damages in a suit of the nature described in subparagraph a.1 above against it may ultimately be borne by the contractor or subcontractor in accordance with the terms of any patent indemnity clause included in the contract, and an authorization and consent clause does not detract from any patent indemnification commitment by the contractor or subcontractor. Therefore, both a patent indemnity clause and an authorization and consent clause may be included in the same contract. 3. Clause 9-2, Authorization and Consent, must be included in all covered contracts except those awarded using simplified procedures (see 4.3) or performed outside the United States. 9.2.3.b Notice and Assistance 1. Clause 9-3, Notice and Assistance Regarding Patent and Copyright Infringement, must be included in all covered contracts except those awarded using simplified procedures (see 4.3) or performed outside the United States. 2. If the contracting officer receives notice of an infringement claim, patent counsel must be notified immediately. 9.2.4 Patent Indemnification 9.2.4.a Indemnification by Postal Service. The contracting officer may not use any contract clause providing for indemnification by the Postal Service for patent infringement by a contractor or subcontractor. 9.2.4.b Indemnification by Contractor 1. The Postal Service's policy is to acquire indemnification for the use, by or on behalf of the Postal Service, of private patents without the authorization or consent of the patentee, when the use relates to supplies or services that the contractor offers or provides to the commercial open market. 2. Except as provided in paragraph c below, Clause 9-4, Patent Indemnity, must be included in all contracts not awarded using simplified procedures. The clause may be used in other contracts if patent infringement is likely. 9.2.4.c Waiver or Modification of Patent Indemnity 1. If it is in the interest of the Postal Service to do so, the contracting officer may waive or modify the right to patent indemnification, with the prior approval of patent counsel. If the waiver or modification to the right to patent indemnification is for research or development, Clause 9-5, Waiver of Indemnity, must be used, and the contract must be modified as applicable patents are identified. 2. If patent indemnification will be waived completely, Clause 9-4 may not be used. 3. Clause 9-5, Waiver of Indemnity, must be used if the waiver applies only to specific patents. Those patents to which the waiver applies must be listed in the clause. Section 3 Rights in Data 9.3.1 Definitions 9.3.1.a Computer. A device capable of accepting data, performing prescribed operations on the data, and supplying the results of those operations. It includes any device that operates on (1) discrete data by performing arithmetic and logic processes on the data or (2) analog data by performing physical processes on the data. 9.3.1.b Computer data base. A collection of data in a form capable of being processed and operated on by a computer. 9.3.1.c Computer program. Instructions or statements including, but not limited to, source code, object code, and algorithms, in computer usable form, that cause a computer to perform specified operations. Computer programs may be machine-dependent or machine-independent, and may be general or specific in purpose. 9.3.1.d Computer software. Computer programs, computer data bases, and their documentation. 9.3.1.e Computer software documentation. Information, including computer listings and printouts in human-readable form, that (1) documents the design or detail of computer software, (2) explains its capabilities, or (3) provides operating instructions for using it. 9.3.1.f Data. Recorded information, regardless of form or the medium on which it may be recorded. The term includes technical data and computer software. The term does not include information incidental to contract administration, such as financial, administrative, cost or pricing, or management information. 9.3.1.g Firmware. Hardware-embedded and hardware-oriented programming that is used for machine control, error recovery, mathematical functions, applications programs, and the like, including firmware furnished with a computer, commercially available proprietary firmware acquired separately, and all related vendor documentation and manuals. 9.3.1.h Form, fit, and function data. Data relating to an item component, or process that are sufficient to enable physical and functional interchangeability, as well as data identifying source, size, configuration, mating and attachment characteristics, functional characteristics, and performance requirements; except that for computer software, it means data identifying origin, functional characteristics, and performance requirements but specifically excludes the source code, algorithm, process, formulas, and machine-level flow charts of the computer software. 9.3.1.i Limited rights. The rights of the Postal Service in limited rights data, as set forth in a Limited Rights Notice if included in a data rights clause of the contract. 9.3.1.j Limited rights data. Data, other than computer software, developed at private expense. 9.3.1.k Restricted computer software. Computer software developed at private expense that is a trade secret, is commercial or financial and confidential or privileged, or is published copyrighted computer software, including minor modifications of this computer software. 9.3.1.l Restricted rights. The rights of the Postal Service in restricted computer software, as set forth in a Restricted Rights Notice included in a computer software rights clause of the contract, or as otherwise may be included or incorporated in the contract. 9.3.1.m Technical data. Data, other than computer software, of a scientific or technical nature. 9.3.1.n Unlimited rights. The rights of the Postal Service in technical data and computer software to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform and display publicly, in any manner and for any purpose, and to have or permit others to do so. 9.3.2 Data Rights Acquisition Policy 9.3.2.a General. It is the policy of the Postal Service to acquire only the technical data, computer software and firmware and the rights to them essential to its needs. These needs include competitive procurement, operation and maintenance of equipment and supply items, dissemination of research and development contract data to users, recoupment of investments in technology or product developments and position in the competitive marketplace, personnel training, inspection and quality assurance, logistics support, and packaging. These needs must be balanced against the valid economic interest that commercial organizations have in technical data and computer software developed at their own expense for competitive purposes. 9.3.2.b Unlimited Rights in Data 1. Unless paragraph c below applies, technical data in the following categories must be acquired with unlimited rights (except for copyrights): (a) Data first produced in the performance of a Postal Service contract (except to the extent that they constitute minor modifications of data that are limited rights data). (b) Form, fit, and function data (including such data describing Limited Rights Data subject to the contract) delivered under the contract. (c) Data that constitute manuals or instructional and training materials for installation, operation, or routine maintenance and repair of items, components, or processes delivered or furnished for use under the contract (but see 9.3.2.g). (d) All other technical data delivered under the contract unless they are limited rights data (see paragraph c below). 2. If any of the foregoing data are published copyrighted data, the Postal Service acquires them under a copyright license, as provided in paragraph f below, rather than with unlimited rights. 3. Unless paragraph c below applies, computer software in the following categories is acquired with unlimited rights: (a) Computer software first produced in the performance of a Postal Service contract (except to the extent that it constitutes minor modifications of computer software that is restricted computer software). (b) Form, fit, and function data (including such data describing Restricted Computer Software subject to the contract) required to be delivered under the contract. (c) All other computer software delivered under the contract unless it is restricted computer software. 9.3.2.c Acquisition of Rights in Data. When it has been determined by the contracting officer and the requirements organization program manager, with the consultation and concurrence of the patent counsel, that it is in the best interests of the Postal Service to take title to technical data or computer software first produced in the performance of a Postal Service contract, Clause 9-16, Postal Service Title in Technical Data and Computer Software, must be incorporated into the contract schedule. 9.3.2.d Privately Developed Data 1. Data developed at private expense including minor modifications thereof, normally is acquired with limited rights. To assert that technical data are limited rights data, the contractor must identify such data in accordance with Provision 9-2, Representation of Rights in Data, and, when they are delivered to the Postal Service, place on them the limited rights legend required by the contract. 2. Restricted computer software normally is acquired with restricted rights. Contractors claiming that software is restricted computer software must identify such software in accordance with Provision 9-2, Representation of Rights in Data, and, when it is delivered to the Postal Service, place on it the contract-required restricted rights legend. 3. When computer software developed at private expense is modified or enhanced as a necessary part of performing a contract, only that portion of the resulting product in which the original product is recognizable will be deemed to be computer software developed at private expense to which restricted rights may attach. 4. A contractor's claim that data or software has been developed at private expense must be supported by clear and convincing evidence that the data or software was developed and is related to a workable device, computer program, or software routine (including separately identifiable components, modules, subsystems, and subroutines) incorporated into larger systems or programs responsive to a contract requirement, before Postal Service funding was introduced into the development process. 5. The Postal Service's recognition of Limited Data Rights or Restricted Computer Software Rights must be incorporated into the contract using Clause 9-17, Delivery of Limited Rights Data and Restricted Computer Software. 9.3.2.e Unmarked or Improperly Marked Technical Data or Software 1. Technical data or software received without a restrictive legend are deemed to have been furnished with unlimited rights. However, the contracting officer may permit the contractor to place a restrictive legend on the technical data or software within six months of delivery if the contractor demonstrates that (a) its omission was inadvertent, and (b) use of the legend is authorized. The Postal Service has no liability with respect to the use or disclosure of the technical data or software made before the actual addition of the legend to the data or software. 2. Technical data or software received with a restrictive legend not permitted by the terms of the contract may only be used with limited rights pending inquiry to the contractor. If no response has been received within 30 days, or if the response fails to show that the restriction is authorized, the contracting officer may obliterate the legend, notify the contractor accordingly, and thereafter use the technical data or software as if they were acquired with unlimited rights. 3. If the contract authorizes the contractor to furnish technical data or software with limited rights, but the restrictive legend employed by the contractor is not in the form prescribed by the contract, the technical data or software must be used with limited rights, and the contractor will be required to amend the legend to conform with that specified in the contract. If the contractor fails to so amend the legend within 30 days after notice, the contracting officer may correct the legend and notify the contractor of the action. 4. The procedures of this paragraph e may be modified in accordance with regulations implementing the Freedom of Information Act (5 U.S.C. 552) (see 1.7. 4) if necessary to respond to a request under the Freedom of Information Act. The contractor is not precluded from bringing a claim in connection with any dispute that may arise at the result of the Postal Service's action to remove any markings on technical data, unless the action occurs as the result of a final disposition of the matter by a court of competent jurisdiction. 9.3.2.f Copyrighted Data 1. Under contracts for basic research, contractors may establish claim to copyright in technical or scientific articles based on, or containing, data first produced in the performance of work under a Postal Service contract only if the data are to be published in academic, technical, or professional journals, symposia proceedings, or similar works. Otherwise, the permission of the contracting officer must be obtained if the contractor desires to establish claim to copyright in data first produced in the performance of a contract. 2. Unless otherwise approved by the contracting officer with concurrence of patent counsel, whenever a contractor establishes claim to copyright first produced in the performance of a contract, the contractor must grant the Postal Service a paid-up, nonexclusive, irrevocable, worldwide license to reproduce, prepare derivative works, distribute to the public, and perform and display publicly by or on behalf of the Postal Service, covering all such data. 3. If any data not first produced in performing a contract are subject to a claim of copyright, the contractor may not incorporate them in data delivered under the contract without either: (a) Acquiring for or granting to the Postal Service copyright license rights in them; or (b) Obtaining permission from the contracting officer to do otherwise. 4. The copyright license the Postal Service acquires for the data in subparagraph e.3 above will normally be of the same scope as discussed in subparagraph e.2 above. However, contracting officers may, on a case-by-case basis, obtain a license of different scope if the contracting officer determines that it is consistent with the purpose of acquiring the data. If a license of a different scope is acquired, it must be so stated in the contract and clearly set forth in a conspicuous place on the delivered data. In addition, if computer software not first produced in the performance of a Postal Service contract is delivered with a claim of copyright, the Postal Service's license will be as set forth in paragraph c of Clause 9-9, Rights in Computer Software, or as otherwise may be provided in a collateral agreement incorporated in or made part of the contract. 5. If contractor action causes limited rights data or restricted computer software to be published with the claim of copyright after the data have been delivered to the Postal Service without a notice, the Postal Service is relieved of disclosure and use limitations and restrictions regarding the data, and the contractor should advise the Postal Service, request that a copyright notice be placed on the copies of the data delivered to the Postal Service, and acknowledge that the applicable copyright license described in subparagraph f.2 above applies. 9.3.2.g Acquisition of Additional Rights in Data 1. The Postal Service may purchase as a separately priced contract item specific rights in privately developed data (such as, unlimited rights in limited rights data) when the contracting officer determines that there is a clear need for these rights in order to accomplish an essential function of the Postal Service. The acquisition of such data rights must be based on a specific written determination of the contracting officer evaluating all alternative methods of accomplishing the function and demonstrating that the acquisition of data rights is the most cost-effective method available to the Postal Service. 2. When additional rights in data are needed, it is possible that the Postal Service does not need unlimited rights but only the right to use the data for Postal Service purposes. One method of acquiring additional rights is to acquire the right to direct the contractor to license other contractors to use the data to perform work for the Postal Service. 3. When additional rights are acquired, Clause 9-14, Acquisition of Additional Rights in Data, must be included in the contract and the contract Schedule must list: (a) The items, components, or processes for which additional rights in technical data will be furnished; and (b) The computer software for which additional rights will be furnished. 4. This list must specify for each listed item whether the contractor will furnish unlimited rights, limited rights, directed license rights (see subparagraph f.2 above), or some other form of rights agreed to by the parties. 9.3.2.h Manuals and Instructional Materials. Manuals or instructional and training materials comprising technical data must be obtained with unlimited rights to allow use by Postal Service employees and Postal Service contractors in the course of installation, training operation, or routine maintenance and repair of equipment. Contractors may request the exclusion of specified limited rights data from the specifications for manuals or training materials. However, if the contracting officer determines that such data are necessary to perform any of these functions, the data must be delivered with unlimited rights. 9.3.2.i Technical Data Necessary to Procure Repair Parts 1. When a solicitation is for the development or manufacture of equipment or a supply item that will require the future procurement of substantial quantities of repair parts, and it appears likely that the contractor will incorporate limited rights data in the drawings and specifications, the contracting officer must consider including in the contract the Postal Service right to use the data to obtain competition in procuring repair parts. When unknown factors, such as cost, make the feasibility of acquiring such rights uncertain, the solicitation may include the rights as a separately priced optional line item. 2. If the solicitation contemplates the acquisition of this additional right, Provision 9-3, Use of Limited Rights Data for Procurement of Repair Parts, must be included in the solicitation, and the Limited Rights Notice in Clause 9-6, Rights in Technical Data, must be modified by Clause 9-18, Manufacture of Repair Parts. 9.3.2.j Subcontracts. It is the responsibility of the contractor to obtain from subcontractors all the data and rights in data necessary to fulfill the contractor's obligations under the contract. If a subcontractor refuses to accept a contractor's terms giving the Postal Service the required data and rights in data, the contractor must notify the contracting officer and seek approval for the subcontract data provisions. 9.3.2.k Modification of Postal Service Rights. The Postal Service's rights in technical data and computer software may not be modified except as provided in this part 9.3.2 or in 9.3.4. Acceptance from one source of technical data or computer software subject to limited or restricted rights does not affect the Postal Service's rights in such data or similar data acquired from other sources. 9.3.3 Data Ordering 9.3.3.a Basic Policy. To the extent that the Postal Service's requirements for data are known at the time of contract award, the contract Schedule should specify the data to be delivered to the Postal Service under the contract. 9.3.3.b Additional Ordering of Data. In some contracting situations, such as experimental, developmental, research, or demonstration contracts, it may not be feasible to ascertain all the data requirements at the time of contract award. Clause 9-8, Additional Data Requirements, is used to enable the later ordering of additional data as the actual requirements become known. The clause must be used in solicitations and contracts involving experimental, developmental, research, or demonstration work unless there is certainty that all the requirements for data are specified in the contract. The contracting officer may permit the contractor to identify in the contract data not to be ordered for delivery under Clause 9-8, Additional Data Requirements, if they are not necessary to meet the Postal Service's requirements. 9.3.4 Solicitations 9.3.4.a Contractor's Representation 1. When the Postal Service needs title to data first developed under the Postal Service contract or data with unlimited rights, but there is a possibility that one or more offerors will propose to deliver technical data or computer software with restrictions on use or disclosure, the solicitation must contain Provision 9-2, Representation of Rights in Data. 2. The solicitation may require the contractor to identify all limited rights data and restricted computer software after award if identification is impracticable before award, and to identify limited rights data and restricted computer software relating to any changed requirements. 9.3.4.b Data Offered with Restrictions. After review of the data to be furnished with restrictions, the contracting officer may: 1. Negotiate to acquire unlimited rights or an option for unlimited rights; 2. Modify the requirement for title or unlimited rights; 3. Negotiate to acquire additional data rights necessary to accomplish the purpose for which the data are being acquired; or 4. Reject the proposal as not in the interest of the Postal Service. 9.3.4.c Alternate Proposals 1. The Postal Service may consider an alternate proposal giving a contractor greater rights in data if they are necessary to permit the commercial use of the data or yield a net benefit to the Postal Service. 2. Provision 9-1, Alternate Intellectual Property Rights Proposals, may be included in all solicitations for contracts requiring the delivery of data, and alternate proposals must be considered as part of the evaluation process. 9.3.5 Technical Data Contract Clauses 9.3.5.a Basic Clauses 1. Clause 9-6, Rights in Technical Data, and Clause 9-7, Withholding Payment (Technical Data and Computer Software), must be included in the contract when technical data will be acquired. 2. Clause 9-16, Postal Service Title in Technical Data and Computer Software, must be included in the contract when title to technical data or computer software will be acquired. 3. If the data requirements are not adequately fixed and specified at the time of contracting, Clause 9-8, Additional Data Requirements, must also be included in the contract. 9.3.5.b Alternate Arrangements. When, in accordance with 9.3.2.f, the contracting officer determines to acquire specific technical data items with Postal Service rights greater than those specified in Clause 9-6, Rights in Technical Data, the contract Schedule must specifically describe the applicable data items sought and Clause 9-14, Acquisition of Additional Rights in Data, must also be included in the contract. If an alternate data rights proposal is accepted in accordance with 9.3.4.c, clause 9-6 (see subparagraph a.1 above) must be appropriately modified by special provision to reflect the data rights being acquired. 9.3.5.c Computer Software. When computer software is to be generated or produced under a contract, the contracting officer must include Clause 9-9, Rights in Computer Software, in the contract in addition to the appropriate clauses prescribed in paragraphs a and b above. 9.3.6 Acquisition of Rights in Computer Software 9.3.6.a Covered Contracts. This part 9.3.6 applies to contracts under which computer software (computer programs, computer data bases, and their documentation) will be generated, developed, or modified using Postal Service funds and those for specific acquisition of computer software developed at private expense. 9.3.6.b Computer Software Developed at Private Expense 1. If restricted computer software will be delivered, Clause 9-9, Rights in Computer Software, must be used. Unless otherwise agreed to, the restricted rights obtained by the Postal Service are as set forth in the Restricted Rights Notice contained in that clause. Restricted computer software may not be used or reproduced by or disclosed outside the Postal Service, except to the extent provided for by the contract. The restricted computer software may be: (a) Used or copied for use in or with the computer or computers for which it was acquired, including use at any Postal Service installation to which the computer or computers may be transferred; (b) Used or copied for use in or with a backup computer if any computer for which it was acquired becomes inoperative; (c) Reproduced for safekeeping (archives) or backup purposes; (d) Modified, adapted, or combined with other computer software, provided the modified, adapted, or combined portions of any derivative software incorporating restricted computer software are made subject to the same restricted rights, unless otherwise agreed to by the parties; (e) Disclosed to and reproduced for use by support service contractors, subject to the same restriction under which the Postal Service acquired the software; and (f) Used in accordance with b.1(a) through (e) above, without disclosure prohibitions, if the computer software is published copyrighted computer software. 2. The restricted rights set forth in subparagraph b.1 above are the minimum rights the Postal Service normally obtains in restricted computer software and automatically apply when it is provided under the Restricted Rights Notice of Clause 9-9, Rights in Computer Software. Either greater or lesser rights, consistent with the purposes and needs for which the software is to be procured, may be specified by the contracting officer in a particular contract. For example, consideration should be given to any networking needs or any requirements for use of the computer software from remote terminals. Also, in addressing such needs, the scope of the restricted rights may be different for the documentation accompanying the computer software than for the programs and data bases. Any additions to, or limitations on, the restricted rights set forth in the Restricted Rights Notice must be expressly stated in the contract or in a collateral agreement incorporated in the contract, and the notice modified accordingly. 3. When needed to determine whether restricted computer software must be delivered by a contractor, Provision 9-2, Representation of Rights in Data, may be included in any solicitation containing Clause 9-9, Rights in Computer Software. This representation requests that an offeror state, to the extent feasible, whether restricted computer software is likely to be used in meeting the contract requirements. 9.3.6.c Marking of Computer Software. Restricted computer software delivered to the Postal Service must contain the legend prescribed by paragraph g of Clause 9-9, Rights in Computer Software, if the contractor desires to protect the restricted computer software. All markings (notices, legends, identifications) concerning restrictions on the use, duplication, or disclosure of computer software required or authorized by the terms of the contract under which delivery is made must be in human-readable form that can be readily and visually perceived, and in addition may be in machine-readable form as appropriate and feasible under the circumstances. These markings must be affixed by the contractor to the computer software before its delivery to the Postal Service. 9.3.6.d Clauses 1. Contracts that call for the delivery of computer software and contracts that call for development, generation, or modification of computer software (whether or not delivery of the computer software is required) must include Clause 9-9, Rights in Computer Software, and Clause 9-7, Withholding Payment (Technical Data and Computer Software). 2. If technical data, as well as computer software, are to be delivered, Clause 9-6, Rights in Technical Data, must also be included in the contract. 3. If the computer software deliverables are not fixed at the time of contract award, Clause 9-8, Additional Data Requirements, must be included in the contract. 9.3.7 Special Works 9.3.7.a Covered Contracts. This part applies to all contracts for special works if the Postal Service specially commissions the works and requires ownership and control of them. Examples of such contracts may include those for (1) the production of audiovisual works (including motion pictures and television recordings) or the preparation of motion picture scripts, musical compositions, sound tracks, translations, adaptions, and the like; (2) histories of the Postal Service; (3) works pertaining to recruiting, morale, training, or career guidance; (4) surveys of facilities; (5) works pertaining to the instruction or guidance of Postal Service employees in the discharge of their official duties; or (6) production of technical reports, studies, or similar documents not otherwise covered by paragraph 9.3.2. 9.3.7.b Restrictions on Release 1. Because the release of works covered by this part 9.3.7 by the contractor preparing the works would prejudice the Postal Service's activities, release must be restricted. 2. Contracts for items such as audiovisual works and sound recordings may include limitations in connection with music licenses, talent releases, and the like that are consistent with the purpose for which the works are acquired. 9.3.7.c Assignment of Copyrights. The contract must enable the Postal Service to obtain ownership of the copyright in the works described above. This is to be accomplished by contract provisions requiring the contractor to assign copyrights to the Postal Service in those works in which the Postal Service would not otherwise be considered the author under section 201(b) of Title 17, United States Code. 9.3.7.d Indemnification. Preparation of certain types of copyright works requires talent releases and other permission from artists, models, and - in some cases - other copyright owners. Therefore, an indemnification for any liability that may be incurred by the Postal Service for any violation of proprietary rights, including copyrights, or right of privacy or publicity, or for libelous or other unlawful matter arising out of or contained in any production or compilation of data, should be acquired from the contractor. 9.3.7.e Clauses. Clause 9-10, Rights in Data - Special Works, must be included in covered contracts. When appropriate, Clause 9-7, Withholding Payment (Technical Data and Computer Software), may also be included in the contract. 9.3.8 Existing Works 9.3.8.a Covered Contracts. Contracts for the procurement of existing works (other than computer programs and audiovisual works), such as books and periodicals, generally require no specific contract coverage for data rights. When reproduction rights are required in such works, specific contract coverage is needed. 9.3.8.b Clause. If reproduction rights are to be obtained for existing works (other than computer programs and audiovisual works), Clause 9-11, Rights in Data - Existing Works, must be included in the contract. 9.3.9 Royalties 9.3.9.a Reporting Royalties 1. Provision 9-4, Royalty Report, must be included in any solicitation that may result in other than a firm-fixed-price contract. 2. The contracting officer must forward any information received regarding royalties to the General Counsel. 3. The General Counsel must advise the contracting officer concerning any royalties that are excessive or that the Postal Service is not obligated to pay. 9.3.9.b Refunds of Royalties. When the price of a contract described in subparagraph a.1 above is based in part on a contingency for patent royalties that may not have to be paid by the contractor, Clause 9-12, Refund of Royalties, must be included in the contract. 9.3.10 Professional Services Contracts for professional consultant, research, technical development or other specialized support services may require access to Postal Service information. The products of such contracts may not otherwise be covered by the policies of 9.2 or 9.3, and generally have unknown long-term implications and therefore require broad rights in intellectual property to flow to the Postal Service. Clause 9-13, Intellectual Property Rights, must be included in such contracts. Chapter 10 Socioeconomic Policies Section 1 Small, Minority-owned and Woman-owned Businesses 10.1.1 General 10.1.1.a Policy 10.1.1.b Definitions 10.1.2 Requirements 10.1.3 Identification of Sources 10.1.4 Contracting with Minority-owned and Woman-owned Businesses 10.1.4.a Identification of Suitable Purchases 10.1.4.b Postal Estimate 10.1.4.c Negotiation and Award 10.1.5 Subcontracting with Small, Minority-owned and Woman-owned Businesses 10.1.5.a General 10.1.5.b Solicitation Provision 10.1.5.c Clauses 10.1.5.d Reports Section 2 Labor Policies 10.2.1 Basic Labor Policies 10.2.2 Convict Labor 10.2.2.a Policy 10.2.2.b Clause 10.2.3 Contract Work Hours and Safety Standards Act 10.2.3.a Requirement 10.2.3.b Exemptions 10.2.3.c Clause 10.2.3.d Enforcement 10.2.4 Construction Contracts and Lease Agreements 10.2.4.a Definitions 10.2.4.b Labor Standards for Construction 10.2.4.c Labor Standards for Leases 10.2.4.d Clauses 10.2.4.e Administration and Enforcement 10.2.5 Walsh-Healey Public Contracts Act 10.2.5.a General 10.2.5.b Requirement 10.2.5.c Solicitation Provision 10.2.5.d Clause 10.2.5.e Exemptions 10.2.5.f Definitions 10.2.5.g Agents. 10.2.5.h Determining Eligibility of Offerors 10.2.5.i Protests 10.2.5.j Other Responsibilities 10.2.5.k Exceptions to Required Stipulations 10.2.6 Fair Labor Standards Act of 1938 10.2.6.a General 10.2.6.b Inquiries About the Act 10.2.7 Equal Employment Opportunity 10.2.7.a General 10.2.7.b Exempt Contracts 10.2.7.c Preaward Compliance Reviews 10.2.7.d Affirmative Action Programs 10.2.7.e Poster 10.2.7.f Inquiries 10.2.7.g Complaints 10.2.7.h Enforcement 10.2.7.i Solicitation Provisions 10.2.7.j Clauses 10.2.8 Workshops for People who are Blind or Severely Disabled 10.2.9 Blind Persons' Priority for Food Vending Services 10.2.10 Service Contract Act 10.2.10.a General 10.2.10.b Exemptions 10.2.10.c Clauses 10.2.10.d Notice of Intent to Make a Service Contract 10.2.10.e Minimum Wage Determinations 10.2.10.f Notice of Award 10.2.10.g Department of Labor Poster 10.2.10.h Inquiries Concerning the Act 10.2.10.i Withholding Contract Payments and Contract Termination 10.2.10.j List of Violators 10.2.11 Employment of the Handicapped 10.2.11.a Policy 10.2.11.b Applicability 10.2.11.c Department of Labor Notices 10.2.11.d Collective Bargaining Agreements 10.2.11.e Complaints 10.2.11.f Department of Labor Sanctions 10.2.12 Veterans 10.2.12.a Requirement 10.2.12.b Applicability 10.2.12.c Department of Labor Notices 10.2.12.d Complaints 10.2.12.e Department of Labor Sanctions Section 3 Buy American Policy 10.3.1 Policy 10.3.2 Supplies 10.3.2.a Applicability 10.3.2.b Definitions 10.3.2.c Requirement 10.3.2.d Proposal Evaluation 10.3.2.e Price Comparison 10.3.2.f Solicitation Provision 10.3.2.g Clause 10.3.3 Construction Materials 10.3.3.a Applicability 10.3.3.b Definitions 10.3.3.c Requirement 10.3.3.d Solicitation Provision 10.3.3.e Clause 10.3.4 List of Excepted Articles and Materials 10.3.4.a Crude oil 10.3.4.b Finished products 10.3.4.c Unfinished oils Section 4 Clean Air Act and Clean Water Act 10.4.1 General 10.4.2 Requirements Section 5 Drug-Free Workplace 10.5.1 General 10.5.1.a Policy 10.5.1.b Definitions 10.5.2 Applicability 10.5.3 Exceptions 10.5.4 Requirements 10.5.5 Sanctions 10.5.5.a Suspension of Payments 10.5.5.b Termination, Suspension and Debarment Chapter 10 Socioeconomic Policies Section 1 Small, Minority-owned and Woman-owned Businesses 10.1.1 General 10.1.1.a Policy. It is Postal Service policy to encourage the participation of small, minority-owned and woman-owned businesses in the USPS purchasing program 10.1.1.b Definitions 1. Small Business. A business, including an affiliate, that is independently owned and operated, is not dominant in producing or performing the supplies or services being purchased, and has no more than 500 employees, unless a different size standard has been established by the Small Business Administration (see 13 CFR 121, particularly for different size standards for airline, railroad, and construction companies). For subcontracts of $50,000 or less, a subcontractor having no more than 500 employees qualifies as a small business without regard to other factors. 2. Affiliates. Businesses connected by the fact that one controls or has the power to control the other, or a third party controls or has the power to control both. Factors such as common ownership, common management, and contractual relationships must be considered. Franchise agreements are not considered evidence of affiliation if the franchisee has a right to profit in proportion to its ownership and bears the risk of loss or failure. 3. Dominant. Being a controlling or major influence in a market in which a number of businesses are primarily engaged. Factors such as business volume; number of employees; financial resources; competitiveness; ownership or control of materials, processes, patents, and license agreements; facilities; sales territory; and nature of the business must be considered. 4. Minority-owned business. A concern that is at least 51 percent owned by, and whose management and daily business operations are controlled by, one or more members of a socially and economically disadvantaged minority group, namely U.S. citizens who are Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, or Asian-Indian Americans. (Native Americans are American Indians, Eskimos, Aleuts, and Native Hawaiians. Asian-Pacific Americans are U.S. citizens whose origins are Japanese, Chinese, Filipino, Vietnamese, Korean, Samoan, Laotian, Kampuchean, Taiwanese or in the U.S. Trust Territories of the Pacific Islands. Asian-Indian Americans are U.S. citizens whose origins are in the Indian subcontinent.) 5. Woman-owned business. A concern at least 51 percent of which is owned by a woman (or women) who is a U.S. citizen, controls the firm by exercising the power to make policy decisions, and operates the business by being actively involved in day-to-day management. 6. Number of employees. Average employment (including domestic and foreign affiliates), based on the number of people employed (whether full-time, part-time, or temporary), during each pay period of the preceding 12 months, or, if the business has been in existence less than 12 months, during each pay period of its existence. 10.1.2 Requirements Contracting officers must: 10.1.2.a Provide an opportunity for small, minority-owned and woman-owned businesses to compete, by including them on mailing lists, allowing reasonable proposal preparation time, and establishing realistic delivery schedules; and 10.1.2.b Encourage prime contractors to subcontract with small businesses. 10.1.3 Identification of Sources Market research (see 2.1.2) must be performed to identify small, minority-owned and woman-owned businesses for solicitation mailing lists and other source files. Contracting officers may also ask the Small Business Administration and the Department of Commerce's Minority Business Development Agency to identify small, minority-owned and woman-owned business sources for a specific procurement, and to provide information on their qualifications and capabilities. 10.1.4 Contracting with Minority-owned and Woman-owned Businesses To help minority-owned and woman-owned businesses enter and maintain themselves in the marketplace, purchasing offices must establish procedures to accomplish the following: 10.1.4.a Identification of Suitable Purchases. Contracting officers should review and identify those requisitions suitable for competition among minority-owned and woman-owned businesses. One indication that a requisition is suitable is previous success in obtaining the supplies or services from minority-owned businesses or woman-owned businesses. Selection of requisitions must be consistent with purchasing objectives, and no quotas may be established. 10.1.4.b Postal Estimate. When a requisition is selected, the contracting officer must establish a Postal Service price estimate, based on the price of the last competitive purchase of identical supplies or services, adjusted for any known or projected variation in the cost of labor and materials. If there has been no competitive purchase, the estimate must be based on the lowest price that might reasonably be expected from any efficient, experienced firm with proven capability, without taking into account any factors unique to minority-owned and woman-owned businesses. 10.1.4.c Negotiation and Award. Contracting officers must solicit proposals from all minority-owned and woman-owned businesses found to be capable of performing the contract, using the procedures in 4.2 or 4.3. If only one minority-owned or woman-owned business is known to be capable, the procedures in 4.4 apply. The negotiated price may not exceed fair market value, taking into account the Postal Service estimate and other methods of cost and price analysis (see 5.3.3). 10.1.5 Subcontracting with Small, Minority-owned and Woman-owned Businesses 10.1.5.a General. To realize the benefits of a board supply base, contracting officers must require contractors to encourage the participation of small, minority-owned and woman-owned businesses as subcontractors to the maximum extent consistent with efficient contract performance. Small businesses are exempt from the submission of formal subcontracting plans as required in Provision 10-1, Notice of Small, Minority-owned and Woman-owned Subcontracting Requirements and Clause 10-2, Small, Minority-owned and Woman-owned Subcontracting Requirements. 10.1.5.b Solicitation Provision. For contracts estimated to exceed $1,000,000 ($500,000 for construction), solicitations must include Provision 10-1, Notice of Small, Minority-owned and Woman-owned Business Subcontracting Requirements. 10.1.5.c Clauses 1. Clause 10-1, Participation of Small, Minority-owned and Woman-owned Business, must be included in all contracts except purchases made using simplified procedures (see 4.3) and contracts for professional services. 2. Contracts over $1,000,000 ($500,000 for construction) must include Clause 10-2, Small, Minority-owned and Woman-owned Business Subcontracting Requirements. 10.1.5.d Reports. Purchasing offices must compile and report, quarterly, on the number and dollar value of subcontracts and purchase orders placed by postal contractors with small, minority-owned and woman-owned businesses. Reports are to be forwarded, through channel, to the department's representative on the Socioeconomic Committee. Section 2 Labor Policies 10.2.1 Basic Labor Policies Purchasing offices must: 10.2.1.a Maintain good relations with industry and labor so that Postal Service purchasing requirements may be met without delay; 10.2.1.b Be impartial in any dispute between contractor management and labor, and not try to conciliate, mediate, or arbitrate a labor dispute; 10.2.1.c Cooperate fully with the Department of Labor's investigation and enforcement activities; and 10.2.1.d Cooperate fully with federal and state agencies responsible for enforcing requirements in such areas as safety, health and sanitation, work hours and minimum wages, equal employment opportunity, and child and convict labor. 10.2.2 Convict Labor 10.2.2.a Policy. Under 39 U.S.C. 2201, the Postal Service may not contract for supplies to be manufactured by convict labor, except for purchase from Federal Prison Industries, Inc. (see 3.1.5). The Postal Service may purchase supplies from firms employing persons on parole or probation under the conditions set forth in Executive Order 11755, December 29, 1973, which the Postal Service has elected to follow. 10.2.2.b Clause. Except for purchases from Federal Prison Industries, Inc., all contracts involving the employment of labor must contain Clause 10-3, Convict Labor. 10.2.3 Contract Work Hours and Safety Standards Act 10.2.3.a Requirement. The Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333) requires that certain contracts contain a clause specifying that no laborer or mechanic doing any work under the contract may be required or permitted to work more than 40 hours in any workweek unless paid at least one and one-half times the basic rate of pay for all overtime hours. A violation makes the contractor liable for liquidated damages. Lease agreements, being subject to Reorganization Plan No. 14 of 1950 under 39 U.S.C. 410(d), are subject to the safety standards of the Act in addition to the overtime pay requirements. 10.2.3.b Exemptions. The Secretary of Labor is responsible for enforcement of the Act and may permit variations and exemptions from the Act's requirements when necessary in the public interest or to prevent injustice or undue hardship (29 CFR 5.14). 10.2.3.c Clause. Clause 10-4, Contract Work Hours and Safety Standards Act - Overtime Compensation, must be included in all contracts, lease agreements, and ordering agreements that may involve the employment of laborers or mechanics, except: 1. Construction contracts and lease agreements involving alterations or improvements of $2,000 or less, and other contracts and lease agreements of $2, 500 or less; 2. Indefinite delivery contracts and ordering agreements, if the total amount of all orders placed for one year after the effective date will not exceed the limits in subparagraph c.1 above: 3. Contracts for supplies usually purchased in the open market or requiring labor merely incidental to the sale; 4. Contracts for work subject solely to the Walsh-Healey Public Contracts Act (see 10.2.5); 5. Contracts for transportation by land, air, or water; and 6. Any other contracts exempt under regulations of the Secretary of Labor (see 29 CFR 5.15). 10.2.3.d Enforcement. Investigation and enforcement will be in accordance with 10.2.4.e.6 and 7. 10.2.4 Construction Contracts and Lease Agreements 10.2.4.a Definitions 1. Construction. Defined in 11.5.1.a. For purposes of this part 10.2.4, this definition: (a) Applies only if the work is performed at a specified work site, so that wage rates can be determined for the locality; (b) Does not apply to construction so closely related to research, experiment, and development that it cannot be performed separately, or is itself the subject of research, experiment, or development; (c) Does not apply to manufacturing or furnishing equipment, components, or other materials, except manufacturing or fabricating construction materials and components on site by a construction contractor or subcontractor under a contract that otherwise meets the definition; and (d) Does not apply to contracts solely for dismantling, demolishing, or removing improvements, unless further work that will result in the construction, alteration, or repair of a building or work at that location is contemplated. 2. Laborers and mechanics. People who work predominantly with their hands or with construction tools and equipment. In this part, the term includes working foremen, apprentices, trainees, helpers, watchmen, guards, firefighters, fireguards, cooks, and storekeepers. 3. Work site. The place where a construction contract is performed, and adjacent or nearby sites of job headquarters, storage yards, prefabrication or assembly yards, quarries or borrow pits, batch plants, and similar facilities set up to serve the contract operation exclusively. Transportation of materials, equipment, or personnel to and from the construction site by employees of construction contractors or subcontractors is included, but transportation by common carriers, material suppliers, or manufacturers is not. 10.2.4.b Labor Standards for Construction 1. Davis-Bacon Act. The Davis-Bacon Act (40 U.S.C. 276a et seq.) requires that construction contracts over $2,000 contain a provision setting the minimum wages to be paid to all classes of laborers and mechanics working on the work site. Minimum wage rates are determined by the Secretary of Labor on the basis of prevailing wage rates. 2. Copeland Act. The Copeland Anti-Kickback Act (18 U.S.C. 874 and 41 U.S.C. 276(c)) applies to any contract over $2,000 subject to the Davis-Bacon Act. The Copeland Act makes it unlawful to force laborers or mechanics to give up any part of their compensation except for permissible deductions such as taxes and union dues. 3. Contract Work Hours and Safety Standards Act. The overtime pay requirements of the Contract Work Hours and Safety Standards Act (see 10.2.3.a) apply to all construction contracts and lease agreements involving the employment of laborers and mechanics in construction work, with the exceptions described in 10.2.3.c. 4. Department of Labor Regulations. Regulations covering the administration and enforcement of these laws are published by the Department of Labor in 29 CFR 3 and 5. 5. Other Contracts Involving Construction. The labor standards and regulations described in subparagraphs b.1 through b.4 above do not apply to contracts for supplies, services, maintenance, research and development, or other nonconstruction requirements, unless the contracts also involve construction. The labor standards in this part apply whenever such a contract specifically requires substantial construction work, or a substantial amount of construction work will be necessary to meet the requirements, and the construction work is performed separately from the rest of the contract work. ("Substantial" refers to the type and quantity of construction, not merely its total value in relation to the contract price.) The contract must specifically identify the work covered by the labor standards. 10.2.4.c Labor Standards for Leases 1. Davis-Bacon Act. The Davis-Bacon Act requirements for minimum wages for laborers and mechanics (see subparagraph b.1 above) apply to any lease of, or agreement to lease, interior space netting more than 6,500 square feet. 2. Work Hours and Safety Standards (a) The Contract Work Hours and Safety Standards Act requirements for overtime pay apply to all leases except those described in 10.2.3.c. The Act's health and safety standards apply to all leases and agreements to lease, regardless of building size or rental amount, that involve the employment of laborers or mechanics in construction work. (b) These requirements apply not only to laborers and mechanics employed at the work site but to any laborers or mechanics working under the contract, including subcontractors furnishing supplies or materials if the work is performed directly on or adjacent to the work site or fabricated specifically for the project. 10.2.4.d Clauses 1. Construction Contracts. Construction contracts over $2,000 must include: (a) Clause 10-4, Contract Work Hours and Safety Standards Act - Overtime Compensation; and (b) Clause 10-5, Davis-Bacon Act. 2. Construction Contracts with States. If a construction contract over $2, 000 is with a state or a political subdivision of a state, the contract must include Clause 10-6, Compliance by States with Labor Standards. 3. Leases (a) All leases and agreements to lease involving construction work by laborers or mechanics must contain Clause 10-7, Contract Work Hours and Safety Standards Act - Safety Standards. (b) All leases and agreements to lease involving more than $2,000 of construction work by laborers or mechanics must contain Clause 10-4, Contract Work Hours and Safety Standards Act - Overtime Compensation. (c) All leases and agreements to lease interior space netting more than 6, 500 square feet and involving construction work over $2,000 must include Clause 10-5, Davis-Bacon Act. 10.2.4.e Administration and Enforcement 1. General. Contracting officers must make sure that contractors and lessors are fully informed of the labor standards provisions in their contracts and their responsibilities under those provisions. Unless it is clear that the contractor or lessor is already fully informed, the contractor or lessor must be informed by conference or letter as soon as possible after the contract is awarded. 2. Applicability. The following requirements apply to all contracts and leases containing the clauses prescribed in paragraph d above. 3. Wage Determinations (a) General Wage Determinations. Unlike project wage determinations, general wage decisions do not expire, but are modified or superseded to keep them current. They are available by subscription from the Department of Labor. A general wage determination may be requested for an area where none presently exists if a large number of contracts for a specific type of construction are expected in that area. (b) Project Wage Determinations. If no general wage determination is applicable to a project, the contracting officer must request a project wage determination from the local Regional Administrator, Department of Labor, using Standard Form 308, Request for Determination and Response to Request. (c) Time for Making Requests. Whenever possible, the contracting officer must request any needed wage determination in sufficient time to receive it for inclusion in the solicitation, normally 30 days before the date planned for issuance of the solicitation. (d) Incorporation by Amendment. If a wage determination cannot be obtained before issuing the solicitation, it may be incorporated in the solicitation by an amendment furnished to all offerors. If there is not enough time to issue an amendment before proposals are due, and the due date for proposals cannot be extended, the amendment must be a subject of discussions (see 4.2.5.g) and included in the request for best and final offers. (e) Limitations. Project wage determinations are effective for 120 days from the date of the determination. If a project wage determination will expire before a contract or lease agreement can be awarded, the contracting officer must request a new determination in time for it to be included in a solicitation amendment before proposals are due. (f) Extensions. The Department of Labor may extend the effective period of a wage determination that expired after proposals were due but before award. The request must be submitted to the Solicitor of Labor with a finding by the vice president of Facilities, that the wage determination expired unavoidably and an extension is necessary and proper in the public interest to prevent injustice or undue hardship or to avoid serious impairment in the conduct of Postal Service business. (g) Modifications. Any modification of a wage determination by the Department of Labor must be made part of the contract or lease agreement if received before award, using the procedures in (d) above. (h) Posting. The contracting officer must instruct the contractor to post a copy of the wage determination in a prominent place at the work site where it can easily be seen by the workers. (i) Additional Classifications. Any class of laborers or mechanics working under the contract but not listed in the wage determination must be classified or reclassified to conform to the wage determination. Whatever action is taken must be reported in the Department of Labor. If there is any disagreement about the proper classification or reclassification, the contracting officer must submit the question, with a recommendation, to the Secretary of Labor for final determination. 4. Subcontracts. The contracting officer must obtain a list of all subcontracts, with descriptions of the work to be done under each, to assist in the payroll review required under subparagraph e.5 below. 5. Payrolls and Compliance Statements (a) Submissions. Contractors, or lessors, and subcontractors must submit copies of weekly payrolls to the contracting officer within seven days after the payroll payment dates. They must also submit weekly compliance statements required by the Copeland Act regulations (see 29 CFR 3.3). (b) Examination. The contracting officer must examine the payrolls and statements to make sure the contractors, lessors, and subcontractors comply with contract, statutory, and regulatory requirements. (c) Retention. Payrolls and compliance statements must be retained for three years from the contract completion date and produced to the Department of Labor upon request. 6. Investigations (a) The contracting officer must make whatever investigations are necessary to ensure compliance with contract, statutory, and regulatory requirements. Contracts of six months or less must be investigated before final payment is made, if possible. Longer contracts and lease agreements must be investigated as often as necessary to ensure compliance. Investigations must include interviews with employees on a sampling basis. (b) Special detailed investigations must be made when there are complaints or other evidence of violations. Complaints must be given priority. (c) Written or oral statements made by an employee must be kept confidential and may not be disclosed to the employer without the employee's consent. 7. Enforcement Reports (a) If underpayments total less than $1,000, are not willful, and have been made good to the employees, the contracting officer must submit a factual summary report to the Department of Labor in accordance with 29 CFR 5.7(a)(1), unless the Department did not request any future compliance investigation. (b) If underpayments total $1,000 or more or are willful, the contracting officer must submit as soon as possible a detailed enforcement report to the Secretary of Labor through the Inspection Service. The report must include a statement of findings about the violations and information about restitution, payment deductions, and contract terminations, as well as the names and addresses of the workers, lessors, contractors, and subcontractors concerned. (c) If there is substantial evidence that violations are willful and violate the False Affidavits Act (18 U.S.C. 1001) or another criminal statute, the matter must be referred to the Inspection Service, the Attorney General, and the Secretary of Labor. 8. Semiannual Enforcement Reports. The VP, Facilities, must submit semiannual reports to the Secretary of Labor on compliance with and enforcement of labor standards and prevailing wage determinations. A copy of each report must be furnished to the Inspection Service. Reports for the period January 1-June 30 are due by July 31, and reports for the period July 1-December 31 are due by January 31. 9. Suspensions and Deductions of Contract Payments. If a contractor, lessor, or subcontractor fails or refuses to pay all or any part of the wages due workers, the contracting officer may suspend contract or rent payments in amounts equal to the unpaid wages and liquidated damages that may be due, until restitution has been made or deductions against payment vouchers are made as provided in this paragraph. If failure or refusal to pay continues or appears to be willful or there is failure or refusal to comply with other contract, statutory, or regulatory requirements, the contracting officer may suspend contract or rent payments until violations stop. If restitution is not made within a reasonable time or before final payment under the contract or lease agreement, the contracting officer must send the information service center a report on Standard Form 1093, Schedule of Withholdings Under the Davis-Bacon Act, and/or the Contract Work Hours and Safety Standards Act, stating the amounts to be withheld for underpayment of wages and liquidated damages. These amounts must be deducted from the payments made to the contractor or lessor and disposed of in accordance with the contracting officer's instructions. 10. Restitution. Contractors, lessors, or subcontractors may make restitution of amounts due workers at any time. If wages were underpaid, the contracting officer must ask the contractor to make restitution to the employees or to plans, funds, or programs for any type of fringe benefit listed in the wage determination. 11. Contract Termination (a) Construction Contracts. Whenever a contract is terminated for labor standards violations, the contracting officer must send a report to the Secretary of Labor and the Comptroller General. The report must give the name and address of the violating contractor or subcontractor; the name and address of the contractor or subcontractor which will complete the work; and the contract number, dollar amount, and description of work for the replacement contract. (b) Lease Agreements. A lease agreement may be terminated and the lessor, general contractor, or subcontractor declared ineligible under 29 CFR 5.6 for violating the Contract Work Hours and Safety Standards Act. However, a lease agreement may not be terminated for failure to pay prevailing wages. 12. Liquidated Damages. If the VP, P&M, finds that an assessment of liquidated damages for failure to pay overtime wages is incorrect, or that the failure to pay overtime wages was inadvertent, the VP may adjust the damages or release the contractor, lessor, or subcontractor from liability when the amount of damages is $100 or less. If the amount is over $100, the VP may recommend adjustment or relief to the Secretary of Labor (see 29 CFR 5.8). 10.2.5 Walsh-Healey Public Contracts Act 10.2.5.a General. The Walsh-Healey Public Contracts Act (41 U.S.C. 35-45) requires that certain contracts for the manufacture or furnishing of supplies must be with manufacturers or regular dealers in the supplies manufactured or used in performing the contract. The Act also establishes requirements pertaining to minimum wages, maximum hours, child labor, convict labor, and safe and sanitary working conditions. 10.2.5.b Requirement. All contracts for supplies over $10,000 (except those exempt under paragraph e below) must be with manufacturers or regular dealers, and must incorporate the Walsh-Healey Public Contracts Act requirements by reference. No contracting officer, contractor, or subcontractor may purchase quantities amounting to less than $10,000 to avoid compliance with the Act. 1. If a contract for $10,000 or less is modified to exceed $10,000, the Act applies. 2. If a contract that exceeds $10,000 is modified to $10,000 or less, the work performed after the modification is subject to the Act if both parties agreed to the modification. 3. The Act applies to indefinite delivery contracts and ordering agreements if the aggregate amount of all orders is expected to exceed $10,000 during the year following award. Indefinite delivery contracts and ordering agreements not initially subject to the Act become subject to the Act if orders will exceed $10, 000 during any year after the first year. Applicability must therefore be determined annually until the contracts or agreements become subject to the act. 10.2.5.c Solicitation Provision. All solicitations that will result in contracts subject to the Act (see paragraph b above) must include Provision 10-2, Regular Dealer/Manufacturer Representation. 10.2.5.d Clause. All contracts subject to the Act (see paragraph b above) must include Clause 10-8, Walsh-Healey Public Contracts Act. 10.2.5.e Exemptions. The following purchases are exempt from the Walsh-Healey Public Contracts Act: 1. Noncompetitive purchases justified by unusual or compelling urgency (when delay would seriously harm the Postal Service). 2. Perishables, including dairy, livestock, and nursery products. 3. Purchases of agricultural or farm products processed for first sale by the original producers. 10.2.5.f Definitions. The definitions below apply to terms in the Walsh-Healey Public Contracts Act. 1. Manufacturer. A person who owns, operates, or maintains a factory or establishment that produces on the premises the type of supplies described in the contract specifications. An offeror qualifies as a manufacturer if it shows before award that it is: (a) An established manufacturer of the type of item being purchased; or (b) New in the field but has arranged for all the space, equipment, and personnel necessary to perform the contract. If a firm has written, binding commitments for these before award, it may not be barred from award merely because it has not yet done any manufacturing. 2. Regular dealer. A person who owns, operates, or maintains a store, warehouse, or other establishment in which supplies such as described by the contract specifications are bought, kept in stock, and sold to the public in the normal course of business. Exceptions are in (b) and (c) below. 3. An offeror qualifies as a regular dealer if it shows before award that it meets all of the following requirements: (a) It has an establishment or leased or assigned space in which it regularly keeps a stock of supplies in which it claims to be a dealer (if the space is in a public warehouse, it must be maintained on a continuing - not a demand - basis). (1) The stock is a true inventory from which sales are made. This requirement is not satisfied by a stock of samples or display items, supplies left over from past orders, stock unrelated to the supplies offered, or stock kept primarily for token compliance with the Act from which few, if any, sales are made. (2) The supplies stocked are the same type as those to be supplied under the contract. To be the same type, the items must be either identical or supplies for which dealers in the same line of business would be an obvious source. (3) Recurring sales are made regularly from the stock. They cannot be an occasional exception to the usual business operations. The proportion of sales from stock that will satisfy this requirement depends on the nature of the business. (4) Sales are made regularly in the usual course of business to the public (not federal, state, or local government agencies). This requirement is not satisfied if the contractor merely seeks to sell to the public but has not yet made sales. If government agencies are the sole purchasers, the offeror does not qualify as a regular dealer. The number and amount of sales that must be made to the public will vary with the amount of total sales and nature of the business. (5) The business is an established and going concern. It is insufficient to show that arrangements have been made to set up such a business. (b) For certain products (lumber and lumber products, machine tools, hay, grain, feed or straw, raw cotton, green coffee, petroleum, agriculture liming materials, tea, and raw or unmanufactured cotton linters), there are different definitions for "regular dealer." The qualifications are in the regulations of the Secretary of Labor (41 CFR 50-201.101(b)). (c) Coal dealers are exempt from the regular dealer requirements if they meet the terms and conditions set by the Secretary of Labor in 41 CFR 50-201. 604(a). If these terms and conditions are not met, coal dealers must meet the requirements in subparagraph f.2 above. 10.2.5.g Agents. A manufacturer or regular dealer may offer, negotiate, or contract through an agent if the agency is disclosed and the agent acts and contracts in the name of the principal (see 1.9.3). 10.2.5.h Determining Eligibility of Offerors 1. The initial responsibility for applying the eligibility requirements rests with the contracting officer. The Department of Labor does not conduct preaward investigations or make final determinations until the contracting officer has determined eligibility or ineligibility. 2. If the contracting officer has determined that an apparently successful offeror is ineligible, the contracting officer must notify the offeror promptly in writing, informing the offeror: (a) Of the reason for the determination; (b) That to protest, the offeror may submit evidence of eligibility to the contracting officer; and (c) That if, after reviewing the evidence submitted by the offeror, the contracting officer has not changed position, the protest, together with all pertinent material, will be forwarded to the Administrator, Wage and Hour Division, Department of Labor, for a final determination. 3. If an offeror's protest is forwarded to the Department of Labor for eligibility review, the contracting officer must comply with i.2(c) through (f) below. 10.2.5.i Protests 1. If an apparently successful offeror protests the contracting officer's determination of ineligibility in response to the notification given (see subparagraph h.2 above), and if the contracting officer does not change position after reviewing the evidence submitted by the protester, the contracting officer must forward the protest to the Administrator, Wage and Hour Division, for a final determination. 2. When an offeror challenges the eligibility of the apparently successful offeror before award: (a) The contracting officer must notify the protester promptly in writing that: (1) The protester may submit evidence concerning the ineligibility to the contracting officer; and (2) After reviewing the evidence, the contracting officer will make a decision and, if unfavorable to the protester, forward the protest, along with all pertinent material, to the Administrator, Wage and Hour Division, for a final determination. (b) The contracting officer must notify the apparently successful offeror promptly in writing that the offeror's eligibility under the Walsh-Healey Public Contracts Act has been challenged and that: (1) The offeror may submit evidence concerning the matter to the contracting officer; and (2) After reviewing the evidence, the contracting officer will make a decision and, if unfavorable to the protester, forward the protest, along with all pertinent material, to the Administrator, Wage and Hour Division, for a final determination. (c) The contracting officer must notify offerors that might become eligible for award, when an award is to be withheld under (d) below, and ask them to extend their proposal acceptance period if necessary. (d) If the contracting officer forwards a case to the Department of Labor for eligibility review, award must be withheld until the contracting officer receives a final determination from the Department of Labor or the contracting officer determines that award must be made because: (1) The supplies are urgently required; (2) Delivery or performance will be unduly delayed by failure to make the award promptly; or (3) A prompt award will be advantageous to the Postal Service. (e) If the contracting officer decides to proceed with award after forwarding a case to the Department of Labor, the contracting officer must notify the protester and any other concerned parties in writing. (f) If an award is made under (d) above, the contracting officer must explain in the contract file the need for making an award before receiving the Department of Labor's determination. 3. Protests received after award must be forwarded to the Department of Labor if the contract has not been completed. The contracting officer must notify the protester that this has been done. If the contract has been completed, the protester must be notified that no action will be taken on the protest. 10.2.5.j Other Responsibilities. When a contract subject to the Act is awarded, the contracting officer, under the regulations or instructions issued by the Secretary of Labor must: 1. Give the contractor a Department of Labor combination letter and poster (WH Publication 1313) explaining the Walsh-Healey Public Contracts Act; and 2. Report any violation of the representations or stipulations required by the Walsh-Healey Public Contracts Act to the Secretary of Labor through the Inspection Service. 10.2.5.k Exceptions to Required Stipulations. The Secretary of Labor may allow exceptions to the requirement that the representations and stipulations of the Act be included in contracts. The contracting officer must submit requests for exceptions to the Administrator, Wage and Hour Division, Department of Labor, through the Manager, Policies, Planning, and Diversity. 10.2.6 Fair Labor Standards Act of 1938 10.2.6.a General. The Fair Labor Standards Act (29 U.S.C. 201-219) provides for minimum wages and maximum workhours and a Wage and Hour Division in the Department of Labor to interpret and enforce the Act (including investigating and inspecting General contractors). It also prohibits oppressive child labor. The Act applies to all employees (with some exceptions) engaged in interstate or foreign commerce, the production of supplies for such commerce, or any closely related process or occupation essential to such production. 10.2.6.b Inquiries About the Act. Contractors or their employees who inquire concerning the applicability or interpretation of the Act must be advised that rulings on it fall under the jurisdiction of the Department of Labor and must be referred to the Regional Administrator, Wage and Hour Division, Department of Labor. 10.2.7 Equal Employment Opportunity 10.2.7.a General 1. Executive Order (EO) 11246 prohibits any discrimination in employment by government contractors and subcontractors based on race, color, religion, sex, or national origin. The Executive Order sets forth a clause for inclusion in all nonexempt government contracts and subcontracts (Clause 10-9, Equal Opportunity). 2. The Secretary of Labor is responsible for issuing regulations implementing EO 11246. These regulations are in 41 CFR 60. The Secretary has delegated to the Director, Office of Federal Contract Compliance Programs (OFCCP), the authority and responsibility to carry out the program. 3. No contract (or contract modification involving new procurement) may be entered into, and no subcontract approved, with a contractor or subcontractor found ineligible by the Director, OFCCP, for reasons of noncompliance with EO 11246. 4. Contracting officers and contractors may not contract for supplies and services in a way designed to avoid the requirements of EO 11246. 5. Contractor disputes related to compliance with EO 11246 must be handled according to the regulations of the Secretary of Labor (see 41 CFR 60-1.1). 10.2.7.b Exempt Contracts 1. Transactions of $10,000 or Less (a) Contracts and subcontracts of $10,000 or less are exempt from the requirements of EO 11246 and Clause 10-9, Equal Opportunity, unless the aggregate amount of all contracts or subcontracts awarded to the contractor or subcontractor in any 12-month period will exceed $10,000. (However, government bills of lading, contracts with depositories of Postal Service funds, and contracts with financial institutions that are issuing and paying agents for U.S. savings bonds and savings notes are not exempt regardless of amount). (b) Indefinite delivery contracts and ordering agreements are exempt only when the amount to be ordered in any year under the contract will not exceed $10, 000. The contracting officer must determine this at the time of award for the first year, and annually for each succeeding year. Whenever a single order exceeds $10,000, Clause 10-9, Equal Opportunity, applies. Once clause 10-9 applies, it continues in effect for the duration of the contract or ordering agreement, regardless of the amounts ordered or expected to be ordered. 2. Contracts with State or Local Governments. If a contract is with a state or local government, the agencies, instrumentalities, or subdivision that are not involved in the contract work do not fall under the requirements of EO 11246. 3. Contracts with Certain Educational Institutions. It is not a violation of EO 11246 for an educational institution to employ members of a particular religion if the institution is owned, supported, controlled, or managed (in whole or substantial part) by a religious group, or if the curriculum propagates a particular religion. 4. Work On or Near Indian Reservations. It is not a violation of EO 11246 for a contractor to announce publicly a preference for employment of American Indians living on or near an Indian reservation. "Near" includes the area within which a person could commute daily. Contractors extending such a preference must not, however, discriminate among Indians on the basis of religion, sex, or tribe. Using such a preference does not exclude a contractor from complying with the Executive Order. 5. Contracts Exempted by the VP. The responsible VP may determine that a contract is essential and must be awarded without complying with one or more of the requirements of EO 11246 in the interest of the Postal Service. 6. Contracts Exempted by the Director, OFCCP. (a) The Director, OFCCP, may exempt the Postal Service from having to include one or more of the requirements of EO 11246 in any contract when required by special circumstances in the national interest. The Director may also exempt groups or categories of contracts when it is not feasible to act upon each request individually or when group exemptions are more convenient. (b) The Director, OFCCP, may exempt any facilities of a contractor that are totally separate and distinct from work related to the contract when the exemption will not interfere with the effectiveness of EO 11246. (c) Contracting officers may request exemptions by submitting a justification to the Director, OFCCP, through the responsible VP. (d) The Director, OFCCP, may withdraw an exemption for a specific contract or group of contracts. Such withdrawal does not apply to contracts awarded before withdrawal, or to competitive contracts when the withdrawal is made less than ten days before the date set for receipt of proposals. 10.2.7.c Preaward Compliance Reviews 1. Before awarding any contract of $1,000,000 or more (excluding construction contracts and contracts exempt under paragraph b above), the contracting officer must request the appropriate OFCCP regional office to conduct a compliance review of the contractor's employment practices, and those of all known first-tier subcontractors with subcontracts of $1,000,000 or more, except when a compliance review has been conducted within 12 months before award). This requirement applies to a modification of an existing contract that increases its value to $1,000,000 or more, a contract modification adding new procurement of $1,000,000 or more, a letter contract, and an indefinite delivery contract or ordering agreement under which orders are expected to aggregate $1, 000,000 or more. 2. The contracting officer must include the following information in the preaward request: name and address of prospective contractor or subcontractor; telephone number; anticipated award date; information about previous government contracts or subcontracts held; place of performance; and the estimated dollar amount of the contract or subcontract. Whenever possible, preaward review requests must be submitted at least 30 days before the anticipated award date. Oral requests must be confirmed in writing. 3. If the OFCCP has not made a final preaward determination within 30 days from submission of the request, the contracting officer must withhold award of the contract for an additional 15 days, or until clearance is received, whichever occurs first. If the additional 15 days expire, and the OFCCP has neither found the contractor to be in compliance nor made a final written determination declaring the contractor ineligible for reasons of noncompliance, the award may be made. The contracting officer must notify the OFCCP regional office of the award. 4. These procedures do not apply when the responsible VP finds that the procedures would delay an urgent or critical award or delay an award beyond the time specified for acceptance of a proposal. In such cases, the contracting officer must inform the Director, OFCCP, requesting a postaward review. 10.2.7.d Affirmative Action Programs 1. Nonconstruction. Except for contracts exempt under paragraph b above, each nonconstruction prime contractor and each subcontractor with 50 or more employees and (a) a contract or subcontract of $50,000 or more or (b) government bills of lading that in any 12-month period, total, or can reasonably be expected to total, $50,000 or more, is required to develop a written affirmative action program for each of its establishments (see 41 CFR 60-1.40). 2. Construction (a) Except for contracts exempt under paragraph b above, construction contractors are required to meet affirmative action requirements that apply to covered geographical areas or projects, and the applicable requirements of 41 CFR 60-1 and 60-4. (b) A contracting officer contemplating a construction project over $10,000 within a geographic area not known to be covered by specific affirmative action goals must request the most current information from the OFCCP regional office before issuing the solicitation. (c) Contracting officers must give written notice to the OFCCP regional office within ten days after award of a contract subject to these requirements. 10.2.7.e Poster. The contracting officer must supply appropriate quantities of Poster OFCCP-1420, Equal Opportunity is the Law, to contractors subject to EO 11246. The poster is available from the General Services Administration and contains text in both English and Spanish. The stock number is 7690-00-926-8988. 10.2.7.f Inquiries 1. Inquiries from contractors regarding status of compliance with EO 11246, or rights to appeal any of the enforcement actions in paragraph h below, must be referred to the OFCCP regional office. 2. Inquiries from labor unions regarding revision of a collective compliance with EO 11246 must be referred to the OFCCP regional office, and the complainant must be notified of the referral in writing. The complainant's name, the nature of the complaint, or the fact that the complaint was received may be disclosed only to the OFCCP. 10.2.7.g Complaints. Any complaint received by a contracting officer concerning compliance with EO 11246 must be referred to the OFCCP regional office, and the complainant must be notified of the referral in writing. The complainant's name, the nature of the complaint, or the fact that the complaint was received may be disclosed only to the OFCCP. 10.2.7.h Enforcement. At the written direction of the Director, OFCCP, one or more of the following actions, as well as administrative sanctions and penalties, may be exercised against contractors found to be in violation of EO 11246, the regulations of the Secretary of Labor, or the applicable contract clauses: 1. Publication of the names of the contractors or their unions. 2. Cancellation, termination, or suspension of the contractor's contracts or portion thereof. 3. Debarment from future contracts, or extensions or modifications of existing contracts, until the contractor has established and carried out personnel and employment policies in compliance with EO 11246 and the regulations of the Secretary of Labor. 4. Referral by the Director, OFCCP, of any matter arising under EO 11246 to the Department of Justice or to the Equal Employment Opportunity Commission (EEOC) for the institution of appropriate civil or criminal proceedings. 10.2.7.i Solicitation Provisions. Except when contracts will be exempt from EO 11246 under paragraph b above, solicitations must include the following provisions: 1. Other Than Construction (a) Provision 10-3, Certification of Nonsegregated Facilities. (b) Provision 10-4, Equal Opportunity Affirmative Action Program, when proposals of $50,000 or more are anticipated from offerors having 50 or more employees. (c) Provision 10-5, Preaward Equal Opportunity Compliance Review, when the amount of the contract is expected to be $1,000,000 or more. 2. Construction 3. Provision 10-3, Certification of Nonsegregated Facilities. (a) Provision 10-6, Notice of Requirement for Equal Opportunity Affirmative Action. 10.2.7.j Clauses. Contracts not exempt from EO 11246 under paragraph b above must include the following clauses: 1. Clause 10-9, Equal Opportunity. 2. Clause 10-10, Affirmative Action Compliance Requirements for Construction, in contracts for construction. 3. Clause 10-11, Equal Opportunity Preaward Clearance of Subcontracts, in contracts over $1,000,000. 10.2.8 Workshops for People who are Blind or Severely Disabled See section 3.1.3. 10.2.9 Blind Persons' Priority for Food Vending Services People who are blind and licensed under the provisions of the Randolph-Sheppard Act (20 U.S.C. 107 et seq.) or by a state agency must be given priority for the operation of food vending services in Postal Service buildings. See 32 CFR 601 and the relevant handbook. 10.2.10 Service Contract Act 10.2.10.a General. The Service Contract Act of 1965 (Public Law 89-286, 41 U.S.C. 351 et seq.) applies to any contract whose principal purpose is to provide services to be performed by service employees. 1. Employees working under a service contract must be paid no less than the minimum wage specified by the Fair Labor Standards Act of 1938, as amended (29 U. S.C. 201 et seq.). 2. Service contracts over $2,500 must contain the clauses required by paragraph e below concerning minimum wages, including fringe benefits; safe and sanitary working conditions; and employee notification of the compensation required under the Act. 3. Many types of services are covered by the Act, which attempts to cover contract workers who do not fall under the Davis-Bacon Act for construction and the Walsh-Healey Public Contracts Act for supplies. 29 CFR 4, Subpart C, and CFR 4.101 provide examples of coverage. The Act does not cover executive, administrative, or professional personnel. If services are only incidental to the performance of a contract, the Act does not apply. 4. The Act also applies to subcontracts under covered contracts, and prime contractors must include the Service Contract Act provisions in subcontracts for services. Except where indicated, the terms "contract" and "contractor" include "subcontracts" and "subcontractors" in this part 10.2.10. 5. The Secretary of Labor administers and enforces the Service Contract Act. 10.2.10.b Exemptions 1. The following contracts are exempt from the Service Contract Act, subject to subparagraph b.2 below: (a) Any contract for construction, alteration, or repair, including painting and decorating. (b) Any work covered by the Walsh-Healey Public Contracts Act (see 10.2.5). (c) Any contract for transporting freight or personnel by ship, plane, bus, truck, express, railway line, or oil or gas pipeline when published tariff rates are in effect or rates are covered by section 10721 of the Interstate Commerce Act. (d) Any service contract with a radio, telephone, telegraph, or cable company subject to the Communications Act of 1934. (e) Any contract for public utility services, including electric light and power, water, steam, and gas. (f) Any employment contract with individuals for direct services. (g) Any contract that is principally for contract postal units. (h) Contracts with common carriers for mail transportation by rail, air (except air-taxi routes), bus, or ocean vessel on regularly scheduled runs over established routes, when mail accounts for a small portion of the revenue. (i) Contracts for mail service with an individual owner/operator, when it is not believed that the contractor will hire service employees under the contract except for short vacations or unexpected contingencies or emergencies. (j) Contracts principally for the maintenance, calibration, or repair of: (1) Automated data processing equipment (including office information and word processing equipment); (2) Scientific and medical equipment involving sophisticated technology; or (3) Office or business machines not included under (1) above, when the services are performed by the manufacturer or supplier. 2. The exemptions in subparagraph b.1 above apply only when the contractor certifies that: 3. The equipment is commercially available, used regularly outside the government, and normally sold or traded by the contractor to the public in substantial quantities; (a) Prices are established catalog or market prices; and (b) Wages and fringe benefits paid under the contract are the same as the contractor pays employees servicing the same equipment for commercial customers. 10.2.10.c Clauses 1. Contracts Over $2,500. Clause 10-12, Service Contract Act, must be included in every contract for services covered by the Act that is over $2,500 or is modified to exceed $2,500. This includes indefinite-delivery contracts and ordering agreements when orders are expected to aggregate more than $2,500. 2. Contracts of $2,500 or Less. Every contract of $2,500 or less for services covered by the Act must include Clause 10-13, Service Contract Act - Short Form. 3. Multiyear Service Contracts and Service Contracts with Renewal Options. Except for mail transportation contracts, multiyear service contracts and service contracts with options to renew that include clause 10-12 or clause 10-13 must also include Clause 10-14, Fair Labor Standards Act and Service Contract Act - Price Adjustment. 10.2.10.d Notice of Intent to Make a Service Contract 1. The contracting officer must file a notice of intent to make a service contract with the Wage and Hour Division, Employment Standards Administration, Department of Labor, for any contract over $2,500 covered by the Act. Standard Form 98, Notice of Intention to Make a Service Contract, must be used. The notice must be accompanied by Standard Form 98a or a statement indicating the numbers and classes of service employees expected to perform the contract, or a statement that the number will not exceed five. 2. Whenever possible, notice of intent must be filed at least 60 days (30 days for unanticipated requirements) before a competitive solicitation is issued, noncompetitive negotiations begin, an option is exercised, a contract is extended, or the anniversary date of a multiyear contract. If it is not possible to file a notice before the 30-day limit, it must be filed as soon as possible, with an explanation of why it was not filed on time. 3. If the contract will be for substantially the same services as are being furnished at the same location by an incumbent contractor whose contract the proposed contract will succeed, and the wages and fringe benefits of the service employees are determined by a collective bargaining agreement, the agreement must be filed with the Standard Form 98, along with any related documents specifying wages and fringe benefits that will apply to the contract. If the contracting officer believes that the collective bargaining agreement was not the result of "arm's-length" negotiations, a statement of the facts leading the contracting officer to that conclusion must accompany the agreement and the Office of Special Wage Standards must be advised if the wages and fringe benefits vary substantially from those for similar services. 10.2.10.e Minimum Wage Determinations 1. If more than five service employees will be involved in performing work covered by the Service Contract Act, the contract may not be awarded without a Department of Labor determination of applicable minimum wages and fringe benefits, unless the determination will be incorporated in the contract after award. 2. The required determination will normally be issued by the Wage and Hour Division, Employment Standards Administration, in response to the notice of intent filed under paragraph d above, in sufficient time to be included as an attachment to the solicitation. 3. If the place of performance is unknown when the solicitation is issued, a wage determination need not be included in the original solicitation. Instead, when proposals are received, a notice of intent must be filed in accordance with paragraph d above showing each location where the contract might be performed, so that a wage determination may be made for each. The wage determination that applies to the successful offeror must be included in the contract. If the Department of Labor finds this impracticable, the Department may issue a composite wage determination. 4. The contracting officer must contact the Wage and Hour Division to find out whether a wage determination is still current when a solicitation or negotiation has been delayed for more than 60 days from the anticipated date of award stated on the Standard Form 98 submitted. Any wage determination received in response must replace the earlier wage determination. 5. When a notice of intent has been filed but the wage determination has not been received in time for attachment to the solicitation, the solicitation must state that the wage determination will be issued as an amendment to the solicitation or incorporated into the contract at the time of award. 6. Any revision of a wage determination received less than ten days before proposals are due is not effective unless there is enough time to notify offerors. If the contract action involves noncompetitive procedures, exercise of an option or extension of a contract, any revision of a wage determination received after award is not effective if performance begins within 30 days after award; otherwise, any revision received at least ten days before performance begins is effective. 7. If circumstances require that a contract be awarded before a wage determination is obtained, the contract must include Clause 10-12, Service Contract Act, and provide for equitable adjustment of the contract terms when the wage determination is incorporated, effective from the date of issuance unless another effective date is specified in the determination. The notice of intent, if not already filed, must be filed promptly and explain the need for immediate award. 8. The Wage and Hour Division may require that a wage determination be applied to a contract retroactively, if the contract is subject to the Service Contract Act and more than five service employees are involved in performing the work. If the contracting officer questions the applicability of the Act to the contract, the contracting officer must forward the matter for resolution to assigned counsel. If it is determined that the Service Contract Act is not applicable to the contract, the contracting officer must advise the Department of Labor of the basis for this determination. No further action is needed unless the Secretary of Labor determines that the contract is subject to the Act. 9. If a wage determination does not contain all the classifications and rates requested in the notice of intent, those classifications for which no determinations were received must be deleted from the attachment incorporating the wage determination. When omitted classifications or classifications not previously contemplated are found necessary after award, they must be incorporated following the procedures in Clause 10-12, Service Contract Act. 10.2.10.f Notice of Award. Upon the award of the contract of $10, 000 or more that includes Clause 10-12, Service Contract Act (or upon issuing the first order under an indefinite delivery contract or ordering agreement containing that clause), the contracting officer must send an original and one copy of Standard Form 99, Notice of Award of Contract, to: ATTENTION OFFICE OF SPECIAL WAGE STANDARDS DEPARTMENT OF LABOR WASHINGTON DC 20210-0001 10.2.10.g Department of Labor Poster. At the time of award, the contracting officer must supply the contractor with WH Publication 1313, a Department of Labor combination letter and poster explaining the Service Contract Act. 10.2.10.h Inquiries Concerning the Act. Contractors or their employees with questions about the applicability of the Service Contract Act must be referred to: DEPUTY ASSISTANT SECRETARY EMPLOYMENT STANDARDS ADMINISTRATION DEPARTMENT OF LABOR WASHINGTON DC 20210-0001 Questions concerning safety or health must be referred to: DIRECTOR BUREAU OF LABOR STANDARDS EMPLOYMENT STANDARDS ADMINISTRATION DEPARTMENT OF LABOR WASHINGTON DC 20210-0001 Questions may also be directed to any regional office of the Employment Standards Administration. 10.2.10.i Withholding Contract Payments and Contract Termination 1. Withholding (a) A violation of the stipulations of Clause 10-12, Service Contract Act, or Clause 10-13, Service Contract Act - Short Form, makes the responsible party liable for the sum of any deductions, rebates, refunds, or underpayments due employees. At the written request of a District Director (or above) of the Department of Labor, as much of the accrued payment due on the contract (or any other contract between the contractor and the Postal Service that has not been assigned) must be withheld as is necessary to pay the employees. Withheld sums must be kept in an escrow fund. Any compensation that the Postal Service or the Wage and Hour Division has found to be due must be paid directly from the withheld payments. (b) If the withheld payments are insufficient to reimburse the underpaid employees, this fact must be reported to the General Accounting Office (for possible setoff), the Wage and Hour Division of the Department of Labor, and the Department of Justice. The United States may bring an action to recover the remaining amount. Any sums recovered must be held in the escrow fund and paid, on order of the Secretary of Labor, directly to the underpaid employees. 2. Termination. Any violation of Clause 10-12, Service Contract Act, or Clause 10-13, Service Contract Act - Short Form, may be cause to terminate the contractor's right to continue the work. If the contract is terminated, the Postal Service may enter into other contracts or arrangements to complete the work, charging any additional costs to the contractor. 10.2.10.j List of Violators. The Comptroller General sends a list of the names of people or firms in violation of the Service Contract Act to all government agencies. Unless the Secretary of Labor recommends otherwise, Postal Service contracts may not be awarded to any violator on the list (or to any firm, corporation, partnership, or association in which such violator has a substantial interest) for three years from the date the list was published. 10.2.11 Employment of the Handicapped 10.2.11.a Policy. It is Postal Service policy to comply with the Rehabilitation Act of 1973 (29 U.S.C. 702 et seq.), Executive Order 11758 of January 15, 1974, and the implementing regulations of the Secretary of Labor (41 CFR 60-741). The Act requires contractors to take affirmative action to employ and advance qualified individuals without discrimination as to their physical or mental handicaps. 10.2.11.b Applicability 1. General. With the exceptions below, every contract for supplies or services (including construction and transportation services) over $2,500 must include Clause 10-15, Affirmative Action for Handicapped Workers. (a) Contracts with State and Local Government. The requirements of Clause 10-15 do not apply to any agency, instrumentality, or subdivision of the state or local government that does not participate in work under the contract. (b) Exemption. The VP, Purchasing and Materials, may exempt any contractor or subcontractor (or any group or category of contractor or subcontractor) from any provisions of Clause 10-15 in the Postal Service's interest. (c) Request for Exemption. The contracting officer must submit a justification for any proposed exemption to the VP, Purchasing and Materials. 10.2.11.c Department of Labor Notices. Under Clause 10-15, the contracting officer must supply the contractor with Department of Labor notices that state the contractor's obligations and handicapped individuals' rights under the Employment of the Handicapped program. These notices may be obtained from: OFFICE OF INFORMATION EMPLOYMENT STANDARDS ADMINISTRATION DEPARTMENT OF LABOR WASHINGTON DC 20210-0001 10.2.11.d Collective Bargaining Agreements. When performance under Clause 10-15 requires revision of a collective bargaining agreement, the unions that are parties to such agreements must be advised that the Department of Labor will give them appropriate opportunity to express their views. Neither the contracting officer nor any representative of the contracting officer may discuss with representatives of the contractor or of labor any aspects of the collective bargaining agreements. 10.2.11.e Complaints. The contracting officer must forward any complaint concerning the Act through channels to the VP, Purchasing and Materials. No investigation or attempt to resolve the complaint may be made without specific instructions from the VP, Purchasing and Materials. 10.2.11.f Department of Labor Sanctions. When Policies, Planning, and Diversity is notified that the Department of Labor has imposed sanctions on a contractor (such as withholding progress payments, terminating or suspending the contract, or debarring the contractor) for violation of Clause 10-15, the contracting officer must put the sanctions into effect as soon as possible. 10.2.12 Veterans 10.2.12.a Requirement. The Vietnam Era Veterans Readjustment Assistance Act of 1972 (38 U.S.C. 2012), Executive Order 11701 of January 23, 1973, and the implementing regulations of the Secretary of Labor (41 CFR 60-250) require contractors to take affirmative action to employ veterans of the Vietnam era without discrimination based on their disability, and to list all employment openings with appropriate local employment services. 10.2.12.b Applicability 1. General. Except as provided in subparagraph b.2 below, every contract for supplies or services (including utility, construction, and transportation services) or for the use of real or personal property (including lease arrangements) in the amount of $10,000 or more must include Clause 10-16, Affirmative Action for Disabled Veterans and Veterans of the Vietnam Era. No contracting officer, contractor, or subcontractor may purchase quantities of supplies or services in less-than-normal quantities to avoid application of Clause 10-16. 2. Exceptions (a) Contracts with State and Local Governments. Clause 10-16 does not apply to any agency, instrumentality, or subdivision of a state or local Government that does not participate in work under the contract. (b) Exemption. The Postmaster General (with the concurrence of the Director, Office of Federal Contract Compliance Program (OFCCP), Department of Labor) may exempt any contract or category of contracts from any part of Clause 10-16 in the national interest. 3. Request for Exemption. The contracting officer must submit a detailed justification for any proposed exemption to the VP, Purchasing and Materials, for submission through channels to the Postmaster General and the Director, OFCCP. 10.2.12.c Department of Labor Notices. The contracting officer must furnish the contractor appropriate notices for posting when such notices are prescribed by the Director, OFCCP. 10.2.12.d Complaints. The contracting officer must forward any complaint concerning the Act through channels to the VP, Purchasing and Materials. No investigation or attempt to resolve the complaint may be made without specific instructions from the VP, Purchasing and Materials. 10.2.12.e Department of Labor Sanctions. When Policies, Planning, and Diversity is notified that the Department of Labor has imposed sanctions on a contractor (such as withholding progress payments, terminating or suspending the contract, or debarring the contractor) for violation of Clause 10-16, the contracting officer must put the sanctions into effect as soon as possible. Section 3 Buy American Policy 10.3.1 Policy Postal Service policy is to give preference to domestic-source products and materials in purchasing supplies and services, in accordance with the provisions of this manual, which are based on the Buy American Act (41 U.S.C. 10a-d). With respect to individual procurements or procurement categories, the Postmaster General may adopt more stringent standards for domestic manufacture when required in the interest of the Postal Service. 10.3.2 Supplies 10.3.2.a Applicability. The procedures in this part apply to all purchase of supplies, or services that involve the furnishing of supplies. Deviations may be authorized by the VP, Purchasing and Materials. 10.3.2.b Definitions 1. End products. Articles, materials, and supplies to be purchased for Postal Service use. 2. Components. Articles, materials, and supplies directly incorporated in end products. 3. Domestic-source end product. An unmanufactured end product mined or produced in the United States or an end product manufactured in the United States, if the cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. The cost of components includes transportation costs to the place of incorporation into the end product and, in the case of components of foreign origin, duty (whether or not a duty-free entry certificate is issued). For procurements in excess of $25, 000, components of Canadian origin are treated as domestic. The articles and materials listed in 10.3.4 are considered to have been mined, produced, or manufactured in the United States, regardless of their source in fact. 4. Foreign end product. An end product other than a domestic-source end product. 5. Domestic proposal. A proposed price for a domestic-source end product, including transportation to destination. 6. Foreign proposal. A proposed price for a foreign end product, including transportation to destination and duty (whether or not a duty-free entry certificate is issued). 10.3.2.c Requirement. Only domestic-source end products may be purchased, except when the VP, Purchasing and Materials, determines that: 1. The articles, materials, or supplies are of a class or kind not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities of satisfactory quality (see 10.3.4); or 2. Purchase of domestic-source end product would be inconsistent with the interest of the Postal Service, or that its cost would be unreasonable, as when the price comparison procedures described in paragraph e below result in the purchase of a foreign end product. 10.3.2.d Proposal Evaluation 1. If award is to be based solely on price and price-related factor, the procedures of paragraph e below are used for price comparison. 2. If factors other than price will have a significant weight in proposal evaluation, domestic-source end products should receive a preference in the case of closely ranked proposals, unless there are more important discriminators, but no price differential should be applied. 10.3.2.e Price Comparison. Each foreign price proposal must be adjusted for purposes of evaluation by adding to the foreign proposal (inclusive of duty) a factor of six percent of that proposal. If a tie results between a foreign proposal and a domestic proposal, the domestic proposal must be selected for award. When more than one line item is involved, the six percent evaluation factor is applied on an item-by-item basis, except that the factor may be applied to any group of items that the solicitation specifies will be awarded as a group. 10.3.2.f Solicitation Provision. Solicitations must include Provision 10-7, Buy American Certificate - Supplies. 10.3.2.g Clause. Contracts must include Clause 10-17, Preference for Domestic Supplies. 10.3.3 Construction Materials 10.3.3.a Applicability. The procedures in this part apply to all construction contracts. Deviations may be authorized by the VP, P&M. 10.3.3.b Definitions 1. Components. Articles, materials, and supplies incorporated directly into construction materials. 2. Construction materials. Articles, materials, and supplies brought to the construction site for incorporation into the building or work. 3. Domestic construction material. This means (a) an unmanufactured construction material mined or produced in the United States, or (b) a construction material manufactured in the United States, if the cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. The cost of each component includes transportation costs to the place of incorporation into the construction material and any applicable duty (whether or not a duty-free entry certificate is issued). Components of foreign origin of the same class or kind as those listed in 10.3.4 are treated as domestic. 4. Foreign construction material. A construction material other than a domestic construction material. 10.3.3.c Requirement. Only domestic construction materials may be used in construction, except: 1. When the contracting officer determines that use of a particular domestic construction material would be impracticable, or that its cost would be unreasonable, under guidelines established by the VP, P&M, in the relevant handbook; or 2. When the VP, P&M, determines that a construction material is not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities of satisfactory quality (see 10.3.4). 10.3.3.d Solicitation Provision. Solicitations must include Provision 10-8, Buy American Certificate - Construction Materials. 10.3.3.e Clause. Contracts must include Clause 10-18, Preference for Domestic Construction Materials. 10.3.4 List of Excepted Articles and Materials The VP, Purchasing and Materials, has determined that the articles and materials listed below are not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities of satisfactory quality, or that it would be inconsistent with the interest of the Postal Service to apply the Buy American policy to these articles and materials. When incorporated into end products or construction materials manufactured in the United States, these items may be regarded as components of domestic origin for the purpose of determining the origin of the manufactured end products or construction materials: Acetylene, black Asbestos, amosite Books/pamphlets;/newspapers/magazines/periodicals: printed briefs and films not printed in the United States and for which domestic editions are not available Cadmium, ores and flue dust Calcium cyanamide Chrome ore or chromite Cobalt, in cathodes, rondelles, or other primary forms Cork, wood or bark and waste Cover glass, microscope slide Diamonds, industrial, stones Emetine, bulk Ergot, crude Fibers of the following types: agave, coir, jute, and palmyra Graphite, natural Hand sewing needles Hyoscine, bulk Leather, sheepskin, hair type Mica Nickel, primary, in ingots, pigs, shot, cathodes, or similar form; nickel oxide and nickel salts Nitroguanidine (also known as picrite) Petroleum, crude oil, finished products, and unfinished oils (see petroleum definitions in paragraph a-c below) Platinum and platinum group metals refined, as sponge, powder, ingots, or cast bars Pyrethrum flowers Quartz crystals Quebracho Radium salts Rosettes Rubber, crude and latex Rutile Wire glass Woods of the following species: angelique, balsa, ekki, greenheart, lignum vitae, mahogany, and teak 10.3.4.a Crude oil. Crude petroleum as produced at the wellhead and liquids (under atmospheric conditions) recovered from mixtures of hydrocarbons that existed in a vaporous phase in a reservoir and are not natural gas products. 10.3.4.b Finished products. Any one or more of the following petroleum oils, or a mixture or combination of them to be used without further processing except blending by mechanical means: 1. Liquefied gases - hydrocarbon gases recovered from natural gas or produced from petroleum refining and kept under pressure to maintain a liquid state at ambient temperatures. 2. Gasoline - a refined petroleum distillate that, by its composition, is suitable for use as a carburetant in internal combustion engines. 3. Jet fuel - a refined petroleum distillate used to fuel jet propulsion engines. 4. Naphtha - a refined petroleum distillate falling within a distillation range overlapping the higher gasolines and lower kerosenes. 5. Fuel oil - a liquid or liquefiable petroleum product burned for lighting or for the generation of heat or power and derived directly or indirectly from crude oil, such as kerosene, range oil, distillate fuel oils, gas oil, diesel fuel, topped crude oil, and residues. 6. Lubricating oil - a refined petroleum distillate or specially treated petroleum residue used to lessen friction between surfaces. 7. Residual fuel oil - a topped crude oil or viscous residuum that, as obtained in refining or after blending with other fuel oil, meets or is the equivalent of Military Specifications Mil-F-859. 8. Asphalt - a solid or semisolid cementitious material that gradually liquefies when heated, in which the predominating constituents are bitumens, and that is obtained in refining crude oil. 9. Natural gas products - liquids (under atmospheric conditions), including natural gasoline, that are recovered by a process of absorption, adsorption, compression, refrigeration, cycling, or a combination of such processes, from mixtures of hydrocarbons that existed in a vaporous phase in a reservoir and that, when recovered and without processing in a refinery, otherwise fall within any of the definitions of products contained in b.2 through b.5 above. 10.3.4.c Unfinished oils. One or more of the petroleum oils listed in paragraph b above, or a mixture or combination of such oils, to be further processed other than by blending by mechanical means. Section 4 Clean Air Act and Clean Water Act 10.4.1 General The Clean Air Act (42 U.S.C. 7401 et seq.) and the Clean Water Act (33 U.S.C. 1251 et seq.) prohibit any federal agency from contracting with a party that will use a facility that does not meet the standards of those statutes and their implementing regulations. Executive Order 11738, September 10, 1973, makes these statutes applicable to the Postal Service. 10.4.2 Requirements 10.4.2.a The Environmental Protection Agency (EPA) maintains a list of violating facilities. Contractors submitting proposal for contracts expected to exceed $100,000 must certify that the facilities to be used are not on the EPA List of Violating Facilities. 10.4.2.b Provision 10-9, Clean Air and Water Certification, must be included in solicitations for contracts expected to exceed $100,000. Contracts over $100,000 must contain Clause 10-19, Clean Air and Water. Section 5 Drug-Free Workplace 10.5.1 General 10.5.1.a Policy. The Postal Service voluntarily adopts the intent and purpose of the Drug-Free Workplace Act of 1988 (Public Law 100-690). Postal Service contracts must require contractors to take affirmative steps to maintain drug-free workplaces. Contractors' failure to do so may result in the imposition of appropriate sanctions. 10.5.1.b Definitions 1. Controlled substance. Those substances identified in schedules I through V, section 202 of the Controlled Substances Act (21 U.S.C. 812), and as further defined in 21 CFR sections 1308.11 through 1308.15. 2. Conviction. A finding of guilt (including a finding based on a plea of guilty or a plea of nolo contendere) by any judicial body charged with the responsibility to determine violations of criminal drug statutes. 3. Criminal drug statute. A federal or nonfederal criminal statute involving drug abuse. 4. Drug abuse. The unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance. 5. Employee. Any person directly engaged in the performance of work under a Postal Service contract. 6. Individual. A contractor with no employees other than himself or herself. 7. Workplace. Any site where work is being done in connection with a Postal Service contract. 10.5.2 Applicability The Postal Service's drug-free workplace requirements apply to all Postal Service contracts with individuals without regard to dollar amount, and to all other Postal Service contracts over $50,000. 10.5.3 Exceptions Those contracts to be performed completely outside of the United States, its territories, and its possessions are exempt from this policy. 10.5.4 Requirements Clause 10-20, Drug-Free Workplace, must be included in all applicable solicitations and contracts. 10.5.5 Sanctions A contractors' failure to comply with the requirements of the Clause 10-20, Drug-Free Workplace, may be grounds for any or all of the following sanctions: 10.5.5.a Suspension of Payments. After determining in writing that adequate evidence exists to show that a contractor has failed to comply with the requirements of the Clause 10-20, Drug-Free Workplace, the contracting officer may suspend progress payments pending a determination that the contractor is again in compliance (see 6.4.5). 10.5.5.b Termination, Suspension and Debarment. The contracting officer may terminate the contract for default (see 6.9.3) and recommend suspension or debarment (see 3.3.2) when the contractor fails to make a good faith effort to provide a drug-free workplace, as evidenced by a large number of employee convictions for drug abuse violations in the workplace. Chapter 11 Facilities and Related Services Section 1 Applicability 11.1.1 General 11.1.1.a Purchases Covered 11.1.1.b Leases Covered 11.1.1.c Transactions Not Covered 11.1.2 Additional Socioeconomic Policies 11.1.2.a Relocation Assistance 11.1.2.b Environmental Policy 11.1.2.c Intergovernmental Cooperation 11.1.2.d Architectural Barriers 11.1.2.e Historic Preservation Section 2 Services Related to Real Property Acquisition and Management 11.2.1 Use of Brokers 11.2.1.a Purchases 11.2.1.b Sales, Outleases, and Subleases 11.2.2 Real Estate-Related Services Section 3 Architect-Engineer Services 11.3.1 General 11.3.1.a Applicability 11.3.1.b Definitions 11.3.2 Selection Procedures 11.3.2.a Publicizing 11.3.2.b Evaluation Board 11.3.2.c Procedures When Fee (Price) is Expected to Exceed $50,000 11.3.2.d Procedures When Fee (Price) is Not Expected to Exceed $50,000 11.3.3 Negotiations 11.3.3.a General 11.3.3.b Order of Negotiations 11.3.3.c Postal Service Estimate 11.3.3.d Cost or Pricing Data 11.3.3.e Comparison of Estimates 11.3.3.f Fee Limitations 11.3.3.g Contract Type 11.3.4 Organizational Conflicts of Interest 11.3.4.a Policy 11.3.4.b Procedure 11.3.5 Task Order Contracts Section 4 Leasing of Interests in Facilities 11.4.1 General 11.4.1.a Definition 11.4.1.b Policy 11.4.1.c Competition 11.4.1.d Awards 11.4.2 Leases of Existing Space 11.4.2.a Publicizing 11.4.2.b Market Surveys 11.4.2.c Solicitation, Evaluation, and Award 11.4.2.d Requirements for Alterations 11.4.2.e Economic Price Adjustment 11.4.3 New Construction Leases Section 5 Construction 11.5.1 Procurement of Construction 11.5.1.a Definition 11.5.1.b Purchase Method 11.5.1.c Performance of Work by Prime Contractor 11.5.1.d Performance Time 11.5.1.e Contractor Responsibility 11.5.1.f Specifications 11.5.1.g Postal Service Estimate 11.5.1.h Presolicitation Notice 11.5.1.i Liquidated Damages 11.5.1.j Contract Types 11.5.1.k Concurrent Firm-Fixed-Price and Cost-Reimbursement Construction Contracts 11.5.1.l Solicitations 11.5.1.m Inspection of Construction Site and Data 11.5.1.n Preproposal Conferences 11.5.1.o Base and Alternate Prices 11.5.1.p Award 11.5.2 Minor Repairs and Alterations 11.5.2.a Applicability 11.5.2.b Purchase Method 11.5.2.c Description of Work 11.5.2.d Applicability of Part 11 11.5.3 Indefinite-Quantity Construction Contracts 11.5.3.a Purpose 11.5.3.b Procedures 11.5.3.c Limitations 11.5.3.d Work Not Covered 11.5.3.e Contract Preparation 11.5.4 Contractor Prequalification 11.5.4.a Policy 11.5.4.b Procedure 11.5.5 Clauses Chapter 11 Facilities and Related Services Section 1 Applicability 11.1.1 General 11.1.1.a Purchases Covered. This chapter covers procurement of: 1. Services related to real property acquisition and management; 2. Services related to facilities design and construction management; and 3. Construction. 11.1.1.b Leases Covered. The chapter also covers the leasing of facilities (including incidental personal property), whether existing or built to meet Postal Service plans and specifications. 11.1.1.c Transactions Not Covered 1. Neither this chapter nor the Procurement Manual as a whole covers the purchase of real property or the leasing of any interest in unimproved real property, including interests held in fee title, easements, rights of way, water or air rights, ground leases, or otherwise, except leases made in connection with and as part of a lease specified in paragraph b above. 2. Additionally, neither this chapter nor this manual covers: (a) Transactions in which the Postal Service is transferring an interest in real estate to another party; or (b) Lease or agreements with federal, state, or local government agencies. 11.1.2 Additional Socioeconomic Policies In addition to the policies in chapter 10, the Postal Service follows the socioeconomic policies set forth in paragraphs a through e following: 11.1.2.a Relocation Assistance. When acquiring sites or control of site, it is the policy of the Postal Service to follow regulations based on Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (P.L. 91-646) to the extent practicable. Regulations providing for voluntary compliance with the Act are contained in 39 CFR Part 777. 11.1.2.b Environmental Policy. It is Postal Service policy to comply with the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). As amended, and Executive Order 11514 (covering protection and enhancement of environmental quality) to the extent consistent with the public interest and the Postal Service mission. See 39 CFR 775. The Postal Service also voluntarily complies with Executive Order 11988 (regarding flood-plain management) and Executive Order 11990 (for protection of wetlands). See 39 CFR 776. 11.1.2.c Intergovernmental Cooperation. It is the policy of the Postal Service to cooperate with federal, state, and local planning agencies, when appropriate, in keeping with the Intergovernmental Cooperation Act and Executive Order 12372. See 39 CFR 778. 11.1.2.d Architectural Barriers. The Postal Service is mandated to design, lease, and construct buildings that are accessible to the physically handicapped under the Architectural Barriers Act of 1968 (P.L. 90-480; see CFR 255), as amended. See Handbook RE-4, Standards for Facility Accessibility to the Physically Handicapped, for information on accessibility standards. 11.1.2.e Historic Preservation. The Postal Service has voluntarily adopted procedures based on the general provisions of the National Historic Preservation Act of 1966 (16 U.S.C. 470). Section 2 Services Related to Real Property Acquisition and Management 11.2.1 Use of Brokers 11.2.1.a Purchases 1. The Postal Service normally does not use brokers in connection with real estate procurement. 2. When a property owner with whom the Postal Service is dealing is represented by a broker, the owner must pay all brokerage fees or commissions. The Postal Service will not pay any premium or surcharge because a broker is used. 3. Brokers who represent owners in transactions with the Postal Service must present evidence of their authority to act for the owner. 11.2.1.b Sales, Outleases, and Subleases. Brokers may be used by the Postal Service for sales, outleases, and subleases. 11.2.2 Real Estate-Related Services 11.2.2.a Each office procuring real estate-related services over $50,000 must develop a list of qualified providers for services other than architects and engineers (such as appraisers) as the need to procure these services arises. To develop this list, the office must publish a request for qualification statements (resumes) in the Commerce Business Daily and publish appropriate notice in local publications, or use other methods approved by the Managers, Major Facilities, Customer Service Facilities, and Asset Management. 11.2.2.b All qualification statements must be reviewed in the light of the criteria in 11.3.2.c.2 for evaluating potential providers. Those meeting these standards must be placed on the list of qualified providers. 11.2.2.c Procurement of real estate-related service must be accomplished in accordance with chapter 4, except that, when 11.2.2.a applies, only listed providers are to be solicited and the requirements for publicizing (see 3.2) do not apply. Oral solicitations may be used for simplified purchases pursuant to 4.3.2.b. 11.2.2.d The provisions of 8.2 apply to real-estate services. Clauses for professional services contracts are prescribed in 8.2. See the relevant handbook for guidance. 11.2.2.e The requirements of 7.2.4, related to Errors and Omissions Insurance, do not apply to transactions under this section. Section 3 Architect-Engineer Services 11.3.1 General 11.3.1.a Applicability. When the provisions of this section 11.3 conflict with any other provision of this manual, this section's provisions will govern. 11.3.1.b Definitions 1. Firm. An individual, firm, partnership, corporation, association, or other legal entity permitted by law to practice the profession of architecture or engineering. 2. Responsible official. The officer or executive having overall responsibility for real estate and buildings at Postal Service Headquarters and in each area, or the responsible official's designee. 3. Architect-engineer services (A-E services). Professional services of an architectural or engineering nature, as well as incidental services that members of those professions and those in their employ may logically or justifiably perform in relation to construction, alteration, or repair of buildings, site improvements, roads or other kinds of real property. Such services include master planning, architectural and engineering studies, surveys, reports, design development, drawings preparation, specification preparation, interior design, space planning, and observation and reporting of the work performed during construction, alteration, or repair. 11.3.2 Selection Procedures 11.3.2.a Publicizing 1. For each contract for which the fee is expected to exceed $50,000, a notice of intention to contract for A-E services must be published in the Commerce Business Daily. The notice must be prepared and transmitted in accordance with 3.2, and must solicit submission of Standard Form 254, Architect-Engineer and Related Services Questionnaire, and Standard Form 255, Architect-Engineer and Related Services Questionnaire for Specific Project. 2. For each contract for which the fee is not expected to exceed $50,000, publicizing may be limited to the area in which the project is to be performed. 11.3.2.b Evaluation Board 1. The responsible official must establish one or more A-E evaluation boards composed of at least three members (two for projects where the anticipated fee is not over $100,000) who are highly qualified professional employees of the Postal Service and who, collectively, have experience in architecture, engineering, construction, and related matters. One member of each board must be designated as the chair. Neither the contracting officer nor anyone delegated to conduct A-E contract negotiations for a given project may be a member of the evaluation board for that project. 2. The A-E evaluation board must maintain current data files on A-E firms, including information on the qualifications of their members and key employees and on their experience in various types of construction projects. Firms should be encouraged to submit annually a statement of their qualifications and performance. The board's data files may also include information from sources such as clients, members of the profession, managers and occupants of facilities previously designed, qualification statements submitted for other projects, and assessments of work on previous Postal Service projects. 11.3.2.c Procedures When Fee (Price) is Expected to Exceed $50,000 1. When procurement of A-E services is proposed, the board must review the data files on qualified firms, including firms furnishing qualification statements in response to any notice publicizing the contemplated purchase. File data must be evaluated in accordance with the criteria set forth in subparagraph 2 below. Following data evaluation, the board must visit at least three of the best qualified firms to discuss concepts and alternative approaches. 2. The board must use the following criteria in making evaluations: (a) Professional qualification, registration, and general reputation of the principals of the firm. (b) General stability of the firm, and capability of the firm to sustain loss of key personnel without adverse effect on current work. (c) If a branch office, capability of performing independently of the main office. (d) Professional qualifications of consultant regularly or frequently engaged. (e) Extent to which the firm specializes in or has designed projects of a type and scope similar to the one at hand. (f) Professional background of key personnel, other than principals, who will be assigned to the project. (g) Volume of work that can be handled at one time. (h) Familiarity with the area in which the project is located. (i) Ability to work within cost limitations. (j) Capability and past performance in meeting schedules. (k) Quality of performance on other projects. (l) Experience in all phases of construction contract administration and capability of providing qualified and experienced personnel to satisfy Postal Service requirements during that phase of the project. 3. The board must submit to the responsible official a report recommending at least three firms, in order of preference, considered highly qualified to perform the required services. This report must be supported by a record detailing the evaluation and review process and the considerations upon which the board's recommendations are based. 4. The responsible official must review the recommendations of the board, and either: (a) Advise the board of approval, which will serve as an authorization for the contracting officer to begin negotiating with the highest-ranked firm; or (b) Reject the board's recommendations by a memorandum explaining the reasons for rejection and providing direction to the board's further evaluation and selection of qualified firms. 11.3.2.d Procedures When Fee (Price) is Not Expected to Exceed $50,000. Action by a board of three or more is required only when the contracting officer determines that that is necessary. In other cases, the chairman of the board may take the actions prescribed under paragraph c above, recommending three or more qualified firms and notifying the contracting officer to commence negotiations upon receipt of approval from the responsible official. 11.3.3 Negotiations 11.3.3.a General. The contracting officer is responsible for negotiating contracts for A-E services, using the services of technical, legal, auditing, pricing, and other specialists as necessary. Negotiations must be directed toward: 1. Making certain that the architect-engineer has a clear understanding of the essential requirements; 2. Determining that the architect-engineer will make available the necessary personnel and facilities to accomplish the work within the required time; 3. Determining whether the architect-engineer can provide the design to ensure construction at a cost not to exceed the limit established for the project; and 4. Reaching mutual agreement on the provisions of the contract, including a fair and reasonable price for the required work. 11.3.3.b Order of Negotiations. Negotiations must be conducted initially with the A-E firm given first ranking. If a mutually satisfactory contract cannot be achieved with that firm, negotiations must be terminated. Negotiations must then be initiated with the firm next in order of preference, and this procedure must be repeated until a mutually satisfactory contract has been negotiated. 11.3.3.c Postal Service Estimate. Before negotiation of any proposed contract or contract modification is initiated, an independent Postal Service estimate of the cost for the required A-E services must be developed, based on a detailed analysis of the costs expected to be generated by the work. Consideration must be given to the estimated value of the services and to the scope, complexity, and nature of the project. The independent estimate must be revised as required during negotiations to reflect changes in or clarification of the scope of the work to be performed. A fee estimate based on the application of percentage factors to cost estimates for the various segments of the project may be developed for comparison purposes, but such an estimate must not be used as a substitute for the independent Postal Service estimate. The cost breakdown figures in the Postal Service estimate may be revealed during negotiations to the extent necessary to arrive at a fair and reasonable price provided that the overall amount of the Postal Service estimate is not disclosed. Any change in the Postal Service estimate during or after price negotiation must be specifically but succinctly explained in the record of price negotiation. 11.3.3.d Cost or Pricing Data. The provisions of 5.3 relating to cost analysis, provision of cost or pricing data, and preparation of negotiation memoranda apply to purchases of A-E services. Because of the nature of the procedures used to purchase A-E services and the lack of price competition, price analysis is normally insufficient. 11.3.3.e Comparison of Estimates. The contracting officer must negotiate a price considered fair and reasonable on the basis of comparison of the independent Postal Service estimate with the architect-engineer's proposal. Significant differences between elements of the two figures and between the overall figures must be discussed, and the contracting officer must be satisfied as to the reasons for the differences. 11.3.3.f Fee Limitations. Unless an exception is documented as to reasonableness and necessity and approved by the responsible official, the A-E firm's fee, including reimbursement of costs for A-E services related to the preparation of construction designs, plans, drawings, and specifications, may not exceed 6 percent of the estimated construction cost of the project if the estimated construction cost exceeds $50,000; if the estimated construction cost does not exceed $50,000, the fee may not exceed 8 percent of it. 11.3.3.g Contract Type. A-E contracts are normally of the fixed-price type. However, any contract type authorized by chapter 5 may be used if approved by the responsible official. 11.3.4 Organizational Conflicts of Interest 11.3.4.a Policy. To ensure objective performance of contracts and prevent unfair competitive advantage, the award of a contract for A-E services and the later award of a separate contract for the related construction management or construction work to the same firm, to a parent firm, or to the firm's subsidiaries or affiliates is prohibited, unless authorized in writing by the VP, Facilities. A single contract for design and construction (design-build) is not subject to this prohibition. 11.3.4.b Procedure. An A-E firm selected for negotiation of an A-E services contract must be advised of this policy before negotiations begin. If the firm possesses construction or construction-management capabilities, either within its own organization or through a parent firm, subsidiary, or affiliate, the firm has the option of either: 1. Declining to enter into contract negotiations in order that it or its parent firm, subsidiary, or affiliate may be eligible to compete for the related construction management or construction contract; or 2. Entering into contract negotiations with the clear understanding that, if they are successful, it and its parent firm, subsidiary, or affiliate will be ineligible to compete for the related construction management or construction contract. 11.3.5 Task Order Contracts A-E services may be procured under task order contracts (see 5.1.9) that provide for services to be directed by task order. Contracts for one year, with options for two more years, are authorized. Section 4 Leasing of Interests in Facilities 11.4.1 General 11.4.1.a Definition. Lease means any written agreement by which the rights of use and occupancy of real estate are transferred from the owner to the Postal Service for a specified period of time in return for a specified rental amount. It includes leases of ground, existing space, or space to be altered, modified, or constructed at any time during the term of the lease. Leases are not considered to be construction contracts, purchase contracts, permits, or licenses, and the specific procurement provisions applicable to those contracts are not applicable to leases. 11.4.1.b Policy. Only some of the statutory policies that govern Postal Service procurement in general apply to the leasing of facilities, while several additional statutory and internal policies are applicable. Consequently, many of the procedures required for other purchases do not apply to leases of facilities. 11.4.1.c Competition. Postal Service leasing practices incorporate the best of commercial leasing practices, consistent with the Postal Service's mission and statutory constraints. Competition must be obtained whenever practicable. However, flexibility in procedures is necessary, since the needs of customers often dictate the location of postal facilities, and since the Postal Service must evaluate the quality of the facilities offered as a part of its selection process. When a solicitation is issued, the contracting officer may (1) negotiate with any or all offerors as to rental rates or other terms and conditions of proposals; (2) obtain proposals in addition to those offered initially in response to solicitations, without waiving the right to accept any proposal as submitted; or (3) reject any or all proposals. The contracting officer must maintain in the file a detailed record of all negotiations and additional proposals, as well as a justification for all decisions made. Information as to the number of proposals received or the identity of offerors may not be disclosed prior to award to anyone whose official Postal Service duties do not require such knowledge. 11.4.1.d Awards. Awards made as a result of solicitations for space must be made to the responsible offeror whose proposal is most advantageous to the Postal Service, cost and other evaluation factors set out in the solicitation considered. 11.4.2 Leases of Existing Space 11.4.2.a Publicizing 1. Except as authorized in subparagraph a.4 below, the contracting officer will normally publicize Postal Service requirements for new leases of space in excess of 6,500 net interior square feet by: (a) Placing advertisements in periodicals or newspapers in the locale in which the space is required; and (b) Posting a notice of the requirement in public spaces such as post offices. 2. The contracting officer may also publicize requirements for leased space by contacting local business and real estate organizations. 3. At the contracting officer's discretion, requirements for space of 6,500 square feet or less may be publicized as provided in subparagraphs a.1 and 2. 4. Requirements for space that will be satisfied by enlargements of existing space or extensions of existing leases, including renewal options, and leases for which only one location is suitable, need not be publicized. Further, space requirements for post offices and other public service facilities need not be publicized when existing facilities are satisfactory and a reasonable rental can be negotiated for continued occupancy. 11.4.2.b Market Surveys 1. The contracting office surveys the local area for all actions to lease more than 6,500 square feet of space, as follows: (a) For leases of more than 6,500 square feet to be used for administrative purposes, the market survey identifies all acceptable space available within the local area. (b) For leases obtained under subparagraph a.4 above, the contracting officer may substitute for the market survey an appraisal to verify price reasonableness. 2. A market survey or appraisal must be used as a guide to fair and reasonable price in cases in which competition is normally required but is not available. 11.4.2.c Solicitation, Evaluation, and Award. Except when leasing without publicizing is authorized under paragraph a above, the contracting officer solicits owners of acceptable available space within the local area. 11.4.2.d Requirements for Alterations 1. When space is offered on a fully altered basis, the contracting officer may dispense with the requirements for executing an Agreement to Lease Space, and instead execute the actual lease with an agreed-upon occupancy date. When the Postal Service leases space requiring initial alterations, an Agreement to Lease (or other equivalent document) is used, which described what work is to be done, when it is to be completed, what is to happen if it is not completed on time, and what are the obligations of the parties. Such an agreement may be used in other situations when the contracting officer determines it appropriate. 2. When alterations are specifically required under a lease or modification of a lease in excess of 6,500 square feet, the clauses prescribed in 10.2.4.d.3 must be used, and the lessor must include those clauses in any subcontract for the alterations. 3. Construction of alterations, repairs, and improvements to be accomplished by a lessor may be procured in accordance with 11.5.1, to the extent practicable, but without any requirement for publicizing or competition, provided the contracting officer determines that the price proposal by the lessor for the work are reasonable. 11.4.2.e Economic Price Adjustment. Economic price adjustment clauses based on cost indexes (see 5.1.3.c.1(b)) may not be used without the approval of the Manager, Customer Service Facilities. 11.4.3 New Construction Leases 11.4.3.a Lease construction (sometimes called "build-to-suit") is a specialized type of procurement, encompassing a range of construction issues as well as leasing issues. 11.4.3.b The requirements for new leased construction must be set forth in the solicitation. 11.4.3.c Facilities not yet built, but offered in response to solicitations under 11.4.2, are not considered lease construction. 11.4.3.d Solicitations for new leased construction must be publicized in accordance with 11.4.2.a. Section 5 Construction 11.5.1 Procurement of Construction 11.5.1.a Definition. Construction means construction, alteration, repair (including painting and improvements of all types), and demolition of buildings, structures, improvements of all types, or other real property. The term does not include exploratory drilling and other investigative work aimed at obtaining preliminary data to be used in engineering, environmental or other studies and not a part of beginning of continuing the construction process, nor does it include a lease (see 11.4.1.a). 11.5.1.b Purchase Method. Construction must be procured in accordance with 4.2. Construction of alterations, repairs, and improvements to be accomplished by a lessor may be procured in accordance with this part 11.5.1 to the extent practicable, but without reference to any requirement for publicizing or competition. 11.5.1.c Performance of Work by Prime Contractor 1. Unless the prime contractor is required to perform a significant part of the contract work with its own forces, it may be difficult to obtain adequate contractor supervision of the work. To address this problem, each Postal Service construction contract (but see subparagraph 2 following) must contain Clause 11-3, Performance of Work by Contractor, establishing the minimum percentage of the work that the contractor itself must perform, consistent with customary or necessary specialty subcontracting and the complexity and magnitude of the work. Normally, the minimum percentage should be 12 percent. 2. This clause is not required in new lease construction contracts (see 11. 4.3) but may be included in them at the contracting officer's discretion. It is not used in contracts in which the lessor performs construction under the terms of a lease. 11.5.1.d Performance Time 1. In establishing the time for contract completion, the contracting officer must consider, among other things: (a) The nature and complexity of the project; (b) The construction seasons involved; (c) The requirements of the Postal Service; and (d) The availability of materials, equipment, and labor. 2. In any given contract, separate completion periods may be established for separable items of work. When such periods are shown, requests for time extensions must be evaluated for each item, and all affected completion periods must be modified when appropriate. 11.5.1.e Contractor Responsibility. In evaluating a prospective contractor's financial resources and ability to perform, the contracting officer may not consider the mere ability to furnish a proposal guarantee and performance and payment bonds to be sufficient evidence of adequate financial resources and ability to perform. When the prospective contractor is a joint venture, the contracting officer must consider the financial resources and individual capacities of all the joint venture's members in determining responsibility. See 3.3.1. 11.5.1.f Specifications 1. The technical provisions of construction specifications, along with the applicable drawings, must be sufficiently detailed to: (a) Enable preparation of offers by contractors, material suppliers, and manufacturers on a fair and competitive basis; and (b) Permit completion of construction without additional construction specifications, except those necessary to deal with unforeseen conditions or to accomplish changes during construction. 2. Materials and equipment must be described, when possible, by reference to documents generally known to the industry. 3. When it is necessary to use a "brand name or equal" description in the specifications, all known acceptable brands must be listed to establish quality requirements (see 2.3.3 and 2.3.5), except that, if more than three acceptable brands are known, only three need be listed. 11.5.1.g Postal Service Estimate. An independent Postal Service estimate of construction costs must be prepared before solicitation of proposal and, at the earliest practicable time, for each modification of an existing contract. When the anticipated cost is less than $10,000, the contracting officer, at his or her discretion, may delete the requirement for an estimate. Except when broader disclosure is permitted by regulations, information about the Postal Service estimate must be given only to Postal Service personnel whose official duties require knowledge of the estimate. 11.5.1.h Presolicitation Notice 1. When it is practicable to do so, the contracting officer must issue a presolicitation notice for all construction projects that will not be purchased under 11.5.2, Minor Repairs and Alterations. The presolicitation notice must be published, posted, and distributed as provided in 3.2.2. 2. When the estimated value of the work is $50,000 or more, presolicitation notices must include a statement of magnitude in terms of physical characteristics and an estimated price range (for example, $500,000 to $1,000, 000). In no event may the statement disclose the Postal Service estimate, however. 11.5.1.i Liquidated Damages 1. Clause 2-10, Liquidated Damages (see 2.2.6), must be included in a construction contract when the estimated value is $100,000 or more, and may be included, at the discretion of the contracting officer, in contracts of lesser estimated value. It is not mandatory in lessor construction or new lease construction contracts regardless of estimated value but may be included at the contracting officer's discretion if the circumstances warrant. 2. When different completion periods for separate parts or stages of the work are specified in the contract, the clause may be revised to provide for liquidated damages for each separate part or stage in which delay will damage the Postal Service. 11.5.1.j Contract Types 1. Generally, contracts for construction should be firm-fixed-price contracts. Such contracts may be: (a) Lump-sum contracts for the total work or for defined parts of it; (b) Unit-price contracts in which a unit price is paid for a specified quantity of work completed, such as cubic yards of earth or concrete or square yards of pavement; or (c) A combination of both. 2. Fixed-price contracts with economic price adjustment may be used when price adjustment arrangements are customary and when use of a firm-fixed price contract would likely keep a significant number of firms from proposing, result in the inclusion of unwarranted allowances for contingencies, or unreasonably increase the cost. 3. Contracts with performance incentives are authorized. 11.5.1.k Concurrent Firm-Fixed-Price and Cost-Reimbursement Construction Contracts. In view of potential labor and administrative problems, cost-plus-fixed-fee, price-incentive, or other types of contracts with cost-variation or cost-adjustment features may not be used concurrently (with the same contractor and at the same work site) with firm-fixed-price lump-sum or unit-price contracts, unless the VP, Facilities, or an authorized designee gives prior approval. 11.5.1.l Solicitations 1. Content. In addition to the elements required by appendix A, solicitations must contain the following, when applicable: (a) The applicable wage determination of the Secretary of Labor. If it is necessary to solicit proposals before receiving a wage determination, the solicitation must contain a notice that the determination will be issued as an amendment to the specifications before the proposal submission date. (b) A clause concerning the minimum percentage of the work the contractor must perform on the site with its own forces (see paragraph c above). (c) Indication of the magnitude of the proposed construction. (d) Indication of the time of performance. (e) Arrangements to be made for inspecting the site and data that may affect performance of the work. (f) Information on the furnishing, during construction, of items such as utilities, office space, and warehouse space. (g) Information on any preproposal conference. (h) Any special qualifications or experience requirements that will be considered in determining offeror responsibility. (i) Any special instructions concerning alternates (see paragraph o below). (j) Information on reporting requirements. (k) Any necessary instructions on the conduct of construction activities, covering items such as: (1) Base lines and grades to be used in construction; (2) Storage areas; (3) Access to construction of temporary buildings; (4) Construction of temporary buildings; (5) Protection of materials and work; (6) Damage to existing structures, work, or utilities; (7) Preservation of existing vegetation; (8) Possession of or use by the Postal Service of any completed or partially completed part of the work; (9) Cleanup of the site during and after construction; (10) Handling of shop drawings; (11) Safety requirements and special precautions for hazardous, toxic, and radioactive materials and processes; and (12) Provisions concerning work at occupied Postal Service premises. 2. Timing. Solicitations must allow enough time between solicitation distribution and the date set for proposal submission to allow offerors to prepare and submit their proposals, giving due regard to the construction season and the time necessary for offerors to inspect the site, obtain subcontract bids, examine data concerning the work, and prepare estimates from plans and specifications. 3. Distribution. In addition to distribution in accordance with 4.2.2, solicitations may be furnished (with plans and specifications) without charge to organizations that maintain display rooms for the benefit of contractors, subcontractors, and material suppliers. Requests from organizations in the United States for solicitations for all or for a stated class of construction projects may be honored on an annual or semi-annual basis. The geographical extent of this distribution may be determined on a case-by-case basis by the contracting officer. 11.5.1.m Inspection of Construction Site and Data. Provision must be made for offerors to inspect the construction site. Also, offerors must be given the opportunity to examine data available to the Postal Service that may provide information affecting performance of the work, such as boring samples, original boring logs, and records and plans of previous construction. These data should be assembled in one place and made available to all offerors in the same manner. When feasible, a record should be kept of the identity and affiliation of all offerors' representatives who inspect the site or examine the data. 11.5.1.n Preproposal Conferences. When a preproposal conference is held, the design architect-engineer must be available to help interpret the plans and specifications. 11.5.1.o Base and Alternate Prices 1. Solicitations permitting alternate proposals must require the base proposal to include all features considered essential to a sound and adequate building design. Any alternates to be included in the specifications should involve significant amounts of work in relation to the base proposal, and they should generally be structured as "add" alternates. For example, proposals to provide a proprietary item or system considered necessary for proper operation of the facility may be requested as add alternates. 2. When accurate cost estimates are not available, a base proposal may be required for the minimum acceptable project, with add alternates for desired materials or equipment. 3. Solicitation documents calling for alternates must clearly state that the Postal Service reserves the right to accept or reject any and all alternate prices, as may be determined by the contracting officer to be in the Postal Service's interests. 11.5.1.p Award 1. A notice of intent to make award must be furnished to the successful offeror not later than the time set for acceptance in the solicitation or any extension to which the offeror has agreed. The notice must: (a) Identify the solicitation; (b) Identify the contractor's proposal; (c) Set forth the award price; and (d) Advise the contractor of the date by which the contractor's copy of the contract and performance, payment, and any other bonds must be executed and returned. 2. When a signed copy of the contract and all required bonds have been received, the contracting officer will make award and issue a notice to proceed. 11.5.2 Minor Repairs and Alterations 11.5.2.a Applicability. This part 11.5.2 applies to requirements for minor repairs and alterations of Postal Service buildings, including painting, when no additional land is required. Such requirements may be purchased if the cost of the repairs and alterations is not over $100,000. 11.5.2.b Purchase Method. Section 4.3, Simplified Purchasing, applies to minor repairs and alterations costing $100,000 or less. However, the bond requirements of chapter 7 and the socioeconomic requirements of chapter 10 must be met at the appropriate dollar thresholds set out in those chapters. 11.5.2.c Description of Work. Work descriptions, specifications, and drawings must be sufficiently detailed to enable potential contractors to prepare offers on a fair and competitive basis and to complete the repairs and alterations without additional specifications (unless necessary to deal with unforeseen conditions or to make changes during construction). 11.5.2.d Applicability of Part 11. The following paragraphs of 11. 5.1 apply to minor repairs and alterations: d through f, and j through p. (Solicitations should contain the elements listed in 11.5.1.1, Solicitations, as applicable; however, the forms discussed in 4.3, Simplified Purchasing, should be used instead of those discussed in appendix A.) 11.5.3 Indefinite-Quantity Construction Contracts 11.5.3.a Purpose. Minor repairs and alterations at one or more Postal facilities may be accomplished by using fixed-price indefinite-quantity construction contracts. These contracts permit a large number of projects to be accomplished through work orders against a single contract rather than through individual solicitations. 11.5.3.b Procedures 1. A solicitation must be used to request proposals based on a unit price schedule prepared by the Postal Service. Offerors must be required to submit a multiplier that will apply equally to all prices listed in the unit price schedule. 2. Multiple awards may be made if the solicitation so states. 11.5.3.c Limitations 1. An indefinite-quantity construction contract may extend no longer than two years. 2. The total value of work under an indefinite-quantity construction contract may not exceed $1,000,000 or be less than $10,000. 3. A single work order placed under an indefinite-quantity construction contract must be for at least $500 and may not exceed $100,000. 4. No building construction work may be ordered under an indefinite-quantity construction contract, except for site preparation or foundation work for a pre-engineered building purchased directly from the manufacturer. 11.5.3.d Work Not Covered. The contracting officer may request quotations from an indefinite-quantity construction contractor for work items not covered by the unit price schedule and order such items, in addition to ordering covered work. However, not more than 25 percent of the cost of any work order may be for such uncovered work. 11.5.3.e Contract Preparation. Guidance for indefinite-quantity construction contract preparation is contained in Handbook RE-14, Design and Construction Handbook. 11.5.4 Contractor Prequalification 11.5.4.a Policy. Construction contracts may be awarded to contractors prequalified under this part 11.5.4 (see 3.1.6.c). 11.5.4.b Procedure 1. When a construction project plan subject to this part is approved under applicable procedures, a request for qualification statements will be published in the Commerce Business Daily. The request will generally describe the project and specify any special qualifications required. 2. The VP, Facilities, or authorized designees, will evaluate the statements received and select the most highly qualified firms (at least three) for solicitation. Solicitation will be limited to those firms so selected. 11.5.5 Clauses 11.5.5.a Contracts Other than Minor Repairs and Alterations Contracts or Indefinite-Quantity Construction Contracts. The following clauses must be used: 1. Clause 11-1, Conditions Affecting the Work. 2. Clause 11-2, Differing Site Conditions. 3. Clause 11-3, Performance of Work by Contractor. 4. Clause 11-4, Superintendence by Contractor. 5. Clause 11-5, Materials and Workmanship. 6. Clause 11-6, Use of Premises. 7. Clause 11-7, Other Contracts. 8. Clause 11-8, Subcontracts (Construction). 9. Clause 11-9, Permits and Responsibilities. 10. Clause 11-10, Payment (Construction). 11. Clause 11-11, Inspection and Acceptance (Construction). 12. Clause 11-12, Building Codes, Fees, and Charges. 13. Clause 11-13, Protection of Existing Vegetation, Structures, Utilities, and Improvements. 14. Clause 11-14, Heat. 15. Clause 11-15, Debris and Cleanup. 16. Clause 11-16, Measurements. 17. Clause 11-17, Survey Monuments and Bench Marks. 18. Clause 11-18, Specifications and Drawings. 19. Clause 11-19, Standard References. 20. Clause 11-20, Shop Drawings, Coordination Drawings, and Schedules. 21. Clause 11-21, Record "As-Built" Drawings. 22. Clause 11-22, Spare-Parts Data. 23. Clause 11-23, Construction Progress Chart. 24. Clause 11-24, Postal Service Occupancy. 25. Clause 11-25, Warranty (Construction). 26. Clause 11-26, Changes (Construction). 27. Clause 11-27, Accident Prevention. 28. Clause 11-28, Samples. 11.5.5.b Minor Repairs and Alterations Contracts and Indefinite-Quantity Construction Contracts. The clauses prescribed in paragraph a above may be used when applicable. Chapter 12 Mail Transportation Section 1 Applicability 12.1.1 General 12.1.2 Other Publications Section 2 Meanings of Words and Terms 12.2.1 General 12.2.2 Definitions 12.2.2.a Administrative official 12.2.2.b Advertised contract 12.2.2.c Bid 12.2.2.d Higher-level contracting authority 12.2.2.e Negotiated contract Section 3 Responsibility and Authority 12.3.1 Responsibility of Contracting Officers 12.3.2 Authority of Contracting Officers 12.3.3 Requirements to Be Met Before Entering into Contracts 12.3.4 Delegations of Authority 12.3.5 Contracting Officer's Representative 12.3.5.a Designation 12.3.5.b Authority and Limitations 12.3.5.c Restrictions Section 4 General Policies 12.4.1 Anticompetitive Practices 12.4.2 Procurement Planning 12.4.3 Sources 12.4.4 Solicitation Mailing Lists 12.4.4.a Establishing Lists 12.4.4.b Retention on Lists 12.4.4.c Use of Mailing Lists 12.4.4.d Presolicitation Notice 12.4.4.e Presolicitation Conference 12.4.4.f "Sources Sought" Notice 12.4.4.g Release of Mailing Lists 12.4.5 Publicizing and Distribution of Solicitations 12.4.5.a General 12.4.5.b Solicitation Notice 12.4.5.c Publicizing 12.4.5.d Posting 12.4.5.e Distribution 12.4.6 Procurement Methods 12.4.6.a Contract Type 12.4.6.b Contract Term 12.4.6.c Modes of Transportation 12.4.6.d Procedures 12.4.6.e Discussions 12.4.6.f Alternatives to Contracts 12.4.7 Mistakes in Bids or Proposals 12.4.8 Protests 12.4.9 Small, Minority-owned and Woman-owned Businesses 12.4.10 Renewal of Contracts 12.4.10.a General 12.4.10.b Characteristics of Renewal Contracts 12.4.10.c Procedures for Renewal 12.4.10.d Restrictions 12.4.11 Extension of Contracts 12.4.12 Contract Changes 12.4.12.a General 12.4.12.b Termination for Convenience 12.4.12.c Service Changes 12.4.12.d Exceptional Service 12.4.12.e Schedule Changes for Highway or Domestic Inland Water Contracts 12.4.12.f Emergency Contracts 12.4.13 Subcontracting 12.4.13.a Highway or Domestic Inland Water Contracts 12.4.13.b Other Surface Contracts and Air Contracts 12.4.14 Release of Contractor 12.4.15 Service Deficiencies 12.4.15.a Damages 12.4.15.b Breach Not Warranting Termination 12.4.15.c Loss or Damage to Mail 12.4.15.d Contractor with Several Contracts 12.4.16 Death or Incompetence of Contractor 12.4.16.a Individual 12.4.16.b Partnership 12.4.16.c Administration Section 5 Contractor Qualifications 12.5.1 Eligibility Requirements for Contractors 12.5.2 Service Employees 12.5.3 Screening Section 6 Contract Administration 12.6.1 General 12.6.2 Unsatisfactory Service 12.6.3 Major Irregularity Section 7 Advertised Contracts 12.7.1 General 12.7.2 Disclosure of Procurement Information 12.7.2.a Before Solicitation 12.7.2.b After Solicitation 12.7.3 Solicitations 12.7.3.a Forms 12.7.3.b Contents 12.7.3.c Bidding Time 12.7.3.d Telegraphic and Facsimile Bids 12.7.3.e Amendment of Solicitations 12.7.3.f Cancellation Before Opening 12.7.4 Bids 12.7.4.a Responsiveness 12.7.4.b Time of Submission 12.7.4.c Late Bids 12.7.4.d Notification of Late Bidders 12.7.4.e Disposition of Late Bids 12.7.4.f Late Bid Record 12.7.4.g Modification or Withdrawal of Bids 12.7.4.h Late Modifications and Withdrawals 12.7.4.i Unidentified Bids 12.7.4.j Receipt and Safeguarding of Bids 12.7.5 Opening of Bids 12.7.5.a Opening Committee 12.7.5.b Postponement of Opening 12.7.5.c Recording of Bids 12.7.5.d Distribution of Abstract 12.7.6 Mistakes in Bids 12.7.6.a Minor Informalities or Irregularities 12.7.6.b Mistakes 12.7.7 Evaluation and Award 12.7.7.a General 12.7.7.b Equal Low Bids 12.7.7.c All-or-None Qualifications 12.7.7.d Rejection of Individual Bids 12.7.7.e Cancellation of Solicitation After Opening 12.7.7.f Notification of Bidders 12.7.8 Records Applicability of Procurement Manual to Mail Transportation Exhibit 12.1.1 Chapter 12 Mail Transportation Section 1 Applicability 12.1.1 General 12.1.1.a This chapter governs the procurement by contract of mail transportation services authorized in Part V of Title 39, U.S. Code, and those authorized under applicable provisions of 49 U.S.C. 1375(e)(2). It also governs the procurement by contract of ancillary services directly related to the transportation of mail. 12.1.1.b Procedural guidance necessary to implement and supplement this chapter is issued by the VP, Purchasing and Materials (P&M), in the Mail Transportation Procurement Handbook (MTPH). References in other chapters of this manual to the Procurement Handbook are not applicable. 12.1.1.c Requirements in other chapters of this manual for the use of specific solicitation provisions, contract clauses, or forms are not applicable. The forms in appendix C contain solicitation provisions and contract clauses for mail transportation procurement. 12.1.1.d In case of any conflict between this chapter and another part of this manual, this chapter will govern. 12.1.1.e Exhibit 12.1.1 lists the other chapters, sections, and parts of this manual that are applicable to the procurement of mail transportation, and those that are not. PM references to inapplicable chapters, sections, or parts have no effect. Deviations from the applicability requirements of Exhibit 12.1.1 may be obtained following the procedures in 1.4.2. 12.1.2 Other Publications The VP, P&M, or his or her designee, may issue policies, procedures, and information concerning the procurement of mail transportation and related services in the Transportation Services Bulletin and other publications as an interim measure, pending incorporation in this chapter or the MTPH. Applicability of Procurement Manual to Mail Transportation PM Section Subject Applicability Reference 1.1 Authority and Responsibility Yes PM 12.3, MTPH 1.1.1,1.1. 1.2 PM Publication Yes MTPH 1.1.2 1.3 PM Changes Yes MTPH 1.1.2 1.4 PM Deviations Yes MTPH 1.1.2 1.5 Procurement Authority Yes PM 12.3.4 1.6 Definitions Yes PM 12.2 1.7.2 Competition Yes None 1.7.3 Contracts with Postal Service Employees Yes MTPH 1.1.5 1.7.4 Release of Information Yes None 1.7.5 Protection of Privacy Yes None 1.7.6 Advance and Progress Payments No None 1.7.7 Conflicts of Interest No None 1.7.7 Officials Not To Benefit Yes None 1.7.8 Standards of Conduct Yes MTPH 1.1.5 1.7.9 Gratuities Yes MTPH 1.1.5 1.8 Anticompetitive Practices Yes PM 12.4.1, MTPH 1.1.6 1.9 Contingent Fees Yes None 1.10 Administrative Matters No None 2.1 Procurement Planning No PM 12.4.2, MTPH 1.2 2.2 Planning Considerations No None 2.3 Specifications No MTPH 1.4.1-B, 1.4.2-A 3.1 Sources No PM 12.4.3, 12.4.4 3.2 Publicizing Procurements No See 12.4.5 3.3 Contractor Qualifications Yes PM 12.5, MTPH 1.3 4.2 Negotiated Purchasing Yes MTPH 1.4.2 4.3 Simplified Purchasing No None 4.4 Noncompetitive Purchasing Yes MTPH 1.4.2 4.5 Price Negotiation Yes MTPH 1.4.2 4.6 Protests Yes PM 12.4.8, MTPH 1.4.4 5.1 Types of Contracts Yes MTPH 1.5.1 5.2 Cost Principles Yes None 5.3 Price Evaluation Yes MTPH 1.5.2 6.1.1 Contracting Officer's Representative No PM 12.3.5, MTPH 1.1.4 6.1.2 Contract Administration Functions Yes PM 12.6 6.2 Contract Performance Yes MTPH 1.6.1 6.3 Quality Assurance No None 6.4 Payments and Financing Yes MTPH 1.6.2, 2.3, 3.3, 4.3, 5.3, 7.3 6.5 Contract Modifications Yes PM 12.4.12, MTPH 1.6.3 6.6 Postal Service Property No None 6.7 Subcontracting No PM 12.4.13 6.8 Claims and Disputes Yes MTPH 1.6.4 6.9 Contract Termination Yes PM 12.4.12, MTPH 1.6.5 6.10.1 Remedies Yes None 6.10.2 Damages No PM 12.4.15 7.1 Bonds No None 7.2 Insurance No None 7.3 Taxes Yes None Chapter 8 Special Categories of Contracts No None Chapter 9 Patents and Data Rights No None PM Section Subject Applicability Reference 10.1 Small, Minority-owned and Woman-owned Businesses Yes PM 12.4.9, MTPH 1.7.1 10.2 Labor Policies Yes MTPH 1.7.2 10.3 Buy American No None 10.4 Clean Air and Water No None 10.5 Drug-Free Workplace Yes None Chapter 11 Facilities and Related Services No None Appendix A Solicitations No None Appendix B Contract Clauses No None Appendix C Forms and Formats Yes None Appendix D Rules of Practice - Debarment and Suspension Yes None Appendix E Rules of Practice - Board of Appeals Yes None Applicability of Procurement Manual to Mail Transportation (cont.) Exhibit 12.1.1 Section 2 Meanings of Words and Terms 12.2.1 General In addition to the definitions in 1.6.2, the words and terms defined in this section have the meanings given whenever used in this chapter or the MTPH. 12.2.2 Definitions 12.2.2.a Administrative official. Any Postal Service official designated by a contracting officer to supervise and administer the performance of mail transportation and related services by contractors. Officials so designated do not have the authority of contracting officer's representatives as described in 12.3.5. 12.2.2.b Advertised contract. A contract awarded through sealed bidding procedures (see 12.7). 12.2.2.c Bid. An offer submitted under sealed bidding procedures. 12.2.2.d Higher-level contracting authority. The next higher-level contracting authority for contracts awarded by Distribution Network and Headquarters contracting officers is the manager of National Mail Transportation Purchasing or is or her designee. 12.2.2.e Negotiated contract. A contract awarded using the procedures in 4.2 or 4.4, as they may be modified by this chapter. Section 3 Responsibility and Authority 12.3.1 Responsibility of Contracting Officers Contracting officers must: 12.3.1.a Ensure that all procurements subject to this chapter are made in accordance with the requirements of this chapter; and 12.3.1.b Maintain surveillance over all phases of procurement performance to ensure adequacy of organizational structure, staffing, and training. 12.3.2 Authority of Contracting Officers 12.3.2.a Contracting officers are authorized to enter into and administer contracts on behalf of the Postal Service for mail transportation and related services subject to the limitations specified in this section. Any contracting action in violation of the limitations prescribed is of no effect unless ratified by a contracting officer with the authority to perform the action. 12.3.2.b Only a contracting officer is authorized to commit the Postal Service contractually. 12.3.3 Requirements to Be Met Before Entering into Contracts Any solicitation or contract made using other than approved forms, and any novel or unusual procurement action, must be coordinated with the contracting officer's assigned counsel, and concurred in by the next-higher level of contracting authority. 12.3.4 Delegations of Authority Through the issuance of a Certificate of Appointment, the VP, P&M, or an individual delegated contracting officer appointment authority, appoints contracting officers, and delegates to them the authority to make, enter into, and approve advertised and negotiated regular, temporary, and emergency contracts of the modes specified in the Certificate. A contracting officer so appointed (that is, by the VP's Certificate of Appointment) may temporarily assign contracting authority to another individual within the Transportation organization. Unless otherwise specified, the appointment will be without dollar limitation. The appointment may not be redelegated. 12.3.5 Contracting Officer's Representative 12.3.5.a Designation. A contracting officer may designate, by name and position title, responsible employees as authorized representatives to take actions related to the award and administration of specified contracts. Employees so designated must be in the contracting officer's organization or an organization subordinate to the contracting officer. Designations must be in writing and evidenced by an appropriate certificate or authority. The designation must clearly specify the contracts or types of contracts over which the contracting officer's representative has authority. A designation of a contracting officer's representative remains in effect until: 1. Revoked by the contracting officer or the contracting officer's successor; or 2. Revoked by the departure or reassignment of the individual designated. 12.3.5.b Authority and Limitations 1. A contracting officer's representative may not be empowered to award, agree to, or sign any contract or, except as authorized in subparagraph 2 below, any contract modification or termination notice. Only the contracting officer may sign such documents. 2. A contracting officer's representative is authorized to: (a) Review and grant contract adjustments when the annual compensation paid under the contract will not be increased or decreased by more than ten percent. (b) Negotiate, approve, and sign orders and contract modifications changing service schedules, provided that the annual compensation paid under the contract will not be increased or decreased by more than ten percent; and (c) Review and sign contract modifications having no effect on cost or price. 12.3.5.c Restrictions. The following restrictions apply to the designation of contracting officer's representatives: 1. Contracting officer's representatives must be employed in the Executive and Administrative Schedule or the Postal Career Executive Service. 2. Contracting officer's representatives designated by a contracting officer at USPS Headquarters level must be employed in the same organization as the contracting officer. Contracting officer's representatives designated by other contracting officers must be employed in a capacity responsible for mail transportation procurement, contract administration, or logistics (including dispatch and routing). 3. Contracting officer's representatives may not redelegate their authority. They may, however, assign the performance of administrative tasks to their subordinates. Section 4 General Policies 12.4.1 Anticompetitive Practices In accordance with 1.8.2, any suspected anticompetitive practice must be reported through normal management channels (appropriate functional manager) to the manager of National Mail Transportation Purchasing. The manager of National Mail Transportation Purchasing must forward the report to the VP, P&M, with a recommendation as to whether the matter should be reported to the Inspection Service. 12.4.2 Procurement Planning There must be an annual review of anticipated procurements to identify high dollar value or complex requirements needing market research, individual plans, or source selection plans. Requirements and procedures for procurement planning, specifications, and source selection are contained in the MTPH. Proposal evaluation criteria must be established in accordance with 2.1.7.c. 12.4.3 Sources Section 1 of chapter 3 is not applicable. Mail transportation and ancillary services are procured from commercial sources under contract, with exceptions noted in 12.4.6.f. 12.4.4 Solicitation Mailing Lists 12.4.4.a Establishing Lists. The contracting officer must establish a list of potential offerors for each solicitation, and must maintain lists of potential sources for services solicited on a recurring basis. Those wanting to be included on mailing lists may apply by submitting Form 5436, Mailing List Application - Mail Transportation Services, or by letter providing the information required by the contracting officer. 12.4.4.b Retention on Lists. Offerors must be retained on mailing lists for two years from the date of their application or the date of their most recent response to a solicitation, whichever is later. Those that have been removed from mailing lists may be reinstated by filing a new application. 12.4.4.c Use of Mailing Lists. Mailing lists should be used in a way that will promote competition commensurate with the dollar value of the procurement. When the number of concerns on a mailing list is excessive for a particular procurement, the list may be reduced by the use of a presolicitation notice. A solicitation must be sent to any concern requesting it, whether on the mailing list or not. 12.4.4.d Presolicitation Notice. Before issuing a solicitation, the contracting officer may send a presolicitation notice to concerns on the mailing list for a procurement, seeking to identify those that are qualified and interested in responding to the solicitation. The notice should describe the service and equipment requirements, summarize applicable qualification requirements, announce any presolicitation conference to be held, and specify a date by which the notice must be returned to ensure inclusion on the solicitation mailing list. 12.4.4.e Presolicitation Conference. The contracting officer may hold a presolicitation conference when appropriate to explain complex or unusual requirements and to identify potential sources. The conference must be announced through a presolicitation notice or a "sources sought" notice. 12.4.4.f "Sources Sought" Notice. The contracting officer may publish a "sources sought" notice in the Journal of Commerce when there are not enough potential offerors on a mailing list to provide adequate competition. The notice should describe the service and equipment requirements, summarize applicable qualification requirements, announce any presolicitation conference to be held and request that a statement of capabilities and interest be returned by a specified date. 12.4.4.g Release of Mailing Lists. Solicitation mailing lists must be made available to the public in accordance with 1.7.3 and subchapter 350 of the Administrative Support Manual. However, no information concerning the use of lists in a particular solicitation, or identification of sources solicited, may be made available to the public prior to award. When it is necessary to dispatch identical information by means of electronic transmission to prospective bidders or offerors, the electronically transmitted message, when released for communications handling, must be marked "Book Message - Transmit a Single Address Message" to prevent addressees from learning the names of others solicited. 12.4.5 Publicizing and Distribution of Solicitations 12.4.5.a General. Solicitations for competitive procurements must be distributed and publicized in accordance with the requirements of this part 12.4.5. Section 2 of chapter 3 is not applicable, and no other PM requirements for publication of a notice in the Commerce Business Daily are applicable. 12.4.5.b Solicitation Notice. A solicitation notice must be issued for each solicitation, and must be posted in accordance with paragraph d below. The solicitation notice must describe the service and equipment requirements, summarize applicable qualification requirements, state the date and time set for receipt of bids or proposals, and tell how to obtain the complete solicitation package. 12.4.5.c Publicizing. The contracting officer may have an announcement of the solicitation published in the Journal of Commerce. Announcements of solicitations may be made available to newspapers, other news media and trade journals at no cost to the Postal Service. Paid commercial announcements or advertisements may be used when determined by the contracting officer to be in the Postal Service's interest. Unless precluded by urgency, any announcement published must appear at least 30 days before the date for receipt of bids or proposals. 12.4.5.d Posting 1. A solicitation notice must be posted for a minimum of 30 days before the date for receipt of bids or proposals, unless precluded by urgency. In case of urgency, the notice must be posted for a minimum of 15 days before the date for receipt of bids or proposals, and must contain a prominent notice stating: "Because of urgency, this notice will be posted for less than 30 days." 2. For highway or inland domestic water transportation services, the notice must be posted at the route termini, and at any intermediate points. For other modes, the notice must be posted at the facilities served, to the extent practicable, and at such other places as the contracting officer considers appropriate in the interest of obtaining competition. 12.4.5.e Distribution. The contracting officer must mail the solicitation, or a solicitation notice, to all potential bidders or offerors on the solicitation mailing list (see 12.4.4). The complete solicitation package must be mailed to (1) any incumbent contractor, whether that contractor is performing on a regular, temporary, or emergency contract; (2) any previous bidders or offerors, if the solicitation is a reissuance of a cancelled solicitation; and (3) those requesting the solicitation in response to a notice of availability. For treatment of concerns that are debarred, suspended, or ineligible, see 3.3.2.d. 12.4.6 Procurement Methods 12.4.6.a Contract Type. All mail transportation contract types must be one of those listed in 5.1. 12.4.6.b Contract Term 1. Except for air and terminal-handling contracts, the term of the contract must be one of the following: (a) Regular Contract. A fixed-term contract that cannot exceed four years unless warranted by special conditions or the use of special equipment. In these cases, the contract may be for a six-year term. (b) Emergency Contract. A contract entered into for the duration of an emergency under the authority of 39 U.S.C. 5001. (c) Temporary Contract. A short-term contract other than an emergency contract. It may not exceed two years, and may be terminated by either party without entitlement or indemnity. (d) Seasonal Contract. During periods such as the Christmas season, seasonal regular and temporary contracts may be awarded. The term of a seasonal contract may encompass less time than a regular or temporary contract. 2. Regular contracts must be used whenever possible. 3. Temporary contracts may be used only when (a) the need for the service is expected to be two years or less, or (b) the need for the service has been established, but the duration, frequency, or volume of mail are not certain. Temporary contracts must be replaced with competitively awarded regular contracts as soon as service requirements are firmly established. 4. Emergency contracts may be entered into only when an emergency exists, and must terminate when the emergency ceases and the Postal Service is able to obtain service otherwise pursuant to its contracting authority. Emergency contracts are awarded through competition and negotiation, or may be negotiated noncompetitively following the procedures in Management Instruction AS-710-95-7, Noncompetitive Purchases. No emergency contract may remain in effect more than six months without the approval of the next-higher level of contracting authority. Circumstances under which emergency contracts may be appropriate include the following: (a) A catastrophic event has interrupted normal transportation operations. (b) Strikes or other labor disputes are causing service interruptions. (c) A mail transportation contractor has been suspended or removed or a contract has been terminated. (d) A sole highway contractor has died or become incompetent and the estate representative will not continue service. (e) The generation of mail at unanticipated locations or an unexpected increase in mail volume at regular locations exceeds the mail hauling capacity of the Postal Service or regular contractors. 12.4.6.c Modes of Transportation. Transportation contracts are distinguished by the mode of transportation service provided. A contract for any mode of service may require container and additional service such as stevedoring, terminal handling, ground drayage between postal facilities and the contractor's facilities, and the like. The modes follow: 1. Air Transportation (a) Air Taxi. Air taxi contracts call for the transportation of mail by dedicated aircraft operating between two or more specified points. In most cases, these contracts also call for the exclusive utilization of the entire aircraft capacity for the transportation of mail. Air taxi contracts are entered into under the authority of 39 U.S.C. 5402(b). (b) Air Network. Air transportation network contracts call for the transportation of mail by air carrier, usually by dedicated aircraft between points where hub transfers are used. (c) Air Segment. Air transportation segment contracts call for the transportation of mail by air carrier between an origin and a destination specified by the Postal Service. (d) Air System. Air system contracts call for the transportation of mail to any point within the air carrier's existing transportation system or network. (e) International Surface Airlift. An international surface airlift contract calls for the international transportation of surface mail by United States or foreign air carriers operating from designated departure terminals in the United States, its territories or possessions to designated terminals in foreign countries. It is Postal Service policy to give preference to domestic air carriers. If an award is based on price or price- related factors, a foreign proposal adjustment factor of ten percent will be added to the lowest acceptable foreign proposal when it is evaluated against domestic proposals. The manager of National Mail Transportation Purchasing may specify a more stringent method of evaluating foreign proposals. (f) Surface Airlift. A surface airlift contract calls for the airlifting of surface mail to its destination. 2. Ground Transportation 3. Highway. Highway transportation is the surface transportation of mail by means other than bus, rail or water. Service may be between either two or more designated points (over the road) or within a local metropolitan area (shuttle service). Highway transportation contracts may include requirements for the in-route distribution of mail in specially designed and equipped vehicles, box delivery, collections and other services similar to those provided by rural carriers. Under these contracts, another suitable means of transportation may be authorized when the use of a motor vehicle would prove impracticable. (a) Rail Transportation. A rail transportation contract calls for the transportation of mail in railroad or highway equipment when the equipment is transported primarily by rail. These contracts may either cover a segment of the particular rail service or may cover the entire rail system or network. (b) Bus. Bus contracts call for the transportation of mail by passenger common carriers in passenger-carrying or other motor vehicles on the routes on which they are permitted to carry passengers. These contracts may either cover a segment of the particular bus service or may cover the entire bus system or network. International Ocean Transportation Schedule of Rates Distance (Nautical Miles) Rate(cents/lb) 0-499 16.0 500-999 16.4 1,000-1,499 16.7 1,500-1,999 17.1 2,000-2,499 17.4 2,500-2,999 17.8 3,000-3,499 18.1 3,500-3,999 18.4 4,000-4,499 18.8 4,500-4,999 19.1 5,000-5,499 19.5 5,500-5,999 19.8 6,000-6,499 20.2 6,500-6,999 20.5 7,000-7,499 20.8 7,500-7,999 21.2 8,000-8,499 21.5 8,500-8,900 21.9 9,000-9,499 22.2 9,500-9,999 22.6 10,000-10,499 22.9 10,500-10,999 23.2 11,000-11,499 23.6 11,500-11,999 23.9 12,000-12,499 24.3 12,500-12,999 24.6 13,000-13,499 25.0 13,500-13,999 25.3 14,000-14,499 25.7 14,500-14,999 26.1 International Ocean Transportation Schedule of Rates Exhibit 12.4.6 4. Water Transportation (a) Domestic Inland Water. A domestic inland water contract calls for the transportation of mail in vessels between points within the 48 contiguous states or between points within Alaska, Hawaii, or United States territories and possessions. Such a contract may include provisions requiring box delivery, collection and other services similar to those furnished by highway contractors or rural carriers. (b) Domestic Offshore Water. Domestic offshore water contracts call for the transportation of mail in vessels between points in the 48 contiguous states and offshore points and points in Alaska, Hawaii, or United States territories and possessions. (c) International Ocean. An international water contract is a contract with United States or foreign-flag carriers for the transportation of mail by vessel from points in the United States or its territories and possessions to points in foreign countries. 5. Terminal Handling. Terminal handling contracts call for the sorting, dispatching, loading, or unloading of mail into and out of transportation equipment. These services may be performed at the contractor or the Postal Service terminal handling facility and are ancillary in nature to the line-haul services performed by other contractors. 6. Leased Trailer. Leased trailer contracts call for the lease of trailers for transportation of mail within geographical areas designated by the Postal Service. These contracts may contain provisions for trailer maintenance and repair service and load restraint systems. 12.4.6.d Procedures 1. Competitive Procedures. Contracts may be entered into using the negotiation procedures listed in 4.2 as modified in this chapter and by sealed bidding under the procedures in 12.7. Contracts awarded using these procedures are competitively awarded. 2. Noncompetitive Procedures. Noncompetitive procurements must be justified in writing and approved in accordance with Management Instruction AS-710-95-7, Noncompetitive Purchases. 3. Limited Competitive Procedures. With the approval of the next higher-level of authority, contracting officers may solicit sealed bids for additional service exclusively from contractors currently serving common termini, providing service to the same intermediate points, from contractors affected by Postal Service operational changes, or from transportation companies with special security clearances. 12.4.6.e Discussions. In conducting discussions regarding surface or air contracts involving multiple segments, when segments are evaluated individually or discussions with offerors are conducted sequentially, cut-off dates for receipt of best and final offers (see 4.2.5.g.4) may be staggered to reflect the sequence of discussions. 12.4.6.f Alternatives to Contracts 1. Domestic Air Transportation. Transportation of mail between points within the state of Alaska performed by scheduled air carriers and paid for at rates of compensation established by the Department of Transportation in its service mail rate orders. 30 U.S.C. 5402(f). 2. International Ocean Transportation. International ocean transportation services may be obtained on a per-pound basis by tender. Mail of all classes and empty mail equipment may be tendered to U.S. and foreign-flag steamship companies for transportation in accordance with the scheduled rates at Exhibit 12.4.6, unless the responsible Manager has negotiated other rates. Mail may be tendered at postal facilities for transport by the steamship company to the pier, or at the carrier's facility. The schedule or negotiated rates include any costs incurred for such transport. 3. International Air Transportation. International air transportation services other than those for which the Postal Service has contracting authority under Title 39 U.S.C. 5402(a) and (b) and 49 U.S.C. 1375(e)(5) must be obtained from certificated carriers and reimbursed pursuant to Department of Transportation service mail rate orders. 4. Set-Rate Ordering Agreements. Set-rate ordering agreements are used when a number of contractors agree to provide specified services at a common rate established by the Postal Service. These agreements may be established as unpriced or prepriced BPAs (see 4.3.5) or as discussed in 5.1.8, and the contracting officer should order services using the most advantageous delivery terms under the circumstances. 12.4.7 Mistakes in Bids or Proposals Procedures for considering mistakes in sealed bids before and after award are set forth in 12.7.6. The procedures in 4.2.3 apply to mistakes in proposals; for mistakes in proposals asserted after award, see 6.5.1.g. 12.4.8 Protests In addition to the requirements of 4.6, the contracting officer must do the following: 12.4.8.a Furnish a copy of any protest filed with the contracting officer or the General Counsel, with any accompanying or additional documents received in the course of the protest, to the responsible functional Manager, and the Manager, Transportation Policies and Procedures. 12.4.8.b Obtain the concurrence of the responsible functional Manager, and the VP, Transportation, before determining a protest to be without merit. 12.4.9 Small, Minority-owned and Woman-owned Businesses Contracting officers must encourage the participation of small, minority-owned and woman-owned businesses in accordance with 10.1 (except 10.1.4.c) and current Postal Service policy directives. 12.4.10 Renewal of Contracts 12.4.10.a General. Competitively awarded regular and temporary mail transportation contracts including seasonal contracts (see 12.4.6.b.1) may be renewed in accordance with this section by the mutual agreement of the Postal Service and the contractor. Emergency contracts (see 12.4.6.b.1) and regular or temporary highway and inland water contracts that have been wholly subcontracted less than six months before their expiration date (except those subcontracted by an immediate family member of a deceased or incompetent contractor) may not be renewed. Wholly subcontracted contracts that are eligible for renewal may be renewed by agreement between the Postal Service and the subcontractor, by which the subcontractor becomes the prime contractor under the renewal contract. 12.4.10.b Characteristics of Renewal Contracts 1. Duration. The renewal term of a temporary contract may not exceed two years, and the renewal term of a regular contract may not exceed the greater of four years or the original contract term. 2. Service. The service provided at the beginning of the renewal term must be that existing at the end of the previous contract term. 3. Contract Rate. The contract rate at the beginning of the contract term must be the contract rate in existence at the end of the previous contract term. 12.4.10.c Procedures for Renewal 1. Establishing Requirements. Before entering into negotiations for the renewal of a contract, the contracting officer must determine the need to be met by the renewal contract and a reasonable rate for the service which will meet that need. 2. Determining Satisfactory Service. Contracting officers should not renew contracts with contractors who are currently providing less than satisfactory service. Faults in service which do not rise to the level of deficiencies which would justify termination for default may be sufficient to support a determination not to renew. 3. Negotiating Service and Price. Having determined that a contract is appropriate for renewal, the contracting officer enters into negotiations with the contractor on the terms of the renewal contract. Before agreeing to the terms arrived at in negotiation, the contracting officer must determine that renewal offers the best value and most advantageous alternative to the Postal Service, price and other factors considered. For the purpose of this determination, "other factors" may include the benefits of continuity of service and the potential costs of disruption arising out of resolicitation. 4. Contract Modifications, Renewal, Resolicitation. If agreement is reached on the renewal terms (and, in the case of temporary contracts, the next higher-level of contracting authority is obtained), the existing contract is modified to reflect any adjustments in service and rates before the contract is renewed. If a contract will not be renewed, or terms for renewal cannot be agreed upon in whole or in part, any continuing service requirement may be the subject of a new competitive solicitation. 5. Documentation. The determinations made throughout the renewal process must be thoroughly documented in the contract renewal file. 12.4.10.d Restrictions. Emergency contracts may not be renewed. 12.4.11 Extension of Contracts 12.4.11.a A contract modification extending the term of a contract, as distinct from the renewal of a contract (see 12.4.10), is authorized when determined appropriate by the contracting officer. 12.4.11.b The contract term may be extended in increments of up to 180 days, provided the extension does not result in a total term of more than two, four, or six years, whichever is the allowable maximum contract term. The extension must be made with the consent of the contractor by a supplemental agreement (see 6.5.1.c), and the need for the extension must be documented in the contract file. 12.4.11.c Pending full renewal in accordance with 12.4.10, an expiring contract that is eligible for renewal may be renewed for short terms of up to one year by agreement of the parties. The renewal must be made with the consent of the contractor by a written contract modification. When the full renewal is approved, the short-term renewal may be converted into a full-term renewal to cover the full remaining term of the contract. 12.4.12 Contract Changes 12.4.12.a General 1. Contracting officers may take action to discontinue, extend, or curtail contracts; to change and restate service required; and to increase or decrease frequencies. 2. The contracting officer must carefully consider the effect of any proposed contract change. The contracting officer may not authorize any change contingent on or related to a change in another contract service without the concurrence of the contracting officer responsible for the other service. 12.4.12.b Termination for Convenience 1. A contract, or any part of a contract, must be terminated if it becomes unnecessary or if it is to be superseded by some other service. The contracting officer must provide notice in writing to the contractor. The contractor is entitled to the indemnity provided in the contract. If it is more advantageous to operate than to pay the indemnity, the service should be continued. 2. Discontinuance of service under the contract may, in some instances, be to the advantage of the contractor. In these instances, if the contractor is willing to waive the indemnity, the waiver must be included in a contract modification discontinuing the service. In the case of highway or inland domestic water routes, the waiver must be included in a supplemental agreement signed by the contractor. 3. It is the policy of the Postal Service to furnish contractors as much advance notice as possible when a contract is to be terminated before the end of its term. Specific requirements for notice may be stated in the contract. A contractor may be notified by letter of intent to discontinue in advance of issuing a formal notice. In the case of highway or inland domestic water routes, the termination notice must indicate that the termination may be appealed to the next-higher level of contracting authority. 12.4.12.c Service Changes 1. Highway or Domestic Inland Water Contracts (a) Types. There are two general types of service changes: minor service changes and major service changes. They are effected by contract modification. (b) Definitions (1) Minor Service Change (i) A minor service change is any change that results in a change in equipment type or termini; an extension; a curtailment; a change in line of travel; or a permanent increase or decrease in the frequency or number of trips which, either individually or in combination with previous changes, does not increase by more than 100 percent the mileage required at the beginning of the contract or renewal term. (ii) An insignificant minor service change is one that increases or decreases the contractor's rate of pay by no more than $1,000. (iii) A significant minor service change is one that increases or decreases the contractor's rate of pay by more than $1,000. (2) Major Service Change. A major service change is any service change other than a minor service change. (c) Effecting Service Changes (1) Insignificant Minor Service Change. Insignificant minor service changes resulting in increased compensation to the contractor may be ordered by the contracting officer as a unilateral contract modification (see 6.5.1.c.2). They do not require the contractor's approval. The contracting officer may authorize an equitable increase in compensation at the existing rate or at such other rates as the contracting officer determines to be fair and reasonable. If the contractor considers the amount of increase inequitable, the contracting officer must attempt to negotiate a mutually agreeable increase and incorporate it by contract modification. If time permits, the contracting officer may discuss the change and increase in compensation with the contractor; if an agreement on compensation is reached, the change may be made by contract modification. If agreement cannot be reached, the contracting officer may issue a unilateral contract modification and determine the amount of increased compensation, subject to the Claims and Disputes Clause. (2) Significant Minor Service Change. Significant minor service changes are made by contract modification, incorporating a price adjustment, with the agreement of the contractor. (3) Major Service Change. Major service changes are negotiated with the contractor and effected by contract modification. The contracting officer must obtain the approval of the next higher-level of contracting authority, before negotiating major service changes. When determining whether or not to recommend or approve the negotiation of a major service change, the contracting officer and the next higher-level of contracting authority must take into consideration indemnity liability, the contractor's experience in operating a service of the scope required, past performance, rate, and any factors that would indicate the proper course of action to take in the best interests of the Postal Service. When a major service change is not approved by the next higher-level of contracting authority, the old service may be terminated and the new service procured. 1. Other Surface Contracts and Air Contracts. Service changes for contracts other than those discussed in subparagraph c.1 above may be made, consistent with the terms of the contract, provided that these changes do not: (a) Alter the original intent of the contract; or (b) Transform the service into an entirely new service. 12.4.12.d Exceptional Service 1. Exceptional service is additional service to perform scheduled or backup route operations (such as extra trips, detour miles, and additional equipment). Exceptional service may be required only when an unanticipated increase in mail volume or other conditions arise that require the performance of additional service or equipment. 2. Whenever feasible, contracting officers should negotiate with contractors to establish the rate to be paid for exceptional service before its performance. When negotiation in advance would delay the mail or otherwise not be feasible, the contracting officer or a designated representative may order the contractor to perform such service at pro-rata pay. 3. If no rate of pay for exceptional service has been negotiated in advance, the contractor may be paid a lump sum reimbursement for the difference between costs incurred as a direct result of performing exceptional service and pro-rata payment, provided that such costs are adequately supported by evidence satisfactory to the contracting officer. Claims for compensation above pro-rata pay for exceptional service must be filed in writing with the contracting officer, with full supporting documentation, no later than 90 days after the performance of the service. 4. Disputes regarding compensation are handled as provided in the Claims and Disputes clause. 12.4.12.e Schedule Changes for Highway or Domestic Inland Water Contracts 1. Improvement of mail service must be the primary consideration in ordering a schedule change. Schedules may not be changed for the convenience of contractors, subcontractors, or drivers unless the change will in no way be detrimental to the Postal Service. The contracting officer must consider the following before making schedule changes: (a) Financial effect on the contractor. Reversing a schedule or requiring an excessive layover might cause sufficient increase in cost of operation to provide the basis for a request for pay adjustment. (b) Hardship on contractors or customers. Arbitrary action should be avoided and reasonable effort should be made to work out arrangements satisfactory to contractors. (c) Schedule realism. Schedules may not be set that would require running times in violation of established speed limits. 2. The contracting officer must ensure that schedule changes are coordinated with all those responsible for other affected services. 12.4.12.f Emergency Contracts. The service and rate of compensation under emergency contracts may not be changed unless specifically authorized in the contract or by the next-higher level of contracting authority. 12.4.13 Subcontracting 12.4.13.a Highway or Domestic Inland Water Contracts 1. A subcontract for the transportation of mail is any agreement, other than an employer-employee agreement, between a party that has contracted with the Postal Service to transport mail and a third party, in which the latter agrees to provide all or part of the contract service. An employer-employee agreement is one under which the employee is subject to the continuing authority of the mail contractor to supervise and direct the manner of work performance of the employee. Such an employer-employee agreement is also characterized by, expressly or implied, the employer's responsibility to pay compensation directly to the employee, to withhold taxes and amounts for social security benefits from the employees' compensation for the work performed under the agreement. An agreement between a contractor and a third party for the latter to provide labor for service other than the transportation of mail is not a subcontract within the meaning of this section. When an owner-operator, who because of illness or temporary equipment failure, is required to obtain labor from another in order to continue performance of the service as required by the contract, the resultant transaction is not a subcontract within the meaning of this section. 2. A contractor may, without approval of the contracting officer, subcontract the whole or part of the contract with one or more owner-operators who provide and drive their own vehicles, provided that the service is for irregular mail movements such as plant loads. All other subcontracts, for either the whole route or any part of it, must be approved by the contracting officer. 3. Subcontracting is an exceptional action and may be approved only when the contractor offers good and sufficient reasons. The contractor must request permission to subcontract in writing, giving the contracting officer its reasons for subcontracting, the desired effective date, and the identity and qualifications of the proposed subcontractor. 4. Approval by the Postal Service and execution by a contractor of a subcontract does not release the contractor from its contractual obligations, nor from liability for damages. 5. Whenever the contracting officer determines that a contractor has breached the contract by subletting the whole or part of the contract contrary to the requirements of this manual, the contracting officer may terminate the contract for default. 6. Subcontractors must meet the same responsibility and qualification requirements as the prime contractor. 7. If the whole contract is subcontracted, the subcontract must be for the full remainder of the contract term. The subcontractor's initial rate of pay will be the same as the contractor's, unless there is a change in operations costs resulting from a service change or from the enactment of a statue or ordinance or the adoption of lawful regulations by any federal, state, or local agency. No further increased operation costs may be recognized as the basis for adjusting compensation during the first seven accounting periods after the effective date of the subcontract. 8. When a subcontract is terminated, the prime contractor may be required to take charge of the route. A subcontract may be terminated at the subcontractor's request only with the prior approval of the contracting officer. Such approval may be given only for good cause, and must be in writing. Subcontracts are automatically terminated by death of the subcontractor or abandonment of the service by the subcontractor. 9. When a subcontractor fails to meet the terms of a contract, the contracting officer must notify the prime contractor of the subcontractor irregularities. The contracting officer may (1) require removal of the subcontractor for failure to perform, and require the prime contractor to resume route operations, (2) terminate the prime contract for default. 12.4.13.b Other Surface Contracts and Air Contracts. For other surface contracts and air contracts whose terms permit subcontracting, the contractor must give the contracting officer advance notice of its intent to subcontract. The contractor may enter into a subcontract unless notice of disapproval is received from the contracting officer within 30 days of the date the notice was given. 12.4.14 Release of Contractor In the case of highway or domestic inland water contracts, when the contract officer determines that it is in the best interest of the Postal Service, a contractor may be released from a contract if unable to perform adequately due to a disability, or when the contractor's life or the public safety would be endangered by the contractor's continued performance. Whenever practicable, a replacement contract should be awarded before the current contractor is released. The contractor must waive any indemnity as a condition of release. For other than highway or domestic inland water contracts, a contractor may be released only as provided in the terms of the contract. 12.4.15 Service Deficiencies 12.4.15.a Damages. The contracting officer may make deductions from the compensation due contractors for failure to perform contractually required service, and may assess damages for delinquencies with regard to any contractual requirements as provided in the terms of the contract. The contracting officer may also change or remit deductions and damages. Contractors are also answerable in damages to the Postal Service for the proper care and transportation of the mail. Such damages, as determined by the contracting officer, may be withheld by the Postal Service from compensation otherwise due the contractor. Contractors are accountable to the Postal Service for loss or damage to the mail or any part thereof due to (1) loss, rifling, damage, wrong delivery, depredation, or other mistreatment of the mail by the contractor or any of the contractor's officers, agents, or employees, or (2) the failure of the contractor or any of the contractor's officers, agents, or employees to exercise due care in the custody, handling, or transportation of the mail. 12.4.15.b Breach Not Warranting Termination. When a contractor has committed a breach of the contract not sufficiently serious to warrant termination, the contractor may be assessed damages in an amount determined by the contracting officer, in accordance with the terms of the contract. 12.4.15.c Loss or Damage to Mail. When a contractor, or contractor's agent or employee, permits loss or damage to the mail, the contracting officer may withhold from the contractor's compensation as damages the value of the mail lost or damaged plus administrative costs of handling the irregularity. 12.4.15.d Contractor with Several Contracts. When a contractor holding several contracts is subject to a fine or assessment for damages on one contract, the contracting officer may withhold compensation due under other contracts held by the contractor until such fines and damages have been recovered. 12.4.16 Death or Incompetence of Contractor 12.4.16.a Individual. The procedures below are to be followed upon the death or legally adjudged incompetence of an individual contracting in his or her own name (sole proprietorship), or in the name of a corporation all of whose stock is substantially owned by the individual (closely-held corporation). These procedures do not apply when the death or incompetence of an owner or officer of a corporation does not significantly impair the corporation's ability to perform the contract service. 1. The contracting officer must act to maintain continuity of service. If a prime contract is affected, the representative of the estate (administrator, executor, or immediate family member) must be contacted to ascertain whether the estate wishes to continue to perform the service. If a subcontract is affected, the subcontract may be terminated and the prime contractor is responsible for performance of the service. 2. The death of a sole proprietor terminates the contract, and the estate has no obligation to continue to provide the service. 3. The representative of the estate may operate the route with the consent of the contracting officer. If there is reason to deny consent, the contracting officer must promptly submit a full written report to the next-higher level of contracting authority for determination. The contracting officer must document the file with evidence of the representative's authority to represent and assume control of the contractor's business. 4. When an individual regains competence during the performance of the contract by a representative, the individual may apply to the contracting office for reinstatement as contractor. Any such application must be approved at the next-higher level of contracting authority before reinstatement. 12.4.16.b Partnership. When the contractor is a partnership, and the death or incompetence of a member of the partnership dissolves the partnership, the surviving partner or partners may continue to operate the route. At the request of the surviving partner or partners, the contracting officer will order a simple name change to recognize the new contracting entity. 12.4.16.c Administration 1. When the representative of an estate assumes a route, the contract rate remains the same. Pending pay adjustment requests are processed under instructions in effect at the time of adjustment. The operator of the route is entitled to all benefits of the adjustment. 2. The representative of an estate may subcontract all or part of the route in accordance with 12.4.13. 3. If a contract expires while being performed by the representative of an estate, the contract cannot be renewed, unless the representative is the surviving spouse or child of the deceased, in which case the contract may be renewed in that individual's name. 4. If the representative of an estate does not want to continue the service, or if consent is denied for the representative to continue the service, the contracting officer must procure emergency service and issue a solicitation for a new contract for permanent service. 5. Procedures for processing payments to deceased or incompetent contractor are described in the MTPH. Section 5 Contractor Qualifications 12.5.1 Eligibility Requirements for Contractors 12.5.1.a Any individual 21 years of age or older, any partnership in which at least one partner is 21 years of age or older, and any corporation in which at least one of the officers is 21 years of age or older may hold contracts entered into under this chapter. 12.5.1.b See 1.7.3 for restrictions concerning contracts with Postal Service employees and business organizations substantially owned or controlled by Postal Service employees or their immediate families. 12.5.1.c Solicitations may establish other eligibility requirements as needed. 12.5.2 Service Employees 12.5.2.a The following persons are ineligible to perform services under a contract: 1. Persons on parole or under suspended sentence for commission of a felony. 2. Persons with known criminal records that involve convictions for offenses involving moral turpitude or dishonesty. 3. Persons who associate with convicted felons. 4. Persons known to engage in the illegal use, possession, sale, or transfer of narcotics or other drugs. 5. Persons who knowingly submit false data or conceal data for the purpose of gaining employment. 6. Persons whose traffic records indicate that their driving motor vehicles would be hazardous (applies only to drivers and assistants). 7. Pilots with unsatisfactory aircraft-operations safety- performance records. 8. Persons who through their abusive or disruptive behavior would pose a danger to fellow workers. 12.5.2.b Contractor employees engaged in the performance of services under a contract must meet the following requirements: 1. Drivers of vehicles with a GVW of 10,000 lbs. or more must be at least 21 years old. All other drivers must be at least 18 years old. 2. Employees other than drivers must be of suitable age for the duties required. 3. They must be of good character, reliable, and trustworthy. 4. They must be sufficiently educated to enable them to perform all required duties in a satisfactory manner. 12.5.3 Screening 12.5.3.a No contractor, subcontractor, or employee of a contractor or subcontractor may be allowed access to mail matter or postal operational areas unless he or she displays a valid identification card issued by the Postal Service. 12.5.3.b Except for those categories of persons identified in paragraph c below, the Postal Service will not issue the identification cards described above to individuals until they have been screened to determine their suitability for that access. Forms and procedures for screening are as set forth in the MTPH and in any applicable Management Instruction. 12.5.3.c Exceptions 1. Persons employed by contractors whose own security screening procedures have been approved by the contracting officer and reviewed by the Inspector-in-Charge. 2. Persons who are civil service personnel otherwise subject to investigation under Executive Order 10450. 3. Persons previously screened under another contract with a break in service of less than one year. 4. Persons hired for service in an emergency of not more than 15 days. (This does not exempt regular relief or substitute employees or those repeatedly hired on an emergency basis.) 5. Persons employed to transport plant-load mail, but only if such mail is not generated with regularly recurring frequency. 12.5.3.d The contracting officer will notify the contractor of the grounds on which any person has been denied access to the mails under the procedure set out herein. 12.5.3.e Any decision as to whether a contractor, subcontractor, or contract or subcontract employee is to be denied access to the mail or precluded from operating a vehicle transporting mail must be made by the contracting officer in accordance with the eligibility requirements of 12.5.1 and 12.5.3. 12.5.3.f All information obtained or developed in the screening program must be restricted from disclosure outside the Postal Service to anyone other than the contractor, subcontractor, or contract or subcontract employee concerned. Section 6 Contract Administration 12.6.1 General The contracting officer is responsible for monitoring contract performance in a manner appropriate to ensure that the contractor provides all services and equipment required under the terms of the contract (see 6.1.2). 12.6.2 Unsatisfactory Service The contracting officer must take necessary action to correct any problem caused by unsatisfactory contractor performance. If the remedies and damages provided in 12.4.15 are insufficient, termination for default should be considered. 12.6.3 Major Irregularity A major irregularity is an action or service deficiency requiring summary suspension or removal of the contractor in the public interest (such as subcontracting without approval, or theft, deliberate loss, damage, or abandonment of the mail or contract operation). When a major irregularity occurs, the contracting officer may take immediate suspension or removal action, without prior notice to the contractor. Suspension may be with or without pay, as provided in the contract. Section 7 Advertised Contracts 12.7.1 General This section contains special requirements for advertised contracts. The procurement of mail transportation services by advertising for sealed bids is usually appropriate when the specifications are clear and uncomplicated and a fixed-price contract will be awarded on the basis of the lowest evaluated price submitted by a responsible bidder whose bid is responsive to the terms of the solicitation. Advertised procurement may not be used when only one source is known to be available in the geographic area covered by the transportation requirement to be solicited. The contracting officer must document the file showing that only one source is available. 12.7.2 Disclosure of Procurement Information 12.7.2.a Before Solicitation. Information concerning proposed procurements must not be released outside the Postal Service before solicitation of bids, except for information disclosed in resolicitation notices, "sources sought" notices, or presolicitation conferences (see 12.4.4.d-f). Within the Postal Service, such information must be restricted to those having a legitimate interest. 12.7.2.b After Solicitation 1. After issuance of a solicitation, only the contracting officer, the contracting officer's superiors having contractual authority, and others they specifically authorize may communicate or transmit information concerning the solicitation. 2. Any information given to a prospective bidder concerning a solicitation must be furnished promptly to all other prospective bidders as an amendment to the solicitation, if the information is needed for the preparation of bids or if lack of it would be prejudicial to uninformed bidders. 3. General information that would not give any prospective bidder an advantage over others may be furnished upon request, such as an explanation of a clause, a procedural requirement, or a provision of the solicitation. If it becomes apparent that an ambiguity must be clarified or an error corrected, the solicitation must be amended. 12.7.3 Solicitations 12.7.3.a Forms. Solicitations must be issued using Form 7435, Solicitation for Transportation Services Contract. A solicitation package, consisting of the solicitation and all specifications, forms, and informational documents needed to enable the preparation of a responsive bid, must be furnished to any prospective bidder upon request (see 12.4.4 and 12.4.5). 12.7.3.b Contents. Solicitations must contain the following information, as applicable, and any other information needed for a particular procurement: 1. Solicitation number, date of issuance, and name and address of issuing activity. 2. Date, hour, and place of opening. 3. Specifications describing the services and equipment to be furnished, and delivery or performance requirements. 4. Permission, if any, to submit telegraphic bids (see subparagraph d.1 below). 5. A notice that bids may not allow less than 60 days for acceptance, using a provision substantially as follows: Bid acceptance period. Bids offering less than 60 days for acceptance by the Postal Service from the date set for opening will be considered nonresponsive and will be rejected. 6. A statement of any special bidder qualification requirements. 7. Directions for obtaining any specifications or other documents incorporated by reference. 8. Place, methods, and conditions of inspection by the Postal Service. 12.7.3.c Bidding Time. Consistent with Postal Service needs, all solicitations must allow sufficient time between the date of issuing a solicitation and the date and time set for receipt of bids to permit prospective bidders to prepare and submit bids. Except in cases of urgency, bidding time should be no less than 30 days. 12.7.3.d Telegraphic and Facsimile Bids 1. Telegraphic Bids. When the bidding time will not allow sufficient time for bidders to prepare and submit bids on the prescribed forms, telegraphic bids may be authorized. When telegraphic bids are authorized, the solicitation must contain the following provision: Telegraphic bids. Telegraphic bids may be submitted in response to this solicitation. Telegraphic bids must be received in this office not later than the date and time specified for receipt of bids. Such bids must specifically refer to this solicitation; must include the item or sub-items, quantities, and unit to this solicitation; must include the item or sub-items, quantities, and unit prices for which the bid is submitted and the time and place of delivery; and must contain all the representations and other information required by the solicitation together with a statement that the bidder agrees to all the terms, conditions, and provisions of the solicitation. Failure to furnish, in the telegraphic bid, the representations and information required by the solicitation may result in rejection of the bid. Signed bids on the prescribed forms must be furnished in confirmation of telegraphic bids. 2. Facsimile Bids. The electronic transmission of bids, bid modifications, and withdrawals of bids to the purchasing office by facsimile equipment are not authorized. Electronically transmitted bids, bid modifications, and withdrawals of bids that are hand-delivered to the purchasing office may be accepted, provided that signed forms are furnished in confirmation. 12.7.3.e Amendment of Solicitations. If it becomes necessary to make changes in a solicitation in matters such as specifications, delivery requirements, or date for receipt of bids, or to clarify or correct ambiguities or defects, a solicitation amendment must be issued. A solicitation amendment must be issued in sufficient time to permit bidders to consider it in submitting or modifying their bids. When it is necessary or desirable to give preliminary notification of a change by telephone or telegram, confirmation by written amendment must follow. The amendment must be sent to all prospective bidders that received the solicitation, and must be posted in the bid room and the same places as the solicitation. 12.7.3.f Cancellation Before Opening. A solicitation may not be canceled unless cancellation is necessary in the interest of the Postal Service, as when there is no longer a requirement for the services, or when amendments to the solicitation would be of such magnitude that a new solicitation would be preferable. A notice of cancellation must be sent to all prospective bidders receiving the solicitation, explaining the reasons for cancellation. Any bids received must be returned to the bidders unopened. 12.7.4 Bids 12.7.4.a Responsiveness. To be considered for award, bids must comply in all material respects with the solicitation requirements. Bids must be completed, signed, and submitted in accordance with instructions contained in the solicitation. 12.7.4.b Time of Submission. Bids must be submitted so as to be received in the office designated in the solicitation not later than the exact time set for receipt of bids. When telegraphic bids are authorized, a telegraphic bid received in the designated office by telephone from the receiving telegraph office not later than the time set for receipt of bids may be considered if such bid is confirmed by the telegraph company by sending a copy of the telegram that formed the basis for the telephone call. 12.7.4.c Late Bids. Bids received in the office designated in the solicitation after the exact time set for receipt are late bids, and may be considered for award only in the following circumstances (as provided in the Late Submissions, Modifications, and Withdrawals provision of the solicitation): 1. Bids and modifications or withdrawals of bids received at the office designated in the solicitation after the exact hour and date specified for receipt will not be considered unless they are received before award is made and either: (a) They were sent by registered or certified mail not later than the fifth calendar day before the date specified for receipt; (b) They were sent by Express Mail service (post office to addressee) not later than the second calendar day (excluding Saturdays, Sundays, and federal holidays) before the date specified for receipt; or (c) They were sent by mail (or telegram if authorized), or delivered by other means to the precise depository prescribed in the solicitation, and it is determined by the contracting officer that the late receipt was due solely to mishandling after receipt by the office designated to receive bids. 2. The only acceptable evidence to establish: 3. The date of mailing under 1(a) above is a legible, original postmark supplied and affixed on the date of mailing by Postal Service employees on the bid wrapper or on the original receipt given therefor; (a) The date of mailing under 1(b) above is the date entered on the Express Mail label by the post office receiving clerk; or (b) The time of receipt under 1(c) above is the date/time stamp of the receiving activity on the bid wrapper or other contemporary, documentary evidence of receipt maintained by the activity. 4. Notwithstanding the above, a modification of an otherwise successful bid that makes its terms more favorable to the Postal Service will be considered at any time it is received and may be accepted. 12.7.4.d Notification of Late Bidders. When a late bid is received and it is clear that under paragraph c above it cannot be considered for award, the contracting officer must promptly notify the bidder that it was received late and will not be considered. However, when a late bid is transmitted by registered or certified mail or Express Mail service and is received before award, but it is not clear from available information whether it can be considered, the late bid must be left unopened and the bidder must be promptly notified that the bid cannot be considered for award unless the contracting officer receives: 1. In the case of registered or certified mail, the original post office receipt showing a date of mailing not later than the fifth calendar day before the date specified for receipt; or 2. In the case of Express Mail post office to addressee service, the Express Mail service customer receipt endorsed by the post office receiving clerk to show a date of mailing not later than the second calendar day (excluding Saturdays, Sundays, and federal holidays) before the date specified for receipt. 12.7.4.e Disposition of Late Bids. A late bid that is not being considered for award must be held unopened until after award and then returned to the bidder (unless other disposition is requested or agreed to by the bidder). However, an unidentified late bid may be opened solely for purposes of identification as provided in paragraph i below. 12.7.4.f Late Bid Record. The following must, if available, be included in the solicitation file for each late bid: 1. The date and hour of mailing or filing. 2. The date and hour of receipt. 3. A determination of whether or not the late bid was considered for award, with supporting facts. 4. A statement of the disposition of the late bid. 5. The envelope, or other evidence, if the late bid was considered for award. 12.7.4.g Modification or Withdrawal of Bids 1. Bids may be modified or withdrawn by written or telegraphic notice submitted so as to be received in the office designated in the solicitation not later than the exact time set for the receipt of bids. A telegraphic modification or withdrawal of a bid received in the designated office by telephone from the receiving telegraph office not later than the time set for the receipt of bids may be considered if the telephone message is confirmed by the telegraph company by sending a copy of the telegram that formed the basis for the telephone call. Modifications received by telegram, including a record of those telephoned by the telegraph company, must be sealed in an envelope by a representative of the contracting officer, who must write on the envelope the date and time of receipt and by whom, the solicitation number, and his or her signature. No information concerning modifications or withdrawals of bids may be disclosed before the date and time set for the receipt of bids. 2. A bid may be withdrawn in person by a bidder or the bidder's authorized representative, provided his or her identity is made known and he or she signs a receipt for the bid, but only if the withdrawal is before the exact time set for receipt of bids. 12.7.4.h Late Modifications and Withdrawals. Modifications and withdrawals of bids received in the office designated in the solicitation after the exact time set for the receipt of bids are late and subject to the rules for late bids in paragraph c above. However, a late modification of the otherwise successful bid must be opened whenever received; if the late modification makes the terms of the bid more favorable to the Postal Service, it must be considered. Notification of bidders sending late modifications and withdrawals must be given in the same manner as for late bids (paragraph d above). 12.7.4.i Unidentified Bids. Whenever an unidentified or incorrectly identified envelope is found to contain a bid, the person opening the bid must immediately deliver it to a bid custodian (see paragraph j below). The custodian must (1) write on the envelope an explanation of the opening, the date and time opened, and the solicitation number; (2) sign the envelope and reseal it; and (3) place it in the bid storage container. 12.7.4.j Receipt and Safeguarding of Bids. The contracting officer must designate two responsible Postal Service employees who perform little or no travel, and who are not responsible for day-to-day administration of contracts, to receive and maintain custody of bids before their release to the opening committee. A suitable container with key or combination lock must be used to store the bids. Access to the container must be restricted to the two custodians, one of whom must: 1. Note the time of receipt and the solicitation expiration date on the bid envelopes. If envelopes are received damaged or open, seal them and mark damaged or open when received, as appropriate. If tampering is indicated, submit the facts with the envelope to the postal inspector in charge. When envelopes are not properly endorsed, open them and determine the intended solicitation, reseal, and complete the envelope endorsement. If outer envelopes are marked to indicate that they contain bids for several solicitations, open them and complete the envelope endorsement for each bid on its inner envelope. Place all envelopes in the locked container. 2. Prevent unauthorized opening of envelopes endorsed as containing bids and the disclosure of bids while in their custody. 3. Not accept bids presented in person unless sealed in an envelope properly endorsed; not examine such bids while the solicitation is pending. 4. When a solicitation is canceled, return any bids received, unopened, with a copy of the cancellation notice. 5. When a written withdrawal notice is received from a bidder before the date and time set for the receipt of bids, return the bid unopened and retain the withdrawal notice with the remaining bids. Accept any substitute bid presented by the withdrawer before the date and time set for the receipt of bids and treat it as any other bid received. 6. Furnish bids, unopened, only to the opening committee (see 12.7.5.a) on the date of opening, with Form 7436, Abstract of Bids or Proposals Received--Transportation Services Contract. 12.7.5 Opening of Bids 12.7.5.a Opening Committee. The contracting officer must appoint a committee of three or more responsible Postal Service employees, at least one of whom must be from the office of the contracting officer, to open bids in the presence of bidders and other interested persons. Two or more members of the committee must, after the exact time set for the receipt of bids, open all bids received before that time, and when practicable, read them aloud to the persons present and have them recorded. The original of each bid must be carefully safeguarded until the abstract of bids has been made and its accuracy validated. 12.7.5.b Postponement of Opening 1. A bid opening may be postponed without advance notice when: (a) The contracting officer has reason to believe that the bids of an important segment of bidders have been delayed in the mails for causes beyond their control and without their fault or negligence (such as flood, fire, accident, weather conditions, or strikes); (b) An emergency or unanticipated events interrupt normal Postal Service operations so that the conduct of the bid opening as scheduled is impracticable; or (c) The contracting officer determines that there are other circumstances warranting postponement of the bid opening in the interest of the Postal Service. 2. Whenever the contracting officer determines to postpone a bid opening for the reasons in subparagraphs 1(a) or (c) above, an announcement of the determination must be publicly posted and, if practicable, communicated to prospective bidders likely to attend the rescheduled bid opening, in addition to issuing a solicitation amendment. 3. If events of the sort contemplated by subparagraph 1(b) above occur, but the bid opening committee determines that the delay incident to the postponement of bid opening by amendment or notice is not in the interest of the Postal Service, the committee may proceed with the bid opening as soon as practicable after the time set for receipt of bids without amendment or notice to bidders. In such a case, the time set for receipt of bids will be deemed to be the actual time of bid opening for the purpose of determining late bids (see 12.7.4.c). 12.7.5.c Recording of Bids 1. The bid custodians (see 12.7.4.j) must complete Form 7436, Abstract of Bids or Proposals Received - Transportation Services Contract, except for names of bidders and their rates, and furnish it, with all bids received, to the opening committee at the time set for bid opening. 2. The opening committee must open and read aloud the bids and complete Form 7436 by entering on it the names of the bidders and their rates. For air-taxi solicitations, they must also record each bidder's Federal Aviation Administration certificate number, the name and title of the person signing the bid, and the name, model, and any modification of the aircraft proposed for use. After the abstract of bids has been completed and its accuracy verified, examination of the abstract by persons present at the bid opening is permitted if it does not unduly interfere with or delay the conduct of Postal Service business; the bids themselves may not be examined by the public. The committee members must sign the abstract and turn it and the bids over to the contracting officer. 12.7.5.d Distribution of Abstract. After ensuring its accuracy, the contracting officer must mail a copy of Form 7436 to each bidder. Copies of the abstract furnished to the bidders, and to other members of the public requesting it, must not contain annotations or information regarding debarment, suspension, or ineligibility of bidders; failure to meet standards of responsibility or other qualifications; apparent collusion or other misconduct; the reasons for rejecting a low bid; or other information not proper for disclosure. 12.7.6 Mistakes in Bids 12.7.6.a Minor Informalities or Irregularities. A minor informality or irregularity is one that is merely a matter of form or is some immaterial variation from the exact requirements of the solicitation, having no effect or merely a trivial or negligible effect on price, quality, quantity, delivery, or performance of the services being procured, and the correction or waiver of which would not affect the relative standing of the bidders or be otherwise prejudicial to them. The contracting officer must either give to the bidder an opportunity to cure any deficiency resulting from a minor informality or irregularity in a bid, or waive any such deficiency when it is to the advantage of the Postal Service. Examples of minor informalities or irregularities include the following: 1. Failure of a bidder to return the number of copies of signed bids required by the solicitation. 2. Failure of a bidder to sign its bid, but only if: (a) The firm submitting the bid has formally adopted or authorized the execution of documents by typewritten, printed, or rubber stamped signature and submits evidence of such authorization and the bid carries such a signature; or (b) The unsigned bid is accompanied by other material indicating the bidder's intention to be bound by the unsigned bid document, such as the submission with the bid of a letter signed by the bidder referring to and clearly identifying the bid itself. 3. Failure of a bidder to acknowledge receipt of an amendment to a solicitation, but only if the bid clearly indicates that the bidder received the amendment or the amendment clearly would have no effect or negligible effect on price, quality, quantity, performance, or the relative standing of bidders. 12.7.6.b Mistakes 1. Mistakes Discovered Before Award. After the opening of bids, the contracting officer must examine all bids for mistakes. In cases of apparent mistakes, and when the contracting officer has reason to believe that a mistake may have been made, he or she must request from the bidder a verification of the bid, calling attention to the suspected mistake. If the bidder alleges a mistake, the matter must be handled as in subparagraphs 2 and 3 below, before award of a contract. 2. Apparent Clerical Mistakes Discovered Before Award. Any clerical mistake apparent on the face of a bid, such as an obvious error in placement of a decimal point, may be corrected by the contracting officer before award, if the contracting officer has first obtained from the bidder written or telegraphic verification of the bid actually intended. Correction of the bid must be made by attaching the verification to the original bid and a copy of the verification to the duplicate bid. Correction must be made on the face of the bid and reflected in the award document. The contracting officer must annotate the abstract of bids, Form 7436, to show the correction. 3. Other Mistakes Discovered Before Award (a) The contracting officer is authorized to make the following administrative determinations in connection with mistakes in bids, other than apparent clerical mistakes, alleged after opening of bids and before award: (1) When the bidder requests permission to withdraw a bid and clear and convincing evidence establishes the existence of a mistake, a determination permitting the bidder to withdraw the bid may be made. (2) However, if the evidence is clear and convincing both as to existence of the mistake and as to the bid actually intended, and if the bid, both as uncorrected and as corrected, is the lowest received, a determination may be made to correct the bid and not permit its withdrawal. (3) When the bidder requests permission to correct a mistake in its bid and clear and convincing evidence establishes both the existence of a mistake and the bid actually intended, a determination permitting the bidder to correct the mistake may be made; provided that, if such correction would result in displacing one or more lower bids, the determination may not be made unless the existence of the mistake and the bid actually intended are ascertainable substantially from the solicitation and the bid itself. If the evidence is clear and convincing only as to the mistake, but not as to the intended bid, a determination permitting the bidder to withdraw its bid may be made. (4) When the evidence is not clear and convincing that the bid as submitted was not the bid intended, a determination may be made requiring that the bid be considered for award in the form submitted. (b) If the contracting officer has reason to believe that a mistake may have been made, he or she must immediately contact the bidder in question calling attention to the suspected mistake, and request verification of the bid. The action taken to verify bids must be sufficient to either (1) reasonably assure the contracting officer that the bid as confirmed is without error, or (2) elicit the anticipated allegation of a mistake by the bidder. To ensure that the bidder concerned is put on notice of a mistake suspected by the contracting officer, the bidder must be advised, as appropriate, of (1) the fact that its bid is so much lower than the other bids or the Postal Service estimate as to indicate a possibility of error, (2) important or unusual characteristics of the specifications, (3) changes in requirements from previous similar procurements, or (4) other data proper for disclosure to the bidder giving notice of the suspected mistake. If the time for acceptance of bids is likely to expire before a decision can be made, the contracting officer must request all bidders whose bids may become eligible for award to extend the time for acceptance of their bids. If the bidder whose bid is believed erroneous does not grant such extension of time, the bid must be considered as originally submitted. (c) If the bid is verified, the contracting officer must consider the bid as originally submitted. If the bidder alleges a mistake either voluntarily or as a result of the contracting officer's inquiry, the contracting officer must instruct the bidder to make a written request indicating its desire to withdraw or modify the bid. The request must be supported by statements describing the alleged mistake and must include all pertinent evidence such as the bidder's original worksheets and other data used in preparing the bid, subcontractors' quotations, if any, published rates, and any other evidence that conclusively establishes the existence of the mistake, the manner in which it occurred, and the bid actually intended. (d) If the bidder fails or refuses to furnish evidence in support of a suspected or alleged mistake, the contracting officer must consider the bid as submitted, except that the bid must be rejected if: (1) The amount is so far out of line with the amounts of other bids received, with the Postal Service estimate, or an amount determined by the contracting officer to be reasonable, that award would be unfair to the bidder or to other bidders; or (2) There are other indications of error so clear as reasonably to justify the conclusion that acceptance of the bid would be unfair to the bidder or to other bidders, or that the price is so unrealistic as to endanger performance. The contracting officer must take into account the bidder's competence and experience in making a determination under this subparagraph (d). The attempts made to obtain the information required and the action taken must be fully documented. (e) The contracting officer's proposed determination must be submitted for review by assigned counsel and approval by the next-higher level of contracting authority before issuance. The contracting officer must forward the proposed determination for review together with the following: (1) A signed copy of the bid involved. (2) A copy of the solicitation and any specifications relevant to the alleged mistake. (3) A copy of the abstract of bids, Form 7436. (4) A written request by the bidder to withdraw or modify the bid, together with the bidder's written statement and evidence (such as worksheets or other data used in preparing the bid) supporting (i) the existence of the mistake; (ii) the manner in which it occurred; and (iii) the bid actually intended. (5) A written statement by the contracting officer setting forth (i) a description of the equipment and services involved; (ii) the expiration date of the bid in question and of the other bids submitted; (iii) specific information as to how and when the mistake was alleged; (iv) a summary of the evidence submitted by the bidder; (v) if only one bid was received, as statement as to the most recent contract price for the equipment and services involved, or, in the absence of a recent contract, the contracting officer's estimate of a fair price; and (vi) any additional evidence considered pertinent. 4. Mistakes Alleged After Award (a) When a mistake in bid is not alleged until after the award, the mistake may be corrected by an appropriate contract modification, if correcting the mistake would make the contract more favorable to the Postal Service without changing the essential requirements of the specifications. (b) The contracting officer, subject to the review and approval requirements of subparagraph (d) below, may rescind or modify a contract to correct or mitigate the effect of a mistake when the evidence is clear and convincing that: (1) A mistake in the bid was made by the contractor; and (2) The mistake was mutual or the contracting officer was, or should have been, on notice of the mistake before the award; and notice of the mistake is received by the contracting officer before final payment. (c) When a mistake in bid is alleged after award, the contracting officer must instruct the contractor to support the alleged mistake by written statements and by all pertinent evidence, such as original worksheets and other data used in preparing the bid, subcontractors' quotations, if any, published rates, and any other material that will serve to establish the mistake, the manner in which it occurred, and the bid actually intended. (d) The contracting officer's proposed determination must be submitted for review by assigned counsel and approval by the next-higher level of contracting authority. The proposed determination must be accompanied by (1) all evidence furnished by the contractor, (2) a copy of the contract and any change orders or supplemental agreements, (3) the information required by subparagraph 3(e) above as it pertains to mistakes discovered after award, and (4) the contracting officer's opinion as to whether a bonafide mistake was made and whether the contracting officer was, or should have been, on notice of any mistake in the bid before award, together with supporting reasons and information. (e) If the contracting officer proposes to deny, in whole or in part, a claim of mistake asserted after award, the matter must be handled in accordance with the Claims and Disputes clause of the contract. 12.7.7 Evaluation and Award 12.7.7.a General 1. Unless all bids are rejected, award must be made by the contracting officer, within the specified time for acceptance, to the responsible bidder whose bid, conforming to the solicitation, provides the lowest rate to the Postal Service. Notification of award must be made by mailing or otherwise furnishing to the bidder a copy of the contract form and a properly executed copy of Form 7409, Notice of Acceptance - Transportation Services Bid or Proposal. Form 7409 must be accompanied by such documents, and distributed in such manner, as specified in the MTPH for the particular type of contract awarded. 2. If award must be delayed beyond the bid acceptance period, the several lowest bidders must be requested, before expiration of their bids, to extend the bid acceptance period in writing, to avoid any need for resolicitation. 3. The contracting officer must annotate Form 7436, Abstract of Bids or Proposals Received - Transportation Services Contract, to explain the basis for any award to other than the bidder offering the lowest rate. 12.7.7.b Equal Low Bids 1. When the lowest acceptable bids are at the same rate, award must be made in the following order of preference: (a) To the incumbent contractor. (b) To the bidder currently providing similar services satisfactorily. (c) To the bidder that has satisfactorily provided the same or similar services within the previous 12 months. (d) To the bidder that is a minority-owned or woman-owned business. (e) To the bidder that is a small business. 2. If application of the rule in subparagraphs a-e above does not break the tie, selection for award must be by a drawing of lots, witnessed by at least three Postal Service employees. The drawing may be attended by the bidders or their representatives. 3. The contracting officer must annotate the abstract of bids, Form 7436, to show the basis used for breaking the tie. If the award is determined by a drawing of lots, the names and titles of the three witnesses and the person supervising the drawing must be entered on the abstract. 12.7.7.c All-or-None Qualifications. Unless the solicitation provides otherwise, a bid is made nonresponsive by the fact that the bidder specifies that award will be accepted only on a specified group of the segments of service included in the solicitation. 12.7.7.d Rejection of Individual Bids 1. Any bid that fails to conform to the essential requirements of the solicitation must be rejected (see 12.7.4.a). A bid must be rejected if the bidder imposes conditions that would modify any substantive solicitation requirement, limit the bidder's liability, or limit the Postal Service's rights. See 12.7.6.a for handling of minor informalities or irregularities not requiring rejection of bids. 2. Any bid from a person or concern determined to be nonresponsible (see 3. 3.1.e), including any person or concern that is debarred, suspended, or ineligible (see 3.3.2), must be rejected. 3. Any bid that is excessive in amount must be rejected. For a bid to be considered excessive, it must state a rate that is unreasonably high for the service called for in the solicitation. Rate reasonableness should be determined by comparison with prevailing rates for similar service in the same area, and with the cost of the service currently being operated on the route, all as adjusted to reflect any unique or changed circumstances. 4. When a bid is rejected, the contracting officer must give the bidder prompt written notification, in no event later than the date of contract award, stating the reason for rejection. 5. The original copy of any rejected bid, and the contracting officer's written reason for rejection, must be retained in the solicitation file. 12.7.7.e Cancellation of Solicitation After Opening 1. To preserve the integrity of the advertised sealed bidding system, award must be made to the responsible bidder submitting the lowest responsive bid, unless there is a compelling reason to reject all bids and cancel the solicitation. Every effort must be made to ensure that changes in requirements so significant as to require cancellation of a solicitation are identified in advance of the bid opening, so that the solicitation may be canceled before the bidders' rates are disclosed. Consistent with this, a solicitation may be canceled after the opening of bids only when the contracting officer with the concurrence of the next higher level of contracting authority determines in writing that: (a) Inadequate or ambiguous specifications were cited in the solicitation; (b) Specifications have been revised; (c) The services being procured are no longer required; (d) All otherwise acceptable bids received are excessive in amount (see subparagraph d.3 above); (e) There are indications that the bids were not independently arrived at in open competition, were collusive, or were submitted in bad faith (see 1.8.2 for required report); or (f) For other reasons, cancellation is clearly in the interest of the Postal Service. 2. Cancellation of a solicitation after opening must be accomplished by issuance of a solicitation amendment stating the reason for the cancellation. 12.7.7.f Notification of Bidders. The contracting officer must mail a notice to all unsuccessful bidders at the time of contract award, identifying the successful bidder and the annual rate, in the format illustrated in the MTPH. See subparagraph d.4 above for notification requirements for rejected bids. 12.7.8 Records The solicitation, the solicitation mailing list, the abstract of bids, the original copies of all rejected and unsuccessful bids, a copy of the successful bid, any written determinations regarding late bids, mistakes in bids, and rejection of bids, and copies of any notifications to bidders and other correspondence, must be retained by the contracting officer in the solicitation file, and must be made available for inspection by the Inspection Service. Appendix A: Solicitations Section 1 General A.1.1 Applicability A.1.2 Numbering of Provisions A.1.3 Solicitations for Information or Planning Purposes Section 2 Preparation A.2.1 Format A.2.2 Contents a. Section A, Items and Prices b. Section B, Specifications or Statement of Work c. Section C, Delivery or Performance d. Section D, Packaging and Marking e. Section E, Inspection and Acceptance f. Section F, Payment and Funding g. Section G, Special Clauses h. Section H, General Clauses i. Section I, List of Attachments j. Section J, Instructions to Offerors k. Section K, Solicitations Notices and Provisions l. Section L, Representations and Certifications m. Section M, Evaluation and Award Factors A.2.3 Solicitation Notices and Provisions A.2.4 Representations and Certifications Section 3 Solicitation Mailing Lists A.3.1 Establishing Lists A.3.2 Removing Names from Lists A.3.3 Use of Mailing Lists A.3.4 Release of Mailing Lists Section 4 Solicitation Provisions Appendix A: Solicitations Appendix A: Solicitations Section 1 General A.1.1 Applicability This appendix establishes requirements for solicitations of proposals for supplies and services, including construction, except (a) solicitations using simplified procedures (see 4.3) and (b) solicitations for supplies or services requiring provisions prescribed elsewhere in this manual or in handbooks or directives implementing or supplementing this manual (see 1.1.1.b). A.1.2 Numbering of Provisions Procurement Manual solicitation provisions are numbered with a Procurement Manual chapter or appendix prescribing their use. Thus, Provision 7-1, Proposal Guarantee, is prescribed in chapter 7, and Provision A-10, Discounts, is prescribed in this appendix. In parentheses to the right of the provision title is a reference to the chapter (or appendix), section, and part where the provision is prescribed. Other solicitation provisions are numbered or identified as set forth in the relevant handbook. A.1.3 Solicitations for Information or Planning Purposes It is the policy of the Postal Service to solicit proposals only when there is a definite intention to award a contract; however, in some cases solicitations for information or planning purposes may be justified. Solicitations may be issued for information or planning purposes only with prior approval of an individual at a level higher than the contracting officer. In such cases, the solicitation must contain Provision A-18, Solicitation for Information or Planning Purposes, and a notice on the cover sheet as provided in A.2.3.b.3. Section 2 Preparation A.2.1 Format Solicitations must be in the following order: Section Description Part 1 - Schedule A Items and Prices B Specifications or Statement of Work C Delivery or Performance D Packaging and Marking E Inspection and Acceptance F Payment and Funding G Special Clauses Part 2 - Clauses and Attachments H General Clauses I List of Attachments Part 3 - Solicitation Provisions J Instructions to Offerors K Solicitation Notices and Provisions L Representations and Certifications M Evaluation and Award Factors A.2.2 Contents Section A, Items and Prices. Include brief descriptions of the supplies or services (item number, stock number or part number if applicable, verbal description, and quantities). Include incidental deliverables such as manuals and reports. Section B, Specifications or Statement of Work. Include, or attach and incorporate by reference, any specifications, drawings, statement of work, or description of supplies or services needed in addition to the description in section A. Section C, Delivery or Performance. Specify the time, place, and method of delivery or performance. Solicitations specifying shipment f.o.b. origin must state that proposals will be evaluated on the basis of the proposed price plus transportation costs from point of origin to one or more designated destinations. Section D, Packaging and Marking. Provide packaging, packing, preservation, and marking requirements, if any. Section E, Inspection and Acceptance. Include inspection, acceptance, quality assurance, and reliability requirements. Section F, Payment and Funding. Include invoicing instructions, payment procedures, and any funding limitations. When supplies are to be delivered to multiple destinations, include a requirement that the contractor submit a separate invoice for each destination and shipment. Section G, Special Clauses. Include any contract clauses not included in section H. Section H, General Clauses. See appendix B. Section I, List of Attachments. List the title and number of pages of each document, exhibit, or other attachment. Section J, Instructions to Offerors. Include all information and instructions not included elsewhere to guide offerors in preparing proposals. Examples include: 1. Provision 5-1, Type of Contract (see 5.1.2); 2. Any requirement to submit proposals in separate parts, such as separate technical and cost or price proposals; 3. Permission, if any, to submit alternate proposals, including different materials, designs, or approaches; 4. Any requirement to demonstrate special technical qualifications because of the complexity of the supplies being purchased or for some other reason; and 5. Directions for obtaining copies of any documents, such as plans, drawings, and specifications, that have been incorporated by reference. Section K, Solicitation Notices and Provisions. See A.2.3 and A.2.4. Section L, Representations and Certifications. See A.2.3 and A.2.4. Section M, Evaluation and Award Factors. Identify all evaluation factors, including price or cost, and any significant subfactors that will be considered in making award (see 2.1.7.c). State the relative importance of the evaluation factors and subfactors, and their relation to price or cost. Numerical weights or scoring systems, which may be used to rank proposals, need not be disclosed in solicitations. Describe any minimum requirements that may apply to particular evaluation factors or subfactors. Identify any Postal Service costs or charges other than proposed prices to be considered in the evaluation of proposals. A.2.3 Solicitation Notices and Provisions The following provisions must be included in section K of all solicitations: 1. Provision A-1, Preparation of Proposals 2. Provision A-2, Submission of Proposals 3. Provision A-3, Modification or Withdrawal of Proposals 4. Provision A-4, Late Submissions and Modifications of Proposals 5. Provision A-5, Acknowledgment of Solicitation Amendments 6. Provision A-6, Explanation to Prospective Offerors 7. Provision A-7, Restriction on Disclosure and Use of Data 8. Provision A-8, Contract Award 9. Provision A-9, Award Without Discussions 10. Provision A-10, Discounts 11. Provision A-11, (Reserved) 12. Provision A-12, Postal-Furnished Property or Services 13. Provision A-13, Labor Information 14. Provision A-14, Failure to Submit Proposal 15. Provision A-15, Protests The following provisions must be included as applicable: 1. If multiple awards are contemplated, and the contracting officer determines that it is advantageous to do so, he or she should include Provision A-16, Evaluation of Proposals for Multiple Awards. If Provision A-16 is included, and if circumstances warrant the use of an administrative cost factor greater than $500, the contracting officer must justify the higher cost factor in the solicitation file. 2. If telegraphic proposals are authorized (see 4.1.2.c), include Provision A-17, Telegraphic Proposals. 3. If the solicitation is for information or planning purposes (see A.1.3), include Provision A-18, Solicitation for Information or Planning Purposes, and insert in Block 11 on Form 7333: "This solicitation is for information and planning purposes. See notice in section K." 4. When price and price-related factors will be the only criteria for evaluation and award, and there is reasonable certainty that award will be made without discussions, the solicitation may include Provision A-19, Notice of Intent to Award Without Discussions. 5. When commercial supplies or services are being purchased, and warranties are customary in the trade (see 2.2.4.h), include Provision 2-1, Warranty Information. 6. When the Postal Service requires or desires delivery by a certain date or by a date based on the date of the contract (see 2.2.5.d), include Provision 2-2, Time of Delivery. 7. When the contract will have an option clause (see 2.2.8.g), include Provision 2-3, Evaluation of Options. 8. If a brand-name-or-equal product description is used (see 2.3.2.c), include Provision 2-4, Brand Name or Equal, and after each item so described, insert the following in Section A for completion by offerors: "Proposing Manufacturer's Brand Name, Model, or Catalog No." 9. When a proposal guarantee is required (see 7.1.2), include Provision 7-1, Proposal Guarantee. 10. When a performance bond is required (see 7.1.3), include Provision 7-2, Performance Bond Requirements. 11. When a payment bond is required (see 7.1.4), include Provision 7- 3, Payment Bond Requirements. 12. When a fidelity bond will be required (see 7.1.6), include Provision 7-4, Fidelity Bond Requirements. 13. When a solicitation requires the furnishing of bonds, other than payment bonds for construction (see 7.1.10.d.5), include Provision 7-5, Deposit of Assets Requirements. 14. When the contract will be for commercial ADP hardware or software and will require a systems test using Postal Service test data (see 8.3.3.a), include Provision 8-1, Demonstrability. 15. When the contract will be for commercial ADP hardware or software and will require a functional demonstration of one or more products (see 8.3.3.b), include Provision 8-2, Functional Demonstration. 16. When the solicitation is for research, experimental, developmental, or engineering work and for initial production of products or equipment to be developed (see 9.2.1.c.2), or when delivery of data is required (see 9.3.4.c.2), include Provision 9-1, Alternate Intellectual Property Rights Proposals. 17. When data are needed to obtain future competition in purchasing repair parts (see 9.3.2.h), include Provision 9-3, Use of Limited Rights Data for Procurement of Repair Parts. 18. When patent royalties or license fees may be paid by the contractor under other than a firm-fixed-price contract (see 9.3.9), include Provision 9-4, Royalty Report. 19. If the contract will require an equal opportunity affirmative action program (see 10.2.7.d), include Provision 10-6, Notice of Requirement for Equal Opportunity Affirmative Action as provided in 10.2.7.i. 20. If the contract will be $1 million or more and not exempt from the equal opportunity requirements of Executive Order 11246 (see 10.2.7), include Provision 10-5, Preaward Equal Opportunity Compliance Review. A.2.4 Representations and Certifications The following provisions must be included in Section L of all solicitations: 1. Provision A-20, Type of Business Organization. 2. Provision A-21, Parent Company and Taxpayer Identification Number. 3. Provision A-22, Authorized Negotiators. 4. Provision A-23, Place of Performance. 5. Provision 1-1, Certification of Independent Price Determination 6. (see 1.8.1). 6. Provision 1-2, Contingent Fee Representation (see 1.9.2). The following provisions must be included in Section L as applicable: 1. When there is a possibility that offerors will propose to deliver technical data or computer software with restrictions on use or disclosure (see 9.3.4.a.1), include Provision 9-2, Representation of Rights in Data. 2. Unless the contract will be exempt from the Walsh-Healey Public Contracts Act (see 10.2.5.b), include Provision 10-2, Regular Dealer/Manufacturer Representation. 3. Unless the contract will be exempt from the equal opportunity requirements of Executive Order 11246 (see 10.2.7), include Provision 10-3, Certification of Nonsegregated Facilities. When proposals of $50,000 or more are anticipated from offerors having 50 or more employees, include Provision 10-4, Equal Opportunity Affirmative Action Program. 4. If the contract will be for supplies, or for services that involve the furnishing of supplies (see 10.3.2), include Provision 10-7, Buy American Certificate - Supplies. 5. If the contract will be for construction, (see 10.3.3), include Provision 10-8, Buy American Certificate - Construction Materials. 6. If the contract will be subject to the Clean Air Act and Clean Water Act (see 10.4), include Provision 10-9, Clean Air and Water Certification. Section 3 Solicitation Mailing Lists A.3.1 Establishing Lists Solicitation mailing lists must be established by purchasing activities to ensure access to adequate sources of supplies and services, except when the requirements of the purchasing activity can be obtained within the local trade area through simplified purchase procedures (see 4.3), or are nonrecurring. Only eligible and qualified concerns that have submitted mailing list applications, or that the activity considers capable of meeting requirements of a particular purchase, should be placed on the appropriate mailing list. For follow-on contracts, the incumbent contractor must be included on the list. A.3.2 Removing Names from Lists The name of each concern failing to respond to a solicitation or presolicitation notice (see A.3.3.c) may be removed from the mailing list for the item involved without notice to the concern. When a concern fails to respond to two consecutive solicitations or presolicitation notices, its name must be removed from the mailing list except that, in individual cases, concerns thus failing to respond may be retained on a mailing list if retention is in the Postal Service's interest. Both actual proposals and written requests for retention on the mailing list are responses to solicitations. Concerns that fail to respond to five consecutive solicitations or presolicitation notices must be removed from the mailing list, notwithstanding any request for retention on the list. The names of concerns that have been debarred, suspended, or otherwise determined to be ineligible to receive award of a Postal Service contract, must be removed from the mailing lists to the extent required by such debarment, suspension, or determination of ineligibility (see 3.3.2). Concerns that have been removed from mailing lists may be reinstated by filing a new application. No concern that is debarred, suspended, or ineligible may be reinstated during the period of debarment, suspension, or ineligibility. A.3.3 Use of Mailing Lists Mailing lists should be used in a way that will promote competition commensurate with the dollar value of the purchase to be made. As much of the mailing list should be used as appropriate to obtain adequate competition. When the number of concerns on a mailing list is excessive in relation to a specific purchase, the list may be reduced by any equitable method including those described in paragraphs b and c below. The fact that less than an entire mailing list is used may not in itself preclude furnishing the solicitation to others upon request or consideration of proposals received from offerors not solicited. Mailing lists may be rotated if there is a large number of qualified offerors. Consideration also should be given as to whether time permits use of a presolicitation notice. When the rotation method is employed, the successful offeror on the previous purchase of the same or similar items and those prospective offerors that have been added to the mailing list since the last purchase are solicited, in addition to those offerors comprising that segment of the list selected for use in a particular purchase. In lieu of initially forwarding complete solicitation sets, the purchasing activity may send presolicitation notices to concerns on the mailing list. The notice must: 1. Specify the date by which prospective offerors should return the notice in order to receive a complete solicitation set; 2. Describe the requirement so as to furnish a complete item description and a condensation of other essential information to provide concerns with an intelligible basis for judging whether they have an interest in the solicitation; and 3. Expressly notify concerns that if no proposal is to be submitted they should advise the issuing office in writing if future solicitations are desired for the type of supplies or services involved. Drawings, plans, and specifications normally will not be furnished with the presolicitation notice. The return date of the notice must be sufficiently in advance of the mailing date of the solicitation to permit an accurate estimate of the number of solicitation sets required. Solicitation sets will be sent to those that request them. A.3.4 Release of Mailing Lists Solicitation mailing lists, except those used for a specific procurement, must be made available to the public in accordance with 1.7.4 and subchapter 350 of the Administrative Support Manual. However, except as provided in 4.2.2.k.4 and paragraph b below, the actual solicitation mailing list used for a specific procurement may not be released to the public prior to award. When it is necessary to dispatch identical information by means of electrical transmission to prospective offerors, the electrically transmitted message, when released for communications handling, must be marked "Book Message - Transmit a Single Address Message" to prevent prospective offerors from learning the names of others solicited. When solicitations for construction contracts have been issued, trade journals, prospective subcontractors, materials suppliers, and others having a bona fide interest in such information, may upon request be given a list of all prospective offerors furnished copies of the plans and specifications. Section 4 Solicitation Provisions No. Title Page A-1 Preparation of Proposals A-2 Submission of Proposals A-3 Modification or Withdrawal of Proposals A-4 Late Submissions and Modifications of Proposals A-5 Acknowledgment of Solicitation Amendments A-6 Explanation to Prospective Offerors A-7 Restriction on Disclosure and Use of Data A-8 Contract Award A-9 Award Without Discussions A-10 Discounts A-11 (Reserved) A-12 Postal-Furnished Property or Services A-13 Labor Information A-14 Failure to Submit Proposal A-15 Protests A-16 Evaluation of Proposals for Multiple Awards A-17 Telegraphic Proposals A-18 Solicitation for Information or Planning Purposes A-19 Notice of Intent to Award Without Discussions A-20 Type of Business Organization A-21 Parent Company and Taxpayer Identification Number A-22 Authorized Negotiators A-23 Place of Performance 1-1 Certificate of Independent Price Determination 1-2 Contingent Fee Representation 2-1 Warranty Information 2-2 Time of Delivery 2-3 Evaluation of Options 2-4 Brand Name or Equal 5-1 Type of Contract 7-1 Proposal Guarantee 7-2 Performance Bond Requirements 7-3 Payment Bond Requirements 7-4 Fidelity Bond Requirements 7-5 Deposit of Assets Requirements 8-1 Demonstrability 8-2 Functional Demonstration 8-3 System Integrity 9-1 Alternate Intellectual Property Rights Proposals 9-2 Representation of Rights in Data 9-3 Use of Limited Rights Data for Procurement of Repair Parts 9-4 Royalty Reports 10-1 Notice of Small, Minority-owned and Woman-owned Business Subcontracting Requirements 10-2 Regular Dealer/Manufacturer Representation 10-3 Certification of Nonsegregated Facilities 10-4 Equal Opportunity Affirmative Action Program 10-5 Preaward Equal Opportunity Compliance Review 10-6 Notice of Requirement for Equal Opportunity Affirmative Action 10-7 Buy American Certificate - Supplies 10-8 Buy American Certificate - Construction Materials 10-9 Clean Air and Water Certification Provision A-1 Preparation of Proposals (October 1987) (A.2.3) Offerors are expected to examine the drawings, specifications, and all provisions and instructions. Failure to do so will be at the offeror's risk. Each offeror must furnish the information required by the solicitation. The offeror must sign the proposal and print or type its name on the proposal and each continuation sheet on which it makes an entry. Erasures or other changes must be initialed by the person signing the proposal. For each item included in the proposal, the offeror must: 1. Show the unit price/cost, including, unless otherwise specified, packaging, packing, and preservation; and 2. Enter the extended price/cost for the total quantity of the item. In case of discrepancy between a unit price/cost and an extended price/cost, the unit price/cost will be presumed to be correct, subject, however, to correction to the same extent and in the same manner as any other mistake. Proposals for supplies or services other than those specified will not be considered unless authorized by the solicitation. Offerors must state a definite time for delivery of supplies or for performance of services, unless otherwise specified in the solicitation. Time, if stated as a number of days, will include Saturdays, Sundays, and federal holidays. If the proposal exceeds $100,000, the offeror must either include a copy of its current financial statements (most recent balance sheet and profit and loss statement, updated) or, alternatively, be prepared to submit such data immediately upon request. Submitted data must be certified by a company officer as to accuracy and veracity. Provision A-2 Submission of Proposals (October 1987) (A.2.3) Proposals and proposal modifications must be submitted in sealed envelopes or packages: 1. Addressed to the office specified in the solicitation; and 2. Showing the time specified for receipt, the solicitation number, and the name and address of the offeror. Telegraphic proposals will not be considered unless authorized by the solicitation. However, proposals may be modified by telegraphic notice (including Mailgram) if that notice is received by the time specified for receipt of proposals. Provision A-3 Modification or Withdrawal of Proposals (October 1987) (A.2.3) Proposals may be modified by written notice or telegram (including Mailgram) received before the time specified for receipt of proposals. Proposals may be withdrawn by written notice or telegram (including Mailgram) received at any time before award. Proposals may be withdrawn in person by an offeror or an authorized representative, if the representative's identity is made known and the representative signs a receipt for the proposal before award. Provision A-4 Late Submissions and Modifications of Proposals (October 1987) (A.2.3) Any proposal or modification of a proposal received at the office designated in the solicitation after the exact time specified for receipt will not be considered unless it is received before award is made and: It is the only proposal received; or Consideration of the proposal is determined by the contracting officer to be in the Postal Service's interest. Provision A-5 Acknowledgment of Solicitation Amendments (October 1987) (A.2.3) Offerors must acknowledge receipt of any amendment to this solicitation: 1. By signing and returning the amendment; 2. By identifying the amendment number and date in the space provided for this purpose on the solicitation form; or 3. By letter or telegram. Acknowledgments of amendments are subject to the Late Submissions and Modifications of Proposals provision of the solicitation. Proposals lacking acknowledgment of an amendment affecting price, quantity, quality, or delivery may be disregarded. Provision A-6 Explanation to Prospective Offerors (October 1987) (A.2.3) Any prospective offeror desiring an explanation or interpretation of the solicitation, drawings, or specifications must request it in writing soon enough to allow a reply to reach all prospective offerors before the submission of their proposals. Oral explanations or instructions will not be binding. Any information given to a prospective offeror concerning a solicitation will be furnished promptly to all other prospective offerors as an amendment of the solicitation, if that information is necessary in submitting offers or if the lack of it would be prejudicial to any other prospective offerors. Provision A-7 Restriction on Disclosure and Use of Data (June 1988) (A.2.3) Offerors that include in their proposals data they do not want used or disclosed by the Postal Service for any purpose other than proposal evaluation may take the following steps: "This proposal includes data that may not be duplicated, used, or disclosed outside the Postal Service - in whole or in part - for any purpose other than to evaluate this proposal. If, however, a contract is awarded to this offeror as a result of - or in connection with - the submission of such data, the Postal Service will have the right to duplicate, use, or disclose the data to the extent provided in the resulting contract. This restriction does not limit the Postal Service's right to use information contained in the data if it is obtained from another source without restriction. The data subject to this restriction are contained in sheets (Offeror insert numbers or other identification of sheets)." Mark each sheet of data they wish to restrict with the following legend: "Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal." Provision A-8 Contract Award (February 1992) (A.2.3) The Postal Service will award a contract resulting from this solicitation to the responsible offeror whose proposal conforming to the solicitation offers the best value to the Postal Service, considering price, price-related factors and other evaluation factors specified elsewhere in this solicitation. The Postal Service may reject any or all proposals, and may waive informalities and minor irregularities in proposals received. The Postal Service may accept any item or group of items of a proposal, unless the offeror qualifies the proposal by specific limitations. Unless otherwise provided in the solicitation, proposals may be submitted for quantities less than those specified. The Postal Service reserves the right to make an award on any item for a quantity less than the quantity contained in a proposal, at the unit cost or prices proposed, unless the offeror specifies otherwise in its proposal. A written award or acceptance of proposal mailed or otherwise furnished to the successful offeror within the time for acceptance specified in the proposal will result in a binding contract without further action by either party. Before the proposal's specified expiration time, the Postal Service may accept a proposal (or part of a proposal as provided in paragraph c above), whether or not there are discussions or negotiations after its receipt, unless a written notice of withdrawal is received before award. Discussions or negotiations conducted after receipt of a proposal do not constitute a rejection of counteroffer by the Postal Service. Neither financial data submitted with a proposal, nor representations concerning facilities or financing, will form a part of the resulting contract. However, if the resulting contract contains a clause providing for price reduction for defective cost or pricing data, the contract price will be subject to reduction if cost or pricing data furnished are incomplete, inaccurate, or not current. Provision A-9 Award Without Discussion (October 1987) (A.2.3) The Postal Service may award a contract on the basis of initial proposals received, without discussions. Therefore, each initial proposal should contain the offeror's best terms from a cost or price and technical standpoint. Provision A-10 Discounts (October 1987) (A.2.3) Even though a space is provided for entering a prompt payment discount, such discounts will not be considered in evaluating proposals for award. However, any prompt payment discount offered by a successful offeror will form a part of the contract, and will be taken by the Postal Service if payment is made within the discount period. In connection with any discount offered, time will be computed from the date of delivery of the supplies to the carrier when delivery and acceptance are at point of origin; or from the date of delivery at destination or port of embarkation when delivery and acceptance are at either of those points; or from the date when a correct invoice or voucher is received in the office specified by the Postal Service, if the latter date is later than date of delivery. Payment is deemed to be made, for the purpose of earning the discount, when the Postal Service mails the check. Provision A-11 (Reserved) (A.2.3) Provision A-12 Postal-Furnished Property or Services (October 1987) (A.2.3) No property or services will be furnished by the Postal Service unless specifically provided for in the solicitation. Provision A-13 Labor Information (October 1987) (A.2.3) General information regarding the requirements of the Walsh-Healey Public Contracts Act (41 U.S.C. 35-45), the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333), and the Service Contract Act of 1965 (41 U.S.C. 351 et seq.) may be obtained from the DEPARTMENT OF LABOR 200 CONSTITUTION AVENUE NW WASHINGTON DC 20210-0999 or from any regional office of that agency. Provision A-14 Failure to Submit Proposal (October 1987) (A.2.3) Recipients of this solicitation not responding with a proposal should not return this solicitation, unless it specifies otherwise. Instead, they should advise the issuing office by letter or postcard whether they want to receive future solicitations for similar requirements. If a recipient does not submit a proposal and does not notify the issuing office that future solicitations are desired, the recipient's name may be removed from the applicable mailing list. Failure to submit a proposal in response to five consecutive solicitations for the same or similar requirements will result in removal from the mailing list, notwithstanding any written request for receipt of future solicitations; a new solicitation mailing list application must be filed to obtain reinstatement. Provision A-15 Protests (October 1987) (A.2.3) Protest will be considered only if submitted in accordance with the time limits and procedures provided in chapter 4 of the USPS Procurement Manual. A copy of the protest procedures may be obtained from the office issuing the solicitation. Provision A-16 Evaluation of Proposals for Multiple Awards (July 1995) (A.2.3) In addition to other factors, proposals will be evaluated on the basis of advantages and disadvantages to the Postal Service that might result from making more than one award (multiple awards). It is assumed, for the purpose of evaluating proposals, that $500 is the administrative cost to the Postal Service for issuing and administering each contract awarded under this solicitation, and individual awards will be for the items or combinations of items that result in the lowest aggregate cost to the Postal Service, including the assumed administrative costs. Provision A-17 Telegraphic Proposals (October 1987) (A.2.3) Offerors may submit telegraphic responses to this solicitation. These responses must be received by the time specified for receipt of proposals. Telegraphic responses must refer to this solicitation and include the items or sub-items, quantities, unit prices, time and place of delivery, all representations and other information required by this solicitation, and a statement specifying the extent of agreement with all the terms, conditions, and provisions of the solicitation. Offerors must promptly sign and submit complete copies of their proposals in confirmation of their telegraphic responses. The term "telegraphic responses," as used in the provision, includes Mailgrams. Provision A-18 Solicitation for Information or Planning Purposes (October 1987) (A.2.3) The Postal Service does not intend to award a contract on the basis of this solicitation or to pay for the information solicited. This solicitation is issued for the purpose of: (Contracting officer state purpose of solicitation). Provision A-19 Notice of Intent to Award Without Discussions (October 1987) (A.2.3) The Postal Service intends to make award on the basis of initial proposals received, without discussions, as permitted by the Award Without Discussions provision of this solicitation. Provision A-20 Type of Business Organization (December 1989) (A.2.4) The offeror, by checking the applicable blocks, represents that it: Operates as a corporation incorporated under the laws of the state of , an individual, a partnership, a joint venture, a nonprofit organization, or an educational institution; and Is a small business concern, minority-owned business, woman-owned business, labor surplus area concern, educational or other nonprofit organization, or none of the above entities. A small business concern for the purposes of Postal Service procurement means a business, including an affiliate, that is independently owned and operated, is not dominant in producing or performing the supplies or services being purchased, and has no more than 500 employees, unless a different size standard has been established by the Small Business Administration (see 13 CFR 121, particularly for different size standards for airline, railroad, and construction companies). For subcontracts of $50,000 or less, a subcontractor having no more than 500 employees qualifies as a small business without regard to other factors. Minority-owned Business. A minority-owned business is a concern that is at least 51 percent owned by, and whose management and daily business operations are controlled by, one or more members of a socially and economically disadvantaged minority group, namely U.S. citizens who are Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, or Asian-Indian Americans. (Native Americans are American Indians, Eskimos, Aleuts, and Native Hawaiians. Asian-Pacific Americans are U.S. citizens whose origins are Japanese, Chinese, Filipino, Vietnamese, Korean, Samoan, Laotian, Kampuchean, Taiwanese or in the U.S. Trust Territories of the Pacific Islands. Asian-Indian Americans are U.S. citizens whose origins are in the Indian subcontinent.) Woman-owned Business. A woman-owned business is a concern at least 51 percent of which is owned by a woman (or women) who is a U.S. citizen, controls the firm by exercising the power to make policy decisions, and operates the business by being actively involved in day-to-day management. Labor Surplus Area. A geographical area which at the time of award is either a section of concentrated unemployment or underemployment, a persistent labor surplus area, or a substantial labor surplus area, as defined in this paragraph. 1. Section of concentrated unemployment or underemployment means appropriate sections of states or labor areas so classified by the Secretary of Labor. 2. Persistent labor surplus area means an area which is classified by the Department of Labor as an area of substantial and persistent labor surplus (also called Area of Substantial and Persistent Unemployment) and is listed as such by that Department in conjunction with its publication Area Trends in Employment and Unemployment. 3. Substantial labor surplus area means an area which is classified by the Department of Labor as an area of substantial labor surplus (also called Area of Substantial Unemployment) and which is listed as such by that Department in conjunction with its publication Area Trends in Employment and Unemployment. Labor Surplus Area Concern. A firm which will perform or cause to be performed a substantial proportion of a contract in a labor surplus area. Educational or Other Nonprofit Organization. Any corporation, foundation, trust, or other institution operated for scientific or educational purposes, not organized for profit, no part of the net earnings of which inures to the profits of any private shareholder or individual. Provision A-21 Parent Company and Taxpayer Identification Number (October 1987) (A.2.4) A parent company is one that owns or controls the basic business polices of an offeror. To own means to own more than 50 percent of the voting rights in the offeror. To control means to be able to formulate, determine, or veto basic business policy decisions of the offeror. A parent company need not own the offeror to control it; it may exercise control through the use of dominant minority voting rights, proxy voting, contractual arrangements, or otherwise. Enter the offeror's Taxpayer Identification Number (TIN) in the space provided. The TIN is the offeror's Social Security number or other Employee Identification Number used on the offeror's Quarterly Federal Tax Return, U.S. Treasury Form 941. Offeror's TIN: Check this block if the offeror is owned or controlled by a parent company: If the block above is checked, provide the following information about the parent company: Parent Company's Name: Parent Company's Main Office Address: No. and Street City State Zip Code Parent Company's TIN If the offeror is a member of an affiliated group that files its federal income tax return on a consolidated basis (whether or not the offeror is owned or controlled by a parent company, as provided above) provide the name and TIN of the common parent of the affiliated group: Name of Common Parent Common Parent's TIN Provision A-22 Authorized Negotiators (October 1987) (A.2.4) The offeror represents that the following persons are authorized to negotiate on its behalf with the Postal Service in connection with this solicitation (Offeror list names, titles, and telephone numbers of the authorized negotiators). Provision A-23 Place of Performance (October 1987) (A.2.4) If the offeror intends, in the performance of any contract resulting from this solicitation, to use one or more facilities located at addresses different from the offeror's address as indicated in this proposal, the offeror must include in its proposal a statement referencing this provision and identifying those facilities by street address, city, country, state, and ZIP Code, and the name and address of the operators of those facilities if other than the offeror. Provision 1-1 Certificate of Independent Price Determination (October 1987) (1.8.1) By submitting this proposal, the offeror certifies, and in the case of a joint proposal each party to it certifies as to its own organization, that in connection with this solicitation: 1. The prices proposed have been arrived at independently, without consultation, communication, or agreement, for the purpose of restricting competition, as to any matter relating to the prices with any other offeror or with any competitor; 2. Unless otherwise required by law, the prices proposed have not been and will not be knowingly disclosed by the offeror before award of a contract, directly or indirectly to any other offeror or to any competitor; and 3. No attempt has been made or will be made by the offeror to induce any other person or firm to submit or not submit a proposal for the purpose of restricting competition. Each person signing this proposal certifies that: 1. He or she is the person in the offeror's organization responsible for the decision as to the prices being offered herein and that he or she has not participated, and will not participate, in any action contrary to paragraph a above; or 2. He or she is not the person in the offeror's organization responsible for the decision as to the prices being offered but that he or she has been authorized in writing to act as agent for the persons responsible in certifying that they have not participated, and will not participate, in any action contrary to paragraph a above, and as their agent does hereby so certify; and he or she has not participated, and will not participate, in any action contrary to paragraph a above. Modification or deletion of any provision in this certificate may result in the disregarding of the proposal as unacceptable. Any modification or deletion should be accompanied by a signed statement explaining the reasons and describing in detail any disclosure or communication. Provision 1-2 Contingent Fee Representation (October 1987) (1.9.2) The offeror must complete the following representations: 1. The offeror has has not employed or retained any company or person (other than a full-time bona fide employee working solely for the offeror) to solicit or secure this contract. 2. The offeror has has not paid or agreed to pay any company or person (other than a full-time bona fide employee working solely for the offeror) any fee, commission, percentage or brokerage fee, contingent upon or resulting from the award of this contract. If either representation is in the affirmative, or upon request of the contracting officer, the offeror must furnish, in duplicate, a completed Form 7319, Contractor's Statement of Contingent or Other Fees, and any other information requested by the contracting officer. If the offeror has previously furnished a completed Form 7319 to the office issuing this solicitation, it may accompany its proposal with a signed statement: 1. Indicating when the completed form was previously furnished; 2. Identifying the number of the previous solicitation or contract, if any, in connection with which the form was submitted; and 3. Representing that the statement on the form is applicable to this proposal. Provision 2-1 Warranty Information (October 1987) (2.2.4) Offerors are encouraged to submit information on any standard commercial warranties provided for offered products. The Postal Service will consider these warranties in determining the most advantageous proposal, to the extent provided in the evaluation factors. Provision 2-2 Time of Delivery (October 1987) (2.2.5) The Postal Service requires delivery to be made according to the delivery schedule specified in section C of the contract Schedule. The Postal Service will evaluate offerors' proposed delivery schedules to determine the proposal most advantageous to the Postal Service. Proposals that propose delivery that will not clearly fall within the required delivery period will be unacceptable. The Postal service reserves the right to award under either the required delivery schedule or the proposed delivery schedule when an offeror proposes an earlier delivery schedule than required. If the offeror proposes no other delivery schedule, the required delivery schedule will apply. The required delivery schedule may be stated in terms of days after contract award or specific dates. If stated in terms of days after award, the following paragraph c applies. The Contract Award provision of the solicitation provides that a written award or acceptance of proposal mailed or otherwise furnished to the successful offeror results in a binding contract. The Postal Service will mail or otherwise furnish to the offeror an award or notice of award not later than the day award is dated. Therefore, the offeror should compute the time available for performance beginning with the actual date of award, rather than the date the written notice of award is received from the contracting officer through the ordinary mails. However, the Postal Service will evaluate an offer that proposes delivery based on the contractor's date of receipt of the contract or notice of award by adding five days for delivery of the award through the ordinary mails. If, as so computed, the offered delivery date is later than the required delivery date, the proposal will be unacceptable. Provision 2-3 Evaluation of Options (October 1987) (2.2.8) If the Postal Service elects to exercise an option simultaneously with award, proposals will be evaluated for purposes of award on the basis of total price for the basic quantity and the option quantity exercised with award. Otherwise, proposals will be evaluated for purposes of award by adding the total price for all option quantities to the total price for the basic quantity. Evaluation of options does not obligate the Postal Service to exercise the option or options. Any proposal that is materially unbalanced as to prices for basic and option quantities may be disregarded as unacceptable. An unbalanced proposal is one that is based on prices significantly less than cost for some work and prices that are significantly overstated for other work. Provision 2-4 Brand Name or Equal (February 1992) (2.3.2) One or more items called for by this solicitation have been identified in the Schedule by a brand-name-or-equal product description. Proposals offering equal products will be considered for award if these products are clearly identified and are determined by the Postal Service to contain all of the essential characteristics of the brand-name products referenced in the solicitation. Unless the offeror clearly indicates in the proposal that the proposal is for an equal product, the proposal will be considered as offering a brand-name product referenced in the solicitation. If the offeror proposes to furnish an equal product, the brand name and model or catalog number, if any, of the product to be furnished must be inserted in the space provided in the solicitation. The evaluation of proposals and the determination as to equality of the product offered will be based on information furnished by the offeror or identified in the proposal, as well as other information reasonably available to the purchasing activity. The purchasing activity is not responsible for locating or obtaining any information not identified in the proposal and reasonably available to the purchasing activity. Accordingly, to ensure that sufficient information is available, the offeror must furnish as a part of the proposal: 1. All descriptive material (such as cuts, illustrations, drawings, or other information) necessary for the purchasing activity to establish exactly what the offeror proposes to furnish and to determine whether the product offered meets the requirements of the solicitation; or 2. Specific references to information previously furnished or to information otherwise available to the purchasing activity to permit a determination as to equality of the product offered. If the offeror proposes to modify a product so as to make it conform to the requirements of the solicitation, the offeror must: 1. Include in the proposal a clear description of the proposed modifications; and 2. Clearly mark any descriptive material to show the proposed modifications. Provision 5-1 Type of Contract (October 1987) (5.1.2) The Postal Service plans to award a type of contract under this solicitation, and all proposals must be submitted on this basis. Alternate proposals based on other contract types will will not be considered. Provision 7-1 Proposal Guarantee (June 1988) (7.1.2) Offerors must furnish a proposal guarantee in the form of a proposal bond, a postal money order, a certified or cashier's check, an irrevocable letter of credit, or United States bonds or notes with a maturity of less than five years. The required amount of the proposal guarantee is set forth in the Schedule. The contracting officer will return proposal guarantees, other than proposal bonds: 1. To unsuccessful offerors as soon as possible after an award decision is made; and 2. To the successful offeror after it signs the contract and submits acceptable bonds required under the contract. If the successful offeror fails to sign the contract or submit the required bonds within the time specified by the contracting officer, the contract may be terminated for default. If the contract is terminated for default, the offeror is liable for any cost of acquiring the work in excess of its proposed price, and the guarantee is available to offset the difference. However, the guarantee is not an exclusive remedy. Provision 7-2 Performance Bond Requirements (October 1987) (7.1.3) Any offeror awarded a contract as a result of this solicitation will be required to submit a performance bond in a penal amount equal to 100 percent of the contract price, within the time specified by the contracting officer. The bond must be executed on the Postal Service forms attached to this solicitation, and sureties must be acceptable to the Postal Service. Corporate sureties must appear on the list in Treasury Circular 570, and the amount of the bond may not exceed the underwriting limit stated for the surety on that list. Failure to submit an acceptable bond may be cause for termination of the contract for default. Provision 7-3 Payment Bond Requirements (October 1987) (7.1.4) Any offeror awarded a contract as a result of this solicitation will be required to submit a payment bond in the penal amount set forth in the Schedule, within the time required by the contracting officer. The bond must be executed on the Postal Service forms attached to this solicitation, and sureties must be acceptable to the Postal Service. Corporate sureties must appear on the list in Treasury Circular 570, and the amount of the bond may not exceed the underwriting limit stated for the surety on that list. Failure to submit an acceptable bond may be cause for termination of the contract for default. Provision 7-4 Fidelity Bond Requirements (October 1987) (7.1.6) Any offeror awarded a contract as a result of this solicitation will be required to submit a fidelity bond in the penal amount set forth in the Schedule, in a form acceptable to and within the time specified by the contracting officer. Corporate sureties must appear on the list in Treasury Circular 570, and the amount of the bond may not exceed the underwriting limit stated for the surety on that list. Failure to submit an acceptable bond may be cause for termination of the contract for default. Provision 7-5 Deposit of Assets Requirements (October 1987) (7.1.10) Except for payment bonds required for construction contracts, any offeror required to submit a surety bond as a result of this solicitation may instead deposit assets in a form acceptable to the Postal Service in an amount set forth in the Schedule. When assets are deposited, the offeror must execute the Postal Service bond form made a part of this solicitation. Failure to deposit assets acceptable to the Postal Service may be cause for termination of the contract for default. Provision 8-1 Demonstrability (October 1987) (8.3.3) At the sole discretion of the Postal Service and before award of the contract, the Postal Service, upon notification by the contracting officer, may request a test demonstration to validate the technical acceptability of the offeror's proposal. The intent of the Postal Service in any test demonstration is to conduct a test of any or all products proposed by the offeror no less than 40 calendar days after receipt of the offeror's proposal and within seven working days after the contracting officer's written notification, at a mutually agreeable site approved by the Postal Service. The demonstration serves the sole purpose of validating/confirming the offeror's proposal and will not result in any additional revisions to that proposal, nor be construed to be an opportunity to revise. While the Postal Service intends to conduct the demonstration only with the responsible offeror selected for this procurement, the Postal Service reserves the right to request test demonstrations from any or all offerors in the competitive range. The demonstration will be conducted on a pass/fail basis. If the demonstration does not validate the offeror's proposal on the initial observation, the offeror will be afforded a second opportunity to correct the test deficiencies. Within ten calendar days after notification of the unsatisfactory results, the offeror must conduct the second demonstration. If the offeror elects to substitute a product in any second demonstration, this product must be offered to the Postal Service at the same price (or a lower price), and be certified as functionally equivalent. If the offeror fails the second demonstration, the offeror will be unacceptable for after completion of the demonstration whether it was satisfactory or unsatisfactory. The Postal Service reserves the right to proceed with a demonstration by the next-ranked offeror if such demonstration has not already been accomplished. The same terms and conditions would apply to this offeror. Provision 8-2 Functional Demonstration (October 1987) (8.3.3) The Postal Service may request functional demonstrations of some or all products proposed by an offeror during the technical evaluation process when Postal Service questions about specific products or families of products could be resolved more effectively through direct contact with the offeror and the proposed product. The Postal Service will provide the offeror with a list of products, software, or both, that will be required for the demonstration. The purpose of this request is to obtain operational information, and the requirements may be satisfied by visiting an operational site and/or development center. Such functional demonstrations may be held at a site selected by the offeror, subject to approval of the contracting officer. The Postal Service will request that the demonstration be held not less than five, but no more than ten working days following the date of the request. The offeror will not earn technical points as a result of the functional demonstration. Provision 8-3 System Integrity (January 1991) (8.3.3) To ensure the integrity of the Postal Service's computer operating systems, third-party software vendors must provide either a statement certifying that their product, when properly installed, will not compromise or otherwise degrade the integrity of the operating system; or provide the software source code. Provision 9-1 Alternate Intellectual Property Rights Proposals (December 1992) (9.2.2) The Postal service intends to award a contract that may provide for Postal Service acquisition of one or more of the following: 1. Title to any patents resulting from contract performance. 2. Unlimited rights in certain data (technical data and computer software) delivered to the Postal Service during contract performance. 3. Use and disclosure rights in data that may be copyrighted or may embody trade secrets or confidential commercial or financial information. Offeror may propose alternate intellectual property rights arrangements (including licensing arrangements for commercial exploitation of intellectual property developed under the contract); provided (i) the arrangements apply only to intellectual property developed solely at contractor private expense and not first produced in performance of this requirement, (ii) such arrangements are necessary to protect the offeror's trade secrets and commercial market competitiveness, and (iii) the Postal Service, including its support service contractors and their subcontractors, subject to the same disclosure restrictions as the Postal Service, will have the right to utilize such intellectual property for its internal purposes. The following must be included in any alternate proposal. 1. Suggested allocation of rights between the parties. 2. Description of benefits (including royalties to the Postal Service) to each party if the alternate is selected. 3. Costs to each party if alternate is selected (including royalties not collected by the Postal Service). 4. Supporting documentation for calculating benefits and costs. 5. A statement indicating willingness to accept the standard clauses (Patent Rights, Rights in Technical Data, and Rights in Computer Software) if the alternate is rejected. The contracting officer will consider alternate intellectual property rights proposals in determining which offeror's proposal is most favorable to the Postal Service, in accordance with the solicitation's evaluation and award section. Provision 9-2 Representation of Rights in Data (October 1987) (9.3.4) By completion of the representation below, the offeror must identify in its proposal the data (including subcontractor-furnished data) it intends to identify as "limited rights data" or "restricted computer software," or that it does not intend to provide as required. Any identification of limited rights data or restricted rights computer software is not derminative of the status of such data, should a contract be awarded to the offeror. Representation Concerning Data Rights Offeror has reviewed the requirements for the delivery of technical data or computer software and states (Offeror check appropriate block): None of the data proposed for fulfilling the requirements qualifies as limited rights data or restricted computer software. Data proposed for fulfilling the requirements qualify as limited rights data or restricted computer software and are identified as follows: "Limited rights data" and "restricted computer software" are defined in the contract clauses entitled Rights in Technical Data and Rights in Computer Software. Provision 9-3 Use of Limited Rights Data for Procurement of Repair Parts (October 1987) (9.3.2) The Postal Service has determined that it may use competitive procedures to procure repair parts and assemblies for the equipment or supply items being developed or manufactured under this contract. The Rights in Technical Data clause in this solicitation has therefore been modified to provide that limited rights data furnished under any contract resulting from this solicitation may be used for the purpose of competitive procurement. Provision 9-4 Royalty Report (October 1987) (9.3.9) Offerors must include in their proposals a report of any patent royalties or license fees that they expect to pay in connection with performance of any contract resulting from this solicitation. The report must include the following: Identification of patent, license agreement, and so forth. Reason for payment of royalty or license fee. Payee and amount payable. Rights obtained. Provision 10-1 Notice of Small, Minority-owned and Woman-owned Business Subcontracting Requirements (February 1992) (10.1.5) All offerors except small businesses must submit with their proposals the subcontracting plan required by the clause entitled Small, Minority-owned and Woman-owned Business Subcontracting Requirements. Provision 10-2 Regular Dealer/Manufacturer Representation (October 1987) (10.2.5) By checking the applicable block, the offeror represents that it is a regular dealer in, manufacturer of, the supplies offered. Provision 10-3 Certification of Nonsegregated Facilities (October 1987) (10.2.7) By submitting this proposal, the offeror certifies that it does not and will not maintain or provide for its employees any segregated facilities at any of its establishments, and that it does not and will not permit its employees to perform services at any location under its control where segregated facilities are maintained. The offeror agrees that a breach of this certification is a violation of the Equal Opportunity clause in this contract. As used in this certification, segregated facilities means any waiting rooms, work areas, rest rooms or wash rooms, restaurants or other eating areas, time clocks, locker rooms or other storage or dressing areas, parking lots, drinking fountains, recreation or entertainment area, transportation, or housing facilities provided for employees that are segregated by explicit directive or are in fact segregated on the basis of race, color, religion, or national origin, because of habit, local custom, or otherwise. The offeror further agrees that (unless it has obtained identical certifications from proposed subcontractors for specific time periods) it will obtain identical certifications from proposed subcontractors before awarding subcontracts exceeding $10,000 that are not exempt from the provisions of the Equal Opportunity clause; that it will retain these certifications in its files; and that it will forward the following notice to these proposed subcontractors (except when they have submitted identical certifications for specific time periods): NOTICE A certification of nonsegregated facilities must be submitted before the award of a subcontract exceeding $10,000 that is not exempt from the Equal Opportunity clause. The certification may be submitted either for each subcontract or for all subcontracts during a period (quarterly, semiannually, or annually). Provision 10-4 Equal Opportunity Affirmative Action Program (April 1989) (10.2.7) The offeror, by checking the applicable block or blocks, represents that it (1) has developed and has on file, has not developed and does not have on file, at each establishment, affirmative action programs as required by the rules and regulations of the Secretary of Labor (41 CFR 60-1 and 60-2) and has, has not filed the required reports with the Joint Reporting Committee, or (2) has not previously had contracts subject to the written affirmative action program requirement of the rules and regulations of the Secretary of Labor. Provision 10-5 Preaward Equal Opportunity Compliance Review (April 1989) (10.2.7) If the contract award will be $1,000,000 or more, the prospective contractor and its known first-tier subcontractors with subcontracts of $1,000,000 or more will be subject to a preaward compliance review. In order to qualify for award, the prospective contractor and first-tier subcontractors must be found in compliance pursuant to 41 CFR 60-1.20. Provision 10-6 Notice of Requirements for Equal Opportunity Affirmative Action (October 1987) (10.2.7) The offeror's attention is called to the Equal Opportunity clause and the Affirmative Action Compliance Requirements for Construction clause. The goals for minority and female participation, expressed in percentage terms for the contractor's aggregate workforce in each trade on all construction work in the covered area, are as follows: Goals for minority participation for each trade (Contracting officer insert goals.) Goals for female participation for each trade (Contracting officer insert goals.) These goals apply to all the contractor's construction work performed in the covered area. If the contractor performs construction work in a geographical area located outside the covered area, the contractor must apply the goals established for the geographical area where the work is actually performed. Goals are published periodically in the Federal Register in notice form, and these notices may be obtained from the Office of Federal Contract Compliance Programs (OFCCP). The contractor's compliance with Executive Order 11246, as amended, and the regulations in 41 CFR 60-4 must be based on (1) its implementation of the Equal Opportunity clause, (2) specific affirmative action obligations required by the Affirmative Action Compliance Requirements for Construction clause, and (3) its efforts to meet the goals. The hours of minority and female employment and training must be substantially uniform throughout the length of the contract, and in each trade. The contractor must make a good-faith effort to employ minorities and women evenly on each of its projects. The transfer of minority or female employees or trainees from contractor to contractor, or from project to project, for the sole purpose of meeting the contractor's goals will be a violation of the contract, Executive Order 11246, as amended, and the regulations in 41 CFR 60-4. Compliance with the goals will be measured against the total work hours performed. The contractor must provide written notification to the Director, OFCCP, within ten working days following award of any construction subcontract in excess of $10,000 at any tier for construction work under the contract resulting from this solicitation. The notification must list the: 1. Name, address, telephone number, and employer's identification number of the subcontractor; 2. Estimated dollar amount of the subcontract; 3. Estimated starting and completion dates of the subcontract; and 4. Geographical area in which the subcontract is to be performed. As used in this notice, and in any contract resulting from this solicitation, the covered area is (Contracting officer insert description of the geographical area where the contract is to be performed, giving the state, county, and city). Provision 10-7 Buy American Certificate - Supplies (October 1987) (10.3.2) The offeror certifies that each end product, except those listed below, is a domestic-source end product (as defined in the Preference for Domestic Supplies clause) and that components of unknown origin are considered to have been mined, produced, or manufactured outside the United States. Excluded end products (Offeror show country of origin for each excluded end product): Provision 10-8 Buy American Certificate - Construction Materials (October 1987) (10.3.3) The offeror certifies that only domestic construction materials (as defined in the Preference for Domestic Construction Materials clause) will be used in the performance of this contract, except for foreign construction materials listed below: Material Quality Estimated Cost Provision 10-9 Clean Air and Water Certification (October 1987) (10.4.2) This certification applies only if (1) the offer exceeds $100,000, (2) the offer is for an indefinite quantity and indicates that orders for estimating quantities will exceed $100,000 in any year, (3) a facility to be used is listed on the EPA List of Violating Facilities because of a criminal conviction, or (4) the contract is not otherwise exempt. The offeror (1) certifies, by checking the applicable box, that any facility to be utilized in the performance of the proposed contract j is, j is not, listed on the Environmental Protection Agency List of Violating Facilities as of the date of this proposal, and (2) agrees to notify the contracting officer promptly if any communication is received from the Environmental Protection Agency before contract award indicating that any such facility is under consideration for inclusion on the List. Appendix B: Contract Clauses Appendix B: Contract Clauses Section 1 General B.1.1 Applicability B.1.2 Numbering of Clauses Section 2 Clause Prescriptions B.2.1 Clauses Prescribed in this Appendix B.2.2 Clauses Prescribed in Chapters 1-12 Section 3 Clauses Appendix B: Contract Clauses Section 1 General B.1.1 Applicability This appendix sets forth general clauses to be included in solicitations and contracts for supplies and services, including construction, but excluding mail transportation. Special clauses may be prescribed and set forth in handbooks or directives implementing or supplementing this manual (see 1.1.1.b). Applicable clauses must be included in sections A through H of the solicitation and the contract, following the format prescribed in A.2.1. B.1.2 Numbering of Clauses Procurement Manual clauses are numbered with a prefix indicating the Procurement Manual chapter or appendix prescribing their use. Thus, Clause 9-6, Rights in Technical Data, is prescribed in chapter 9, and Clause B-1, Definitions, is prescribed in this appendix. In parentheses to the right of the clause title is a reference to the chapter (or appendix), section, and part where the clause is prescribed. Other clauses are numbered or identified as set forth in the relevant handbook. Section 2 Clause Prescriptions B.2.1 Clauses Prescribed in this Appendix Include the following clauses in all contracts not awarded using simplified procedures (see 4.3): 1. Clause B-1, Definitions 2. Clause B-2, Changes; or, for construction, Clause 11- 26, Changes (Construction) 3. Clause B-5, Certificate of Conformance 4. Clause B-8, Assignment of Claims 5. Clause B-9, Claims and Disputes 6. Clause B-10, Pricing of Adjustments 7. Clause B-14, Examination of Records 8. Clause B-15, Notice of Delay 9. Clause B-16, Suspensions and Delays 10. Clause B-19, Excusable Delays 11. Clause B-20, Invoices 12. Clause B-21, Change-Order Accounting 13. Clause B-22, Interest 14. Clause B-25, Advertising of Contract Awards 15. Clause B-29, Order of Precedence 16. Clause B-30, Permits and Responsibilities (Services) In addition to the clauses in paragraph a above, include the following clauses in all fixed-price contracts not awarded using simplified procedures: 1. Clause B-11, Termination for Convenience 2. Clause B-13, Termination for Default In addition to the clauses in paragraphs a and b above, include the following clauses in all fixed-price supply contracts not awarded using simplified procedures: 1. Clause B-4, Variation in Quantity 2. Clause B-7, Responsibility for Supplies In addition to the clauses in paragraph a above, include the following clauses in all non-fixed-priced contracts: 1. Clause B-12, Termination for Convenience or Default 2. Clause B-17, Disallowance of Costs 3. Clause B-18, Subcontracts Include the following clauses in contracts when applicable, following guidance in the relevant handbook: 1. Clause B-23, Guaranteed Shipping Weight 2. Clause B-24, Frequency Authorization 3. Clause B-26, Protection of Postal Service Buildings, Equipment, and Vegetation 4. Clause B-27, Performance at Occupied Postal Premises 5. Clause B-28, Safety and Health Standards Include Clause B-3, Contract Type, in all contracts awarded without the issuance of a written solicitation. Include Clause B-30, Permits and Responsibilities (Services), in all service contracts performed on Postal Service premises. B.2.2 Clauses Prescribed in Chapters 1 through 12 Instructions for clauses prescribed in chapters 1 through 12 are found by the parenthetical reference to the right of each clause title. Section 3 Clauses No. Title Page B-1 Definitions B-2 Changes B-3 Contract Type B-4 Variation in Quantity B-5 Certificate of Conformance B-6 Receiving Reports B-7 Responsibility for Supplies B-8 Assignment of Claims B-9 Claims and Disputes B-10 Pricing of Adjustments B-11 Termination for Convenience B-12 Termination for Convenience or Default B-13 Termination for Default B-14 Examination of Records B-15 Notice of Delay B-16 Suspensions and Delays B-17 Disallowance of Costs B-18 Subcontracts B-19 Excusable Delays B-20 Invoices B-21 Change-Order Accounting B-22 Interest B-23 Guaranteed Shipping Weight B-24 Frequency Authorization B-25 Advertising of Contract Awards B-26 Protection of Postal Service Buildings, Equipment, and Vegetation B-27 Performance at Occupied Postal Premises B-28 Safety and Health Standards B-29 Order of Precedence B-30 PermitsandResponsibilitis (Services) 1-1 Privacy Act 1-2 Advance Payments 1-3 Progress Payments 1-4 (Reserved) 1-5 Gratuities or Gifts 1-6 Contingent Fees 1-7 Non-Disclosure of Address Information 2-1 Inspection - Fixed-Price 2-2 Inspection - Non-Fixed-Price 2-3 Quality Assurance 2-4 First Article Approval - Contractor Testing 2-5 First Article Approval - Postal Service Testing 2-6 Delayed Acceptance 2-7 Incorporation of Warranty 2-8 Warranty 2-9 Definition of Delivery Terms and Contractor's Responsibilities 2-10 Liquidated Damages 2-11 Postal Service Property - Fixed-Price 2-12 Postal Service Property - Short Form 2-13 Postal Service Property - Non-Fixed-Price 2-14 Postal Service Property - Furnished "As Is" 2-15 Special Tooling 2-16 Special Test Equipment 2-17 Option for Increase Quantity 2-18 Option Item 2-19 Option to Extend Services 2-20 Option to Extend the Term of the Contract 2-21 Component Parts 2-22 Value Engineering Incentive 4-1 Notice to Suppliers 5-1 Payment - Fixed-Price 5-2 Incentive Price Revision 5-3 Economic Price Adjustment - Labor and Materials 5-4 Allowable Cost and Payment 5-5 Limitation of Cost 5-6 Limitation of Funds 5-7 Cost Contract - No Fee 5-8 Cost-Sharing Contract - No Fee 5-9 Incentive Fee 5-10 Fixed Fee 5-11 Ordering 5-12 Delivery-Order Limitations 5-13 Definite Quantity 5-14 Indefinite Quantity 5-15 Requirements 5-16 Payment (Time-and-Materials and Labor-Hour Contracts) 5-17 Execution and Commencement of Work 5-18 Limitation of Postal Service Liability 5-19 Contract Definitization 5-20 Payment of Allowable Costs before Definitization 5-21 Predetermined Indirect Cost Rates 5-22 Price Reduction for Defective Cost or Pricing Data 5-23 Subcontractor Cost or Pricing Data 6-1 Bankruptcy 7-1 Patent Infringement Bond Requirements 7-2 Additional Bond Security 7-3 Deposit of Assets Instead of Surety Bonds 7-4 Insurance 7-5 Errors and Omissions 7-6 Federal, State, and Local Taxes 7-7 Federal, State, and Local Taxes (Short Form) 7-8 Federal, State, and Local Taxes (Noncompetitive Contract) 7-9 State and Local Taxes (Indefinite Delivery Equipment Rental) 8-1 Nondisclosure (Professional Services) 8-2 Conflict of Interest 8-3 Inspection of Professional Services 8-4 Invoices (Professional Services) 8-5 Records Ownership 8-6 Key Personnel 8-7 Inspection and Acceptance - Systems 8-8 Liquidated Damages - Industrial Supply or Service Items Not Ready for Use 8-9 Use of Hardware or Software Monitors 8-10 Site Preparation 8-11 Software License Warranty and Indemnification 8-12 Software Development Warranty 8-13 Warranty Exclusion and Limitation of Damages 8-14 Organizational Conflict of Interest 9-1 Patent Rights 9-2 Authorization and Consent 9-3 Notice and Assistance Regarding Patent and Copyright Infringement 9-4 Patent Indemnity 9-5 Waiver of Indemnity 9-6 Rights in Technical Data 9-7 Withholding Payment (Technical Data and Computer Software) 9-8 Additional Data Requirements 9-9 Rights in Computer Software 9-10 Rights in Data - Special Works 9-11 Rights in Data - Existing Works 9-12 Refund of Royalties 9-13 Intellectual Property Rights 9-14 Acquisition of Additional Rights in Data 9-15 Patent Rights - Contractor Retention 9-16 Postal Service Title in Technical Data and Computer Software 9-17 Delivery of Limited Rights and Restricted Computer Software 9-18 Manufacture of Repair Parts 10-1 Participation of Small, Minority-owned and Woman-owned Business 10-2 Small, Minority-owned and Woman-owned Business Subcontracting Requirements 10-3 Convict Labor 10-4 Contract Work Hours and Safety Standards Act - Overtime Compensation 481 10-5 Davis-Bacon Act 10-6 Compliance by States with Labor Standards 10-7 Contract Work Hours and Safety Standards Act - Safety Standards 10-8 Walsh-Healey Public Contracts Act 10-9 Equal Opportunity 10-10 Affirmative Action Compliance Requirements for Construction 10-11 Equal Opportunity Preaward Clearance of Subcontracts 10-12 Service Contract Act 10-13 Service Contract Act - Short Form 10-14 Fair Labor Standards Act and Service Contract Act - Price Adjustments 10-15 Affirmative Action for Handicapped Workers 10-16 Affirmative Action for Disabled Veterans and Veterans of the Vietnam Era 10-17 Preference for Domestic Supplies 10-18 Preference for Domestic Construction Materials 10-19 Clean Air and Water 10-20 Drug-Free Workplace 11-1 Conditions Affecting the Work 11-2 Differing Site Conditions 11-3 Performance of Work by Contractor 11-4 Superintendence by Contractor 11-5 Materials and Workmanship 11-6 Use of Premises 11-7 Other Contracts 11-8 Subcontracts (Construction) 11-9 Permits and Responsibilities 11-10 Payment (Construction) 11-11 Inspection and Acceptance (Construction) 11-12 Building Codes, Fees, and Charges 11-13 Protection of Existing Vegetation, Structures, Utilities, and Improvements 11-14 Heat 11-15 Debris and Cleanup 11-16 Measurements 11-17 Survey Monuments and Bench Marks 11-18 Specifications and Drawings 11-19 Standard References 11-20 Shop Drawings, Coordination Drawings, and Schedules 11-21 Record "As Built" Drawings 11-22 Spare-Parts Data 11-23 Construction Progress Chart 11-24 Postal Service Occupancy 11-25 Warranty (Construction) 11-26 Changes (Construction) 11-27 Accident Prevention 11-28 Samples Clause B-1 Definitions (June 1988) (B.2.1) As used in this contract, the following terms have the following meanings: Contracting officer. The person executing this contract on behalf of the Postal Service, and any other officer or employee who is a properly designated contracting officer; the term includes, except as otherwise provided in the contract, the authorized representative of a contracting officer acting within the limits of the authority conferred upon that person. Subcontracts. Except as otherwise provided in the contract, the term includes purchase orders under this contract. Clause B-2 Changes (October 1987) (B.2.1) The contracting officer may, in writing, without notice to any sureties, order changes within the general scope of this contract in the following: 1. Drawings, designs, or specifications when supplies to be furnished are to be specially manufactured for the Postal Service in accordance with them. 2. Statement of work or description of services. 3. Method of shipment or packing. 4. Place of delivery of supplies or performance of services. 5. Delivery or performance schedule. 6. Postal Service-furnished property or facilities. Any other written or oral order (including direction, instruction, interpretation, or determination) from the contracting officer that causes a change will be treated as a change order under this clause, provided that the contractor gives the contracting officer written notice stating (1) the date, circumstances, and source of the order and (2) that the contractor regards the order as a change order. If any such change affects the cost of performance or the delivery schedule, the contract will be modified to effect an equitable adjustment. The contractor's claim for equitable adjustment must be asserted within 30 days of receiving a written change order. A later claim may be acted upon - but not after final payment under this contract - if the contracting officer decides that the facts justify such action. Failure to agree to any adjustment is a dispute under the Claims and Disputes clause. Nothing in that clause excuses the contractor from proceeding with the contract as changed. Clause B-3 Contract Type (February 1991) (B.2.1) This is a contract. (insert type of contract) Clause B-4 Variation in Quantity (October 1987) (B.2.1) No variation in the quantity of any item called for by this contract will be accepted unless caused by conditions of loading, shipping, or packing, or allowances in the manufacturing process, and then only to any extent specified elsewhere in the contract. The contractor is responsible for delivering each item quantity within any allowable variations. If the contractor delivers, and the Postal service receives, quantities of any item in excess of the quantity called for (after considering any allowable variation in quantity), these excess quantities will be treated as being delivered for the contractor's convenience. The Postal Service may retain excess quantities up to $100 in value without compensating the contractor for them, and the contractor waives all right, title, or interests in them. Quantities in excess of $100 will, at the option of the Postal Service, either be returned at the contractor's expense or retained and paid for at the contract unit price. If this contract calls for deliveries at different times, this clause applies to each delivery rather than to the aggregate of all deliveries under the contract. Clause B-5 Certificate of Conformance (October 1987) (B.2.1) When authorized in writing by the contracting officer, the contractor may use a Certificate of Conformance for supplies or services that would otherwise require inspection. The right of inspection under the inspection provisions of this contract is not prejudiced by this procedure. The contractor's signed certificate must be attached to the inspection or receiving report. The Postal Service has the right to reject defective supplies or services within a reasonable time after delivery, by written notification to the contractor. The contractor must promptly replace, correct, or repair the rejected supplies or services at the contractor's expense. "I certify that on (Contractor insert date), the (Insert contractor's name) furnished the supplies or services called for by Contract No. via (Carrier) on (Identify the bill of lading or shipping document) in accordance with all applicable requirements. I further certify that the supplies or services are of the quality specified and conform in all respects with the contract requirements, including specifications, drawings, preservation, packaging, packing, marking requirements, and physical item identification (part number), and are in the quantity shown on this or on the attached acceptance documents." Date of Execution: Signature: Title: Clause B-6 Receiving Reports (October 1987) (B.2.1) The contracting officer will provide the proper receiving report forms before the delivery date. The contractor must complete the proper sections of the forms and include the forms with any shipments to the Postal Service. Payment will not be made for shipments not accompanied by receiving reports. Clause B-7 Responsibility for Supplies (October 1987) (B.2.1) Except as otherwise provided in this contract: The contractor is responsible for the supplies covered by the contract until they are delivered at the designated delivery point, regardless of the point of inspection; After delivery and before Postal Service acceptance or rejection and notification, the Postal Service is responsible for loss or destruction of or damage to the supplies only if it results from the negligence of officers, agents, or employees of the Postal Service acting within the scope of their employment; and The contractor bears all risks as to rejected supplies after notice of rejection, except that the Postal Service is responsible for loss, destruction, or damage resulting from the negligence of officers, agents, or employees of the Postal Service acting within the scope of their employment. Clause B-8 Assignment of Claims (October 1987) (B.2.1) If this contract provides for payments aggregating $10,000 or more, claims for monies due or to become due from the Postal Service under it may be assigned to a bank, trust company, or other financing institution, including any federal lending agency, and may thereafter be further assigned and reassigned to any such institution. Any assignment or reassignment must cover all amounts payable and must not be made to more than one party, except that assignment or reassignment may be made to one party as agent or trustee for two or more parties participating in financing this contract. No assignment or reassignment will be recognized as valid and binding upon the Postal Service unless a written notice of the assignment or reassignment, together with a true copy of the instrument of assignment, is filed with: 1. The contracting officer; 2. The surety or sureties upon any bond; and 3. The office, if any, designated to make payment, and the contracting officer has acknowledged the assignment in writing. Assignment of this contract or any interest in this contract other than in accordance with the provisions of this clause will be grounds for termination of the contract for default at the option of the Postal Service. Clause B-9 Claims and Disputes (June 1988) (B.2.1) This contract is subject to the Contract Disputes Act of 1978 (41 U.S.C. 601-613) ("the Act"). Except as provided in the Act, all disputes arising under or relating to this contract must be resolved under this clause. "Claim," as used in this clause, means a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract. However, a written demand or written assertion by the contractor seeking the payment of money exceeding $50,000 is not a claim under the Act until certified as required by subparagraph d.2 below. A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim under the Act. The submission may be converted to a claim under the Act by complying with the submission and certification requirements of this clause, if it is disputed either as to liability or amount is not acted upon in a reasonable time. 1. A claim by the contractor must be made in writing and submitted to the contracting officer for a written decision. A claim by the Postal Service against the contractor is subject to a written decision by the contracting officer. 2. For contractor claims exceeding $50,000, the contractor must submit with the claim a certification that: (a) The claim is made in good faith; (b) Supporting data are accurate and complete to the best of the contractor's knowledge and belief; and (c) The amount requested accurately reflects the contract adjustment for which the contractor believes the Postal Service is liable. 3. (a) If the contractor is an individual, the certification must be executed by that individual. (b) If the contractor is not an individual, the certification must be executed by: (1) A senior company official in charge at the contractor's plant or location involved; or (2) An officer or general partner of the contractor having overall responsibility for the conduct of the contractor's affairs. For contractor claims of $50,000 or less, the contracting officer must, if requested in writing by the contractor, render a decision within 60 days of the request. For contractor-certified claims over $50,000, the contracting officer must, within 60 days, decide the claim or notify the contractor of the date by which the decision will be made. The contracting officer's decision is final unless the contractor appeals or files a suit as provided in the Act. The Postal Service will pay interest in the amount found due and unpaid from: 1. The date the contracting officer receives the claim (properly certified, if required); or 2. The date payment otherwise would be due, if that date is later, until the date of payment. Simple interest on claims will be paid at a rate determined in accordance with the Interest clause. The contractor must proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under the contract, and comply with any decision of the contracting officer. Clause B-10 Pricing of Adjustments (October 1987) (B.2.1) When costs are a factor in determining any contract price adjustment under the Changes clause or any other provision of this contract, chapter 5 of the USPS Procurement Manual in effect on the date of this contract will serve as a guide in negotiating the adjustment. Clause B-11 Termination for Convenience (October 1987) (B.2.1) Performance under this contract may be terminated by the Postal Service in whole or in part whenever the contracting officer determines that termination is in the interest of the Postal Service. A termination may be effected by delivery to the contractor of a notice of termination specifying the extent of work terminated, and the effective date of the termination. Upon receipt of a notice of termination, unless otherwise directed by the contracting officer, the contractor must take the following actions: 1. Stop work to the extent specified in the notice. 2. Place no further orders or subcontracts for materials, services, or facilities except as may be necessary for completion of the unterminated work. 3. Terminate all orders and subcontracts to the extent that they relate to the work terminated. 4. Assign to the Postal service, as directed by the contracting officer, all right, title, and interest of the contractor under the orders and subcontracts terminated. The Postal Service has the right, in its discretion, to settle or pay claims arising out of these terminations. 5. Settle all outstanding liabilities and claims arising out of the termination of orders and subcontracts, with the approval or ratification of the contracting officer. The contracting officer's decision is final for the purposes of this clause. 6. Transfer title to the Postal Service and deliver as directed by the contracting officer: (a) Work in process, completed work, and other material produced as a part of or acquired for the work terminated; and (b) The completed or partially completed plans, drawings, information, and other property that, if the contract had been completed, would have been furnished to the Postal Service. 7. Use its best efforts to sell as directed by the contracting officer any property of the types referred to in subparagraph b.6 above, provided that the contractor may acquire property under the conditions prescribed and at prices approved by the contracting officer, and the proceeds of any such transfer will be applied in reduction of any payments to be made by the Postal Service to the contractor, or be credited to the price or cost of the work covered by this contract, or be paid in any manner directed by the contracting officer. 8. Complete performance of the work not terminated. 9. Take any action that may be necessary, or that the contracting officer may direct, for protecting and preserving any property related to this contract that is in the possession of the contractor and in which the Postal Service has or may acquire an interest. At any time, the contractor may submit to the contracting officer a list, certified as to quantity and quality, of termination inventory not previously disposed of and may request the Postal Service to remove inventory items or enter into a storage agreement covering them. Not later than 15 days after receiving this request, the Postal Service will accept title to the items and remove them or enter into a storage agreement. The list will be subject to verification by the contracting officer upon removal of the items or, if the items are stored, within 45 days after submission of the list. After termination, the contractor must submit to the contracting officer a termination claim in the form and with the certification prescribed by the contracting officer. The claim must be submitted promptly, but in no event more than one year after the effective date of termination, unless an extension in writing is granted by the contracting officer. However, if the contracting officer determines that the facts justify such action, any termination claim may be received and acted upon at any time after the one-year period. Upon failure of the contractor to submit a termination claim within the time allowed, the contracting officer may determine, on the basis of the information available, the amount, if any, due the contractor by reason of the termination and will pay that amount. If the contractor and the contracting officer fail to agree on the amount to be paid to the contractor by reason of the termination, the contracting officer will determine the amount, if any, due the contractor and pay the contractor the contract price for completed and accepted supplies or services not previously paid for (adjusted for any saving of freight and other charges) and, with respect to all other contract work performed before the effective date of termination, the total of: 1. The cost of such work; 2. The cost of settling and paying claims arising out of the termination of work under subcontracts; and 3. A profit on e.1 above, determined by the contracting officer to be fair and reasonable; but if it appears that the contractor would have sustained a loss on the entire contract had it been completed, no profit will be included, and an appropriate adjustment will be made reducing the amount of the settlement to reflect the indicated rate of loss. The total sum to be paid to the contractor may not exceed the total contract price as reduced by the payments made and as further reduced by the contract price of work not terminated. Except for normal spoilage, and except to the extent that the Postal Service expressly assumed the risk of loss, there will be excluded from the amounts payable to the contractor under paragraph e above, the fair value, as determined by the contracting officer, of property destroyed, lost, stolen, or damaged so as to become undeliverable to the Postal Service, or to a buyer. Any determination of costs will be governed by the cost principles set forth in chapter 5 of the USPS Procurement Manual in effect on the effective date of termination. The contractor has the right of review under the Claims and Disputes clause of any determination made by the contracting officer under paragraph d or e above, except that, if the contractor has failed to submit its termination claim within the time provided in paragraph d above and has failed to request an extension of time, there may be no right of review. In arriving at the amount due the contractor, there must be deducted: 1. All unliquidated advance or other payments to the contractor applicable to the terminated portion of this contract; 2. Any claim that the Postal Service may have against the contractor under this contract; and 3. The agreed price for or the proceeds of sale of materials, supplies, or other things kept by the contractor or sold and not recovered by or credited to the Postal Service. If the termination is partial, the contractor must file with the contracting officer a request in writing for an equitable adjustment of the price specified in the contract relating to the continued portion of the contract. The Postal Service may, under the terms and conditions it prescribes, make partial payments and payments on account in connection with the terminated portion of this contract whenever the aggregate of these payments is within the amount to which the contractor is entitled. Unless otherwise provided in this contract, or by statute, the contractor, for a period of three years after final settlement, must preserve and make available to the Postal Service at all reasonable times at the contractor's office, all books, records, documents, and other evidence bearing on the costs and expenses of the contractor under this contract and relating to the work terminated. If the contracting officer approves, photographs, microphotographs, or other authentic reproductions may be maintained instead of the originals. Clause B-12 Termination for Convenience or Default (October 1987) (B.2.1) Performance under this contract may be terminated by the Postal Service in whole or in part whenever: 1. The contractor defaults in performing this contract (including in the term "default" any refusal or failure to prosecute the work diligently enough to ensure its completion within the time specified or any extension), and fails to cure the default within ten days (or for a longer period as the contracting officer may allow) after receipt from the contracting officer of a notice specifying the default; or 2. The contracting officer determines that termination is in the best interests of the Postal Service. A termination may be effected by delivery to the contractor of a notice of termination specifying whether the termination is for default or for the convenience of the Postal Service, the extent of work terminated, and the effective date of the termination. If, after notice of termination for default under subparagraph a.1 above, it is determined that the contractor was not in default or that the delay was excusable, the notice of termination will be deemed to have been issued for the convenience of the Postal Service. Upon receipt of a notice of termination, unless otherwise directed by the contracting officer, the contractor must take the following actions: 1. Stop work under the contract to the extent specified in the notice. 2. Place no further orders or subcontracts for materials, services, or facilities except as necessary for completion of the unterminated work. 3. Terminate all orders and subcontracts to the extent that they relate to the work terminated. 4. Assign to the Postal Service, as directed by the contracting officer, all right, title, and interest of the contractor under the orders and subcontracts terminated. The Postal Service has the right, in its discretion, to settle or pay claims arising out of these terminations. 5. Settle all outstanding liabilities and all claims arising out of the termination of orders and subcontracts, with the approval or ratification of the contracting officer. The contracting officer's decision is final for the purposes of this clause. 6. Transfer title to the Postal Service and deliver as directed by the contracting officer: (a) Work in process, completed work, and other material produced as a part of or acquired for the work terminated; and (b) The completed or partially plans, drawings, information, and other property that, if the contract had been completed, would have been furnished to the Postal Service. 7. Use its best efforts to sell as directed by the contracting officer any property of the types referred to in subparagraph b.6 above, provided that the contractor may acquire property under the conditions prescribed and at prices approved by the contracting officer, and the proceeds of any such transfer will be applied in reduction of any payments to be made by the Postal Service to the contractor, or be credited to the price or cost of the work covered by this contract or paid in any manner directed by the contracting officer. 8. Complete performance of the work not terminated. 9. Take any action that may be necessary, or that the contracting officer may direct, for protecting and preserving any property related to this contract that is in the possession of this contractor and in which the Postal Service has or may acquire an interest. At any time, the contractor may submit to the contracting officer a list, certified as to quantity and quality, of termination inventory not disposed of and may request the Postal Service to remove inventory items or enter into a storage agreement covering them. Not later than 15 days after receiving this request, the Postal Service will accept title to the items and remove them or enter into a storage agreement. The list will be subject to verification by the contracting officer upon removal of the items or, if the items are stored, within 45 days after submission of the list. After termination, the contractor must submit to the contracting officer a termination claim in the form and with the certification prescribed by the contracting officer. The claim must be submitted promptly, but in no event more than 180 days after the effective date of termination, unless an extension in writing is granted by the contracting officer. However, if the contracting officer determines that the facts justify such action, any termination claim may be received and acted upon at any time after the 180-day period. Upon failure of the contractor to submit a termination claim within the time allowed, the contracting officer may determine, on the basis of information available, the amount, if any, due the contractor by reason of the termination and will pay that amount. Subject to the provision of paragraph d above, the contractor and the contracting officer may agree upon the whole or any part of the amount to be paid (including and allowance for the fee) to the contractor by reason of the termination. If the contractor and the contracting officer fail to agree on the amount with respect to cost or fee, the contracting officer will determine, on the basis of information available, the amount, if any, due the contractor and pay the contractor as follows: 1. If the settlement includes cost and fee: (a) All costs and expenses reimbursable in accordance with this contract, not previously paid to the contractor and such as may continue for a reasonable time after termination; (b) The cost of settling and paying claims arising out of the termination of work under subcontracts or orders; (c) The reasonable costs of settlement, including accounting, legal, clerical, and other expenses reasonably necessary for the preparation of settlement claims, together with reasonable storage, transportation, and other costs incurred in connection with protecting or disposing of the termination inventory (however, if the termination is for default, there must not be included any amount for the preparation of the contractor's settlement proposal); and (d) A portion of the fee payable under the contract, determined as follows: (1) In the event of termination for convenience, a percentage of the fee equivalent to the percentage of the completion of work contemplated by the contract, but exclusive of subcontract effort included in subcontractor's termination claims, less fee payments previously made; or (2) In the event of termination for default, that proportionate part of the fee (or, if this contract calls for articles of different types, of such part of the fee as is reasonably allocable to the type of article under consideration) as the total number of articles accepted bears to the total number of articles of a like kind called for by this contract. If the amount determined under this subparagraph (2) is less than the total payment already made to the contractor, the contractor must repay to the Postal Service the excess. 2. If the settlement includes only the fee, its amount will be determined in accordance with f.1(d) above. Costs claimed, agreed to, or determined pursuant to paragraphs c, d, and e above must be in accordance with chapter 5 of the USPS Procurement Manual in effect on the effective date of termination. The final settlement is limited as provided in the Limitation of Cost clause of this contract. The contractor has the right of review, under the Claims and Disputes clause, of any determination made by the contracting officer under paragraph d or f above, except that if the contractor fails to request an extension of time, the contractor will have no right of review. In any case where the contracting officer determines the amount due under paragraph d or f above, the Postal Service must pay to the contractor the following: 1. If there is no right of review under this clause or if no timely review has been taken, the amount determined by the contracting officer; or 2. If a review has been taken, the amount finally determined. There will be deducted: 1. All unliquidated advance or other payments made to the contractor applicable to the terminated portion of this contract; 2. Any claim the Postal Service may have against the contractor; and 3. The agreed price for, or the proceeds of sale of, any materials, supplies, or other things acquired by the contractor or sold in accordance with this clause. If the termination is partial, the portion of the fee payable for the continued portion of the contract must be equitably adjusted by agreement between the contractor and the contracting officer. The Postal Service may, under the terms and conditions it may prescribe, make partial payments against costs incurred by the contractor in connection with the terminated portion of the contract whenever, in the opinion of the contracting officer, the aggregate of the partial payments is within the amount to which the contractor will be entitled. If the total of these payments exceeds the amount finally determined to be due under this clause, the excess must be repaid to the Postal Service upon demand, together with interest calculated in accordance with the Interest clause of this contract, for the period from the date the excess payment is received by the contractor to the date on which the excess is repaid to the Postal Service. However, no interest will be charged with respect to an excess payment attributable to a reduction in the contractor's claim by reason of retention or other disposition of termination inventory, until ten days after the date of the retention or disposition. Clause B-13 Termination for Default (October 1987) (B.2.1) 1. The Postal Service may, subject to paragraphs c and d below, by written notice of default to the contractor, terminate this contract in whole or in part if the contractor fails to: (a) Complete the requirements of this contract within the time specified in the contract or any extension; (b) Make progress, so as to endanger performance of this contract (but see paragraph d below); or (c) Perform any of the other provisions of this contract (but see subparagraph a.2 following). 2. The Postal Service's right to terminate this contract under a.1(b) and (c) above may be exercised if the contractor does not cure the failure within ten days (or more if authorized in writing by the contracting officer) after receipt of the notice from the contracting officer specifying the failure. If the Postal Service terminates this contract in whole or in part, it may acquire similar supplies or services or complete the work, and the contractor will be liable to the Postal Service for any excess costs. However, the contractor must continue the work not terminated. Except for defaults of subcontractors at any tier, the contractor is not liable for any excess costs if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the contractor. If the failure to perform is caused by the default of a subcontractor at any tier, and if the cause of the default is beyond the control of both the contractor and subcontractor, and without the fault or negligence of either, the contractor is not liable for any excess costs for failure to perform, unless the subcontractor supplies or services were obtainable from other sources in sufficient time for the contractor to meet the required delivery schedule. If this contract is terminated for default, the Postal Service may require the contractor to transfer title and deliver to the Postal Service, as directed by the contracting officer, any completed supplies, partially completed supplies, and materials, parts, tools, dies, jigs, fixtures, plans, drawings, information, and contract rights that the contractor has specifically produced or acquired for the terminated portion of this contract. Upon direction of the contracting officer, the contractor must also protect and preserve property in its possession in which the Postal Service has an interest. The Postal Service will pay the contract price for completed items delivered and accepted. The contractor and contracting officer may agree on the amount of payment for items delivered and accepted under paragraph e above for the protection and preservation of the property. Failure to agree will be a dispute under the Claims and Disputes clause. The Postal Service may withhold from these amounts any sum the contracting officer determines to be necessary to protect the Postal Service against loss because of outstanding claims. If, after termination, it is determined that the contractor was not in default, or that the delay was excusable, the rights and obligations of the parties will be the same as if the termination had been issued for convenience. The rights and remedies of the Postal Service under this clause are in addition to any other rights and remedies provided by law or under this contract. Clause B-14 Examination of Records (October 1987) (B.2.1) The Postal Service and its authorized representatives will, until three years after final payment under this contract, or for any shorter period specified for particular records, have access to and the right to examine any directly pertinent books, documents, papers, or other records of the contractor involving transactions related to this contract. The contractor agrees to include in all subcontracts under this contract a provision to the effect that the Postal Service and its authorized representatives will, until three years after final payment under the subcontract, or for any shorter specified period for particular records, have access to and the right to examine any directly pertinent books, documents, papers, or other records of the subcontractor involving transactions related to the subcontract. The term subcontract as used in this clause excludes: 1. Purchase orders; and 2. Subcontracts for public utility services at rates established for uniform applicability to the general public. Clause B-15 Notice of Delay (October 1987) (B.2.1) Immediately upon becoming aware of any difficulties that might delay deliveries under this contract, the contractor will notify the contracting officer in writing of them. The notification must identify the difficulties, the reasons for them, and the estimated period of delay anticipated. Failure to give notice may preclude later consideration of any request for an extension of contract time. Clause B-16 Suspensions and Delays (October 1987) (B.2.1) If the performance of all or any part of the work of this contract is suspended, delayed, or interrupted by: 1. An order or act of the contracting officer in administering this contract; or 2. By a failure of the contracting officer to act within the time specified in this contract - or within a reasonable time if not specified - an adjustment will be made for any increase in the cost of performance of this contract caused by the delay or interruption (including the costs incurred during any suspension or interruption). An adjustment will also be made in the delivery or performance dates and any other contractual term or condition affected by the suspension, delay, or interruption. However, no adjustment may be made under this clause for any delay or interruption to the extent that performance would have been delayed or interrupted by any other cause, including the fault or negligence of the contractor, or for which an adjustment is provided or excluded under any other term or condition of this contract. A claim under this clause will not be allowed: 1. For any costs incurred more than 20 days before the contractor has notified the contracting officer in writing of the act or failure to act involved; and 2. Unless the claim, in an amount stated, is asserted in writing as soon as practicable after the termination of the delay or interruption, but not later than the day of final payment under the contract. Clause B-17 Disallowance of Costs (October 1987) (B.2.1) The contracting officer may at any time issue the contractor a written notice of intent to disallow specified costs under this contract that have been determined not to be allowable under the contract terms. The contractor may, after receiving a notice of intent to disallow costs, submit a written response to the contracting officer, with justification for allowance of the costs. If the contractor does respond within 60 days, the contracting officer will, within 60 days of receiving the response, either make a written withdrawal of the notice or issue a written decision. Clause B-18 Subcontracts (October 1987) (B.2.1) Subcontract, as used in this clause, includes, but is not limited to, purchase orders and changes and modifications to purchase orders. The contractor must notify the contracting officer reasonably in advance of entering into any subcontract if the contractor does not have a purchasing system approved by a federal government agency and if the subcontract: 1. Is to be a cost-reimbursement, time-and-materials, or labor-hour contract estimated to exceed $25,000 including any fee; 2. Is proposed to exceed $100,000; or 3. Is one of a number of subcontracts with a single subcontractor, under this contract, for the same or related supplies or services that in the aggregate is expected to exceed $100,000. The advance notification required by paragraph a above must include: 1. A description of the supplies or services to be subcontracted; 2. Identification of the type of subcontract to be used; 3. Identification of the proposed subcontractor and an explanation of why and how the proposed subcontractor was selected, including the competition obtained; 4. The proposed subcontract price and the contractor's cost or price analysis; 5. The subcontractor's current, complete, and accurate cost or pricing data if required by other contract provisions; and 6. A negotiation memorandum reflecting: (a) The principal elements of the subcontract price negotiations; (b) The most significant consideration controlling establishment of initial or revised prices; (c) The reason cost of pricing data were or were not required; (d) The extent, if any, to which the contractor did not rely on the subcontractor's cost or pricing data in determining the price objective and in negotiating the final price; (e) The extent, if any, to which it was recognized in the negotiation that the subcontractor's cost or pricing data were not accurate, complete, or current; the action taken by the contractor and subcontractor; and the effect of any such defective data on the total price negotiated; (f) The reasons for any significant differences 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 must identify each critical performance element, management decisions used to quantify each incentive element, reasons for incentives, and a summary of all trade-off possibilities considered. The contractor agrees to select subcontractors (including suppliers) on a competitive basis to the maximum practical extent consistent with the objectives and requirements of the contract. The contracting officer may disapprove any subcontract in writing for which advance notification is required under paragraph a above. Even if the contractor's purchasing system has been approved, the contractor must obtain the contracting officer's written consent before placing subcontracts that have been selected for special surveillance and so identified in the Schedule of the contract. The lack of disapproval does not constitute a determination: 1. Of the acceptability of any subcontract terms or conditions; 2. Of the acceptability of any subcontract price or of any amount paid under any subcontract; or 3. To relieve the contractor of any responsibility for performing this contract. No subcontract under this contract may provide for payment on a cost-plus-a-percentage-of-cost basis. Clause B-19 Excusable Delays (October 1987) (B.2.1) Except with respect to defaults of subcontractors, the contractor will not be in default by reason of any failure in performing this contract in accordance with its terms (including any failure by the contractor to make progress in the prosecution of the work that endangers performance) if the failure arises out of causes beyond the control and without the fault or negligence of the contractor. Such causes may include, but are not restricted to, acts of God or of the public enemy, acts of the government in its sovereign capacity or of the Postal Service in its contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, and unusually severe weather, but in every case the failure to perform must be beyond the control and without the fault or negligence of the contractor. If failure to perform is caused by the failure of a subcontractor to perform or make progress and arises out of causes beyond the control of both the contractor and subcontractor, and without the fault or negligence of either of them, the contractor will not be deemed to be in default, unless: 1. The supplies or services to be furnished by the subcontractor are obtainable from other sources; 2. The contracting officer orders the contractor in writing to procure the supplies or services from other sources; and 3. The contractor fails to comply reasonably with the order. Upon request of the contractor, the contracting officer shall ascertain the facts and extent of failure, and if the contracting officer determines that any failure to perform was occasioned by any of the said causes, the delivery schedule shall be revised accordingly, subject to the rights of the Postal Service under any termination clause included in this contract. As used in this clause, the terms "subcontractor" and "subcontractors" mean subcontractor(s) at any tier. Clause B-20 Invoices (June 1988) (B.2.1) The contractor's invoices must be submitted before payment can be made. The contractor agrees that submission of an invoice to the Postal Service for payment is a certification that: 1. Any services being billed for have been performed in accordance with the contract requirements; and 2. Any supplies for which the Postal Service is being billed have been shipped or delivered in accordance with shipping instructions issued by the contracting officer in the quantities shown on the invoice, and that the supplies are in the quantity and of the quality designated in the contract. To ensure prompt payment, an invoice must be submitted for each destination and each shipment. Each invoice must contain: 1. The contractor's name and address; 2. The contract number; 3. Any applicable task or delivery order number; 4. A description of the supplies or services and the dates delivered or performed; 5. The point of shipment or delivery; 6. Any applicable unit prices and extensions; 7. Shipping and payment terms; and 8. Any additional information required by the contract. Clause B-21 Change-Order Accounting (October 1987) (B.2.1) The contracting officer may require change-order accounting whenever the estimated cost of a change or series of related changes exceeds $100,000. The contractor, for each change or series of related changes, must maintain separate accounts, by job order or other suitable accounting procedure, of all incurred segregable, direct costs (less allocable credits) or work, both changed and not changed, allocable to the change. The contractor will maintain such accounts until the parties agree to an equitable adjustment for the changes ordered by the contracting officer or the matter is finally disposed of in accordance with the Claims and Disputes clause. Clause B-22 Interest (December 1989) (B.2.1) The Postal Service will pay interest on late payments and unearned prompt payment discounts in accordance with the Prompt Payment Act, 31 U.S.C. 3901 et. seq., as amended by the Prompt Payment Act Amendments of 1988, P.L. 100-496. Clause B-23 Guaranteed Shipping Weight (October 1987) (B.2.1) This clause applies if this contract contains a guaranteed shipping-weight provision. The contractor is responsible for the actual weight at the time of shipment. If the shipping weight exceeds the specified guaranteed shipping weight, the contractor will be liable for any resulting excess transportation costs. The contractor must determine the excess transportation costs and deduct them from the invoice, making reference on it to the applicable bill of lading numbers. When the excess transportation costs are not known and timely notification is not made to the contracting officer for possible price adjustment, 2 percent of the invoice amount covering each shipment with excess weight may be withheld until the Postal Service can calculate the excess costs. In this case, an administrative-cost fee of $50 per shipment will be assessed in addition to any excess transportation costs incurred. Clause B-24 Frequency Authorization (October 1987) (B.2.1) Authorization of radio frequencies required in support of this contract must be obtained through the contracting officer by the contractor or subcontractor in need thereof. Frequency-management procedures prescribed in the schedule of this contract must be followed in obtaining radio frequency authorization. For any experimental, developmental, or operational equipment for which the appropriate frequency allocation has not been made, the contractor or subcontractor must provide technical operating characteristics of the proposed electromagnetic radiating device to the contracting officer during the initial planning, experimental, or developmental phases of contractual performance. This clause, including this paragraph c, must be included in all subcontracts that call for developing, producing, testing, or operating a device for which a radio-frequency authorization is required. Clause B-25 Advertising of Contract Awards (June 1988) (B.2.1) Except with the contracting officer's prior approval, the contractor agrees not to refer in its commercial advertising to the fact that it was awarded a Postal Service contract or to imply in any manner that the Postal Service endorses its products. Clause B-26 Protection of Postal Service Buildings, Equipment, and Vegetation (October 1987) (B.2.1) The contractor must use reasonable care to avoid damaging buildings, equipment, and vegetation (such as trees, shrubs, and grass) on the Postal Service installation. If the contractor fails to do so and damages any buildings, equipment, or vegetation, the contractor must replace or repair the damage at no expense to the Postal Service, as directed by the contracting officer. If the contractor fails or refuses to make repair or replacement, the contractor will be liable for the cost of repair or replacement, which may be deducted from the contract price. Clause B-27 Performance at Occupied Postal Premises (October 1987) (B.2.1) In performing this contract, the contractor must: 1. Comply with applicable Occupational Safety and Health Standards (29 CFR 1910) promulgated pursuant to the authority of the Occupational Safety and Health Act of 1970; 2. Comply with any other applicable federal, state, or local regulations governing work-place safety to the extent they do not conflict with a.1 above; and 3. Take all other proper precautions to protect the safety and health of the contractor's employees, Postal Service employees, and the public. The contractor must coordinate its use of the premises with the installation head or other representative designated by the contracting officer. Subjects of this coordination include the designation of work and storage areas; the extent, if any, of use by the contractor of Postal Service tools and equipment; the furnishing by the contractor of appropriate signs and barricades to exclude unauthorized personnel from the work areas and to call attention to hazards and dangers; and other matters relating to the protection of Postal Service employees and property. Clause B-28 Safety and Health Standards (October 1987) (B.2.1) Materials, supplies, articles, or equipment manufactured or furnished under this contract or order must conform to the Occupational Safety and Health Standards (29 CFR 1910) pursuant to authority in the Occupational Safety and Health Act of 1970 (OSHA), and to other safety and health requirements specified in this contract or order. If no OSHA standard exists, federal or other nationally recognized standards apply. Copies of current Occupational Safety and Health Standards are available from regional and/or area offices of the U.S. Department of Labor, Occupational Safety and Health Administration. If this contract or order contains a Postal Service standard and an OSHA standard covering the same general area of applicability, the Postal Service standard governs and takes precedence, unless the OSHA standard contains more rigorous or stringent safety requirements, in which case the OSHA standard governs and takes precedence. Upon delivery of the first article under the contract or order, or if none, upon delivery of the first production quantity, the contractor must execute a certification in a form acceptable to the contracting officer, attesting to the conformance of the delivered items to the requirements of this clause. Clause B-29 Order of Precedence (February 1991) (B.2.1) Any inconsistency in the provisions of a solicitation, a contract awarded under a solicitation, or a contract awarded without the issuance of a written solicitation will be resolved by giving precedence in the following order: The Schedule. The solicitation provisions and instructions. Special clauses and general clauses. Provisions contained in attachments or incorporated by reference. Clause B-30 Permits and Responsibilities (Services) (April 1993) (B.2.1) The contractor is responsible, without additional expense to the Postal Service, for obtaining any necessary licenses and permits, and for complying with any applicable federal, state, and municipal laws, codes, and regulations in connection with the performance of the contract. The contractor is responsible for all damage to persons or property, including environmental damage, that occurs as a result of its omission(s) or negligence. The contractor must take proper safety and health precautions to protect the work, the workers, the public, the environment, and the property of others. Clause 1-1 Privacy Act (October 1987) (1.7.5) This contract requires the contractor to design, develop, or operate a system of records on individuals to accomplish a Postal Service function. Section 3 of the Privacy Act of 1974 (5 U.S.C. 552a) and 39 CFR 266-268 apply to this system of records. Violation of the Act may subject the violator to criminal penalties (5 U.S.C. 552a(m)). The contractor agrees to: 1. Comply with the Act, and Postal Service regulations issued under it, in designing, developing, or operating any system of records on individuals to accomplish a Postal Service function, when the contract specifically identifies (a) the system of records and (b) the work the contractor is to perform in designing, developing, or operating it; 2. Design or develop the system in such a way that it can be operated in accordance with the Act and regulations; and 3. Include this clause, including this subparagraph b.3, in all subcontracts under this contract that require designing, developing, or operating such a system. The Privacy Act safeguards the individual's right of privacy concerning any system of records operated under this contract. Records must be current and accurate for the intended use, and adequate safeguards must be provided to prevent misuse of personal information. Violations of the Act may subject the Postal Service to civil liability, and its officers or employees to criminal liability. For purposes of the criminal penalties only, the contractor and its employees operating a system of records on individuals to accomplish a Postal Service function are considered employees of the Postal Service. As used in this clause: 1. Operating a system of records means performing any of the activities associated with managing the system of records, including the collection, revision, and dissemination of records; 2. Records means any item, collection, or grouping of information about an individual maintained by the Postal Service, including, but not limited to, education, financial transactions, medical history, and criminal or employment history, and containing the individual's name or a number, symbol, or other identifying particular assigned to the individual, such as a fingerprint, voiceprint, or photograph; and 3. System of records on individuals means a group of any records under the control of the Postal Service from which information is retrieved by the name of the individual or by some number, symbol, or other identifying particular assigned to the individual. Clause 1-2 Advance Payments (June 1988) (1.7.6) Requirements for Payments. Upon contractor submission of properly certified invoices or vouchers and contracting officer approval, advance payments will be made under this contract. The contractor will apply terms similar to those of this clause to any advance payments to subcontractors. Use of Funds. The contractor may pay only for properly allocable, allowable, and reasonable costs incurred. Determinations of whether costs are properly allocable, allowable, and reasonable will be in accordance with generally accepted accounting principles, subject to chapter 5, section 2, of the USPS Procurement Manual as in effect on the date of this contract. Repayment to the Postal Service. At any time, the contractor may repay all or part of the funds advanced by the Postal Service. When requested in writing to do so by the administering office, the contractor must repay to the Postal Service any part of unliquidated advance payments considered by the administering office to exceed the contractor's current requirements or an amount calculated in accordance with paragraph d below. Maximum Payment. When the sum of all unliquidated advance payments exceeds 80 percent of the contract price, the Postal Service will withhold further payments. On contract completion or termination, the Postal Service will deduct from the amount due the contractor all interest charges payable. If previous payments to the contractor exceed the amount due, the excess amount must be paid to the Postal Service on demand. For purposes of this paragraph d, the contract price is the contract price stated at time of award, less any subsequent price reductions under the contract, plus any price increases resulting from any terms of the contract. Any payments withheld under this paragraph will be applied to reduce the unliquidated advance payments. If full liquidation has been made, payments under the contract will resume. Interest 1. The contractor must pay interest to the Postal Service on the daily balance of unliquidated advance payments at the daily rate specified in subparagraph e.3 below. Interest will be computed at the end of each calendar month for the actual number of days involved. For the purpose of computing interest: (a) Advance payments will be considered as increasing the unliquidated balance as of the date of the advance payment check; (b) Repayment of the contractor's check will be considered as decreasing the unliquidated balance as of the date on which the check is received by the Postal Service authority designated by the contracting officer; and (c) Liquidations by deductions from Postal Service payments to the contractor will be considered as decreasing the unliquidated balance as of the date of the check for the reduced payment. 2. Interest charges resulting from the monthly computation will be deducted from payments, other than advance payments, due the contractor. If the accrued interest exceeds the payment due, any excess interest will be carried forward and deducted from subsequent payments. Interest carried forward will not be compounded. Interest on advance payments will cease to accrue upon satisfactory completion or termination of the contract for the convenience of the Postal Service. The Postal Service will charge interest on advance payments to subcontractors in the manner described above. 3. If interest is required under the contract, it will be paid at the rate determined in accordance with the Interest clause of this contract. 4. If the full amount of interest charged under this paragraph e has not been paid by deduction or otherwise upon completion or termination of this contract, the contractor must pay the remaining interest to the Postal Service on demand. Lien on Property under Contract 1. All advance payments under this contract, together with interest charges, must be secured, when made, by a lien in favor of the Postal Service, paramount to all other liens, on the supplies or other things covered by the contract and on all material and other property acquired for or allocated to its performance, except to the extent that the Postal Service already has valid title to the supplies, materials, or other property as against the contractor's other creditors. 2. The contractor will prepare any documents necessary to perfect liens on such property required in any jurisdiction in which any such property is kept. The documents must be approved by the contracting officer and, upon approval, filed with appropriate jurisdictions. The contractor must pay any fees required for filing. 3. The contractor must identify, by marking or segregation, all property subject to a lien in favor of the Postal Service by virtue of this contract so as to indicate that it is subject to a lien and has been acquired for or allocated to performing the contract. If, for any reason, the property is not identified by marking or segregation, the Postal Service will have a lien to the extent of the Postal Service's interest under the contract on any mass of property with which the supplies, materials, or other property are commingled. The contractor must maintain adequate accounting control over the property on its books and records. 4. If, under any termination clause in this contract, the contracting officer authorizes the contractor to sell or retain termination inventory, the approval constitutes a release of the Postal Service's lien to the extent that: (a) The termination inventory is sold or retained; and (b) The sale proceeds or retention credits are applied to reduce any outstanding advance payments. 5. If the contractor delivers to a third party any property on which the Postal Service has a lien, the contractor must notify the third party of the lien and obtain a receipt in duplicate acknowledging the existence of the lien. The contractor must give the contracting officer one copy of the receipt. Insurance. The contractor warrants that it maintains with responsible insurance carriers: 1. Insurance on plant and equipment against fire and other hazards, to the extent that similar properties are usually insured by others operating plants and properties of similar character in the same general locality; 2. Adequate insurance against liability on account of damage to persons or property; and 3. Adequate insurance under all applicable workers' compensation laws. The contractor agrees that, until work under this contract has been completed and all advance payments made under the contract have been liquidated, it will maintain this insurance; maintain adequate insurance on all materials, parts, assemblies, subassemblies, supplies, equipment, and other property acquired for or allocable to this contract and subject to the Postal Service lien under paragraph f above; and furnish any certificate with respect to its insurance that the contracting officer may require. Default 1. By written notice to the contractor, the Postal Service may withhold further payments on this contract in the event of: (a) Termination for default; (b) A finding by the contracting officer that the contractor will be unable to perform or has failed to: (1) Observe any conditions of the advance payment terms; (2) Comply with any material term of the contract; (3) Make progress or maintain a financial condition adequate for performance of the contract; (4) Limit inventory allocated to the contract to reasonable requirements; or (5) Avoid delinquency in payment of taxes or of the costs of performing this contract in the ordinary course of business; or (c) The appointment of a trustee, receiver, or liquidator for any substantial part of the contractor's property, or the institution of proceedings by or against the contractor for bankruptcy, reorganization, arrangement, or liquidation. 2. If any of the events described in subparagraph h.1 above continues for 30 days after the notice to the contractor, the Postal Service may take any of the following actions: (a) Charge interest, in the manner prescribed in paragraph e above, on outstanding advance payments during the period of the event. (b) Demand immediate repayment by the contractor of the unliquidated balance of advance payments. (c) Take possession of and sell any property on which the Postal Service has a lien under the contract and, after deducting any expenses incident to the sale, apply the proceeds to reduce the unliquidated balance of advance payments or other claims against the contractor. 3. The actions described in this clause are in addition to any other rights of the Postal Service. Prohibition Against Assignment. Notwithstanding any other terms of this contract, the contractor may not assign it, any interest in it, or any claim under it to any party. Information and Access to Records. The contractor must furnish to the administering office (1) monthly (or at other intervals as required) signed or certified balance sheets and profit and loss statements in the form prescribed by the contracting officer; and (2) if requested, other information concerning the operation of the contractor's business. The contractor must provide authorized Postal Service representatives proper facilities for inspecting the contractor's books, records, and accounts. Other Security. If the contracting officer considers the security inadequate, the contractor must furnish additional security satisfactory to the contracting officer to the extent it is available. Representations and Warranties. 1. The balance sheet, the profit and loss statement, and any other supporting financial statements furnished the contracting officer fairly reflect the contractor's financial condition at the date shown or during the period covered, and there has been no subsequent materially adverse change; 2. No litigation or proceedings are presently pending or threatened against the contractor, except as shown in the statements; 3. The contractor has disclosed all contingent liabilities in the statements; 4. None of the terms in this clause conflict with the authority under which the contractor is doing business or with the provision of any existing indenture, assignment, or agreement of the contractor; 5. The contractor has the power to enter into this contract and to accept advance payments, and has taken all necessary action to authorize their acceptance under the terms of the contract; 6. The contractor's assets are not subject to any lien or encumbrance except for current taxes not delinquent or as shown in the statements; 7. All information furnished in connection with each request for advance payments is true and correct; and 8. These representations and warranties are continuing and are considered to have been repeated by the submission of each invoice for advance payment. Notice. The contractor must notify the contracting officer in writing within 30 days of any material change in anything represented or warranted in paragraph 1 above. Covenants. While any advance payments made under this contract remain outstanding, the contractor, without the prior written consent of the contracting officer, may not: 1. Mortgage, pledge, or otherwise encumber or allow to be encumbered any of the contractor's assets now owned or subsequently acquired, or permit any preexisting mortgages, liens, or other encumbrances to remain on or attach to any assets allocated to performing this contract with respect to which the Postal Service has a lien under the contract; 2. Sell, assign, transfer, or otherwise dispose of accounts receivable, notes, or claims for amounts due or to become due; 3. Sell, convey, or lease any substantial part of its assets; 4. Make any advance or loan or incur any liability as guarantor, surety, or accommodation endorser for any party; 5. Permit a writ of attachment or any similar process to be issued against its property without getting a release or bonding the property within 30 days after the entry of the writ of attachment or other process; 6. Pay any remuneration to its directors, officers, or key employees at rates higher than provided in existing agreements; 7. Change substantially its management, ownership, or control; 8. Merge or consolidate with any other firm or corporation, change the type business, or engage in any transaction outside the ordinary course of the contractor's business as presently conducted; 9. Deposit any of its funds except in a bank or trust company insured by the Federal Deposit Insurance Corporation; 10. Create or incur indebtedness for advances (other than those to be made under the terms of this contract) or borrowings; or 11. Permit its net current assets, computed in accordance with generally accepted accounting principles, to become less than 80 percent of the assets shown in the last quarterly financial statement issued before contract award. Clause 1-3 Progress Payments (December 1989) (1.7.6) Progress payments will be made to the contractor when requested as work progresses, but not more often than monthly, in amounts approved by the contracting officer, upon the following terms and conditions: Computation of Amounts 1. No progress payments may exceed 80 percent of the amount of the contractor's total costs, plus the amount of progress payments that have been paid to contractor's subcontractors and other divisions. 2. The contractor's total costs must be reasonable, allocable to this contract, and consistent with sound and generally accepted accounting principles and practices. These costs may not include: (a) Any incurred by subcontractors or suppliers; (b) Any payments or amounts payable to subcontractors or suppliers, except for completed work (including partial deliveries) to which the contractor has acquired title and except for amounts paid under cost-reimbursement or time-and-materials subcontracts for work to which the contractor has acquired title; or (c) Costs ordinarily capitalized and subject to depreciation or amortization, except for the properly depreciated or amortized portion of such costs. 3. The aggregate amount of progress payments made must not exceed 80 percent of the total contract price. 4. If at any time a progress payment or the unliquidated progress payments exceed the amount permitted by this paragraph a, the contractor must pay the excess to the Postal Service upon demand. Liquidation. Except as provided in the Termination for Convenience clause, all progress payments must be liquidated by deducting from any payment under this contract, other than advance or progress, the amount of unliquidated progress payments, or 80 percent of the gross amount invoiced, whichever is less. Repayment to the Postal Service required by a retroactive price reduction will be made after calculating liquidations and payments on past invoices at the reduced prices and adjusting the unliquidated progress payments accordingly. Reduction or Suspension. The contracting officer may reduce or suspend progress payments, or liquidate them at a rate higher than the percentage stated in paragraph b above, or both, whenever the contracting officer finds, upon substantial evidence, that the contractor: 1. Has failed to comply with any material requirement of this contract; 2. Has so failed to make progress, or is in such unsatisfactory financial condition, as to endanger performance of this contract; 3. Has allocated inventory to this contract substantially exceeding reasonable requirements; 4. Is delinquent in payment of the costs of performance of this contract in the ordinary course of business; or 5. Has so failed to make progress that the unliquidated progress payments exceed the fair value of the work accomplished on the endelivered portion of this contract. Title 1. Immediately upon the date of this contract, title to all parts; materials; inventories; work in process; special tooling; nondurable (i.e., noncapital) tools, jigs, dies, fixtures, molds, patterns, taps, gauges, test equipment, and other similar manufacturing aids; and drawings and technical data (to the extent that their delivery is required by other provisions of this contract), previously acquired or produced by the contractor and allocated or properly chargeable to this contract under sound and generally accepted accounting principles and practices, will be vested in the Postal Service. Title to all similar property afterwards acquired or produced by the contractor and allocated or properly chargeable to this contract as aforesaid will be vested in the Postal Service upon said acquisition, production, or allocation. 2. Notwithstanding that title to property is in the Postal Service through the operation of this clause, the handling and disposition of such property will be determined by the applicable provisions of this contract (e.g., paragraph h of this Progress Payments clause, and any termination clause included in the contract). Current production scrap may be sold by the contractor without approval of the contracting officer; in this case, the proceeds must be credited against the costs of contract performance. With the consent of the contracting officer, and on terms approved by the contractor, the contractor may acquire or dispose of property to which title is vested in the Postal Service under this clause, and, in that event, the costs allocable to the property so transferred from this contract must be eliminated from the costs of contract performance and the contractor must repay to the Postal Service (by cash or credit memorandum) an amount equal to the unliquidated progress payments allocable to the property so transferred. 3. Upon completion of performance of all the obligations of the contractor under this contract, including liquidation of all progress payments under this clause, title to all property (or the proceeds thereof) not delivered to, and accepted by, the Postal Service under this contract, or not incorporated in supplies delivered and accepted and to which title has been vested in the Postal Service under this clause, will be vested in the contractor. The provisions of this contract referring to or defining liability for Postal Service-furnished property do not apply to property to which the Postal Service acquires title solely by virtue of this clause. Risk of Loss. Except to the extent that the Postal Service otherwise expressly assumes the risk of loss of property, title to which is vested in the Postal Service by this clause, in the event of the loss, theft, or destruction of or damage to any such property before its delivery to, and acceptance by, the Postal Service, the contractor must bear the risk of loss and must repay the Postal Service an amount equal to the unliquidated progress payments on the basis of costs allocable to such lost, stolen, destroyed, or damaged property. Control of Costs and Property. The contractor must maintain an accounting system and controls adequate for the proper administration of this clause. Reports - Access to Records. The contractor must: 1. Furnish promptly such relevant reports, certificates, financial statements, and other information as may be reasonably requested by the contracting officer; and 2. Give the Postal Service reasonable opportunity to examine and verify the contractor's books, records, and accounts. Special Provisions Regarding Default. If this contract is terminated for default: 1. The contractor must, upon demand, pay the Postal Service the amount of unliquidated progress payments; and 2. With respect to all property for which the Postal Service elects not to require delivery, title will be vested in the contractor upon full liquidation of progress payments, and the Postal Service will not be liable for payment. Reservation of Rights. The rights and remedies of the Postal Service provided in this clause are not exclusive and are in addition to any other rights and remedies provided by law or under this contract. No payment, or vesting of title under this clause, will excuse the contractor from obligations under this contract or constitute a waiver of any of the rights and remedies of the parties under this contract. No delay or failure of the Postal Service in exercising any right, power, or privilege under this clause will affect any such right, power, or privilege; nor will any single or partial exercise thereof preclude or impair any further exercise thereof or the exercise of any other right, power, or privilege of the Postal Service. Progress Payments to Subcontractors 1. Progress payments may include reimbursements for unliquidated progress payments paid by the contractor to subcontractors or other divisions under provisions which conform to subparagraph j.2 following. 2. Provisions regarding progress payments must: (a) Be substantially similar to and as favorable to the Postal Service as is this Progress Payments clause, no more favorable to the subcontractor or the other division than this clause is to the contractor, and on a basis of not more than 80 percent of total costs; and (b) Make all rights of the subcontractor with respect to all property to which the Postal Service has title under the subcontract subordinate to the rights of the Postal Service to require delivery of such property to it in the event of default by the contractor under this contract or in the event of the bankruptcy or insolvency of the subcontractor. 3. The Postal Service agrees that any proceeds received by it from property to which it has acquired title by virtue of such provisions in any subcontract must be applied to reduce the amount of unliquidated progress payments made by the Postal Service to the contractor under this contract. In the event that the contractor fully liquidates such progress payments made by the Postal Service to the contractor hereunder and there are unliquidated progress payments to any subcontractors, the contractor must be subrogated to all the Postal Service rights by virtue of such provisions in the subcontract or subcontracts involved as if all such rights had been thereupon assigned and transferred to the contractor. Requests. Contractor's requests for progress payments under this clause must be submitted on Form 7305, Contractor's Request for Progress Payment. Clause 1-4 (Reserved) Clause 1-5 Gratuities or Gifts (April 1993) (1.7.9) The Postal Service may terminate this contract for default if, after notice and a hearing, the Postal Service Board of Contract Appeals determines that the contractor or the contractor's agent or other representative: 1. Offered or gave a gratuity or gift (as defined in 5 CFR 2635) to an officer or employee of the Postal Service; and 2. Intended by the gratuity or gift to obtain a contract or favorable treatment under a contract. The rights and remedies of the Postal Service provided in this clause are in addition to any other rights and remedies provided by law or under this contract. Clause 1-6 Contingent Fees (October 1987) (1.9.2) The contractor warrants that no person or selling agency has been employed or retained to solicit or obtain this contract for a commission, percentage, brokerage, or contingent fee, except bona fide employees or bona fide, established commercial or selling agencies employed by the contractor for the purpose of obtaining business. For breach or violation of this warranty, the Postal Service has the right to annul this contract without liability or to deduct from the contract price or otherwise recover the full amount of the commission, percentage, brokerage fee, or contingent fee. Clause 1-7 Non-Disclosure of Address Information (January 1991) (1.7.4) General. This contract requires the contractor to have access to address information (i.e., addresses and return addresses) that appears on pieces of mail. To ensure the confidentiality of this address information, except as permitted by this clause, no contractor or subcontractor, and no employee or former employee of any contractor or subcontractor may, at any time, during or after the completion of this contract, disclose to any third party any address information obtained in the performance of this contract. This contract does not give the contractor proprietary interest in address information, and the contractor's right to have, use, and disclose address information is restricted by the terms of this clause. Restriction of Access. The contractor agrees to control and restrict access to address information to persons who need it to perform work under this contract, and to prohibit the reproduction of this information. Confidentiality and Non-Disclosure Agreement. The contractor must require an employee (including any employee of a subcontractor) to sign the following agreement before the employee is granted access to address information: CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT I agree to hold in confidence any and all address information (i.e., addresses and return addresses) disclosed by the Postal Service or otherwise obtained or developed in the course of performance under Postal Service contract No. . I understand that no address information may be disclosed to any third party without prior written consent of the United States Postal Service. Signature Date Legal Demands for Information. If a legal demand is made for address information (such as by subpoena), the contractor will immediately notify the contracting officer and the nearest office of the postal inspectors. After notification, the Postal Service will then determine whether and to what extent, to resist the legal demand. Should the Postal Service give in to or unsuccessfully resist a legal demand, the contractor may, with the written permission of the contracting officer, release that address information specifically requested by the legal demand. Indemnification. The contractor will indemnify the Postal Service, its employees and agents, against all liability (including costs and fees) for damages arising out of the intentional or negligent disclosure of address information other than as permitted by this clause. Subcontracts. The contractor must include this clause, modified as necessary, in any subcontract. Clause 2-1 Inspection - Fixed-Price (January 1991) (2.2.1) The Postal Service may inspect the supplies or service provided under this contract at any stage of contract performance and at any place, including the contractor's facility. The Postal Service may reject defective supplies or services and: 1. Require replacement or correction of the defects; 2. Acquire other products and charge the contractor for any costs incurred by the Postal Service; or 3. Accept the supplies or services at a reduced price. The Postal Service may terminate the contract for default and seek any remedy allowed by law if the contractor does not maintain an acceptable inspection system or promptly follow Postal Service directions to replace or correct. The contractor must provide facilities and reasonable assistance, without charge, to Postal Service inspectors when requested. The contractor will be charged at the rate of $50.00 per work-hour for: 1. The total time, including round-trip travel time, lost by Postal Service representatives when the contractor is not ready for inspection at the time inspection and testing is requested by the contractor; and 2. The total time, including round-trip travel time, required by Postal Service representatives for reinspection and retesting necessitated by rejection. Charges other than these, for any retesting caused by rejection, will be the actual laboratory cost as obtained from the National Bureau of Standards or other testing laboratory. Inspection does not relieve the contractor of liability for defects. The contractor must use a written inspection/quality control system acceptable to the Postal Service. Records of all inspection work must be kept and made available to the Postal Service during performance of this contract and for at least three years after acceptance. The Postal Service has the right to evaluate the acceptability and effectiveness of the contractor's inspection system before award and during contract performance. This evaluation may be used to determine the extent of Postal Service inspection and testing, but this does not waive its right to inspect and test all items. As a minimum, the contractor's inspection/quality control system must reflect controls and record keeping in the following functional areas: 1. Receiving Inspection 2. In-Process Inspection 3. Final Inspection and Test (including packaging) 4. Calibration of Inspection/Test equipment 5. Control or Disposition of Nonconforming Material Except as provided in paragraph i below, acceptance of the supplies or services by an authorized Postal Service representative is conclusive except for latent defects, fraud, gross mistakes amounting to fraud, and any warranties included in this contract. If nonconforming performance is accepted (1) because it has not been discovered before acceptance, as a result of the difficulty of discovery, or because of the contractor's assurances, or (2) on the basis of a reasonable assumption that it would be cured and it is not cured, the contracting officer may revoke acceptance if the value of performance is substantially impaired. Revocation of acceptance must occur within a reasonable time after the contracting officer discovers or should have discovered the ground for it and before any substantial change in the condition of the goods not caused by their own defects takes place. It is not effective until the contracting officer notifies the contractor. The Postal Service has the same rights and duties upon revocation as upon rejection. Notwithstanding requirements for any Postal Service inspection and test in specifications applicable to this contract, except when specialized inspections or tests are specified to be performed solely by the Postal Service, or by a third party on its behalf, the contractor must perform or have performed the inspections and tests required to substantiate that the supplies and services provided under the contract conform to the drawings, specifications, and requirements listed in the contract, including, if applicable, the technical requirements for the manufacturer's part number specified in the contract. Clause 2-2 Inspection - Non-Fixed-Price (December 1989) (2.2.1) The Postal Service may inspect the supplies or services provided under this contract at any stage of contract performance and at any place, including the contractor's facility. If requested by the Postal Service, the contractor must provide all reasonable facilities and assistance to the Postal Service inspectors. Acceptance will be made as promptly as practicable after delivery and will be deemed to have been made no later than 60 days after delivery if not made earlier. At any time during contract performance, and for six months after acceptance, the Postal Service may require the contractor to correct or replace any supplies or services that fail to comply with the requirements of this contract. Except as otherwise provided in paragraphs c and d below, reimbursement for the cost of replacement or correction will be determined by the Payments clause of this contract, but the hourly rate for labor hours incurred in replacement or correction will be reduced so as to exclude the portion of this rate attributable to profit. Corrected or replacement supplies or services may not be tendered again unless the former tender and the requirement for correction or replacement are disclosed. If the contractor fails to proceed with reasonable promptness to perform replacement or correction, and if it can be performed within the ceiling price, or the ceiling price as increased by the Postal Service, the Postal Service may: 1. By contract or otherwise perform the replacement or correction, and deduct the increased cost from any amounts due the contractor under this contract (or require repayment of any payments already made); or 2. Terminate this contract for default as provided in the Termination clause of this contract. The Postal Service may at any time require the contractor to remedy, by correction or replacement, without cost to the Postal Service, any failure by the contractor to comply with the requirements of this contract, if this failure is due to fraud, lack of good faith, or willful misconduct on the part of any of the contractor's directors or officers or on the part of any of the contractor's managers, superintendents, or other equivalent representatives who have supervision or direction of: 1. All or substantially all of the contractor's business; 2. All or substantially all of the contractor's operation at any one plant or separate location at which this contract is being performed; 3. A separate and complete major industrial operation in connection with the performance of this contract; or 4. All or substantially all of the contractor's operation under this contract. The Postal Service may at any time also require the contractor to remedy by correction or replacement, without cost to the Postal Service, any such failure caused by one or more individual employees selected or retained by the contractor after any supervisory person described in paragraph c above has reasonable grounds to believe that the employee is habitually careless or otherwise unqualified. The provisions of this clause apply to any corrected or replacement supplies or services. The contractor must use a written inspection/quality control system acceptable to the Postal Service. Records of inspections by the contractor must be maintained and available to the Postal Service at all reasonable times during performance of this contract and for at least three years after acceptance. As a minimum, the contractor's inspection/quality control system must reflect controls and record keeping in the following functional areas: 1. Receiving Inspection 2. In-Process Inspection 3. Final Inspection and Test (including packaging) 4. Calibration of Inspection/Test Equipment 5. Control or Disposition of Nonconforming Material Notwithstanding requirements for any Postal Service inspection and test in specifications applicable to this contract, except when specialized inspections or tests are specified to be performed solely by the Postal Service, or by a third party on its behalf, the contractor must perform or have performed the inspections and tests required to substantiate that the supplies and services provided under the contract conform to the drawings, specifications, and requirements listed in the contract, including, if applicable, the technical requirements for the manufacturer's part number specified in the contract. Clause 2-3 Quality Assurance (January 1991) (2.2.1) The contractor's inspection system must be in accordance with Specification MIL-I-45208, Inspection System Requirements, of the issue in effect on the solicitation date. Copies of MIL-I-45208 may be obtained from: ATTN CODE CDS COMMANDING OFFICER NAVAL PUBLICATIONS AND FORMS CENTER 5801 TABOR AVENUE PHILADELPHIA PA 19120-5099 Clause 2-4 First Article Approval - Contractor Testing (October 1987) (2.2.2) The contractor must test the number of units specified in the Schedule of this contract. The contractor must give the notice specified in the Schedule to the contracting officer, in writing, of the time and location of the testing so that the Postal Service may witness the tests. By the date specified in the Schedule, the contractor must submit to the contracting officer the first article test report marked "First Article Test Report" and identifying the contract number and lot/item number. After the Postal Service receives the test report, the contracting officer will notify the contractor within the time period set forth in the Schedule, in writing, of the conditional approval, approval, or disapproval of the first article. The notice of approval or conditional approval does not relieve the contractor from complying with all requirements of the specifications and all other terms and conditions of this contract. A notice of conditional approval will state any further action required of the contractor. A notice of disapproval will cite reasons for the disapproval. If the first article is disapproved, the contractor, upon request of the Postal Service, must repeat any or all first article tests. After each request for additional tests, the contractor must make any necessary changes, modifications, or repairs to the first article or select another first article for testing. All costs related to these tests are to be borne by the contractor, including any and all costs for additional tests following a disapproval. The contractor must then conduct the tests and deliver another report to the Postal Service under the terms and conditions and within the time specified by the Postal Service. The Postal Service must take action on this report within the same time limit referred to in paragraph b above. The Postal Service reserves the right to require an equitable adjustment of the contract price for any extension of the delivery schedule, or for any additional costs to the Postal Service related to these tests. If the contractor fails to deliver any first article report on time, or the contracting officer disapproves any first article, the contractor will be deemed to have failed to make delivery within the meaning of the Default clause. Unless otherwise provided in the contract, and if the approved first article is not consumed or destroyed in testing, the contractor may deliver the approved first article as part of the contract quantity if it meets all contract requirements for acceptance. If the Postal Service does not act within the time limit referred to in paragraphs b and c above, the contracting officer will, upon timely written request from the contractor, equitably adjust under the Changes clause the delivery or performance dates and/or the contract price, and any other contractual term affected by the delay. Before first article approval, acquisition of materials or components for the balance of the contract quantity or commencement of production is at the contractor's sole risk. Costs incurred under paragraph g above are not allocable to this contract for progress payments before first article approval or for a termination settlement in the event of termination for convenience before first article approval. Clause 2-5 First Article Approval - Postal Service Testing (October 1987) (2.2.2) At the time specified for first article testing, the contractor must deliver the units specified in the Schedule to the Postal Service at the testing facility set forth in the Schedule. The shipping documentation accompanying the first article must contain the number of this contract and the lot/item identification. The performance or other characteristics that the first article must meet, and the tests to which it will be subjected, are contained or referenced in this contract. The contracting officer must, by written notice to the contractor within the time specified in the Schedule, approve, conditionally approve, or disapprove the first article. The notice of approval or conditional approval does not relieve the contractor from complying with all requirements of the specifications and all other terms and conditions of this contract. A notice of conditional approval will state any further action required of the contractor. A notice of disapproval will cite reasons for the disapproval. If the first article is disapproved, the contractor may be required, at the option of the Postal Service, to submit an additional first article for first article approval test. After each notification by the Postal Service to submit an additional first article, the contractor must at no additional cost to the Postal Service make any necessary changes, modifications, or repairs to the first article, or select another first article for testing. The additional first article must be furnished to the Postal Service under the terms and conditions and within the time specified in the notification. The Postal Service must take action on this additional first article within the same time limit referred to in paragraph b above. The costs of additional first article approval tests and all costs related to such tests must be borne by the contractor. The Postal Service reserves the right to require an equitable adjustment of the contract price for any extension of the delivery schedule necessitated by additional first article approval tests. If the contractor fails to deliver a first article on time, or if the contracting officer disapproves a first article, the contract may be terminated for default. Waiver of the right to terminate this contract for default does not relieve the contractor of responsibility to meet the delivery schedule for production quantities. When the first article is not consumed or destroyed in testing, and unless otherwise provided in this contract, the contractor: 1. May deliver an approved first article as a part of the contract quantity if it meets all terms and conditions of this contract for acceptance; and 2. Is responsible for removal and disposition of any first article from the Postal Service test site at the contractor's expense. The contractor is responsible for spare-parts support and repair of the first article during any first article approval test. Before first article approval, acquisition of materials or components for the balance of the contract quantity or commencement of production is at the contractor's sole risk. Costs incurred under paragraph g above are not allocable to this contract for progress payments before first article approval or for a termination settlement in the event of termination for convenience before first article approval. Clause 2-6 Delayed Acceptance (October 1987) (2.2.3) Acceptance under this contract will not occur until the contractor has successfully completed the preacceptance tests set forth in the Schedule. The contractor will remove any equipment and material not accepted under this contract and restore the Postal Service facility to its original condition, at no cost to the Postal Service. The contractor will pay the costs of testing for all equipment and materials rejected for failure to meet the preacceptance test requirements. Clause 2-7 Incorporation of Warranty (October 1987) (2.2.4) The contractor's standard commercial warranty, as disclosed in the offeror's proposal, is incorporated as a part of this contract. However, any dispute concerning it will be resolved under the Claims and Disputes clause of this contract, notwithstanding any disputes procedure that may be specified in the warranty. Clause 2-8 Warranty (October 1987) (2.2.4) The contractor warrants, for the period specified in the Schedule, that all supplies furnished under this contract, including packaging and markings, will be free from defects in material or workmanship and will conform with the specifications and all other requirements of this contract. Within the time specified in the Schedule, the contracting officer must give written notice to the contractor of any breach of warranty and either: 1. Require the prompt correction or replacement of any defective or nonconforming supplies; or 2. Retain them, reducing the contract price by an amount equitable under the circumstances. When return for correction or replacement is required, the contractor is responsible for all costs of transportation and for risk of loss in transit. If the contractor fails or refuses to correct or replace the defective or nonconforming supplies, the contracting officer may correct or replace them with similar supplies and charge to the contractor any cost to the Postal Service. In addition, the contracting officer may dispose of the nonconforming supplies, with reimbursement from the contractor or from the proceeds for excess costs. Any supplies corrected or furnished in replacement are subject to this clause. Supplies, as used in this clause, includes related services. The rights and remedies of the Postal Service provided in this clause are in addition to, and do not limit, any rights afforded to the Postal Service by any other clause of the contract. Clause 2-9 Definition of Delivery Terms and Contractor's Responsibilities (February 1990) (2.2.5) If the contract specifies "f.o.b. destination," the following apply: 1. "F.o.b. destination" means delivery, free of expense to the Postal Service, to the specified delivery point. 2. "F.o.b. destination, within the consignee's premises" means delivered free of expense to the Postal Service, within the doors of the specified building, including delivery to specific rooms when specified. 3. The contractor must: (a) Pack and mark shipments to comply with contract specifications or, in their absence, prepare shipments in accordance with carrier requirements; (b) Prepare and distribute commercial bills of lading; (c) Be responsible for loss or damage occurring before receipt at the specified point of delivery; (d) Furnish a delivery schedule and designate mode of delivery; (e) Bear all delivery costs to the specified point of delivery; and (f) Deliver goods, that meet the prescribed physical limitations of the current USPS Domestic Mail Manual, either by its own personnel/equipment or by use of the United States Postal Service, unless the contracting officer grants a waiver of this requirement. If the contract specifies "delivered postal facility, door, platform, or private siding," the following apply: 1. "Delivered postal facility, door, platform, or private siding" means delivery free of expense to the Postal Service: (a) To the door of postal facilities having no platforms or private siding; (b) On the platform at postal facilities having platforms but no private siding; or (c) On the private siding at postal facilities having private siding. 2. In addition to fulfilling the requirements of the Responsibility for Supplies clause, the contractor must: (a) Pack and mark shipments to protect the goods from normal transportation hazards, promote prompt delivery, and comply with packing and marking specifications of the contract; (b) Unload material at the door or on the platform in the case of b.1(a) and (b) above, free of expense to the Postal Service; (c) Properly prepare and distribute commercial bills of lading; and (d) Be responsible for loss or damage occurring before delivery to the specified delivery point. If the contract specifies "f.o.b. origin," the following apply: 1. "F.o.b. origin" means: (a) Delivery on board the indicated type of conveyance of the carrier (or of the Postal Service), free of expense to the Postal Service, to the specified point from which the shipment will be made and from which line haul transportation service (as distinguished from switching, local drayage, or other terminal service) begins; or (b) Delivered by the contractor, free of expense to the Postal Service, to any Postal Service designated point located within the same commercial zone (as prescribed by the Interstate Commerce Commission) as the f.o.b. point named in the contract. 2. The contractor must: (a) Pack and mark shipments to comply with contract specifications or, in their absence, prepare the shipment in accordance with carrier requirements and good commercial practices and secure the lowest applicable transportation charge. (b) Order specified carrier equipment when requested by the Postal Service. Otherwise, order appropriate carrier equipment not in excess of capacity to accommodate the shipment. (c) When loaded by the contractor, load, stow, trim, block, and/or brace shipments as required by the carrier's rules and regulations. (d) Be responsible for loss or damage occurring before delivery to the carrier; and for loss or damage due to improper packing/marking and, when loaded by the contractor, from improper loading, stowing, trimming, blocking, and/or bracing of the shipment. (e) Complete the government bill of lading supplied by the Postal Service or, when none is supplied, prepare a commercial bill of lading or other transportation receipt, to show: (1) A description of the shipment in terms of the governing freight classification or tariff under which the lowest freight rates are applicable; (2) The seals affixed to the conveyance, including the serial number on them, or other identification; (3) The length and capacity of cars or trucks ordered and furnished; (4) Other pertinent information required to effect prompt delivery to the consignee, including the routing and the name, delivery, and postal address of the consignee; (5) Special instructions or annotations requested by the Postal Service for commercial bills of lading (for example, "To be converted to a government bill of lading"); and (6) The signature of carrier's agent and the date the shipment is received. (f) Distribute the bill of lading, or other transportation receipt, as directed by the Postal Service. (g) Supply with each invoice a memorandum copy of the government bill of lading, clearly indicating the signature of the carrier's agent, date of pickup, and the weight accepted by the carrier. If the weight is determined by the carrier after pickup, it must be annotated on the memorandum copy of the government bill of lading along with the following: "I certify that the weight information is that obtained from the carrier. Signed: 3. F.o.b. origin prices include delivery by the contractor, free of expense to the Postal Service, to any Postal Service designated point located within the same commercial zone (as prescribed by the Interstate Commerce Commission) as the f.o.b. point named in the contract. 4. Where delivery is to be made to points not included under paragraph 3 above, either of the following apply: (a) If the Postal Service has not specified otherwise, the contractor must ship on government bills of lading. (b) If the Postal Service specifies that shipment is to be made on endorsed commercial bills of lading for transportation charges up to $100, the contractor will be required to prepay all transportation charges, not to exceed $100, per shipment, as follows: (1) Delivery to the door of the specified destination by freight or express common carriers on articles for which store-to-door delivery is provided free, or subject to a charge pursuant to published tariffs or schedules filed with the federal and/or state regulatory bodies governing such carriers. (2) Delivery to siding at destination if not covered under (1) above. (3) Delivery to the freight station nearest destination if not covered under (1) or (2) above. (4) The contractor must annotate the commercial bill of lading as follows: "Property of the United States Postal Service". (5) The actual transportation costs, not to exceed $100 per shipment, will be added to the contractor's invoice as a separate item. The costs must be based on the lowest published rate on file with the Interstate Commerce Commission or any state regulatory body. They must be supported by freight or express receipts marked "prepaid." If the receipts are not obtainable, annotate the invoice as follows: "I certify that the items identified on this invoice were shipped prepaid, and freight or express receipts in support thereof are not obtainable: Name: Destination: Names of Carriers: Weight of shipment: Transportation charges claimed: 5. The Postal Service reserves the right to specify the mode of transportation and routing to be employed. Clause 2-10 Liquidated Damages (October 1987) (2.2.6) If the contractor fails to complete the work, deliver the supplies, or perform the services within the time specified in this contract, or any extension, the contractor must, in place of actual damages, pay to the Postal Service (Contracting officer insert amount) for liquidated damages as agreed for each calendar day of delay. Alternatively, if completion, delivery, or performance is delayed beyond the contract dates, the Postal Service may terminate this contract in whole or in part under the Termination for Default clause, and the contractor will be liable for the agreed liquidated damages accruing until the time the Postal Service may reasonably obtain delivery or performance of similar facilities, supplies, or services. The liquidated damages will be in addition to excess costs of reprocurement. The contractor will not be charged with liquidated damages when the delay in completion, delivery, or performance arises out of causes beyond the control and without the fault or negligence of the contractor. Clause 2-11 Postal Service Property - Fixed-Price (October 1987) (2.2.7) Postal Service-Furnished Property 1. The Postal Service will deliver to the contractor, for use in connection with and under the terms of this contract, the property described as Postal Service-furnished property in the Schedule or specifications, together with any related information the contractor may request that may reasonably be required for the intended use of the property (hereinafter referred to as "Postal Service-furnished property"). 2. The contract delivery or performance dates are based on the expectation that Postal Service-furnished property suitable for use (except for property furnished "as is") will be delivered at the times stated in the Schedule or, if not so stated, in sufficient time to enable the contractor to meet these delivery or performance dates. If Postal Service-furnished property is not delivered by these times, the contracting officer will, upon timely written request from the contractor, make a determination of any delay occasioned the contractor and will equitably adjust the delivery or performance dates or the contract price, or both, and any other contractual provision affected by the delay, in accordance with the Changes clause. 3. Except for Postal Service-furnished property furnished "as is," if the Postal Service-furnished property is received in a condition not suitable for its intended use, the contractor must notify the contracting officer and (as directed by the contracting officer ) either (a) return it at the expense of the Postal Service or otherwise dispose of it, or (b) effect repairs or modifications. Upon the completion of (a) or (b), the contracting officer (upon written request from the contractor) will equitably adjust the delivery or performance dates or the contract price, or both, and any other affected contractual provision, in accordance with the Changes clause. 4. The provisions for adjustment in this paragraph a are exclusive, and the Postal Service is not liable to suit for breach of contract by reason of any delay in delivery of Postal Service-furnished property or its delivery in a condition not suitable for its intended use. Changes in Postal Service-Furnished Property 1. By written notice, the contracting officer may (a) decrease the property provided or to be provided by the Postal Service under this contract, or (b) substitute other Postal Service-owned property for the property to be provided by the Postal Service, or to be acquired by the contractor for the Postal Service under this contract. The contractor must promptly take any action the contracting officer may direct regarding the removal and shipping of the property covered by this notice. 2. In the event of any decrease in or substitution of property pursuant to subparagraph b.1 above, or any withdrawal of authority to use property provided under any other contract or lease, which property the Postal Service had agreed in the Schedule to make available for the performance of this contract, the contracting officer, upon the contractor's written request (or - if substitution causes a decrease in the cost of performance - on the contracting officer's own initiative), will equitably adjust any contractual provisions affected by the decrease, substitution, or withdrawal, in accordance with the Changes clause. Title. Title to all Postal Service-furnished property remains in the Postal Service. To define the obligations of the parties under this clause, title to each item of facilities, special test equipment, or special tooling (other than that subject to a special-tooling clause) acquired by the contractor for the Postal Service under this contract will pass to and vest in the Postal Service when its use in the performance of this contract begins, or upon payment for it by the Postal Service, whichever is earlier, whether or not title was previously vested. All Postal Service-furnished property, together with all property acquired by the contractor, title to which vests in the Postal Service under this paragraph c, is subject to the provisions of this clause and is hereinafter collectively referred to as "Postal Service property." Title to Postal Service property is not affected by its incorporation into or attachment to any property not owned by the Postal Service, nor does Postal Service property become a fixture or lose its identity as personal property by being attached to any real property. Use of Postal Service Property. The Postal Service property, unless otherwise provided in this contract or approved by the contracting officer, must be used only for performing this contract. Utilization, Maintenance, and Repair of Postal Service Property. The contractor must maintain and administer, in accordance with sound industrial practice, a program or system for the utilization, maintenance, repair, protection, and preservation of Postal Service property until it is disposed of in accordance with this clause. If any damage occurs to Postal Service property, the risk of which has been assumed by the Postal Service under this contract, the Postal Service will replace the items or the contractor must make such repairs as the Postal Service directs; provided, however, that if the contractor cannot effect these repairs within the time required, the contractor will dispose of the property in the manner directed by the contracting officer. The contract price includes no compensation to the contractor for performing any repair or replacement for which the Postal Service is responsible, and an equitable adjustment will be made in any contractual provisions affected by such repair or replacement made at the direction of the Postal Service, in accordance with the Changes clause. Any repair or replacement for which the contractor is responsible under the provisions of this contract must be accomplished by the contractor at the contractor's own expense. Risk of Loss. Unless otherwise provided in this contract, the contractor assumes the risk of, and becomes responsible for, any loss or damage to Postal Service property provided under this contract upon its delivery to the contractor or upon passage of title to the Postal Service as provided in paragraph c above, except for reasonable wear and tear and except to the extent that it is consumed in performing this contract. Access. The Postal Service, and any persons designated by it, must at reasonable times have access to premises where any Postal Service property is located, for the purpose of inspecting it. Final Accounting for and Disposition of Postal Service Property. Upon completion, or at such earlier dates as may be fixed by the contracting officer, the contractor must submit, in a form acceptable to the contracting officer, inventory schedules covering all items of Postal Service property not consumed in performing this contract (including any resulting scrap) or not previously delivered to the Postal Service, and will prepare for shipment, deliver f.o.b. origin, or dispose of this property, as the contracting officer may direct or authorize. The net proceeds of disposal will be credited to the contract price or will be paid in such other manner as the contracting officer may direct. Restoration of Contractor's Premises and Abandonment. Unless otherwise provided in this contract, the Postal Service: 1. May abandon any Postal Service property in place, whereupon all obligations of the Postal Service regarding it will cease; and 2. Has no obligation with regard to restoration or rehabilitation of the contractor's premises, either in case of abandonment, disposition on completion of need or of the contract, or otherwise, except for restoration or rehabilitation costs properly included in an equitable adjustment under paragraph b or e above. Alternate Paragraph c. (see 2.2.7.d.1(a)) c. Title 1. Title to all Postal Service-furnished property remains in the Postal Service. To define the obligations of the parties under this clause, title to each item of facilities, special test equipment, or special tooling (other than that subject to a special-tooling clause) acquired by the contractor for the Postal Service under this contract will pass to and vest in the Postal Service when its use in the performance of this contract begins, or upon payment for it by the Postal Service, whichever is earlier, whether or not title was previously vested. 2. Title to all material purchased by the contractor for whose cost the contractor is entitled to be reimbursed as a direct item of cost under this contract will pass to and vest in the Postal Service upon delivery of the material to the contractor by the vendor. 3. Title to other material whose cost is reimbursable to the contractor under this contract will pass to and vest in the Postal Service upon: (a) Its issuance for use in the performance of this contract; or (b) Reimbursement of its cost by the Postal Service, whichever occurs first. 4. All Postal Service-furnished property, together with all property acquired by the contractor, title to which vests in the Postal Service under this paragraph c, is subject to the provisions of this clause and is hereinafter collectively referred to as "Postal Service property." Title to Postal Service property is not affected by its incorporation into or attachment to any property not owned by the Postal Service, nor does Postal Service property become a fixture or lose its identity as personal property by being attached to any real property. Clause 2-12 Postal Service Property - Short Form (October 1987) (2.2.7) The Postal Service will deliver to the contractor, at the time and locations stated in this contract, the Postal Service property described in the Schedule or specifications. If that property, suitable for its intended use, is not delivered timely to the contractor, the contracting officer must equitably adjust affected provisions of this contract in accordance with the Changes clause when: 1. The contractor submits a timely written request for an equitable adjustment; and 2. The facts warrant an equitable adjustment. Title to Postal Service property remains in the Postal Service. The contractor may use the Postal Service property only in connection with this contract. The contractor must maintain adequate property control records in accordance with sound industrial practice and must make them available for Postal Service inspection at all reasonable times. Upon delivery of Postal Service property to the contractor, the contractor assumes the risk and responsibility for its loss or damage, except: 1. For reasonable wear and tear; 2. To the extent property is consumed in performing the contract; or 3. As otherwise provided in the contract. Upon completing this contract, the contractor must follow the contracting officer's instructions regarding the disposition of all Postal Service property not consumed in performing this contract or previously delivered to the Postal Service. The contractor must prepare for shipment, deliver f.o.b. origin, or dispose of the Postal Service property, as directed or authorized by the contracting officer. The net proceeds of any such disposal will be credited to the contract price or will be paid to the Postal Service as directed by the contracting officer. Clause 2-13 Postal Service Property - Non-Fixed-Price (October 1987) (2.2.7) Postal Service-Furnished Property 1. Contractor's managerial personnel, as used in paragraph g of this clause, means any of the contractor's directors and officers and any of the contractor's managers, superintendents, or equivalent representatives who have supervision or direction of: (a) All or substantially all of the contractor's business; (b) All or substantially all of the contractor's operation at any one plant or separate location at which the contract is being performed; or (c) A separate and complete major industrial operation connected with performing this contract. 2. The Postal Service will deliver to the contractor, for use in connection with and under the terms of this contract, the property described as Postal Service-furnished property in the Schedule or specifications, together with any related data and information the contractor may request that may be reasonably required for the intended use of the property (hereinafter) referred to as "Postal Service-furnished property"). 3. The contract delivery or performance dates are based on the expectation that Postal Service-furnished property suitable for use will be delivered at the times stated in the Schedule, or, if not so stated, in sufficient time to enable the contractor to meet these delivery or performance dates. 4. If Postal Service-furnished property is received in a condition not suitable for its intended use, the contractor will, upon receipt, notify the contracting officer, detailing the facts, and, as directed by the contracting officer and at Postal Service expense, either effect repairs or modifications or return or otherwise dispose of the property. After the directed action is completed and upon written request from the contractor, the contracting officer will make an equitable adjustment as provided in paragraph h of this clause. 5. If Postal Service-furnished property is not delivered by the required time or times, the contracting officer will, upon the contractor's timely written request, make a determination of any delay caused the contractor and will make an equitable adjustment in accordance with paragraph h of this clause. Changes in Postal Service-Furnished Property 1. The contracting officer may, by written notice, (a) decrease the property provided or to be provided under this contract or (b) substitute other Postal Service-owned property for the property to be provided by the Postal Service or to be acquired by the contractor for the Postal Service under this contract. The contractor must promptly take any action the contracting officer may direct regarding the removal, shipment, or disposal of the property covered by this notice. 2. Upon the contractor's written request, the contracting officer will make an equitable adjustment to the contract in accordance with paragraph h of this clause, if the Postal Service has agreed in the Schedule to make property available for performing this contract and there is any: (a) Decrease or substitution in this property pursuant to subparagraph b.1 above; or (b) Withdrawal of authority to use property, if provided under any other contract or lease. Title 1. The Postal Service retains title to all Postal Service-furnished property. 2. Title to all property purchased by the contractor for which the contractor is entitled to be reimbursed as a direct item of cost under this contract will pass to and vest in the Postal Service upon the vendor's delivery of such property to the contractor. 3. Title to all other property whose cost is reimbursable to the contractor will pass to and vest in the Postal Service upon: (a) Issuance of the property for use in contract performance; (b) Commencement of processing of the property or its use in contract performance; or (c) Reimbursement of the cost of the property by the Postal Service, whichever occurs first. 4. All Postal Service-furnished property and all property acquired by the contractor, title to which vests in the Postal Service under this paragraph c (collectively referred to as "Postal Service property"), is subject to the provisions of this clause. Title to Postal Service property is not affected by its incorporation into or attachment to any property not owned by the Postal Service, nor does Postal Service property become a fixture or lose its identity as personal property by being attached to any real property. Use of Postal Service Property. The Postal Service property must be used only for performing this contract, unless otherwise provided in this contract or approved by the contracting officer. Property Administration 1. The contractor is responsible and accountable for all Postal Service property provided under the contract and must establish and maintain a program or system for the control, use, maintenance, repair, protection, and preservation of Postal Service property in accordance with sound business practice. 2. If any damage occurs to Postal Service property the risk of which has been assumed by the Postal Service under this contract, the Postal Service will replace the items or the contractor must make such repairs as the Postal Service directs. However, if the contractor cannot effect these repairs within the time required, the contractor will dispose of the property as directed by the contracting officer. When any property for which the Postal Service is responsible is replaced or repaired, the contracting officer will make an equitable adjustment in accordance with paragraph h of this clause. Access. The Postal Service and its designees must have access at all reasonable times to the premises where any Postal Service property is located, for the purpose of inspecting it. Limited Risk of Loss 1. The contractor is not liable for loss or destruction of, or damage to, the Postal Service property provided under this contract or for expenses incidental to such loss, destruction, or damage, except as provided in subparagraphs 2 and 3 below. 2. The contractor is responsible for any loss or destruction of, or damage to, the Postal Service property provided under this contract (including expenses incidental to such loss, destruction, or damage): (a) That results from a risk expressly required to be insured under this contract, but only to the extent of the insurance required to be purchased and maintained or to the extent of insurance actually purchased and maintained, whichever is greater; (b) That results from a risk that is in fact covered by insurance or for which the contractor is otherwise reimbursed, but only to the extent of such insurance or reimbursement; (c) For which the contractor is otherwise responsible under the express terms of this contract; (d) That results from willful misconduct or lack of good faith on the part of the contractor's managerial personnel; or (e) That results from a failure on the part of the contractor, due to willful misconduct or lack of good faith on the part of the contractor's managerial personnel, to establish and administer a program or system of the control, use, protection, preservation, maintenance, and repair of Postal Service property as required by paragraph e of this clause. 3. (a) If the contractor fails to act, as described in g.2(e) above, after being notified (by certified mail addressed to one of the contractor's managerial personnel) of the Postal Service's disapproval, withdrawal of approval, or nonacceptance of the system or program, it will be conclusively presumed that this failure was due to willful misconduct or lack of good faith on the part of the contractor's managerial personnel. (b) In this event, any loss or destruction of, or damage to, the Postal Service property will be presumed to have resulted from such failure unless the contractor can establish by clear and convincing evidence that the loss, destruction, or damage: (1) Did not result from the contractor's failure to maintain an approved program or system; or (2) Occurred while an approved program or system was maintained by the contractor. 4. If the contractor transfers Postal Service property to the possession and control of a subcontractor, the transfer does not affect the liability of the contractor for loss or destruction of, or damage to, the property. However, the contractor must require the subcontractor to assume the risk of, and be responsible for, any loss or destruction of, or damage to, the property while in the subcontractor's possession or control, except to the extent that the subcontract, with the advance approval of the contracting officer, relieves the subcontractor from liability. In the absence of approval, the subcontract must contain appropriate provisions requiring the return of all Postal Service property in as good condition as when received, except for reasonable wear and tear or for its use in accordance with the provisions of the prime contract. 5. Upon loss or destruction of, or damage to, Postal Service property provided under this contract, the contractor must so notify the contracting officer and communicate with any loss and salvage organization designated by the contracting officer. With the assistance of any such organization, the contractor must take all reasonable action to protect the Postal Service property from further damage, separate the damaged and undamaged Postal Service property, put all the affected Postal Service property in the best possible order, and furnish to the contracting officer a statement of: (a) The lost, destroyed, and damaged Postal Service property; (b) The time and origin of the loss, destruction, or damage; (c) All known interests in commingled property of which the Postal Service property is a part; and (d) Any insurance covering any part of or interest in the commingled property. 6. The contractor must repair, renovate, and take any other action with respect to damaged Postal Service property that the contracting officer directs. If the Postal Service property is destroyed or damaged beyond practical repair, or is damaged and so commingled or combined with property of others (including the contractor's) that separation is impractical, the contractor may, with the approval of and subject to any conditions imposed by the contracting officer, sell the property for the account of the Postal Service. Such sales may be made in order to minimize the loss to the Postal Service, to permit the resumption of business, or to accomplish a similar purpose. The contractor is entitled to an equitable adjustment in the contract price for expenditures made in performing its obligations under subparagraph g.5 above and this subparagraph g.6 in accordance with paragraph h of this clause. However, the Postal Service may directly reimburse the loss and salvage organization for any of its charges. The contracting officer will give due regard to the contractor's liability under this paragraph g when making any such equitable adjustment. 7. The contract will not be reimbursed for, and may not include as an item of overhead, the cost of insurance or of any reserve covering risk of loss or destruction of, or damage to, Postal Service property, except to the extent that the Postal Service may have expressly required the contractor to carry such insurance under another provision of this contract. 8. In the event the contractor is reimbursed or otherwise compensated for any loss or destruction of, or damage to, Postal Service property, the contractor must use the proceeds to repair, renovate, or replace the lost, destroyed, or damaged Postal Service property or must otherwise credit the proceeds to, or equitably reimburse, the Postal Service, as directed by the contracting officer. 9. The contractor must do nothing to prejudice the Postal Service's rights to recover against third parties for any loss or destruction of, or damage to, Postal Service property. Upon the request of the contracting officer, the contractor will, at the Postal Service's expense, furnish to the Postal Service all reasonable assistance and cooperation (including the prosecution of suit and the execution of instruments of assignment in favor of the Postal Service) in obtaining recovery. In addition, when a subcontractor has not been relieved from liability for any loss or destruction of, or damage to, Postal Service property, the contractor must enforce this liability of the subcontractor for the benefit of the Postal Service. Equitable Adjustment. When this clause specifies an equitable adjustment, it will be made to any affected contract provision in accordance with the procedures of the Changes clause. When appropriate, the contracting officer may initiate an equitable adjustment in favor of the Postal Service. The right to an equitable adjustment shall be the contractor's exclusive remedy. The Postal Service is not liable to suit for breach of contract for: 1. Any delay in delivery of Postal Service-furnished property; 2. Delivery of Postal Service-furnished property in a condition not suitable for its intended use; 3. A decrease in or substitution of Postal Service-furnished property; or 4. Failure to repair or replace Postal Service property for which the Postal Service is responsible. Final Accounting for and Disposition of Postal Service Property. Upon completing this contract, or at such earlier dates as may be fixed by the contracting officer, the contractor must submit, in a form acceptable to the contracting officer, inventory schedules covering all items of Postal Service property not consumed in performing this contract or delivered to the Postal Service. The contractor will prepare for shipment, deliver f.o.b. origin, or dispose of the Postal Service property as the contracting officer may authorize or direct. The net proceeds of any disposal will be credited to the cost of the work covered by this contract or paid to the Postal Service as directed by the contracting officer. The foregoing provisions apply to scrap from Postal Service property; provided, however, that the contracting officer may authorize or direct the contractor to omit from the inventory schedules any scrap consisting of faulty castings or forgings or of cutting and processing waste, such as chips, cuttings, borings, turnings, short ends, circles, trimmings, clippings, and remnants, and to dispose of this scrap in accordance with the contractor's normal practice and account for it as a part of general overhead or other reimbursable costs in accordance with the contractor's established accounting procedures. Abandonment and Restoration of Contractor's Premises. Unless otherwise provided in this contract, the Postal Service: 1. May abandon any Postal Service property in place, whereupon all obligations of the Postal Service regarding it will cease; and 2. Has no obligation to restore or rehabilitate the contractor's premises under any circumstances (for instance, abandonment, disposition upon completion of need, or contract completion). However, if the Postal Service-furnished property (listed in the Schedule or specifications) is withdrawn or is unsuitable for the intended use, or if other Postal Service property is substituted, then the equitable adjustment under paragraph h of this clause may properly include restoration or rehabilitation costs. Communications. All communications under this clause must be in writing. Alternate Paragraph c. (see 2.2.7.d.1(c)) c. Title 1. The Postal Service retains title to all Postal Service-furnished property. 2. All Postal Service-furnished property and all property acquired by the contractor, title to which vests in the Postal Service under this paragraph (collectively referred to as "Postal Service property"), is subject to the provisions of this clause. Title to Postal Service property is not affected by its incorporation into or attachment to any property not owned by the Postal Service, nor does Postal Service property become a fixture or lose its identity as personal property by being attached to any real property. 3. Title to all property purchased by the contractor for which the contractor is entitled to be reimbursed as a direct item of cost under this contract and that, under the provisions of the contract, is to vest in the Postal Service, will pass to and vest in the Postal Service upon the vendor's delivery of such property to the contractor. Title to all other property whose cost is to be reimbursed to the contractor under this contract and that under the contract provisions is to vest in the Postal Service, will pass to and vest in the Postal Service upon: (a) Issuance of the property for use in contract performance; (b) Commencement of processing of the property or its use in contract performance; or (c) Reimbursement of the cost of the property by the Postal Service, whichever occurs first. 4. Title to equipment (and other tangible personal property) purchased with funds available for research and having an acquisition cost of less than $5,000 will vest in the contractor upon acquisition or as soon thereafter as feasible; provided, that the contractor has obtained the contracting officer's approval before each acquisition. Title to equipment purchased with funds available for research and having an acquisition cost of $5,000 or more will vest as set forth in the contract. If title to equipment vests in the contractor under this subparagraph c.4, the contractor agrees that no charge will be made to the Postal Service for any depreciation, amortization, or use under any existing or future Postal Service contract or subcontract thereunder. The contractor will furnish the contracting officer a list of all equipment to which title is vested in the contractor under this subparagraph c.4 within 10 days following the end of the calendar quarter during which it was received. 5. Vesting title under subparagraph c.4 above is subject to civil rights legislation, 42 U.S.C. 2000d. Before title is vested and by signing this contract the contractor accepts and agrees that no person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under the contemplated financial assistance (title to equipment). Clause 2-14 Postal Service Property Furnished "As Is" (October 1987) (2.2.7) The Postal Service makes no warranty whatsoever with respect to Postal Service property furnished "as is" except that the property is in the same condition when placed at the f.o.b. point specified in the solicitation as when inspected by the contractor pursuant to the solicitation or (if not inspected by the contractor) as when last available for inspection under the solicitation. The contractor may repair any property made available to the contractor "as is." Repair will be at the contractor's expense except as otherwise provided in this clause. Such property may be modified at the contractor's expense, but only with the written permission of the contracting officer. Any repair or modification of property furnished "as is" does not affect the title of the Postal Service. If there is any change (between the time inspected or last available for inspection under the solicitation to the time placed on board at the location specified in the solicitation) in the condition of Postal Service property furnished "as is" that will adversely affect the contractor, the contractor must, upon receipt of the property, notify the contracting officer of that fact, and (as directed by the contracting officer) either (1) return the property at the expense of the Postal Service or otherwise dispose of it, or (2) effect repairs to return it to the condition it was in when inspected under the solicitation, or (if not inspected) as it was when last available for inspection under the solicitation. Upon completion of (1) and (2) above, the contracting officer, upon written request from the contractor, will equitably adjust any contractual provisions affected by the return, disposition, or repair, in accordance with the Changes clause. The foregoing provisions for adjustment are exclusive, and the Postal Service is not liable for any delivery of Postal Service property furnished "as is" in a condition other than that in which it was originally offered. Except as otherwise provided in this clause, Postal Service property furnished "as is" is governed by the Postal Service Property clause of this contract. Clause 2-15 Special Tooling (October 1987) (2.2.7) Definition 1. Special tooling means jigs, dies, fixtures, molds, patterns, taps, gauges, other equipment and manufacturing aids, and replacements so specialized that, without substantial modification or alteration, their use is limited to developing or producing particular supplies or performing particular services. The term includes all components of such items, but does not include: (a) Consumable property; (b) Special test equipment; or (c) Buildings, nonseverable structures (except foundations and similar improvements necessary for the installation of special tooling), general or special machine tools, or similar capital items. 2. For the purposes of this clause, special tooling does not include: (a) Items acquired by the contractor before the effective date of this contract, or replacements of such items, whether or not altered or adapted for use in the performance of this contract; or (b) Items specifically excluded by the Schedule. Use of Special Tooling. The contractor agrees not to use any items of special tooling purchased or manufactured by the contractor for the performance of this contract except in performing it, or as approved by the contracting officer. List of Special Tooling. Within 60 days after delivery of the first production end items under this contract, or such later date as the contracting officer may prescribe, the contractor must (if the contracting officer so requests) furnish the contracting officer a list of all special tooling acquired or manufactured by the contractor for use in the performance of this contract. The list shall specify the nomenclature, tool number, and related product part number or service, and unit or group cost of the special tooling. Upon completion or termination of all or a substantial part of the work under this contract, the contractor must furnish a final list in the same form covering all items not previously reported under this paragraph c; provided, however, that the contracting officer may, by written notice, waive this requirement or extend it until the completion of this contract and other contracts and subcontracts for which approval has been obtained under paragraph b above. Special tooling that has become obsolete as a result of changes in design or specification need not be reported, except as provided for in paragraph d below. Changes in Design. If any changes in design or specifications affect interchangeability of parts, the contractor will, unless otherwise agreed to by the contracting officer, give the contracting officer notice of any part that is not interchangeable with the new or superseding part; and the usable special tooling for each part covered in this notice will be retained by the contractor, subject to the provisions of paragraph i below, pending disposition under paragraph f below. Contractor's Offer to Retain Special Tooling. When the contractor furnishes a list or notice under paragraph c or d above, the contractor may designate the items of special tooling (either specifically or by listing the particular products, parts, or services for which they were used or designed) the contractor desires to retain, together with a written offer to retain them: 1. Free and clear of any Postal Service interest, for an amount designated in the offer that should ordinarily not be less than the fair value of the items, which fair value takes into account, among other things, their value to the contractor for use in further work; or 2. For a period of time and under terms and conditions agreed to by the parties, subject to ultimate retention or disposition of these items in accordance with paragraph f below. Disposition of Special Tooling 1. Within 90 days after receipt of any list or notice under paragraph c or d above, or such further period as may be agreed upon by the parties, the contracting officer will furnish to the contractor: (a) A list specifying the particular products, parts, or services for which the Postal Service may require special tooling, together with a request that the contractor transfer title (to the extent not previously transferred under any other clause of this contract) and deliver to the Postal Service all usable items of special tooling used or designed for the manufacture or performance of any designated portion of those products, parts, or services and on hand when production of the products or parts, or performance of the services, ceased; (b) An acceptance or rejection of any offer made by the contractor under paragraph e above, or a request for further negotiation with respect to it; (c) A direction to the contractor to sell, or to dispose of as scrap, for the account of the Postal Service, any or all of the special tooling covered by the list; (d) A statement with respect to any or all of the special tooling covered by the list specifying that the Postal Service has no further interest in it and waives its rights in it; or (e) Any combination of the foregoing, as the circumstances warrant. 2. The contractor will promptly comply with any request by the contracting officer under subparagraph f.1 preceding to transfer title to any items of special tooling, and will: (a) Immediately prepare them for shipment by proper packaging, packing, and marking, in accordance with any instruction issued by the contracting officer, promptly delivering them to the Postal Service as directed by the contracting officer; or (b) If a storage agreement has been entered into, prepare them for storage in accordance with that agreement, as directed by the contracting officer. 3. to the extent that compliance with direction to ship or store under subparagraph f.2 preceding may occasion cost to the contractor for which the contractor will not otherwise be compensated, the contract price will be equitably adjusted in accordance with the Changes clause. Any items of special tooling delivered or stored must be accompanied by any operation sheets or other appropriate data necessary to show the manufacturing operations or processes for which the items were used or designed. 4. If the contracting officer has requested further negotiations under f. 1(b) above, the contractor agrees to enter into them in good faith with the contracting officer. Any items of special tooling not disposed of by transfer of title and delivery to the Postal Service, or by acceptance of an offer of the contractor made under paragraph e above, or of such offer as modified in the course of negotiations, must be disposed of in the manner set forth in f.1(c) or (d) above. Any failure of the contracting officer to give the required direction within the specified period will be construed as a direction pursuant to f.1(c) above. Proceeds of Retention or Disposition of Special Tooling. If the contracting officer accepts an offer of the contractor to retain any items of special tooling, or if any such items are sold to third parties or disposed of as scrap, the net proceeds will be: 1. Deducted from the amounts due to the contractor under this contract and the contract amended accordingly; or 2. Otherwise paid as the contracting officer may direct. Property Control. The contractor agrees to follow normal industrial practice in maintaining property-control records on special tooling and to make them available for inspection by the Postal Service at all reasonable times. The contractor further agrees that, to the extent practicable, the contractor will identify by appropriate stamp, tag, or other mark all special tooling subject to this clause. Maintenance Pending Disposition. The contractor agrees that, between the date any usable items of special tooling are no longer needed by the contractor, within the meaning of this clause, and the date of their final disposition under this clause, the contractor will take all reasonable steps necessary to maintain their identity and existing condition, unless the contracting officer has directed that they be disposed of as scrap or has given notice under f.1(d) above. The contractor shall not be required to keep any such items in place. Special Tooling Provisions for Subcontracts. The contractor agrees, in placing any subcontracts or purchase orders under this contract that involve the use of special tooling whose full cost is charged to the subcontract or purchase order, to include therein appropriate provisions to obtain rights comparable to those granted to the Postal Service by this clause, unless the contracting officer determines, upon the contractor's request, that with respect to any subcontract, purchase order, or class thereof, such rights are not of substantial interest to the Postal Service. The contractor further agrees to exercise any rights for the benefit of the Postal Service as the contracting officer may direct. Clause 2-16 Special Test Equipment (October 1987) (2.2.7) Definition. Special test equipment means electrical, electronic, hydraulic, pneumatic, mechanical, or other items or assemblies of equipment so specialized that, without substantial modification or alteration, their use (if they are to be used separately) is limited to testing in the development or production of particular supplies or in the performance of particular services. The term includes all components of any assemblies of such equipment, but does not include: 1. Consumable property; 2. Special tooling; or 3. Buildings, nonseverable structures (except foundations and similar improvements necessary for the installation of special test equipment), general or special machine tools, or similar capital items. Contractor Notice of Intent to Acquire Special Equipment. This contract provides that the contractor will acquire special test equipment for the Postal Service but does not specify its exact nature. Before acquiring any special test equipment or components having an item acquisition cost of $1,000 or more, the contractor must give the contracting officer 30 days' notice of intention to do so, including a full description of all such items and a list of alternative items that could be used. The Postal Service may elect within the 30-day period to furnish the special test equipment or any components. If the contractor has not received written notice within the period prescribed, the contractor may proceed to acquire the equipment or components, subject to any other applicable provisions of this contract. Postal Service-Furnished Special Test Equipment. If the Postal Service elects to furnish special test equipment or any components pursuant to paragraph b preceding, these items will be furnished subject to the Postal Service Property clause of this contract; provided, however, that the Postal Service is not obligated to deliver them any sooner than the contractor could have procured them after expiration of the 30-day notice period prescribed in paragraph b. Equitable Adjustment. If the Postal Service furnishes any special test equipment or components under paragraph c preceding, any affected provision of this contract will be equitably adjusted in accordance with the Changes clause. Subcontracts. If special test equipment or components having an item acquisition cost of $1,000 or more are to be acquired for the Postal Service by a subcontractor under this contract, the Postal Service's rights to receive 30 days' advance notice from the price contractor, and to furnish the items to the prime contractor and obtain an equitable adjustment of the prime contract therefor, in accordance with paragraphs b, c, and d above, will be preserved. Clause 2-17 Option for Increased Quantity (October 1987) (2.2.8) The Postal Service may increase the quantity of supplies called for in this contract by the amounts stated in the Schedule and at the unit prices specified in the Schedule. The contracting officer may exercise this option, at any time within the period specified in the Schedule, by giving written notice to the contractor. Delivery of the items added by the exercise of this option will continue immediately after, and at the same rate as, delivery of like items called for under this contract, unless the parties otherwise agree. Clause 2-18 Option Item (October 1987) (2.2.8) The Postal Service may increase the quantity of supplies called for in this contract by requiring the delivery of the numbered line item identified in the Schedule as an option item, in the quantity and at the price set forth in the Schedule. The contracting officer may exercise this option, at any time within the period specified in the Schedule, by giving written notice to the contractor. Delivery of the items added by the exercise of this option will continue immediately after, and at the same rate as, delivery of like items called for under this contract, unless the parties otherwise agree. Clause 2-19 Option to Extend Services (October 1987) (2.2.8) The Postal Service may require the contractor to continue to perform any or all items of services under this contract within the limits stated in the Schedule. The contracting officer may exercise this option, at any time within the period specified in the Schedule, by giving written notice to the contractor. The rates set forth in the Schedule will apply to any extension made under this option clause. Clause 2-20 Option to Extend the Term of the Contract (October 1987) (2.2.8) This contract is renewable, at the option of the Postal Service, by the contracting officer giving written notice of renewal to the contractor within the period specified in the Schedule. If the Postal Service exercises this option for renewal, the contract as renewed includes this option clause. The duration of this contract, including renewals, may not exceed the time limit set forth in the Schedule. Clause 2-21 Component Parts (October 1987) (2.3.4) The description of any component parts in the specification by use of brand or manufacturer's names indicates that there are no other acceptable sources for those components known to the Postal Service. Such descriptions are not meant to be restrictive, however, and the contractor may ask the contracting officer to recognize a contractor-proposed component not included in the specifications as equal to one of the specified components and permit its substitution; provided that the contractor submits any request for substitution in a timely manner and with sufficient information to enable the contracting officer to ascertain readily whether the proposed component is in fact equal to the component described in the specifications. The contracting officer's approval or disapproval of the request for substitution is final and not subject to the Claims and Disputes clause. Clause 2-22 Value Engineering Incentive (February 1992) (2.2.10) General. The contractor is encouraged to develop and submit value engineering change proposals (VECPs) voluntarily. The contractor will share in savings realized from an accepted VECP as provided in paragraph h below. Definitions 1. Value Engineering Change Proposal (VECP). A proposal that: (a) Requires a change to the instant contract; (b) Results in savings to the instant contract; and (c) Does not involve a change in: (1) Deliverable end items only; (2) Test quantities due solely to results of previous testing under the instant contract; or (3) Contract type only. 2. Instant Contract. The contract under which a VECP is submitted. It does not include additional contract quantities. 3. Additional Contract Quantity. An increase in quantity after acceptance of a VECP due to contract modification, exercise of an option, or additional orders (except orders under indefinite-delivery contracts within the original maximum quantity limitations). 4. Postal Service Costs. Costs to the Postal Service resulting from developing and implementing a VECP, such as net increases in the cost of testing, operations, maintenance, logistics support, or property furnished. Normal administrative costs of processing the VECP are excluded. 5. Instant Contract Savings. The estimated cost of performing the instant contract without implementing a VECP minus the sum of (a) the estimated cost of performance after implementing the VECP and (b) Postal Service costs. 6. Additional Contract Savings. The estimated cost of performance or delivering additional quantities without the implementation of a VECP minus the sum of (a) the estimated cost of performance after the VECP is implemented and (b) Postal Service cost. 7. Contractor's Development and Implementation Costs. Contractor's cost in developing, testing, preparing, and submitting a VECP. Also included are the contractor's cost to make the contractual changes resulting from the Postal Service acceptance of the VECP. Content. A VECP must include the following: 1. A description of the difference between the existing contract requirement and that proposed, the comparative advantages and disadvantages of each, a justification when an item's function or characteristics are being altered, the effect of the change on the end item's performance, and any pertinent objective test data. 2. A list and analysis of the contract requirements that must be changed if the VECP is accepted, including any suggested specification revisions. 3. A separate, detailed cost estimate for (a) the affected portions of the existing contract requirement and (b) the VECP. The cost reduction associated with the VECP must take into account the contractor's allowable development and implementation costs. 4. A description and estimate of costs the Postal Service may incur in implementing the VECP, such as test and evaluation and operating and support costs. 5. A prediction of any effects the proposed change would have on Postal Service costs. 6. A statement of the time by which a contract modification accepting the VECP must be issued in order to achieve the maximum cost reduction, noting any effect on the contract completion time or delivery schedule. 7. Identification of any previous submissions of the VECP to the Postal Service, including the dates submitted, purchasing offices, contract numbers, and actions taken. Submission. The contractor must submit VECPs to the contracting officer. Postal Service Action 1. The contracting officer will give the contractor written notification of action taken on a VECP within 60 days after receipt. If additional time is needed, the contracting officer will notify the contractor, within the 60-day period, of the expected date of a decision. The Postal Service will process VECPs expeditiously but will not be liable for any delay in acting upon a VECP. 2. If a VECP is not accepted, the contracting officer will so notify the contractor, explaining the reasons for rejection. Withdrawal. The contractor may withdraw a VECP, in whole or in part, at any time before its acceptance. Acceptance 1. Acceptance of a VECP, in whole or in part, will be by execution of a supplemental agreement modifying this contract and citing this clause. If agreement on price (see paragraph h below) is reserved for a later supplemental agreement, and if such agreement cannot be reached, the disagreement is subject to the Claims and Disputes clause of this contract. 2. Until a VECP is accepted by contract modification, the contractor must perform in accordance with the existing contract. 3. The contracting officer's decision to accept or reject all or any part of a VECP is final and not subject to the Claims and Disputes clause or otherwise subject to litigation under the Contract Disputes Act of 1978 (41 U.S. C. 601-613). Sharing. If a VECP is accepted, the contractor will share in the contract savings as follows: 1. Instant Contract Savings. The contractor and the Postal Service will share equally in instant contract savings. Sharing will be accomplished by a modification reducing the contract price by an amount equal to 50 percent of the instant contract savings minus the contractor's allowable VECP development and implementation costs. 2. Additional Contract Savings. Unless this is a construction contract, the contractor will receive 25 percent of additional contract savings. Sharing will be accomplished by negotiating a price for the additional contract quantity that reflects a reduction in price by 75 percent of additional contract savings. 3. Construction Contracts. If this is a construction contract, only instant contract savings will be shared. Sharing will be accomplished in accordance with subparagraph h.1 above. Data 1. The contractor may restrict the Postal Service's right to use any part of a VECP or the supporting data by marking the following legend on the affected parts: "These data, furnished under the Value Engineering Incentive clause of contract , may not be disclosed outside the Postal Service or duplicated, used, or disclosed, in whole or in part, for any purpose other than to evaluate a value engineering change proposal submitted under the clause. This restriction does not limit the Postal Service's right to use information contained in these data if it has been obtained or is otherwise available from the contractor or from another source without limitation." 2. If a VECP is accepted, the contractor hereby grants the Postal Service unlimited rights in the VECP and supporting data, except that, with respect to data qualifying and submitted as limited rights technical data, the Postal Service will have the rights specified in the contract modification implementing the VECP and will appropriately mark the data. (The terms "unlimited rights" and "limited rights" are defined in chapter 9 of the USPS Procurement Manual.) Additional Paragraph j. (see 2.2.10.h) Subcontracts. The contractor must include an appropriate value engineering incentive clause in any firm-fixed-price subcontract of $100,000 or more. In calculating any price adjustment for savings under this contract, the contractor's allowable VECP development and implementation costs include any subcontractor's allowable development and implementation costs. Subcontract savings are subject to the sharing arrangements in paragraph h of this clause, and will be taken into account in determining the savings under this contract. Clause 4-1 Notice to Suppliers (February 1992) (4.3.7) This is a firm order if the total price does not exceed $ (contracting officer insert monetary limitation). Make delivery or perform in accordance with the delivery provisions of this order and submit an invoice to the contracting officer of the purchasing office named in this order. If the total price of this order will exceed the above amount or if you cannot furnish supplies or services in exact accordance with the description and delivery schedule, notify the contracting officer immediately, giving your quotation or proposed substitution or changes, and withhold performance pending reply. Clause 5-1 Payment - Fixed-Price (October 1987) (5.1.3) The Postal Service will pay the contractor, upon the submission of proper invoices or vouchers, the prices stipulated in this contract for work or supplies delivered and accepted or services rendered and accepted, less any deductions provided for by the contract. Unless the contract otherwise specifies, payment will be made on partial deliveries accepted by the Postal Service if: The amount due on the deliveries warrants it; or The contractor requests it and the amount due on the deliveries is at least $1,000 or 50 percent of the total contract price, whichever is less. Clause 5-2 Incentive Price Revision (October 1987) (5.1.3) General. The supplies or services identified in the Schedule as items (Contracting officer insert Schedule line numbers) are subject to price revision in accordance with the provisions of this clause. In no event may the total final price of such items exceed $ (Contracting officer insert ceiling price). Definition. Costs means allowable costs in accordance with chapter 5 of the USPS Procurement Manual in effect on the date of this contract. Submission of Data 1. Within days (Contracting officer insert number of days) after the end of the month in which the contractor has delivered the last unit of supplies and completed the services called for by those items referred to in paragraph a above, the contractor must submit, in such form as the contracting officer may require: (a) A detailed statement of all costs incurred up to the end of that month in performing all work under those items; (b) An estimate of costs of such further performance, if any, as may be necessary to complete performance of all work with respect to them; and (c) Any other relevant data the contracting officer may reasonably require. 2. If the contractor fails to submit the data required within the time specified and it is later determined that the Postal Service has overpaid the contractor, the contractor must repay the excess to the Postal Service immediately. Unless repaid within 30 days after the end of the data submittal period, the amount of the excess will bear interest, computed from the date the data were due to the date of repayment, at the rate established In accordance with the Interest clause of this contract. Price Revision. Upon receipt by the contracting officer of the data required by paragraph c above, the parties will establish the total final price in accordance with the following: 1. On the basis of the information required by paragraph c above, together with any other pertinent information, the parties will negotiate the total final cost incurred or to be incurred for the supplies delivered (or services performed) and accepted by the Postal Service that are subject to price revision under this clause. 2. The total final price will be established by applying to the total final negotiated cost an adjustment for profit or loss, as follows: (a) If the total final negotiated cost is equal to the total target cost, the adjustment is the total target profit. (b) If the total final negotiated cost is greater than the total target cost, the adjustment is the total target profit less percent (Contracting officer insert percent) of the amount by which the total final negotiated cost exceeds the total target cost. (c) If the final negotiated cost is less than the total target cost, the adjustment is the total target profit plus percent (Contracting officer insert percent) of the amount by which the total final negotiated cost is less than the total target cost. 3. The total final price of the items specified in a above must be evidenced by a modification to this contract, signed by the contractor and the contracting officer. This price is not subject to revision, regardless of any changes in the cost of performing the contract, except to the extent that: (a) The parties agree in writing, before the determination of total final price, to exclude specific elements of cost from this price and to a procedure for subsequent disposition of those elements; and (b) Adjustments or credits are explicitly permitted or required by this or any other clause in this contract. Adjusted Billing Price 1. Pending execution of the contract modification described in subparagraph d.3 above, the contractor must submit invoices or vouchers in accordance with the billing price as provided in this paragraph e. The billing price will be the target price shown in this contract. 2. If at any time it appears that the then-current billing price will be substantially greater than the estimated final price, the parties must negotiate a reduction in the billing price. Similarly, the parties may negotiate an increase in the billing price by any or all of the difference between the target price and the ceiling price, upon the contractor's submission of factual data showing that final cost under this contract will be substantially greater than the target cost. 3. Any billing price adjustment must be reflected in a contract modification and will not affect the determination of the total final price under paragraph d above. After the contract modification establishing the total final price is executed, the total amount paid or to be paid on all invoices or vouchers must be adjusted to reflect the total final price, and any resulting additional payments, refunds, or credits must be made promptly. Limitations on Payments. This paragraph f applies until final price revision under this contract has been completed. 1. Within 45 days after the end of each quarter of the contractor's fiscal year in which a delivery is first made (or services are first performed) and accepted by the Postal Service under this contract, and for each quarter thereafter, the contractor must submit to the contracting officer a statement, cumulative from the beginning of the contract, showing: (a) The total contract price of all supplies delivered (or services performed) and accepted by the Postal Service and for which final prices have been established; (b) The total costs (estimated to the extent necessary) reasonably incurred for, and properly allocable solely to, the supplies delivered (or services performed) and accepted by the Postal Service and for which final prices have not been established; (c) The portion of the total target profit (used in establishing the initial contract price or agreed to for the purpose of this paragraph f) that is in direct proportion to the supplies delivered (or services performed) and accepted by the Postal Service for which final prices have not been established - increased or decreased in accordance with subparagraph d.2 above, when the amount stated under f.1(b) above differs from the aggregate target cost of the supplies or services; and (d) The total amount of all invoices or vouchers for supplies delivered (or services performed) and accepted by the Postal Service (including amounts applied or to be applied to liquidate progress payments). 2. Regardless of any provision of this contract authorizing greater payments, if on any quarterly statement the amount under f.1(d) above exceeds the sum due the contractor, as computed in accordance with f.1(a), (b) and (c) above, the contractor must immediately refund or credit to the Postal Service the amount of the excess. The contractor may, when appropriate, reduce this refund or credit by the amount of previous refunds or credits effected under this clause. If any portion of the excess has been applied to the liquidation of progress payments, then that portion may, instead of being refunded, be added to the unliquidated progress payment account consistent with the Progress Payments clause. The contractor must provide complete details to support any claimed reductions in refunds. 3. If the contractor fails to submit the quarterly statement within 45 days after the end of each quarter and it is later determined that the Postal Service has overpaid the contractor, the contractor must repay the excess to the Postal Service immediately. Unless repaid within 30 days after the end of the statement submittal period, the amount of the excess will bear interest, computed from the date the quarterly statement was due to the date of repayment, at the rate established in accordance with the Interest clause. Subcontracts. No subcontract placed under this contract may provide for payment on a cost-plus-a-percentage-of-cost basis. The contractor must: 1. Insert in each subcontract other than a firm-fixed-price subcontract the substance of paragraph f above, and of this paragraph g, modified to omit mention of the Postal Service and to reflect the position of the contractor as purchaser and of the subcontractor as vendor; and 2. Include in each cost-reimbursement subcontract a requirement that each subcontract other than a firm-fixed-price subcontract contain the substance of paragraph f above and of this paragraph g modified as required by subparagraph g.1 above. Disagreements. If the contractor and the contracting officer fail to agree upon the total final price within 60 days (or within such other period as the contracting officer may specify) after the date on which the data required by paragraph c above are to be submitted, the contracting officer must promptly issue a decision in accordance with the Claims and Disputes clause. Termination. If this contract is terminated before the total final price is established, prices of supplies or services subject to price revision must be established in accordance with this clause for completed supplies and services accepted by the Postal Service and those supplies and services not terminated under a partial termination. All other elements of the termination must be resolved in accordance with other applicable clauses of this contract. Equitable Adjustment Under Other Clauses. If an equitable adjustment in the contract price is made under any other clause of this contract before the total final price is established, the adjustment must be made in the total target cost and may be made in the maximum dollar limit on the total final price, the total target profit, or both. If the adjustment is made after the total final price is established, only the total final price may be adjusted. Exclusion from Target Price and Total Final Price. If any clause of this contract provides that the contract price does not or will not include an amount for a specific purpose, then neither any target price nor the total final price may include any amount for that purpose. Separate Reimbursement. If any clause of this contract expressly provides that the cost of performance of an obligation will be at Postal Service expense, that expense may not be included in any target price or in the total final price, but must be reimbursed separately. Taxes. As used in the Federal, State, and Local Taxes clause of this contract or in any other clause that provides for certain taxes or duties to be included in, or excluded from, the contract price, the term contract price includes the total target price or, if it has been established, the total final price. When any of these clauses requires that the contract price be increased or decreased as a result of changes in the obligation of the contractor to pay or bear the burden of certain taxes or duties, the increase or decrease will be made in the total target price or, if it has been established, in the total final price, so that it will not affect the contractor's profit or loss on this contract. Provisioning and Options. Parts, other supplies, or services that are to be furnished under this contract on the basis of a provisioning document or Postal Service option are subject to price revision in accordance with this clause. Any prices established for these parts, other supplies, or services under a provisioning document or Postal Service option will be treated as target prices. Target cost and profit covering these parts, other supplies, or services may be established separately, in the aggregate, or in any combination, as the parties may agree. Clause 5-3 Economic Price Adjustment - Labor and Materials (October 1987) (5.1.3) If at any time during the performance of this contract the rates of pay for labor or unit prices for materials set forth in the Schedule increase or decrease, the contractor must notify the contracting officer within 60 days or within such further period as may be approved in writing by the contracting officer, but in any event not later than final payment under the contract. The notice must include the contractor's proposal for an equitable adjustment in the contract unit prices to be negotiated in accordance with paragraph b below and must be accompanied by data, in such form as the contracting officer may require, explaining: 1. The causes; 2. The effective date; and 3. The amount of the increase or decrease and of the contractor's proposal for an equitable adjustment. Promptly upon receipt of any notice and data described in paragraph a above, the contractor and the contracting officer will negotiate an equitable adjustment (and its effective date) in the contract unit prices to reflect any change in the cost of performance of this contract due to changes in rates of pay for labor or unit prices for materials set forth in the Schedule; provided, however, that negotiations may be postponed by the contracting officer until an accumulation of changes results in an adjustment allowable under subparagraph c. 5 below. The equitable adjustment, and its effective date, will be set forth in an amendment to this contract that also revises the rates of pay for labor or unit prices for materials set forth in the Schedule to reflect the increases or decreases. Pending agreement on, or determination of, any such adjustment and its effective date, the contractor shall continue performance. Notwithstanding any other provision of this clause, any price adjustments under this clause are subject to the following limitations: 1. There will be no adjustment for supplies whose production cost is not affected by a change in the rates of pay for labor or unit prices for materials set forth in the Schedule. 2. There will be no adjustment other than for changes in the rates of pay for labor or unit prices of materials set forth in the Schedule. 3. There will be no adjustment for any change in the quantities of labor or materials set forth in the Schedule for each item to be delivered. 4. No upward adjustment will apply to supplies required by the delivery schedule to be delivered before the effective date of the adjustment but actually delivered later, unless the contractor's failure to deliver in accordance with the delivery schedule results from causes beyond the control and without the fault or negligence of the contractor within the meaning of the Default clause, in which case the contract will be amended to make an equitable extension of the delivery schedule. 5. Except as provided in paragraph d below, there will be no adjustment for any change in rates of pay for labor or unit prices for materials that would not result in a net change of at least 3 percent of the then-current total contract price. 6. The aggregate of the increases in any contract unit price made under this clause may not exceed percent (Contracting officer insert percentage no higher than ten percent) of the original contract unit price. If, after delivery of the last unit called for by this contract, either party requests negotiation pursuant to paragraph b above, the limitations of subparagraph c.5 above do not apply. The final invoice submitted under this contract must include a certification that the contractor has not experienced a decrease in rates of pay for labor or unit prices for materials set forth in the Schedule or that the contractor has given notice of all such decreases in compliance with paragraph a above. The contracting officer may examine the contractor's books, records, and other supporting data relevant to the cost of labor and materials during all reasonable times until the expiration of three years from the date of final payment under the contract. No subcontract placed under this contract may provide for payment on a cost-plus-a-percentage-of-cost basis. Clause 5-4 Allowable Cost and Payment (October 1987) (5.1.4) Invoicing. The Postal Service will make payments to the contractor when requested as work progresses, but not more than monthly, in amounts determined to be allowable by the contracting officer in accordance with chapter 5 of the USPS Procurement Manual in effect on the date of this contract, and the terms of this contract. The contractor must submit an invoice or voucher to the address specified in the Schedule, supported by a statement of claimed allowable costs of performing this contract, in such form and detail as the contracting officer may require. Reimbursement 1. For the purpose of reimbursing allowable costs, the term costs includes only: (a) Those recorded costs that, at the time of the request for reimbursement, the contractor has paid by cash, check, or other form of actual payment for items or services purchased directly for the contract; (b) When the contractor is not delinquent in paying costs of contract performance in the ordinary course of business, costs incurred, but not necessarily paid, for: (1) Materials issued from the contractor's inventory and placed in the production process for use on the contract; (2) Direct labor; (3) Direct travel; (4) Other direct in-house costs; and (5) Properly allocable and allowable indirect costs, as shown in the records maintained by the contractor for purposes of obtaining reimbursement under Postal Service contracts; and (c) The amount of progress payments that have been paid to the contractor's subcontractors under similar cost standards. 2. Notwithstanding the audit and adjustment of invoices or vouchers under paragraph e below, allowable indirect costs under this contract will be obtained by applying indirect cost rates established in accordance with paragraph c below. 3. Any statements in specifications or other documents incorporated by reference in this contract that designate performance of services or furnishing of materials at the contractor's expense or at no cost to the Postal Service will be disregarded for purposes of cost reimbursement under this clause. Final Indirect Cost Rates 1. Final annual indirect cost rates and the appropriate bases will be established in accordance with chapter 5 of the USPS Procurement Manual in effect for the period covered by the indirect cost rate proposal. 2. The contractor must, within 90 days after the end of each of its fiscal years, or by a later date approved by the contracting officer, submit to the contracting officer or contracting officer's representative 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 must be based on the contractor's actual cost experience for that period. The contracting officer or contracting officer's representative and the contractor must establish the final indirect cost rates as promptly as practical after receipt of the contractor's proposal. 3. Agreement on final indirect cost rates must be set forth in a written understanding. The understanding may not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. The understanding is incorporated into this contract upon execution. The understanding must specify: (a) The agreed-upon final annual indirect cost rates; (b) The bases to which the rates apply; (c) The periods for which the rates apply; (d) Any specific indirect cost items treated as direct costs in the settlement; and (e) The affected contract and/or subcontract, identifying any with advance agreements or special terms and the applicable rates. 4. Failure by the parties to agree on a final annual indirect cost rate will be a dispute within the meaning of the Claims and Disputes clause of this contract. Billing Rates. Until final annual indirect cost rates are established for any period, the Postal Service will reimburse the contractor at billing rates established by the contracting officer or the contracting officer's representative, subject to adjustment when the final rates are established. These billing rates: 1. Must 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. Audit. At any time or times before final payment, the contracting officer may have the contractor's invoices or vouchers and statements of cost audited. Any payment may be: 1. Reduced by amounts found by the contracting officer not to constitute allowable costs; or 2. Adjusted for prior overpayments or underpayments. Final Payment 1. The contractor must submit a completion invoice or voucher, designated as such, promptly upon completion of the work, but not later than one year (or longer, as the contracting officer may approve in writing) from the completion date. Upon approval of that invoice or voucher, and upon the contractor's compliance with all terms of this contract, the Postal Service will promptly pay any balance of allowable costs and that part of the fee (if any) not previously paid. 2. The contractor must pay to the Postal Service any refunds, rebates, credits, or other amounts (including interest, if any) accruing to or received by the contractor or any assignee under this contract, to the extent that those amounts are properly allocable to costs for which the contractor has been reimbursed by the Postal Service. Reasonable expenses incurred by the contractor for securing refunds, rebates, credits, or other amounts are 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 must execute and deliver: (a) An assignment to the Postal Service, in form and substance satisfactory to the contracting officer, of refunds, rebates, credits, or other amounts (including any interest) properly allocable to costs for which the contractor has been reimbursed by the Postal Service under this contract; and (b) A release discharging the Postal Service and its officers, agents, and employees from all liabilities, obligations, and claims arising out of or under this contract, except: (1) Specified claims stated in exact amounts, or in estimated amounts when the exact amounts are not know; (2) Claims (including reasonable incidental expenses) based upon liabilities of the contractor to third parties arising out of the performance of this contract, but only if the claims are not known to the contractor on the date of the execution of the release, and only if the contractor gives notice of the claims in writing to the contracting officer within six years following the release date or notice of final payment date, whichever is earlier; and (3) Claims for reimbursement of costs, including reasonable incidental expenses, incurred by the contractor under the patent clauses of this contract, excluding, however, any expenses arising from the contractor's indemnification of the Postal Service against patent liability. Clause 5-5 Limitation of Cost (October 1987) (5.1.4) The parties estimate that the cost to the Postal Service for performing this contract, exclusive of any fee, will not exceed the estimated cost set forth in the Schedule, and the contractor agrees to use its best efforts to perform the work specified in the Schedule and all obligations under this contract within this estimated cost. Whenever the contractor has reason to believe that the costs it expects to incur in performing this contract in the next succeeding 60 days, when added to all costs previously incurred, will exceed 75 percent of the estimated cost then set forth in the Schedule; or that the total cost to the Postal Service for performing this contract will be greater or substantially less than the estimated cost then set forth in the Schedule, the contractor must notify the contracting officer in writing to that effect, giving its revised estimate of the total cost for performing the contract. Except as required by other provisions of this contract specifically citing and stated to be an exception to this clause, the Postal Service is not obligated to reimburse the contractor for costs incurred in excess of the estimated cost set forth in the Schedule, and the contractor is not obligated to continue performance (including actions under the Termination clause) or otherwise to incur costs in excess of that estimated cost, unless the contracting officer notifies the contractor in writing that the estimated cost has been increased. No notice, communication, or representation in any other form or from any person other than the contracting officer may affect the estimated cost. In the absence of the specified notice, the Postal Service is not obligated to reimburse the contractor for any costs in excess of the estimated cost set forth in the Schedule, whether incurred during the course of the contract or as a result of termination. To the extent that the estimated cost set forth in the Schedule is increased, any costs incurred in excess of the estimated cost before the increase will be allowable to the same extent as if incurred afterwards, unless the contracting officer issues a termination or other notice directing that the increase is solely for the purpose of covering termination or other specified expenses. Change orders issued under the Changes clauses are not an authorization to exceed the estimated cost set forth in the Schedule, in the absence of a statement in the change order or other contractual modification increasing the estimated cost. If this contract is terminated or the estimated cost not increased, the Postal Service and the contractor must negotiate an equitable distribution of all property produced or purchased under the contract, based upon the share of costs incurred by each. Clause 5-6 Limitation of Funds (October 1987) (5.1.4) The parties estimate that the cost to the Postal Service for performing this contract will not exceed the estimated cost set forth in the Schedule, and the contractor agrees to use its best efforts to perform the work specified in the Schedule and all obligations under this contract within this estimated cost. The amount presently available for payment and allotted to this contract, the items covered by this amount, and the period of performance it is estimated the allotted amount will cover are specified in the Schedule. It is contemplated that from time to time additional funds will be allotted to this contract up to the full estimated cost set forth in the Schedule, exclusive of any fee. The contractor agrees to perform or have performed work on this contract up to the point at which the total amount paid and payable by the Postal Service under this contract approximates but does not exceed the total actually allotted to the contract. Whenever the contractor has reason to believe that the costs it expects to incur in performing this contract in the next succeeding 60 days (see note 1), when added to all costs previously incurred, will exceed 75 percent (see note 2) of the total amount then allotted to the contract, the contractor must notify the contracting officer in writing to that effect. The notice must state the estimated amount of additional funds required to continue performance for the period set forth in the Schedule. No later than 60 days (see note 1) before the end of the period specified in the Schedule, the contractor must advise the contracting officer in writing as to the estimated amount of additional funds, if any, that will be required for the timely performance of the work under the contract or for such further period as may be specified in the Schedule or otherwise agreed to by the parties. If, after this notification, additional funds are not allotted by the end of the period set forth in the Schedule or an agreed date substituted therefor, the contracting officer will, upon written request by the contractor, terminate this contract on that date, under the Termination clause. If the contractor, exercising reasonable judgement, estimates that the funds available will allow it to continue to discharge its obligations for a period extending beyond that date, the contractor must specify the later date in the request, and the contracting officer, in the contracting officer's discretion, may terminate the contract on that later date. Except as required by other provisions of this contract specifically citing and stated to be an exception to this clause, the Postal Service is not obligated to reimburse the contractor for costs incurred in excess of the total amount from time to time allotted to the contract, and the contractor is not obligated to continue performance (including actions under the contract's Termination clause) or otherwise to incur costs in excess of that amount, unless the contracting officer notifies the contractor in writing that the amount has been increased, specifying an increased amount constituting the total amount then allotted to the contract. To the extent that the amount allotted exceeds the estimated cost set forth in the Schedule, the estimated cost must be correspondingly increased. No notice, communication, or representation in any other form or from any person other than the contracting officer may affect the amount allotted. In the absence of the specified notice, the Postal Service is not obligated to reimburse the contractor for any costs in excess of the total amount then allotted, whether incurred during the course of the contract or as a result of termination. To the extent that the amount allotted is increased, any costs incurred in excess of the amount previously allotted will be allowable to the same extent as if incurred afterwards, unless the contracting officer issues a termination or other notice directing that the increase is solely for the purpose of covering termination or other specified expenses. Change orders issued under the Changes clause are not an authorization to exceed the amount allotted in the Schedule, in the absence of a statement in the change order or other contractual modification increasing the amount allotted. Nothing in this clause affects the right of the Postal Service to terminate this contract. If the contract is terminated, the Postal Service and the contractor must negotiate an equitable distribution of all property produced or purchased under the contract, based upon the share of costs incurred by each. If sufficient funds are not allotted to this contract to allow completion of the work contemplated, the contractor will be entitled to a percentage of the fee set forth in the Schedule equivalent to the percentage of completion of the work contemplated by this contract. Notes: 1. May be varied by contracting officer from 30 to 90 days. 2. May be varied by contracting officer from 75 to 85 percent. Clause 5-7 Cost Contract - No Fee (October 1987) The Postal Service will not pay the contractor a fee for performing this contract. After paying 80 percent of the total estimated cost shown in the Schedule, the contracting officer may withhold further payment of allowable costs until a reserve is set aside in an amount that the contracting officer considers necessary to protect the Postal Service's interest. This reserve may not exceed one percent of the total estimated cost shown in the Schedule or $100,000 (see note), whichever is less. Note: May be changed by the contracting officer to $10,000 in contracts with nonprofit organizations. Clause 5-8 Cost-Sharing Contract - No Fee (October 1987) (5.1.4) The Postal Service will not pay the contractor a fee for performing this contract. After paying 80 percent of the Postal Service share of the total estimated cost of performance shown in the Schedule, the contracting officer may withhold further payment of allowable costs until a reserve is set aside in an amount that the contracting officer considers necessary to protect the Postal Service's interest. This reserve may not exceed one percent of the Postal Service's share of total estimated cost shown in the Schedule or $100,000, whichever is less. Clause 5-9 Incentive Fee (October 1987) (5.1.4) General. The Postal Service will pay the contractor for performing this contract a fee determined as provided in the contract. Target Cost and Target Fee. The target cost and target fee specified in the Schedule are subject to adjustment if the contract is modified in accordance with paragraph d below. 1. Target cost means the estimated cost of this contract as initially negotiated, adjusted in accordance with paragraph d below. 2. Target fee means the fee initially negotiated on the assumption that this contract would be performed for a cost equal to the estimated cost initially negotiated, adjusted in accordance with paragraph d below. Withholding Payment. Normally, the Postal Service will pay the fee to the contractor as specified in the Schedule. However, when the contracting officer considers that performance or cost indicates that the contractor will not achieve target, the Postal Service will pay on the basis of an appropriate lesser fee. When the contractor demonstrates that performance or cost clearly indicates that the contractor will earn a fee significantly above the target fee, the Postal Service may, at the discretion of the contracting officer, pay on the basis of an appropriate higher fee. After payment of 85 percent of the applicable fee, the contracting officer may withhold further payment of fee until a reserve is set aside in an amount that the contracting officer considers necessary to protect the Postal Service's interest. The reserve may not exceed 15 percent of the applicable fee or $100,000, whichever is less. Equitable Adjustments. When the work under this contract is increased or decreased by a contract modification or when any equitable adjustment in the target cost is authorized under any other clause, equitable adjustments in the target cost, target fee, minimum fee, and maximum fee, as appropriate, must be stated in a supplemental agreement to this contract. Fee Payable 1. The fee payable under this contract will be the target fee increased by cents (Contracting officer insert contractor's participation) for every dollar that the total allowable cost is less than the target cost or decreased by cents (Contracting officer insert contractor's participation) for every dollar that the total allowable cost exceeds the target cost. In no event will the fee be greater than percent or less than percent (Contracting officer insert percentages) of the target cost. 2. The fee will be subject to adjustment, to the extent provided in paragraph d above, and within the minimum and maximum fee limitations in subparagraph e.1 above, when the total allowable cost is increased or decreased as a consequence of: (a) Payments made under assignments; or (b) Claims excepted from the release required by subparagraph f.2 of the Allowable Cost and Payment clause. 3. If this contract is terminated in its entirety, the portion of the target fee payable will not be subject to an increase or decrease as provided in this paragraph e. The termination will be accomplished in accordance with other applicable clauses of this contract. 4. For the purpose of fee adjustment, total allowable cost does not include cost arising out of: (a) Any of the causes covered by the Excusable Delays clause, to the extent that they are beyond the control and without the fault or negligence of the contractor or any subcontractor; (b) The taking effect, after the target cost is negotiated, of a statute, court decision, written ruling, or regulation that results in the contractor's being required to pay or bear the burden of any tax or duty or rate increase in a tax or duty; (c) Any direct cost attributed to the contractor's involvement in litigation as required by the contracting officer under a clause of this contract, including furnishing evidence and information requested under the Notice and Assistance Regarding Patent and Copyright Infringement clause; (d) The purchase and maintenance of additional insurance not in the target cost and required by the contracting officer, or claims for reimbursement for liabilities to third persons under the Insurance clause; or (e) Any claim, loss, or damage resulting from a risk for which the contractor has been relieved of liability by the Postal Service Property clause. 5. All other allowable costs are included in total allowable cost for fee adjustment in accordance with this paragraph e, unless this contract specifically provides otherwise. Contract Modification. The total allowable cost and the adjusted fee determined as provided in this clause will be evidenced by a modification to this contract signed by the contractor and the contracting officer. Inconsistencies. In the event of any inconsistencies between this clause and provisioning documents or Postal Service options under this contract, compensation for spare parts or other supplies and services ordered under those documents or options will be determined in accordance with this clause. Clause 5-10 Fixed Fee (October 1987) (5.1.4) The Postal Service will pay the contractor for performing this contract the fixed fee specified in the Schedule. Payment of the fixed fee will be made as specified in the Schedule. 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 Postal Service's interest. This reserve may not exceed 15 percent of the total fixed fee or $100, 000, whichever is less. Clause 5-11 Ordering (October 1987) (5.1.5) Supplies or services to be furnished under this contract will be ordered by issuance of delivery orders during the period and by the activities specified in the Schedule. Orders may be issued in writing, by written telecommunication, or orally. Oral orders will be subject to confirmation in writing. Orders sent by mail are considered issued when placed in the mail. All delivery orders are subject to the terms and conditions of this contract. If there is any conflict between a delivery order and this contract, the contract is controlling. Clause 5-12 Delivery-Order Limitations (October 1987) (5.1.5) When the Postal Service requires supplies or services covered by this contract in an amount less than (Contracting officer insert minimum dollar amount or quantity), the Postal Service is not obligated to purchase, and the contractor is not obligated to furnish, those supplies or services under this contract. The contractor is not obligated to honor: 1. Any order for a single item in excess of (Contracting officer insert maximum dollar amount or quantity); 2. Any order for a combination of items in excess of (Contracting officer insert maximum dollar amount or quantity); or 3. A series of orders from the same ordering office in the course of days (Contracting officer specify) that together call for quantities exceeding the limitations stated in subparagraph b.1 or b.2 above. If this is a requirements contract, the Postal Service is not required to order a part of any one requirement from the contractor if that requirement exceeds the limitations stated in paragraph b above. If it is the contractor's intent not to honor an order received that exceeds the limitations stated in paragraph b above, the contractor must return the order to the ordering office within days (Contracting officer specify) after issuance, with a written notice rejecting the order and giving the reasons; the Postal Service may then obtain the supplies or services from another source. If the contractor does not return the order with a notice of rejection as required, the contractor must honor the order as issued. Clause 5-13 Definite Quantity (October 1987) (5.1.5) This is a definite-quantity, indefinite-delivery contract. The Postal Service will order the quantity of supplies or services specified in the Schedule, and the contractor must furnish those supplies or services when ordered. Delivery or performance must be made at locations designated in orders issued in accordance with the Ordering clause and the contract Schedule. There is no limit on the number of orders that may be issued, unless specified in the Delivery-Order Limitations clause or in the contract Schedule. Orders may require delivery to multiple destinations or performance at multiple locations. Any order issued during the effective period of this contract and not completed within that period must be completed by the contractor within the time specified in the order, and the rights and obligations of the contractor and the Postal Service with respect to the order will be the same as if the order were completed during the effective period of the contract. Clause 5-14 Indefinite Quantity (October 1987) (5.1.5) This is an indefinite-quantity contract; the quantities of supplies or services specified in the Schedule are not purchased until ordered. Delivery or performance must be as directed in orders issued in accordance with the Ordering clause and the contract Schedule. The contractor must furnish to the Postal Service, when ordered, the supplies or services specified in the Schedule up to and including the quantity designated in the Schedule as the maximum. The Postal Service must order at least the quantity of supplies or services designated in the Schedule as the minimum. There is no limit on the number of orders that may be issued, unless specified in the Delivery-Order Limitations clause or in the contract Schedule. Orders may require delivery to multiple destinations or performance at multiple locations. Any order issued during the effective period of this contract and not completed within that period must be completed by the contractor within the time specified in the order, and the rights and obligations of the contractor and the Postal Service with respect to the order will be the same as if the order were completed during the effective period of the contract. Clause 5-15 Requirements (October 1987) (5.1.5) This is a requirements contract for supplies or services described in the Schedule for the period specified. The supplies or services are not purchased until ordered. If the Postal Service's requirements do not result in orders in the quantities described as estimated or maximum in the Schedule, that fact may not be the basis for an equitable price adjustment unless specifically provided elsewhere in this contract. Delivery or performance must be as directed in orders issued in accordance with the Ordering clause and the contract Schedule. The contractor must furnish to the Postal Service, when ordered, the supplies or services specified in the Schedule, subject to any limitations in the Delivery-Order Limitations clause or in the contract Schedule. Orders may require delivery to multiple destinations or performance at multiple locations. Except as otherwise provided in this contract, the Postal Service must order from the contractor all the supplies or services specified in the Schedule that are required to be purchased by the activity or activities identified in the Ordering clause or the Schedule. The Postal Service is not required to purchase from the contractor requirements in excess of any limit on total orders under this contract. If the Postal Service urgently requires delivery or performance before the earliest date specified under this contract, and if the contractor will not accept an order providing for the accelerated delivery or performance, the Postal Service may purchase the urgently required supplies or services from another source. Any order issued during the effective period of this contract and not completed within that period must be completed by the contractor within the time specified in the order, and the rights and obligations of the contractor and the Postal Service with respect to the order will be the same as if the order were completed during the effective period of the contract. Alternate Paragraph c. (see 5.1.5.e): c. The estimated quantities are not the total requirements of the activities specified in the Ordering clause or the Schedule, but are estimates of requirements in excess of the quantities that the activities can themselves furnish within their own capabilities. Except as this contract otherwise provides, the Postal Service must order from the contractor all of a designated activity's requirements for supplies and services specified in the Schedule that exceed the quantities that the activity can itself furnish within its own capabilities. Clause 5-16 Payment (Time-and-Materials and Labor-Hour Contracts) (October 1987) (5.1.6) The Postal Service will pay the contractor as follows upon submission of invoices or vouchers approved by the contracting officer: Hourly Rate 1. The amounts will be computed by multiplying the appropriate hourly rates prescribed in the Schedule by the number or direct labor hours performed. The rates will include wages, indirect costs, general and administrative expenses, and profit. Fractional parts of an hour will be payable on a prorated basis. Vouchers may be submitted once each month (or at more frequent intervals if approved by the contracting officer). The contractor will substantiate vouchers by evidence of actual payment and by individual daily job timecards, or other substantiation approved by the contracting officer. Promptly after receipt of each substantiated voucher, the Postal Service will, except as otherwise provided in this contract, and subject to the terms of paragraph e below, pay the voucher as approved by the contracting officer. 2. Unless otherwise prescribed in the Schedule, the contracting officer will withhold five percent of the amounts due under this paragraph a, but the total amount withheld may not exceed $50,000. The amounts withheld will be retained until the execution and delivery of any required release by the contractor. 3. Unless the Schedule prescribes otherwise, the hourly rates in the Schedule must not be varied by virtue of the contractor having performed work on an overtime basis. If no overtime rates are provided in the Schedule and overtime work is approved in advance by the contracting officer, overtime rates may be negotiated. If the Schedule provides rates for overtime, the premium portion of those rates will be reimbursable only to the extent the overtime is approved by the contracting officer. Materials and Subcontracts 1. Allowable costs of direct materials will be determined by the contracting officer in accordance with chapter 5 of the USPS Procurement Manual in effect on the date of this contract. Reasonable and allocable material handling costs may be included in the charge for material to the extent they are clearly excluded from the hourly rate. 2. The actual costs of subcontracts that are authorized under the Subcontracts clause of this contract are reimbursable; provided, they are consistent with subparagraph 3 following. 3. To the extent possible, the contractor must: (a) Obtain materials at the most advantageous prices available, with due regard to securing prompt delivery of satisfactory materials; and (b) Take all available cash and trade discounts, rebates, allowances, credits, salvage, commissions, and other benefits. When unable to take advantage of the benefits, the contractor will promptly notify the contracting officer and give the reasons. Credit will be given to the Postal Service for cash and trade discounts, rebates, allowances, credits, salvage, the value of any appreciable scrap, commissions, and other amounts that have accrued to the benefit of the contractor, or would have accrued except for the fault or neglect of the contractor. The benefits lost without fault or neglect on the part of the contractor, or lost through no fault of the contracting officer, will not be deducted from gross costs. Total Cost. It is estimated that the total cost for performing this contract will not exceed the ceiling price set forth in the Schedule, and the contractor agrees to use its best efforts to perform the work within this ceiling price. Whenever the contractor has reason to believe that the hourly rate payments and material costs that will accrue in performing the contract in the next 30 days, if added to all other payments and costs previously accrued, will exceed 85 percent of the ceiling price, the contractor must notify the contracting officer, giving any revised estimate of the total price for performing this contract, with supporting reasons and documentation. Whenever the contractor has reason to believe that the total price for this contract will be greater than or substantially less than the then-stated ceiling price, the contractor must notify the contracting officer, giving a revised estimate of the total price for performing this contract, with supporting reasons and documentation. Whenever the Postal Service has reason to believe that the work required will be greater than or substantially less than the then-stated ceiling price, the contracting officer will advise the contractor, giving a revised estimate of the total amount of effort to be required under the contract. Ceiling Price. The Postal Service is not obligated to pay the contractor any amount in excess of the ceiling price in the Schedule, and the contractor is not obligated to continue performance if to do so would exceed the ceiling price, until the contracting officer notifies the contractor in writing that the ceiling price has been increased, specifying a revised ceiling price for performance under the contract. When the ceiling price is increased, any hours expended or material costs incurred in excess of the ceiling price before the increase will be allowable to the same extent as if expended or incurred afterwards. Audit. At any time or times before final payment, the contracting officer may request audit of the invoices or vouchers and substantiating material. Each payment previously made will be subject to reduction to the extent of amounts, on preceding invoices or vouchers, that are found by the contracting officer not to have been properly payable and will also be subject to reduction for overpayments or to increase for underpayments. Upon receipt and approval of the voucher or invoice designated by the contractor as the completion voucher or completion invoice and substantiating material, and upon compliance by the contractor with any required release and all other terms of this contract, the Postal Service will promptly pay any balance due. The completion invoice or voucher, and substantiating material, must be submitted by the contractor as promptly as practicable following completion of the work under this contract, but in no event later than one year (or such longer period as the contracting officer may approve in writing) from the date of completion. Clause 5-17 Execution and Commencement of Work (October 1987) (5.1.7) The contractor must indicate acceptance of this letter contract by signing three copies of the contract and returning them to the contracting officer not later than (Contracting officer insert date). Upon acceptance by both parties, the contractor must proceed with performance of the work, including purchase of necessary materials. Clause 5-18 Limitation of Postal Service Liability (October 1987) (5.1.7) The contractor is not authorized to make expenditures or to incur obligations in performing this contract exceeding $ (Contracting officer insert limit). The maximum amount for which the Postal Service will be liable if this contract is terminated is $ (Contracting officer insert maximum liability). Clause 5-19 Contract Definitization (October 1987) (5.1.7) A (Contracting officer insert type of contract contemplated) definitive contract is contemplated. The contractor agrees to submit a fixed-price or cost-reimbursement proposal as appropriate, and to negotiate with the contracting officer the terms of a definite contract that will include: 1. All clauses required by the USPS Procurement Manual on the date of execution of this letter contract; 2. All clauses required by law on the date of the execution of the definitive contract; and 3. Other mutually agreeable clauses, terms, and conditions. The schedule for definitizing this contract is as follows: 1. Proposal submission date: 2. Beginning of negotiations: 3. Definitization target date: If agreement on a definitive contract to supersede this letter contract is not reached by the target date in paragraph b above or any extension of that date by the contracting officer, the contracting officer may determine a reasonable price or fee in accordance with chapter 5 of the USPS Procurement Manual subject to appeal by the contractor as provided in the Claims and Disputes clause. In any event, the contractor must proceed with a completion of the contract, subject only to the Limitation of Postal Service Liability clause. After the date of the contracting officer's determination of price or fee, the contract will be governed by: 1. All clauses required by the USPS Procurement Manual on the date of execution of this letter contract for either fixed-price or cost-reimbursement contracts as determined by the contracting officer under this paragraph c; 2. All clauses required by law as of the date of the contracting officer's determination; 3. Other clauses, terms, and conditions mutually agreed upon; and 4. To the extent consistent with c.1, 2, and 3 above, all other clauses, terms, and conditions included in this letter contract, except those that by their nature are applicable only to a letter contract. The price of the definitive contract resulting from this letter contract will in no event exceed $ . (See Procurement Manual 5. 1.7.d.2(c) for applicability of this paragraph d.) Clause 5-20 Payment of Allowable Costs before Definitization (October 1987) (5.1.7) Pending the definitization of this letter contract, the Postal Service will promptly reimburse the contractor for all allowable costs under the contract at the following rates: 1. 100 percent of approved costs representing progress payments to subcontractors under fixed-price subcontracts, but not exceeding 80 percent of the allowable costs of those subcontractors. 2. 100 percent of approved costs representing costreimbursement subcontracts, but not exceeding 85 percent of the allowable costs of those subcontractors. 3. 85 percent of all other approved costs. To determine amounts payable to the contractor under this letter contract, allowable costs will be determined by the contracting officer in accordance with chapter 5 of the USPS Procurement Manual in effect on the date of this contract. The total reimbursement made under this clause may not exceed 85 percent of the maximum amount of the Postal Service liability stated in the Limitation of Postal Service Liability clause. Once each month (or more often if approved by the contracting officer), the contractor may submit to the contracting officer or an authorized representative, in such form and reasonable detail as may be required, an invoice or voucher supported by a statement of claimed allowable costs incurred by the contractor in performance of this contract. For the purpose of determining allowable costs, the term costs includes only: 1. Those recorded costs that, at the time of the request for reimbursement, the contractor has paid by cash, check, or other form of actual payment for items or services purchased directly for the contract; 2. When the contractor is not delinquent in payment of costs of contract performance in the ordinary course of business, costs incurred, but not necessarily paid, for: (a) Materials issued from the contractor's inventory and placed in the production process for use on the contract; (b) Direct labor; (c) Direct travel; (d) Other direct in-house costs; and (e) Properly allocable and allowable indirect costs, as shown in the records maintained by the contractor for purposes of obtaining reimbursement under Postal Service contracts; and 3. The amount of progress payments that have been paid to the contractor's subcontractors under similar cost standards. At any time or times before final payment, the contracting officer may have the contractor's invoices or vouchers and statements of cost audited. Any payment may be: 1. Reduced by any amounts found by the contracting officer not to constitute allowable costs; or 2. Adjusted for prior overpayments or underpayments. Clause 5-21 Predetermined Indirect Cost Rates (October 1987) (5.1.12) Notwithstanding the Allowable Cost and Payment clause of this contract, allowable indirect costs under this contract will be determined by applying predetermined indirect cost rates established in accordance with chapter 5 of the USPS Procurement Manual . Predetermined rate agreements must be incorporated into the contract Schedule and must specify: 1. The predetermined indirect cost rates; 2. The bases to which the rates apply; 3. The fiscal year (or other period) for which the rates apply; and 4. the specific terms treated as direct costs or any changes in the items previously treated as direct costs. The predetermined indirect cost rate agreement may not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. Allowable indirect costs for the period from the beginning of performance until the end of the contractor's fiscal year must be obtained using the predetermined indirect cost rates and the bases shown in the Schedule. Clause 5-22 Price Reduction for Defective Cost or Pricing Data (July 1995) (5.3.3) If any price, including profit or fee, negotiated in connection with this contract, or modification to this contract, or any cost reimbursable under this contract, was increased by any significant amount because: 1. The contractor or subcontractor furnished cost or pricing data that were not complete, accurate, and current as of the date of the final agreement on price; 2. A subcontractor or prospective subcontractor furnished the contractor cost or pricing data that were not complete, accurate, and current as of the date of final agreement on price; or 3. Any of these parties furnished data of any description that were not accurate - then the price or cost will be reduced accordingly and the contract will be modified to reflect the reduction. Any reduction in the contract price under paragraph a above due to defective data from a prospective subcontractor that was not awarded the subcontract will be limited to the amount, plus applicable overhead and profit markup, by which the actual subcontract, or the actual cost to the contractor if there was no subcontract, was less than the prospective subcontract cost estimate submitted by the contractor (provided that the actual subcontract price was not itself affected by defective cost or pricing data). Clause 5-23 Subcontractor Cost or Pricing Data (October 1987) (5.3.3) Before awarding any subcontract or pricing any subcontract modification, the contractor must require the subcontractor to submit cost or pricing data whenever cost or pricing data are required by chapter 5 of the USPS Procurement Manual. If the subcontractor is required to submit cost or pricing data under paragraph a above, then the contractor must insert the substance of this clause, including this paragraph b, in the subcontract. Clause 6-1 Bankruptcy (January 1991) (6.2.7) In the event the contractor enters into proceedings relating to bankruptcy, whether voluntary or involuntary, the contractor will furnish, by certified mail, written notification of the bankruptcy to the contracting officer responsible for administering the contract. The notification must be furnished within five days of the initiation of the bankruptcy proceedings. The notification must include the date on which the bankruptcy petition was filed, the court in which the petition was filed, and a list of Postal Service contracts and contracting officers for all Postal Service contracts for which final payment has not yet been made. This obligation remains in effect until final payment under this contract. Clause 7-1 Patent Infringement Bond Requirements (October 1987) (7.1.5) The contractor may be required to submit a patent infringement bond in a penal amount set by the contracting officer and in a form acceptable to the Postal Service. Failure to submit an acceptable bond may be cause for termination of the contract for default. Clause 7-2 Additional Bond Security (October 1987) (7.1.10) If any surety furnishing a bond in connection with this contract becomes unacceptable to the Postal Service or fails to furnish reports on its financial condition as requested by the contracting officer, or if the contract price increases to the point where the security furnished becomes inadequate in the contracting officer's opinion, the contractor must promptly furnish additional security as required to protect the interests of the Postal Service and of persons supplying labor or materials in performance of this contract. Clause 7-3 Deposit of Assets Instead of Surety Bonds (December 1989) (7.1.10) If the contractor has deposited assets instead of furnishing sureties for any bond required under this contract and the assets are in the form of checks, currency, or drafts, the contracting officer will hold the assets in an account for the contractor's benefit. Upon contract completion, the contractor's funds will be returned as soon as possible, unless the contracting officer determines that part or all of the account is required to compensate the Postal Service for costs it incurs as a result of the contractor's delay, default, or failure to perform. In such a case, the entire account will be available to compensate the Postal Service. Clause 7-4 Insurance (June 1988) (7.2.6) During the term of this contract and any extension, the contractor must maintain at its own expense the insurance required by this clause. Insurance companies must be acceptable to the Postal Service. Policies must include all terms and provisions required by the Postal Service. The contractor must maintain and furnish evidence of workers' compensation, employers' liability insurance, and the following general public liability and automobile liability insurance: Bodily Injury Property Damage General Liability $100,000 per person* Per occurrence (as set forth in the Schedule) $500,000 per accident* Aggregate (as set forth in the Schedule) Automobile Liability $100,000 per person* $10,000 per occurrence $500,000 per accident* $10,000 aggregate* *Unless modified in the Schedule Each policy must include substantially the following provision: "It is a condition of this policy that the company furnish written notice to the U.S. Postal Service 30 days in advance of the effective date of any reduction in or cancellation of this policy." The contractor must furnish a certificate of insurance or, if required by the contracting officer, true copies of liability policies and manually countersigned endorsements of any changes. Insurance must be effective, and evidence of acceptable insurance furnished, before beginning performance under this contract. Evidence of renewal must be furnished not later than five days before a policy expires. The maintenance of insurance coverage as required by this clause is a continuing obligation, and the lapse or termination of insurance coverage without replacement coverage being obtained will be ground for termination for default. Clause 7-5 Errors and Omissions (October 1987) (7.2.6) The contractor warrants that it is insured for $200,000 (unless amount is set forth in the Schedule) for errors and omissions per claim in an amount in excess of the minimum set forth in the Schedule in the performance of this contract. Unless the contractor's policy is prepaid, noncancelable, and issued for a period at least equal to the term of this contract on an occurrence basis, the contractor must have the policy amended to include substantially the following provision: "It is a condition of this policy that the company furnish written notice to the U.S. Postal Service 30 days in advance of the effective date of any reduction in or cancellation of this policy." The contractor must furnish a certificate of insurance or, if required by the contracting officer, true copies of liability policies and manually countersigned endorsements of any changes. Insurance must be effective, and evidence of acceptable insurance furnished, before beginning performance under this contract. Evidence of renewal must be furnished not later than five days before a policy expires. Clause 7-6 Federal, State, and Local Taxes (October 1987) (7.3.4) Definitions 1. Contract date. The effective date of this contract or modification. 2. All applicable federal, state, and local taxes and duties. All taxes and duties, in effect on the contract date, that the taxing authority is imposing and collecting on the transactions or property covered by this contract. 3. After-imposed federal tax. Any new or increased federal excise tax or duty, or tax that was exempted or excluded on the contract date but whose exemption is revoked or reduced during the contract period, on the transactions or property covered by this contract that the contractor is required to pay or bear as the result of legislative, judicial, or administrative action taking effect after the contract date. It does not include social security tax or other employment taxes. 4. After-relieved federal tax. Any amount of federal excise tax or duty, except social security or other employment taxes, that would otherwise have been payable on the transactions or property covered by this contract, but which the contractor is not required to pay or bear, or for which the contractor obtains a refund or drawback, as the result of legislative, judicial, or administrative action taking effect after the contract date. 5. Local taxes. Includes taxes imposed by a possession of the United States or by Puerto Rico. The contract price includes all applicable federal, state, and local taxes and duties. The contract price will be increased by the amount of any after-imposed federal tax, provided the contractor warrants in writing that no amount for a newly imposed federal excise tax or duty or rate increase was included in the contract price as contingency reserve or otherwise. The contract price will be decreased by the amount of any after-relieved federal tax. The contract price will be decreased by the amount of any federal excise tax or duty, except social security or other employment taxes, that the contractor is required to pay or bear, or does not obtain a refund of, through the contractor's fault, negligence, or failure to follow instructions of the contracting officer. No adjustment will be made in the contract price under this clause unless the amount of the adjustment exceeds $100. The contractor must promptly notify the contracting officer of all matters relating to any federal excise tax or duty that reasonably may be expected to result in either an increase or decrease in the contract price and must take appropriate action as the contracting officer directs. The Postal Service will, without liability, furnish evidence appropriate to establish exemption from any federal, state, or local tax when the contractor requests such evidence and a reasonable basis exists to sustain the exemption. Clause 7-7 Federal, State, and Local Taxes (Short Form) (June 1988) (7.3.4) Except as this contract may otherwise provide, the contract price includes all applicable federal, state, and local taxes and duties in effect on the contract date but does not include any taxes from which the Postal Service, the contractor, or this transaction is exempt. Upon request of the contractor, the Postal Service must furnish a tax exemption certificate or similar evidence of exemption from any tax not included in the contract price. Contract date means the date of the contractor's proposal or quotation, or, if no proposal or quotation, the date of this purchase order. Clause 7-8 Federal, State, and Local Taxes (Noncompetitive Contract) (October 1987) (7.3.4) Definitions 1. Contract date. The effective date of this contract or modification. 2. All applicable federal, state, and local taxes and duties. All taxes and duties, in effect on the contract date, that the taxing authority is imposing and collecting on the transactions or property covered by this contract. 3. After-imposed tax. Any new or increased federal, state or local tax or duty, or tax that was excluded on the contract date but whose exclusion was later revoked or amount of exemption reduced during the contract period, other than an excepted tax, on the transactions or property covered by this contract that the contractor is required to pay or bear as the result of legislative, judicial, or administrative action taking effect after the contract date. 4. After-relieved tax. Any amount of federal, state, or local tax or duty, other than excepted tax, that would otherwise have been payable on the transactions or property covered by this contract, but which the contractor is not required to pay or bear, or for which the contractor obtains a refund or drawback, as the result of legislative, judicial, or administrative action taking effect after the contract date. 5. Excepted tax. Social security or other employment taxes, net income and franchise taxes, excess profits taxes, capital stock taxes, transportation taxes, unemployment compensation taxes, and property taxes. Excepted tax does not include gross income taxes levied on or measured by sales or receipts from sales, property taxes assessed on completed supplies covered by this contract, or any tax assessed on the contractor's possession of, interest in, or use of property to which the Postal Service has title. 6. Local taxes. Includes taxes imposed by a possession of the United States or by Puerto Rico. Unless otherwise provided in this contract, the contract price includes all applicable federal, state, and local taxes and duties. The contract price will be increased by the amount of any after-imposed tax, or of any tax or duty specifically excluded from the contract price by a term or condition of this contract, that the contractor is required to pay or bear, including any interest or penalty, if the contractor states in writing that the contract price does not include any contingency for such tax and if liability for such tax, interest, or penalty was not incurred through the contractor's fault, negligence, or failure to follow instructions of the contracting officer. The contract price will be decreased by the amount of any after-relieved tax. The Postal Service will be entitled to interest received by the contractor incident to a refund of taxes, to the extent that such interest was earned after the contractor was paid by the Postal Service for such taxes. The Postal Service will be entitled to repayment of any penalty refunded to the contractor, to the extent that the penalty was paid by the Postal Service. The contract price will be decreased by the amount of any federal, state, or local tax, other than exempted tax, that was included in the contract price and that the contractor is required to pay or bear, or does not obtain a refund of, through the contractor's fault, negligence, or failure to follow instructions of the contracting officer. No adjustment will be made in the contract price under this clause unless the amount of the adjustment exceeds $100. The contractor must promptly notify the contracting officer of all matters relating to any federal, state, and local taxes and duties that reasonably may be expected to result in either an increase or decrease in the contract price, and the contractor must take appropriate action as the contracting officer directs. The contract price will be equitably adjusted to cover the costs of action taken by the contractor at the direction of the contracting officer, including any interest, penalty, and reasonable attorney's fees. The Postal Service will furnish evidence appropriate to establish exemption from any federal, state, or local tax when the contractor requests an exemption and states in writing that it applies to a tax excluded from the contract price, and a reasonable basis for the exemption exists. Clause 7-9 State and Local Taxes (Indefinite Delivery Equipment Rental) (October 1987) (7.3.4) Notwithstanding the terms of the Federal, State, and Local Taxes clause of this contract, the contract price excludes all state and local taxes levied on or measured by the contractor or rental price of leased equipment furnished under this contract. The contractor will state separately on its invoices any such taxes levied and paid, and the Postal Service agrees either to reimburse the contractor for the amounts of taxes paid or provide evidence necessary to sustain an exemption. Clause 8-1 Nondisclosure (Professional Services) (October 1987) (8.2.1) The contractor acknowledges that confidential information might be generated or made available during the course of performance of this agreement. In addition to the restrictions on disclosure established under the contractor's code of ethics, the contractor specifically agrees not to disclose any information received or generated under this contract, unless its release is approved in writing by the contracting officer. The contractor further agrees to assert any privilege allowed by law and to defend vigorously Postal Service rights to confidentiality. Clause 8-2 Conflict of Interest (October 1987) (8.2.1) In addition to the obligations embodied in the contractor's code of ethics, the contractor specifically agrees that there is no conflict of interest arising from the services to be provided under this agreement. The contractor further agrees that no employee, principal, or affiliate is in any such conflict. The contractor will immediately notify the contracting officer whenever any non-Postal Service client requests or receives any professional advice, representation, or assistance regarding the Postal Service, whether or not related to the services provided under this agreement. The Postal Service reserves the right to refuse to allow the contractor to undertake any conflicting agreements with non-Postal Service clients, or to terminate this agreement without cost to the Postal Service if the contracting officer determines that a conflict of interest exists. Clause 8-3 Inspection of Professional Service (October 1987) (8.2.1) The contracting officer may, at any time or place, inspect the services performed and the products, including documents and reports. No matter what type of contract is employed, and in addition to any specific standards of quality set out in this agreement, the contracting officer may reject any services or products that do not meet the highest standards of professionalism. No payment will be due for any services or products rejected under this clause. Acceptance of any product or service does not relieve the contractor of the duties imposed by contractor's code of professional ethics, and the contractor remains liable for the period allowed under federal law for claims by the United States, for any errors or omissions occurring during performance. All partners or principals agree that they will be jointly and severable liable for such errors and omissions. Clause 8-4 Invoices (Professional Services) (October 1987) (8.2.1) In addition to the information required elsewhere in this agreement, all invoices for services under this agreement must indicate in detail the following: 1. Person performing service each day by hour and part of an hour. 2. Services performed each day by hour and part of an hour. 3. Rates and charges for each service so detailed. 4. Individual expenses charged, if allowed under this agreement. Minimum charges for portions of an hour may be allowed, if such a charging practice has been disclosed before award of this agreement. Clause 8-5 Records Ownership (October 1987) (8.2.1) Notwithstanding any state law providing for retention of rights in the records, the contractor agrees that the Postal Service may, at its option, demand and take without additional compensation all records relating to the services provided under this agreement. The contractor must turn over all such records upon request but may retain copies of documents produced by the contractor. Clause 8-6 Key Personnel (October 1987) (8.2.1) To the extent that the statement of work provides for services to be performed by key personnel, those services must be performed by the personnel identified in the contractor's proposal to perform them unless substitutes have been approved in writing by the contracting officer. Use of junior personnel, even under key personnel supervision (for example, associates or student workers), is not authorized unless they are identified in the contractor's proposal by name or position, with a description of their duties. This agreement may be terminated if the key personnel named in the contractor's proposal become unavailable for any reason. If the unavailability of key personnel is not the fault of the contractor, the contracting officer may terminate by giving notice of termination. The contractor will be paid for service performed up to the date of termination. If the contracting officer finds that the contractor is at fault for the unavailability of key personnel, the agreement may be terminated for default. Clause 8-7 Inspection and Acceptance - Systems (October 1987) (8.3.4) System Acceptance Performance Criteria - Postal Service Testing. The proposed system will be considered acceptable to the Postal Service when the Postal Service's personnel have verified that the system has been installed and made ready for use and the performance test has been conducted in accordance with the acceptance performance criteria specified. No system will be certified as ready for use until all equipment and software for that site, as specified on the delivery order, are ready for use. Standard of Performance and Acceptance of System. A standard of performance must be met before any system (equipment, software, or other material) is accepted by the Postal Service. These procedures also apply to replacement of substituted equipment, and software, or other material added or field modified after a successful performance trial has been completed on the system. 1. The performance period begins when the contractor has certified that the system and software are ready for use and ends when the system has met the standard of performance period of 30 consecutive calendar days by operating at an effectiveness level of 95 percent or more. 2. In the event the system does not meet the standard of performance during the initial 30 days, the test must continue on a day-by-day basis until the standard of performance is met for a total of 30 consecutive calendar days. 3. If the system hardware or software fails to meet the standard of performance after 90 calendar days from the installation date, the Postal Service may, at its option, request a replacement or terminate the contract. 4. The effectiveness level for a system (as a percentage) is computed by dividing the operational use time by the sum of that time plus system failure downtime and multiplying by 100. 5. The effectiveness level for an added, field-modified, substituted, or replacement machine is a percentage figure. This figure is determined by dividing the operational use time of the machine by the sum of that time plus downtime resulting from equipment or software failure of the machine being tested and multiplying by 100. 6. Operational use time for performance testing of a system is defined as the accumulated time during which the system is in actual operation in accordance with the acceptance test plan. 7. Operational use time for performance testing of a machine added, field-modified, substituted, or replaced is defined as the accumulated time during which the machine is in actual use in accordance with the acceptance test plan. 8. System failure downtime is that period of time when any machine in the system is inoperable because of equipment or software failure. 9. During a period of system downtime, the Postal Service may use operable equipment when such action does not interfere with maintenance of the inoperable equipment. The entire system will be considered down during such periods. 10. Downtime for each incident begins at the time the Postal Service makes a bona fide attempt to contact the contractor's designated representative, at the prearranged contact point, and ends when the system or machine is again operating. Downtime excludes actual travel time required by the contractor's maintenance personnel in excess of two hours on the day the service was requested. 11. As a basis for computing the effectiveness level, a minimum of 100 hours of operation use time for a system with productive or Postal Service-provided simulated work will be required during the performance period. However, in computing the effectiveness level, the actual number of operational hours must be used when in excess of the minimum of 100 hours. 12. The Postal Service maintains appropriate daily records to satisfy the performance requirements and will notify the contractor, in writing, the date of the first day of a successful performance period. 13. Equipment, software, or other material will not be accepted and payment will not be made until the standard of performance is met. The date of acceptance and payment begins the first day of a successful performance period. 14. Operational use time and downtime will be measured in hours and whole minutes. Acceptance Test Plan. The offeror's proposal must provide a preliminary version (detailed outline) of an acceptance test plan. A completed plan must be submitted five working days after contract award. The Postal Service will review the plan within ten working days after submission. The Postal Service reserves the right to disapprove the plan, and the offeror must correct unacceptable areas before resubmission. The approved acceptance test plan will form the basis for testing during the performance period. The contractor-furnished plan must include rerunning those portions of the test demonstration applicable to the configuration. The plan must provide for running actual Postal Service work as it is available during the performance period. The execution of the test plan must meet the performance criteria specified in this contract. Inspection and Acceptance of Maintenance 1. All services (includes services performed, materials furnished or used in performance or service, and workmanship in the performance of services) is subject to inspection and test by the Postal Service, to the extent practicable at all times and places during the term of the contract. The Postal Service must conduct inspections in such a manner as not to delay work. 2. If any services performed do not conform to the requirements of this contract, the Postal Service may require the contractor to perform the services again in conformity with the contract requirements at no additional increase in total contract price. When the services to be performed are such that the defect cannot be corrected by reperformance, the Postal Service may: (a) Require the contractor to immediately take all necessary steps to ensure future performance of the services in conformity with the contract requirements; (b) Reduce the contract price to reflect the reduced value of the services performed; or (c) Terminate this part of the contract 3. In the event the contractor fails to promptly perform the services again or to take the necessary steps to ensure future performance of the services in conformity with the contract requirements, the Postal Service may terminate this contract for default as provided in the Default clause. 4. The contractor must provide and maintain an inspection system acceptable to the Postal Service covering the services to be performed. The contractor's records of all inspection work must be kept complete and must be available to the Postal Service during the term of this contract and for such longer period as may be specified elsewhere in this contract. Clause 8-8 Liquidated Damages - Industrial Supply or Service Items Not Ready for Use (October 1987) (8.3.4) If individual supply or service items are not ready for use or not delivered but the total system is operational, the contractor will be assessed liquidated damages for each individual item of $ (Contracting officer insert amount) for each day's delay or (Contracting officer insert fraction) of the total monthly charges for that item, whichever is greater. Clause 8-9 Use of Hardware or Software Monitors (October 1987) (8.3.4) The contractor must permit inclusion or attachment of such devices as the Postal Service may choose to employ for the purpose of examining or measuring the activity within the computer system. These devices include hardware monitors physically connected to the computer system and software monitors that may require portions of the computer system's control software to be displaced. The contractor may not prohibit the installation of these devices unless the particular device will cause significant or permanent damage to the computer system. The contractor must assist the Postal Service in identifying and locating device connections when requested by the Postal Service if the contractor provides the services to other customers. If attachments cause equipment failure, the Postal Service is liable for any damage, and any maintenance credit provisions contained in this contract do not apply. Clause 8-10 Site Preparation (October 1987) (8.3.4) The contractor must furnish in writing site preparation specifications, including communications requirements, as part of the systems proposal. These specifications must be in such detail as to ensure that the system to be installed will operate in accordance with the requirements of this contract. At the request of the Postal Service and within one week after notification, the contractor must prepare, in cooperation with the Postal Service, a detailed site plan tailored to the Postal Service's facility. The detailed site plan supplements the general specifications furnished as part of the systems proposal. The Postal Service will prepare the site as its own expense in accordance with the contractor's specifications and will maintain these site requirements throughout the contract term. If any alterations or modifications in site preparation are required involving additional expense to the Postal Service and are due to incomplete or erroneous specifications of the detailed site plan provided by the contractor, those expenses will be assessed to the contractor. Unless specified otherwise in the contractor's proposal, the Postal Service will be responsible for procurement, installation, and maintenance of noncontractor communication media necessary for the remote transmission of data. The contractor must inspect the site and furnish the Postal Service an inspection report 15 days before the scheduled installation. Clause 8-11 Software License Warranty and Indemnification (October 1987) (8.3.4) The contractor warrants that it has full power and authority to grant the rights contained in this contract with respect to the software without the consent of any other person. Neither the performance of the services by the contractor nor the license to and use by the Postal Service of the software and documentation (including copying) will in any way constitute an infringement or other violation of any copyright, trade secret, trademark, patent, invention, proprietary information, nondisclosure, or other rights of any third party. The contractor indemnifies and holds harmless (including reasonable attorney's fees) the Postal Service and its employees or agents against all liability to third parties arising from the negligence of the contractor or its agents and the license to or use by the Postal Service of the software, including but not limited to the violation of any third party's trade secrets, proprietary information, trademark, copyright, or patent rights in connection with the licensing of the software. The Postal Service may, at this option, conduct the defense in any third-party action, and the contractor promises fully to cooperate with this defense. This indemnification is limited to the software delivered to the Postal Service or as modified by the contractor, and does not cover third-party claims arising from modifications by the Postal Service not authorized by the contractor. If a third-party claim causes the Postal Service's quiet enjoyment and use of the software to be seriously endangered or disrupted, the contractor must either: 1. Replace the software, without additional charge, by a compatible, functionally equivalent, and noninfringing product; 2. Modify the software to avoid the infringement; 3. Obtain a license for the Postal Service to continue use of the software for the term of this contract, and pay for any additional fee required for the license; or 4. If none of these alternatives is possible even after the contractor's best efforts, return a pro rata portion of the license, or ten years, whichever is less. Clause 8-12 Software Development Warranty (October 1987) (8.3.4) If at any time during the 12-month period immediately following acceptance, the contractor or the Postal Service discovers defects or errors in the software or any other respect in which the software fails to conform to the provisions of any warranty contained in this contract, the contractor must, entirely at its own expense, promptly correct the defects, errors, or nonconformity by, among other things, supplying the Postal Service with corrective codes and making additions, modification, or adjustments to the package as may be necessary to keep the software in operating order in conformity with the warranties in this contract. Appendix B: Contract Clauses Clause 8-13 Warranty Exclusion and Limitation of Damages (October 1987) (8.3.4) Except as specifically provided in this contract, there are no warranties express or implied. In no event will the contractor be liable to the Postal Service for consequential damages, which are defined as: 1. Any loss resulting from general or particular requirements and needs known to the contractor at the time of contracting that could not reasonably be prevented by cover or otherwise; and 2. Injury to person or property in proximity resulting from any breach of warranty. The provisions of this clause do not apply to the contractor's obligation to indemnify the Postal Service from third-party claims. Clause 8-14 Organizational Conflict of Interest (October 1987) (8.4.8) " Note: The following clause will be included in any contract resulting from this solicitation unless an alternative is submitted and negotiated to the satisfaction of the Postal Service. Definitions 1. Contractor. The organization signing this agreement. 2. Systems supplier. Any firm furnishing to the Postal Service or its contractors as a prime contractor any production or development of hardware or software components or subassembly of a system; or such a firm's subsidiaries, its parent corporation, or any subsidiary of the parent corporation. 3. Affiliates. Parent corporation, parent corporation subsidiaries, any entity into or with which the contractor may subsequently merge, or any other successor or assignee of the contractor. Warranty Against Existing Conflict of Interest.The contractor warrants and represents that, to the best of its knowledge and belief, it does not presently have organizational conflict of interest that would diminish its capacity to provide impartial, technically sound, objective research assistance or advice, or would result in a biased work product, or might result in an unfair competitive advantage, except advantages flowing from the normal benefits of performing this agreement. Restrictions on Contracting. The contractor agrees that, during the term of this agreement, any extensions thereto, and for a period of two years thereafter, neither the contractor nor its affiliates will enter into any contracts with the system suppliers: 1. Under which the contractor or its affiliates will sell any system, equipment, or major component thereof for which the contractor prepared any work statements or specifications, or conducted studies or performed any task under this agreement; or 2. To provide any research, support, analysis, or consulting services for which the contractor prepared any work statements or specifications, or conducted studies or performed any task under this agreement. Notwithstanding the foregoing, the contractor is not precluded from furnishing to the Postal Service or the U.S. Government any support, analysis, or consulting service related to any system. Information Exclusion. The contractor agrees that during the term of this agreement, any extensions thereto, and for a period of two years thereafter, neither the contractor nor its affiliates will consult with or discuss with the system suppliers any aspect of the work of this agreement except as is necessary for the performance of the hereunder. Possible Future Conflicts of Interest.The contractor agrees that, if after award of this agreement, it discovers any organizational conflict of interest that would diminish its capacity to provide impartial, technically sound, objective research assistance or advice, or would result in a biased work product, or might result in an unfair competitive advantage, except advantages flowing from the normal benefits of performing this agreement, the contractor will make an immediate and full disclosure in writing to the contracting officer, including a description of the action the contractor has taken or proposes to take to avoid, eliminate, or neutralize this conflict of interest. Nondisclosure of Proprietary Data 1. The contractor recognizes that, in performing orders under this agreement, it may receive information submitted on a proprietary basis by the system suppliers. To the extent that and for as long as this information is proprietary and is identified as such, the contractor agrees to use and examine it exclusively in the performance of these orders and to take the steps necessary to prevent its disclosure to any third party without the prior written consent of the contracting officer. 2. The contractor agrees to indoctrinate its personnel who will have access to proprietary information as to the proprietary nature of the information, and the relationship under which the contractor has possession of this information. 3. The contractor agrees to limit access to the proprietary information obtained, generated, or derived; and to limit participation in the performance of orders under this agreement to those employees whose services are necessary for performing them. Postal Remedy.If the contractor breaches or violates any of the warranties, covenants, restrictions, disclosures, or nondisclosure set forth under this Organizational Conflict of Interest clause, the Postal Service may terminate this agreement, in addition to any other remedy it may have for damages or injunctive relief. Clause 9-1 Patent Rights (October 1987) (9.2.2) Definitions Used in This Clause 1. Subject invention. Any invention or discovery, whether or not patentable, conceived or first actually reduced to practice in the course of or under this contract. The term includes, but is not limited to, any art, method, process, machine, manufacture, design, or composition of matter, or any new and useful improvement thereof, or any variety of plant, that is or may be patentable under the patent laws of the United States of America or any foreign country. 2. Postal Service purposes. The right of the Postal Service to practice and have practiced (make or have made, use or have used, sell or have sold) any subject invention throughout the world by or on behalf of the U.S. Postal Service. 3. Contract. Any contract, agreement, or other agreement or subcontract entered into, with, or for the benefit of the Postal Service. 4. Subcontract and subcontractor. Any subcontract or subcontractor of the contractor under this contract and any lower-tier subcontract or subcontractor under the contract. 5. To bring the invention to the point of practical application. To manufacture (in the case of a composition or product), practice (in the case of a process), or operate (in the case of a machine or system) under such conditions as to establish that the invention works and that its benefits are reasonably accessible to the public. Rights Granted to the Postal Service. The contractor agrees to grant the Postal Service title in and to each subject invention. Nothing contained in this Patent Rights clause grants any rights with respect to any invention other than a subject invention. Subject Invention Disclosure and Reports 1. With respect to subject inventions, the contractor must furnish the contracting officer the items described in (a) through (b) below: (a) A written disclosure of each invention promptly after conception or first actual reduction to practice, whichever occurs first under this contract, sufficiently complete in technical detail to convey to one skilled in the art to which the invention pertains a clear understanding of the nature, purpose, operation, and (to the extent known) the physical, chemical, or electrical characteristics of the invention. When unable to submit a complete disclosure, the contractor must, within three months, submit a disclosure that includes all such technical detail then known; and unless the contracting officer authorizes a different period, submit all other technical detail necessary to complete the disclosure within three additional months. (b) Before final settlement of this contract, a final report listing each invention, including all those previously listed, or certifying that there are no unreported inventions. (This final report and any interim report under (a) above must be submitted on Form 7398, Report of Inventions and Subcontracts, or other format acceptable to the contracting officer). (c) Information in writing, as soon as practicable, of the date and identity of any (1) public use, sale, or publication of the invention made by or known to the contractor or (2) contemplated publication by the contractor. (d) Upon request, any duly executed instruments and other papers (prepared by the Postal Service) necessary to (1) vest in the Postal Service the rights granted it under this clause and (2) enable the Postal Service to apply for and prosecute any patent application, in any country covering the invention, where the Postal Service has the right under this clause to file such an application. (e) Upon request, an irrevocable power of attorney to inspect and make copies of each United States patent application filed by, or on behalf of, the contractor covering the invention. 2. With respect to each subject invention in which the contractor has been granted rights, under license or otherwise, the contractor agrees to provide written reports at reasonable intervals, when requested by the Postal Service, as to: (a) The commercial use being or intended to be made of the invention; (b) Royalties payable to the Postal Service; and (c) The steps taken by the contractor to bring the invention to the point of practical application, or to make the invention available for licensing. Subcontracts 1. The contractor must, unless otherwise authorized or directed by the contracting officer, include a patent rights clause containing all the provisions of this Patent Rights clause except paragraph g below in any subcontract where a purpose of the subcontract is the conduct of experimental, developmental, research, or engineering work. If a subcontractor refused to accept this clause, the contractor: (a) Must promptly submit a written report to the contracting officer setting forth the subcontractor's reasons for the refusal and any other pertinent information that may expedite disposition of the matter; and (b) May not proceed with the subcontract without the written authorization of the contracting officer. The contractor may not, in any subcontract, or by using subcontract as consideration thereof, acquire any rights to subject inventions for its own use (as distinguished from rights required to fulfill its contract obligations to the Postal Service in the performance of this contract). Reports, instruments, and other information required to be furnished by a subcontractor to the contracting officer under a patent rights clause in a subcontract may, upon mutual consent of the contractor and the subcontractor (or by direction of the contracting officer), be furnished to the contractor for transmission to the contracting officer. 2. The contractor, at the earliest practicable date, must notify the contracting officer in writing of any subcontract containing a patent rights clause, furnish to the contracting officer a copy of the subcontract, and notify the contracting officer when the subcontract is completed. The Postal Service is a third-party beneficiary of any subcontract granting rights to the Postal Service in subject inventions, and the contractor hereby assigns to the Postal Service all the rights that the contractor would have to enforce the subcontractor's obligations for the benefit of the Postal Service with respect to subject inventions. the contractor is not obligated to enforce the agreements of any subcontractor relating to the obligation of the subcontractor to the Postal Service regarding subject inventions. Domestic Filing of Patent Applications by Contractor 1. If, pursuant to paragraph h below, greater rights are granted in a subject invention to the extent that the contractor may claim the invention, the contractor must file in due form and within six months of the granting of these rights a United States patent application claiming the invention and furnish, as soon as practicable, the serial number and filing date of the application and the patent number of any resulting patent. As to each invention in which the contractor has been given greater rights, the contractor must notify the contracting officer at the end of six-month period if it has failed to file or cause to be filed a patent application covering the invention. If the contractor has filed or caused to filed such an application within the six-month period, but elects not to continue prosecution of the application, it must notify the contracting officer not less than 60 days before the expiration of the response period. In either of these situations, the contractor forfeits all rights previously granted. 2. The following statement must be included in the first paragraph of any patent application filed or patent issued on an invention made under a Postal Service contract or a subcontract under a Postal Service contract: "The invention herein described was made in the course of or under a contract or subcontract thereunder with the United States Postal Service." Foreign Filing of Patent Applications 1. If the contractor acquires greater rights in a subject invention and has filed a United States patent application claiming the invention, the contractor, or any party other than the Postal Service deriving rights from the contractor, has the exclusive rights, subject to the rights of the Postal Service, to file applications on the inventions in each foreign country within: (a) Six months from the date a corresponding United States patent application is filed; or (b) Such longer period as the contracting officer may approve. 2. The contractor must notify the contracting officer of each foreign application filed and, upon written request of the contracting officer, furnish an English translation of the application and convey to the Postal Service the entire right title and interest in the invention in each foreign country in which an application has not been filed within the time specified in subparagraph f.1. preceding. Withholding Payment 1. Final payment under this contract will not be made until the contractor delivers to the contracting officer the reports required by paragraph c above and all information as to subcontracts required by paragraph d above. 2. If action is deemed warranted because of the contractor's performance under the Patent Rights clause of this contract or of other Postal Service contracts, the contracting officer may withhold from payment such sum as considered appropriate, not exceeding $50,000, or ten percent of the amount of this contract, whichever is less, to be held as a reserve until the contractor delivers all the reports, disclosures, and information specified in paragraph c above. Contractor's Request for Greater Rights. The contractor, at the time of first disclosing a subject invention pursuant to paragraph c.1(a) above, but not later than three months thereafter, may submit in writing to the contracting officer a request for rights by license or otherwise in any invention. The contracting officer will review the contractor's request for rights and will notify the contractor whether it is granted in whole or in part. Any rights granted the contractor will be subject to, but not necessarily limited to, the provisions of paragraph i following. Reservation of Rights to the Postal Service 1. If rights in any subject invention are vested in or granted to the contractor, such rights will, as a minimum, be subject to an irrevocable, nonexclusive, and royalty-free license to practice and have practiced the invention throughout the world for Postal Service purposes, including its practice: (a) In the manufacture, use, and disposition of any article or material; (b) In the use of any method; or (c) In the performance of any service, acquired by or for the Postal Service or with funds otherwise derived through the Postal Service. 2. If rights are vested in the contractor, the contractor agrees to, and grants to the Postal Service the rights to, require the granting of a license to an applicant under any such invention: (a) On a nonexclusive basis, unless the contractor, a licensee, or an assignee demonstrates to the Postal Service, at its request, that (1) effective steps have been taken within three years after a patent issues on the invention to bring the invention to the point of practical application or (2) the invention has been made available for licensing on terms that are reasonable in the circumstances, or can show cause why the title should be retained for a further period of time; or (b) On terms that are reasonable in the circumstances to the extent that the invention is required for public use by Postal Service regulations or as may be necessary to fulfill health needs, or for other public purposes stipulated in the Schedule of this contract. Right to Disclose Subject Inventions. The Postal Service may duplicate and disclose reports and disclosures of subject inventions required to be furnished by the contractor pursuant to this Patent Rights clause. Forfeiture of Rights in Unreported Subject Inventions. The contractor forfeits to the Postal Service all rights in any subject invention that it fails to report to the contracting officer when or before it: 1. Files or causes to be filed a United States or foreign application thereon; or 2. Submits the final report required by c.1(b) above, whichever occurs later, provided, that the contractor will not forfeit rights in a subject invention if: (a) Contending that the invention is not a subject invention, it nevertheless reports the invention and the facts pertinent to its contention to the contracting officer within the time specified in k.1 or k.2 above; or (b) It establishes that failure to report was due entirely to causes beyond its control and without its fault or negligence. The contractor is deemed to hold any such forfeited subject invention, and the patent applications and patents pertaining to it, in trust for the Postal Service pending written assignment of the invention. The rights accruing to the Postal Service under this paragraph k are in addition to, and do not supersede, any other rights the Postal Service may have in relation to unreported subject inventions. Nothing contained in this clause may be construed to require the contractor to report any invention that is not in fact a subject invention. Examination of Records Relating to Inventions. The contracting officer, or an authorized representative, until the expiration of three years after final payment under this contract, has the right to examine any books, records, documents, and other supporting data of the contractor that the contracting officer or authorized representative reasonably deems directly pertinent to the discovery or identification of subject inventions or to compliance by the contractor with the requirements of this clause. Clause 9-2 Authorization and Consent (October 1987) (9.2.3) Research and Development Work. The Postal Service authorizes and consents to all use and manufacture of any invention covered by a U.S. patent in the performance of research, development, or experimental work called for, or performed as a necessary activity, in the performance of this contract or any subcontract, at any tier. Supplies and Construction. The Postal Service authorizes and consents to all use and manufacture of any invention covered by a U.S. patent in performing this contract or subcontract, at any tier, that is: 1. Embodied in the structure or composition of any article, the delivery of which is accepted by the Postal Service under this contract; or 2. Used in machinery, tools, or methods whose use necessarily results from compliance by the contractor or subcontractor with (a) specifications or written provisions forming a part of this contract or (b) specific written instructions given by the contracting officer directing the manner of performance. 3. Determination of Liability. The liability of the Postal Service for patent infringement or for the unauthorized use of any patent will be determined by the provisions of any patent indemnity clause included in this contract or in any subcontract under this contract (at any tier) and by any indemnification or warranty (express or implied) otherwise provided by the contractor or subcontractor for similar products or services when supplied to commercial buyers. 4. Flowdown. The contractor must include, and require inclusion of, this clause, suitably modified to identify the parties, in all subcontracts under this contract at any tier that are expected to exceed $50,000. Clause 9-3 Notice and Assistance Regarding Patent and Copyright Infringement (October 1987) (9.2.3) The contractor must report to the contracting officer, in writing, promptly and in reasonable detail, any notice, claim, or suit regarding patent or copyright infringement (or unauthorized use of a patent or copyright) based on performance of this contract. At the contracting officer's request, the contractor must furnish all evidence and information in its possession pertaining to the suit or claim. The evidence and information will be furnished at the expense of the Postal Service except when the contractor has agreed to indemnify the Postal Service. This clause must be included in all subcontracts under this contract, at any tier, over $50,000. Clause 9-4 Patent Indemnity (October 1987) (9.2.4) Except as provided in paragraph d below, the contractor indemnifies the Postal Service, its employees, and its agents against liability, including costs and fees, for patent infringement (or unauthorized use) arising from the manufacture, use, or delivery of supplies, the performance of service, the construction or alteration of real property, or the disposal of property by or for the Postal Service, if the supplies, service, or property (with or without relatively minor modifications) have been or are being offered for sale or use in the commercial marketplace by the contractor. The Postal Service must promptly notify the contractor of any claim or suit subject to the indemnity of paragraph a above alleging patent infringement or unauthorized use of a patent. To the extent allowed by law, the contractor may participate in the defense of any suit to which this clause applies. This indemnification does not apply to: 1. Infringements for the unauthorized use of a private patent covered by this indemnity resulting from the contracting officer's specific written direction, compliance with which requires an infringement; or 2. Infringement or unauthorized use claims that are unreasonably settled without the contractor's consent before litigation. This clause must be included in all subcontracts under this contract, at any tier, over $50,000. Clause 9-5 Waiver of Indemnity (October 1987) (9.2.4) The Postal Service authorized the making and use, solely in performing the contract, of any invention covered by the below-listed patents and waives indemnification by the contractor solely with respect to these patents. The specific patents to which this waiver applies are as follows: (Contracting officer list each patent) Clause 9-6 Rights in Technical Data (December 1992) (9.3.5) Definitions 1. Data. Recorded information, regardless of the form or the medium on which it may be recorded. The term includes technical data and computer software. The term does not include information incidental to contract administration,such as financial, administrative, cost or pricing, or management information. 2. Form, fit, and function data. Data relating to an item or process that are sufficient to enable physical and functional interchangeability, as well as data identifying source, size, configuration, mating and attachment characteristics, functional characteristics, and performance requirements; except that for computer software, it means data identifying origin, functional characteristics, and performance requirements but specifically excludes the source code, algorithm, process, formulas, and machine-level flow charts of the computer software. 3. Limited rights data. Data other than computer software developed at private expense, including minor modifications of these data. 4. Technical data. Data other than computer software, of a scientific or technical nature. 5. Unlimited rights. The rights of the Postal Service in technical data and computer software to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform and display publicly, in any manner and for any purpose, and to have or permit others to do so. Allocation of Rights 1. Except as provided in paragraph c below regarding copyright, the Postal Service has unlimited rights in: (a) Technical data first produced in the performance of this contract (except to the extent that they constitute minor modifications of data that are limited rights data); (b) Form, fit, and function data delivered under this contract; except that all form, fit, and function data describing limited rights data must be delivered with unlimited rights; (c) Technical data delivered under this contract that constitute manuals or instructional and training material for installation, operation, or routine maintenance and repair of items, components, or processes delivered or furnished for use under this contract; and (d) All other technical data delivered under this contract, unless provided otherwise in paragraph g below. 2. The allocation of rights in any computer programs, data bases, and documentation will be determined by the Rights in Computer Software clause, except that limited rights data formatted as computer data bases for delivery to the Postal Service are to be treated as limited rights data under this Rights in Technical Data clause. Copyright 1. Unless provided otherwise in paragraph d below, the contractor may establish, without prior approval of the contracting officer, claim to copyright in scientific and technical articles based on, or containing, technical data first produced in the performance of this contract and published in academic, technical, or professional journals, symposia proceedings, or similar works. The prior, express written permission of the contracting officer is required to establish claim to copyright in all other technical data first produced in the performance of this contract. When making claim to copyright, the contractor must affix the applicable copyright notice of 17 U.S.C. 401 or 402. The contractor grants to the Postal Service and others acting on its behalf a paid-up, nonexclusive, irrevocable worldwide license in such copyright data to reproduce, prepare derivative works, distribute copies to the public, and perform and display the data publicly. 2. The contractor may not, without prior written permission of the contracting officer, incorporate in technical data delivered under this contract any data not first produced in the performance of this contract containing the copyright notice of 17 U.S.C. 401 or 402, unless the contractor identifies the data and grants to the Postal Service, or acquires on its behalf at no cost to the Postal Service, a license of the same scope as set forth in subparagraph c.1 above. 3. The Postal Service agrees not to remove any copyright notices placed on data pursuant to this paragraph c, and to include such notices on all reproductions of the data. Release, Publication, and Use of Technical Data 1. The contractor has the right to use, release to others, reproduce, distribute, or publish any technical data first produced by the contractor in the performance of this contract, except to the extent these data may be subject to the federal export control or national security laws or regulations, or unless otherwise provided below in this paragraph d.2 following or expressly set forth in this contract. 2. The contractor agrees that if it receives or is given access to data necessary for the performance of this contract that contain restrictive markings, the contractor will treat the data in accordance with the markings unless otherwise specifically authorized in writing by the contracting officer. Unauthorized Marking of Data 1. If any technical data delivered under this contract are marked with the notice specified in paragraph g below and the use of such a notice is not authorized by this clause, or if the data bear any other unauthorized restrictive markings, the contracting officer may at any time either return the data or cancel the markings. The contracting officer must afford the contractor at least 30 days to provide a written justification to substantiate the propriety of the markings. Failure of the contractor to timely respond, or to provide written justification, may result in the cancellation of the markings. The contracting officer must consider any written justification by the contractor and notify the contractor if the markings are determined to be authorized. 2. The foregoing procedures may be modified in accordance with Postal Service regulations implementing the Freedom of Information Act (5 U.S.C. 552) if necessary to respond to a request thereunder. In addition, the contractor is not precluded from bringing a claim in connection with any dispute that may arise as the result of a final disposition of the matter by a court of competent jurisdiction. Omitted or Incorrect Markings 1. Technical data delivered to the Postal Service without limited rights notice authorized by paragraph g below, or the copyright notice required by paragraph c above, will be deemed to have been furnished with unlimited rights, and the Postal Service assumes no liability for the disclosure outside the Postal Service, the contractor may request, within six months (or a longer time approved by the contracting officer) after delivery of the data, permission to have notices placed on qualifying technical data at the contractor's expense, and the contracting officer may agree to do so if the contractor: (a) Indemnifies the technical data to which the omitted notice is to be applied; (b) Demonstrates that the omission of the notice was inadvertent; (c) Establishes that the use of the proposed notice is authorized; and (d) Acknowledges that the Postal Service has no liability with respect to the disclosure, use, or reproduction of any such data made before the addition of the notice or resulting from the omission of the notice. 2. The contracting officer may also (a) permit correction at the contractor's expense of incorrect notices if the contractor identifies the technical data on which correction of the notice is to be made and demonstrates that the correct notice is authorized, or (b) correct any incorrect notices. Protection of Limited Rights Data. When technical data other than data listed in b.1(a), (b), and (c) above are specified to be delivered under this contract and qualify as limited rights data, if the contractor desires to continue protection of such data, the contractor must affix the following "Limited Rights Notice" to the data, and the Postal Service will thereafter treat the data, subject to paragraphs e and f above, in accordance with the Notice: "LIMITED RIGHTS NOTICE These technical data are submitted with limited rights under Postal Service Contract No. (and subcontract if appropriate). These data may be reproduced and used by the Postal Service with the express limitation that they will not, without written permission ofthe contractor, be used for purposes of manufacture or disclosed outside the Postal Service; except that the Postal Service may disclose these data outside the Postal Service for the following purposes, provided that the Postal Service makes such disclosure subject to prohibition against further use and disclosure: 1. Use (except for manufacture) by support service contractors. 2. Evaluation by Postal Service evaluators. 3. Use (except for manufacture) by other contractors participating in the Postal Service's program of which the specific contract is a part, for information and use in connection with the work performed under each contract. 4. Emergency repair or overhaul work. This Notice must be marked on any reproduction of these data, in whole or in part." Subcontracting.The contractor has the responsibility to obtain from its subcontractors all data and rights therein necessary to fulfill the contractor's obligations under the contract. If a subcontractor refuses to accept terms affording the Postal Service such rights, the contractor must promptly bring such refusal to the attention of the contracting officer and may not proceed with subcontract award without further authorization. Relationship to Patents. Nothing contained in this clause implies a license to the Postal Service under any patent or may be construed as affecting the scope of any license or other right otherwise granted to the Postal Service. Clause 9-7 Withholding Payment (Technical Data and Computer Software) (October 1987) (9.3.5) Final payment under this contract will not be made until the contractor delivers all data (technical data and computer software) required by the contract. If the contracting officer determines at any time that the contractor is not in full compliance with contract requirements for the delivery or, and rights in, any technical data or computer software, the contracting officer may withhold from payment up to $50,000 as security for the contractor's performance. Withholding may not be made if the failure to make timely delivery or the deficiencies relating to delivered data arise out of causes beyond the control of the contractor and without fault or negligence of the contractor. Any amount withheld under this clause not finally paid to the contractor is mitigation of damages and in no way affects the right of the Postal Service to collect actual damages for breach of this contract, including profits from exploitation of any rights in data. Nonperformance by a subcontractor does not excuse any failure to comply with this clause. Clause 9-8 Additional Data Requirements (October 1987) (9.3.5) In addition to the data specified elsewhere in this contract to be delivered, the contracting officer may, at any time during contract performance or within a period of three years after acceptance of all items to be delivered under this contract, order any first generated or produced in the performance of this contract. The Rights in Technical Data and the Rights in Computer Software clauses, or other equivalent data clauses if included in this contact, apply to all data ordered under this Additional Data Requirements clause. Nothing in this clause requires the contractor to deliver any data specifically identified in this contract as not subject to this clause. When data are to be delivered under this clause, the contractor will be compensated for converting the data into the prescribed form for reproduction and delivery. The contracting officer may release the contractor from the requirements of this clause for specifically identified data items at any time during the three-year period set forth in paragraph a above. Clause 9-9 Rights in Computer Software (December 1992) (9.3.6) Definitions 1. Computer Software. Computer programs, computer data bases, and their documentation. 2. Form, fit, and function data. Data identifying origin, functional characteristics, and performance requirements but specifically excludes the source code, algorithm, process, formulas, and machine-level flow charts of the computer software. 3. Restricted computer software. Computer software developed at private expense that is a trade secret, is commercial or financial and confidential or privileged, or is published copyrighted computer software, including minor modifications of this computer software. 4. Restricted rights. The rights of the Postal Service in restricted computer software, as set forth in a Restricted Rights Notice as provided in paragraph g below, or as otherwise may be provided in a collateral agreement incorporated in and made part of this contract. 5. Unlimited rights. The rights of the Postal Service in computer software to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform and display publicly, in any manner and for any purpose, and to have or permit others to do so. Allocation of Rights. Except as provided in paragraph c below regarding copyright, the Postal Service has unlimited rights in: 1. Computer software first produced in the performance of this contract (except to the extent that it constitutes minor modifications of computer software that is restricted computer software); 2. Form, fit, and function data delivered under this contract; except that all form, fit, and function data describing limited rights data must be delivered with unlimited rights; 3. All other computer software delivered under this contract, except for restricted computer software provided in accordance with paragraph g below. Copyright 1. (a) The prior, express written permission of the contracting officer is required to establish claim to copyright in all computer software or other data first produced in the performance of this contract. When making claim to copyright, the contractor must affix the applicable copyright notice of 17 U.S.C. 401. The contractor grants to the Postal Service and others acting on its behalf a paid-up, nonexclusive, irrevocable worldwide license in such copyrighted computer software to reproduce, prepare derivative works, and perform and display the computer software and other data publicly. (b) If the Postal Service desires to obtain copyright in the computer software first produced in the performance of the contract and permission has not been granted pursuant to c.1(a) above, the contracting officer may direct the contractor to establish, or authorize the establishment of, claim to copyright in the computer software and to assign, or obtain the written assignment of, the copyright to the Postal Service or its designated assignee. 2. The contractor may not, without prior written permission of the contracting officer, incorporate in computer software delivered under this contract any computer software not first produced in the performance of this contract containing the copyright notice of 17 U.S.C. 401, unless the contractor identifies the computer software and grants to the Postal Service,or acquires on its behalf at no cost to the Postal Service, a license of the same scope as set forth in c.1.(a) above or as otherwise may be provided in a collateral agreement incorporated in and made part of this contract. 3. The Postal Service agrees not to remove the contractor's copyright notice placed on computer software pursuant to this paragraph c, and to include such notices on all reproduction of the computer software. Release, Publication, and Use of Computer Software 1. Unless prior written permission is obtained from the contracting officer or to the extent expressly set forth in this contract, the contractor will not use, release to others, reproduce, distribute, or publish any computer software fist produced by the contractor in the performance of the contract. 2. The contractor agrees that to the extent it receives or is given access to computer software necessary for the performance of this contract that contains restrictive markings, the contractor will treat the computer software in accordance with these markings unless otherwise specifically authorized in writing by the contracting officer. Unauthorized Marking of Computer Software 1. If any computer software delivered under this contract is marked with the notice specified in paragraph g below and the use of such a notice is not authorized by this clause, or if the computer software bears any other unauthorized restrictive markings, the contacting officer may at any time either return the computer software or cancel the markings. The contracting officer must afford the contractor at least 30 days to provide a written justification to substantiate the propriety of the markings. Failure of the contractor to timely respond, or to provide written justification, may result in the cancellation of the markings. The contracting officer must consider any written justification by the contractor and notify the contractor if the markings are determined to be authorized. 2. The foregoing procedures may be modified in accordance with Postal Service regulations implementing the Freedom of Information Act (5 U.S.C. 552) if necessary to respond to a request thereunder. In addition, the contractor is not precluded from bringing a claim in connection with any dispute that may arise as the result of the Postal Service's action to remove any markings on computer software, unless this action occurs as a result of a final disposition of the matter by a court of competent jurisdiction. Omitted or Incorrect Markings 1. Computer software delivered to the Postal Service without the restricted rights notice authorized by paragraph g below, or the copyright notice required by paragraph c above, will be deemed to have been furnished with unlimited rights, and the Postal Service assumes no liability for the disclose, use or reproduction of such computer software. However, the extent the computer software has not been disclosed outside the Postal Service, the contractor may request, within six months (or a longer time approved by the contracting officer) after delivery of the computer software, permission to have notices placed on qualifying computer software at the contractor's expense, and the contracting officer may agree to do so if the contractor: (a) Identifies the computer software involved; (b) Demonstrates that the omission of the notice was inadvertent; (c) Establishes that the use of the proposed notice is authorized; and (d) Acknowledges that the Postal Service has no liability with respect to the disclosure, use, or reproduction of any such computer software made before the addition of the notice or relisting from the omission of the notice. 2. The contracting officer may also (a) permit correction, at the contractor's expense, of incorrect notices if the contractor identifies the computer software on which correction of the notice is to be made and demonstrates that the correct notice is authorized, or (b) correct any incorrect notices. Protection of Restricted Computer Software 1. When computer software other than that listed in subparagraphs b.1 and b. 2 above is specified to be delivered under this contract and qualifies as restricted computer software, if the contractor desires to continue protection of such computer software, the contractor must affix the following "Restricted Rights Notice" to the computer software, subject to paragraphs e and f above, in accordance with the Notice: "RESTRICTED RIGHTS NOTICE a. This computer software is submitted with restricted rights under Postal Service Contract No. (and subcontract , if appropriate). It may not be used, reproduced, or disclosed by the Postal Service except as provided below or as otherwise stated in the contract. b. This computer software may be: 1. Used or copied for use in or with the computer or computers for which it was acquired, including use at any Postal Service installation ot which the computer or computers may be transferred; 2. Used or copied for use in a backup computer if any computer for which it was acquired is inoperative; 3. Reproduced for safekeeping (archives) or backup purposes; 4. Modified, adapted, or combined with other computer software, provided that the modified, adapted, or combined portions of any derivative software incorporating restricted computer software are made subject to the same restricted rights; 5. Disclosed to and reproduced for use by support service contractors in accordance with 1 through 4 above, provided the Postal Service makes such disclosure or reproduction subject to these restricted rights; and 6. Used or copied for use in or transferred to a replacement computer. c. Notwithstanding the foregoing, if this computer software is published copyrighted computer software, it is licensed to the Postal Service, without disclosure prohibitions, with the minimum rights set forth in the preceding paragraph. d. Any other rights or limitations regarding the use, duplication, or disclosure of this computer software are to be expressly stated in, or incorporated in, the contract. e. This Notice must be marked on any reproduction of this computer software, in whole or in part." 2. When it is impracticable to include the above Notice on restricted computer software, the following short-form Notice may be used instead, on condition that the Postal Service's rights with respect to such computer software will be as specified in the above Notice unless otherwise expressly stated in the contract. "RESTRICTED RIGHTS NOTICE (SHORT FORM) Use, reproduction, or disclosure is subject to restrictions set forth in Contract No. (and subcontract , if appropriate) with (name of contractor and subcontractor)." Subcontracting.The contractor has the responsibility to obtain from its subcontractors all computer software and rights in it necessary to fulfill the contractor's obligations under this contract. If a subcontractor refuses to accept terms affording the Postal Service such rights, the contractor must promptly bring such refusal to the attention of the contracting officer and may not proceed with subcontract award without further authorization. Standard Commercial License or Lease Agreements. The contractor unconditionally accepts the terms and conditions of this clause unless expressly provided otherwise in this contract or in a collateral agreement incorporated in and made part of this contract. Thus the contractor agrees that, notwithstanding any provisions to the contrary contained in the contractor's standard commercial license or lease agreement pertaining to any restricted computer software delivered under this contract, and irrespective of whether any such agreement has been proposed before or after issuance of this contract of the fact that such agreement may be affixed to or accompany the restricted computer software upon delivery, the Postal Service has the rights set forth in this clause to use, duplicate, or disclose any restricted computer software delivered under this contract. Clause 9-10 Rights in Data - Special Works (December 1992) (9.3.7) Definition. Works means literary works, including technical reports, studies, and similar documents; musical and dramatic works; and recorded information, regardless of the form or the medium on which it may be recorded. It does not include information incidental to contract administration, such as financial, administrative, cost or pricing, or management information. Rights 1. All works first produced in the performance of this contract are the sole property of the Postal Service. The contractor agrees not to assert or authorize others to assert any rights or establish any claim of copyright in these works. 2. The contractor assigns all right, title, and interest to the Postal Service in all works first produced in performance of this contract that are not otherwise "works for hire" for the Postal Service under Section 201(b) of Title 17, United States Code. The contractor, unless directed otherwise by the contracting officer, must place on all such works delivered under this contract the following notice: "Copyright (year of delivery) United States Postal Service" 3. The contractor grants to the Postal Service a royalty-fee, nonexclusive, irrevocable license throughout the world to publish, translate, deliver, perform, use, and dispose of in any manner any portion of a work that is not first produced in the performance of this contract but in which copyright is owned by the contractor and that is incorporated in the work finished under this contract, and to authorize others to do so for Postal Service purposes. 4. Unless the contracting officer's written approval is obtained, the contractor may not include in any works prepared for or delivered to the Postal Service under this contract any works of authorship in which copyright is not owned by the contractor or the Postal Service without acquiring for the Postal Service any right necessary to perfect a license of the scope set forth in subparagraph b.3 above. 5. Except as otherwise specifically provided for in this contract, the contractor may not use for purposes other than the performance of this contact, or release, reproduce, distribute, or publish, any work first produced in the performance of this contract, or authorize others to do so. Indemnity. The contractor indemnifies the Postal Service (and its officers, agents, and employees acting for the Postal Service) against any liability, including costs and expenses, (1) for violation of proprietary rights, copyrights, or rights of privacy or publicity, arising out of the creation,delivery,or use of any works furnished under this contract, or (2) based upon any libelous or other unlawful matter contained in these works. These provision do not apply to material furnished by the Postal Service and incorporated in the works to which this clause applies. Clause 9-11 Rights in Data - Existing Works (October 1987) (9.3.8) Except as otherwise provided in this contract, the contractor grants to the Postal Service, and others acting on its behalf, a paid-up, nonexclusive, irrevocable worldwide license to reproduce, prepare derivative works, and perform and display publicly all the material or subject matter called for under this contract, or for which this clause is specifically made applicable. The contractor indemnifies the Postal Service, its employees, and its agents against any liability, including costs and fees, incurred as the result of the violation of trade secrets, copyrights, or right of privacy or publicity, arising out of the creation, delivery, publication, or use of any data furnished under this contract; or any libelous or other unlawful matter contained in such data. This paragraph b does not apply unless the Postal Service notifies the contractor as soon as practicable of any claim or suit, affords the contractor an opportunity under applicable laws or regulations to participate in the defense of it, and obtains the contractor's consent to its settlement (which consent may not be unreasonably withheld). These provisions do not apply to material furnished to the contractor by the Postal Service and incorporated in data to which this clause applies. Clause 9-12 Refund of Royalties (October 1987) (9.3.9) If for any reason before final payment is made on this contract, the contractor does not have to pay part or all of the royalties anticipated, or receives a refund of any royalties paid, the Postal Service must be given a credit equal to the amount not paid or refunded, if the contract price was based on a contingency that the royalties would be payable or if the Postal Service, in fact, reimbursed the contractor for royalties. The credit must be applied to the first invoice submitted to the Postal Service after the contractor learns that the royalty is not payable or is refunded. Clause 9-13 Intellectual Property Rights (October 1987) (9.3.10) All intellectual property rights evolving from studies, reports, or other data delivered under this contract are the sole property of the Postal Service. The contractor agrees to make, execute, and deliver to the Postal Service any papers or other instruments in such terms and contents as may be required for the filing of any required instrument necessary for preserving an intellectual property right and does hereby assign and transfer to the Postal Service the entire right, title, and interest in and to the intellectual property rights. Before final settlement of this contract, a final report must be submitted on Form 7398, Report of Inventions and Subcontracts, or other format acceptable to the contracting officer. Clause 9-14 Acquisition of Additional Rights in Data (October 1987) (9.3.2) Unlimited Rights. The contractor grants the Postal Service unlimited rights in all data (technical data and computer software) listed in the Schedule as falling within this clause's unlimited rights provisions. The rights of the parties to these data are governed by the Rights in Technical Data clause of this contract with regard to technical data, and the Rights in Computer Software clause of this contract with regard to computer software. Directed License Rights 1. At the contracting officer's direction, the contractor must license other firms or organizations to use all data (technical data and computer software) listed in the Schedule as falling within this clause's directed license rights provisions, for the purpose of performing Postal Service contacts. If necessary, the contractor will provide a reasonable amount of technical assistance to these firms or organizations to enable them to use the data to perform Postal Service contracts. The contracting officer will direct that licenses and technical assistance agreements be given under this clause only to firms and organizations competent to perform the specific Postal Service contracts to which the direction applies. 2. Upon entering into licenses under this clause, the contractor may restrict the use of the data for all other purposes, and may include any other provisions for trade secret or copyrighted material restrictions that are normally found in commercial licenses. Subject to the contracting officer's approval, the license may provide for payment of reasonable amounts for use of the data, in the form of a lump-sum payment, royalties, or both. The contracting officer will withhold approval of the payment only if it is at variance with normal commercial practice. 3. Subject to the contracting officer's approval, any technical assistance agreement under this clause will provide for full compensation of the contractor's costs of providing the assistance, plus a reasonable profit. The contracting officer will withhold approval of the profit only if it is at variance with normal commercial practice. Other Rights. Any specific rights other than the unlimited rights or directed license rights treated in paragraphs a and b above are as set forth in the Schedule. Clause 9-15 Patent Rights - Contractor Retention (December 1992) (9.2.2) Definitions 1. "Subject Invention" means any invention or discovery of the contractor conceived or first actually reduced to practice in the course of or under this contract, and includes any art, method, process, machine, manufacture, design, or composition of matter, or any new and useful improvement thereof, or any variety of plant, which is or may be patentable under the Patent Laws of the United States of America or any foreign country. 2. "Contract" means any contract, agreement, grant, or other arrangement, or subcontract entered into with or for the benefit of the Postal Service where a purpose of the contract is the conduct of experimental, developmental, or research work. 3. "States and Domestic Municipal Governments" means the states of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, the Trust Territory of the Pacific Islands, and any political subdivision and agencies thereof. 4. "To Bring to the Point of Practical Application" means to manufacture in the case of a composition or product, to practice in the case of a process, or to operate in the case of a machine and under such conditions as to establish that the invention is being worked and that its benefits are reasonably accessible to the public. Allocation of Principal Rights 1. The contractor may retain the entire right, title, and interest throughout the world or any country thereof in and to each subject invention disclosed pursuant to paragraph e.2.(a) of this clause, subject to the rights obtained by the Postal Service in paragraph c of this clause. The contractor must include with each subject invention disclosure an election as to whether he will retain the entire right, title, and interest in the invention throughout the world or any country thereof. 2. Subject to the license specified in paragraph d of this clause, the contractor agrees to convey to the Postal Service, upon request, the entire domestic right, title, and interest in any subject invention when the contractor: (a) does not elect under paragraph b.1 of this clause to retain such rights; or (b) fails to have a United States patent application filed on the invention in accordance with paragraph j of this clause, or decides not to continue prosecution of such application; or (c) at any time, no longer desires to retain title. 3. Subject to the license specified in paragraph d of this clause, the contractor agrees to convey to the Postal Service, upon request, the entire right, title, and interest in any subject invention in any foreign country when the contractor: (a) does not elect under paragraph b.1 of this clause to retain such rights in the country; or (b) fails to have a patent application filed in the country on the invention in accordance with paragraph k of this clause, or decides not to continue prosecution or to pay any maintenance fees covering the invention. To avoid forfeiture of the patent application or patent, the contractor must notify the contracting officer not less than sixty days before the expiration period for any action required by the foreign patent office. 4. A conveyance, requested pursuant to paragraph b.2 or b.3 of this clause, must be made by delivering to the contracting officer duly executed instruments (prepared by the Postal Service) and such other papers as are deemed necessary to vest in the Postal Service the entire right, title and interest to enable the Postal Service to apply for and prosecute patent applications covering the invention in this or the foreign country, respectively, or otherwise establish its ownership of such invention. Minimum Rights Acquired by the Postal Service. With respect to each subject invention to which the contractor retains principal or exclusive rights, the contractor: 1. hereby grants to the Postal Service a nonexclusive, nontransferable, paid-up license to make, use, and sell each subject invention throughout the world by or on behalf of the Postal Service; 2. agrees to grant to responsible applicants, upon request of the Postal Service, a license on terms that are reasonable under the circumstances; (a) unless the contractor, his licensee, or his assignee, demonstrates to the Postal Service that effective steps have been taken within three years after a patent issues on such invention to bring the invention to the point of practical application or that the invention has been made available for licensing royalty-free or on terms that are reasonable in the circumstances, or can show cause why the principal or exclusive rights should be retained for a further period of time, or (b) to the extent that the invention is required for public use by governmental regulations or for other public purposes stipulated in this contract. 3. must submit written reports at reasonable intervals, upon request of the Postal Service during the term of the patent on the subject invention regarding: (a) the commercial use that is being made or is intended to be made of such invention; and (b) the steps taken by the contractor or his transferee to bring the invention to the point of practical application, or to make the invention available for licensing. 4. agrees to arrange, when licensing any subject inventions, to avoid royalty charges on procurements involving the Postal Service and to refund any amounts received as royalty charges on any subject invention in procurements for, or on behalf of, the Postal Service and to provide for such refund in any instrument transferring rights in such invention to any party; and 5. agrees to provide for the Postal Service's paid-up license pursuant to paragraph c.1 of this clause in any instrument transferring rights in a subject invention and to provide for the granting of licenses as required by c.2 of this clause, and for the reporting of utilization information as required by paragraph c.3 of this clause whenever the instrument transfers principal or exclusive rights in any subject invention. (a) Nothing contained in this paragraph c will be deemed to grant to the Postal Service any rights with respect to any invention other than a subject invention. Minimum Rights to the Contractor 1. The contractor reserves a revocable, nonexclusive, royalty-free license in each patent application filed in any country on a subject invention and any resulting patent in which the Postal Service acquires title. The license must extend to the contractor's domestic subsidiaries and affiliates, if any, within the corporate structure of which the contractor is a part and must include the right to grant sublicenses of the same scope to the extent the contractor was legally obligated to do so at the time the contract was awarded. The license must be transferable only with approval of the contracting officer, except when transferred to the successor of that part of the contractor's business to which the invention pertains. 2. The contractor's domestic nonexclusive license retained pursuant to paragraph d.1 of this clause may be revoked or modified to the extent necessary to achieve expeditious practical application of the subject invention. The license will not be revoked in that field of use and/or the geographical areas in which the contractor has brought the invention to the point of practical application and continues to make the benefits of the invention reasonably accessible to the public. The contractor's nonexclusive license in any foreign country reserved pursuant to paragraph d.1 of this clause may be revoked or modified at the discretion of the contracting officer to the extent the contractor or his domestic subsidiaries or affiliates have failed to achieve the practical application of the invention in such foreign country. 3. Before modification or revocation of the license, pursuant to paragraph d.2 of this clause, the contractor will be given written notice of the intent to modify or revoke the license and will be allowed thirty (30) days or such longer period as may be authorized by the contracting officer for good cause shown in writing by the contractor after such notice to show cause why the license should not be modified or revoked. The contractor will have the right to contest any decision concerning the modification or revocation of the license in accordance with the Claims and Disputes clause of this contract. Invention Identification, Disclosures and Reports 1. The contractor must establish and maintain active and effective procedures to assure that subject inventions are promptly identified and timely disclosed. These procedures must include the maintenance of laboratory notebooks or equivalent records and other records as are reasonably necessary to document the conception and/or the first actual reduction to practice of subject inventions, and records which show that the procedures for identifying and disclosing the inventions are followed. Upon request, contractors must furnish contracting officers a description of such procedures so that they may evaluate and determine their effectiveness. 2. The contractor must furnish the contracting officer: (a) a complete technical disclosure for each subject invention, within six months after conception or first actual reduction to practice, whichever occurs first in the course of or under the contract, but in any event prior to any on sale, public use, or publication of such invention known to the contractor. The disclosure must identify the contract and inventor(s) and be sufficiently complete in technical detail and appropriately illustrated by sketch or diagram to convey to one skilled in the art to which the invention pertains, a clear understanding of the nature, purpose, operation, and to the extent known, the physical, chemical, biological, or electrical characteristics of the invention; (b) interim reports, preferably on PS Form 882, at least every twelve months from the date of the contract listing subject inventions during that period and certifying that: (1) the contractor's procedures for identifying and disclosing subject inventions as required by this paragraph e have been followed throughout the reporting period; and (2) all subject inventions have been disclosed or that there are no such inventions; and (c) a final report, preferably on PS Form 882, within three months after completion of the contract work, listing all subject inventions or certifying that there were no such inventions. 3. The contractor must obtain patent agreements to effectuate the provisions of this clause from all persons in his employ who perform any part of the work under this contract except nontechnical personnel, such as clerical and manual labor personnel. 4. The contractor agrees that the Postal Service may duplicate and disclose subject invention disclosures and all other reports and papers furnished or required to be furnished pursuant to this clause. Forfeiture of Rights in Unreported Subject Inventions 1. The contractor must forfeit to the Postal Service all rights in any subject invention which he fails to disclose to the contracting officer within six months after the time he: (a) files or causes to be filed a United States or foreign application thereon, or (b) submits the final report required by paragraph e.2.(c) of this clause. 2. However, the contractor must not forfeit rights in a subject invention if, within the time specified in 1.(a) or 1.(b) of this paragraph f, the contractor: (a) prepares a written decision based upon a review of the record that the invention was neither conceived nor first actually reduced to practice in the course of or under the contract; or (b) contending that the invention is not a subject invention, he nevertheless discloses the invention and all facts pertinent to his contention to the contracting officer; or (c) establishes that the failure to disclose did not result from his fault or negligence. 3. Pending written assignment of the patent applications and patents on a subject invention determined by the contracting officer to be forfeited (such determination to be a final decision under the Claims and Disputes clause), the contractor will be deemed to hold the invention and the patent applications and patents pertaining thereto in trust for the Postal Service. The forfeiture provision of this paragraph f will be in addition to and must not supersede other rights and remedies which the Postal Service may have with respect to subject inventions. Examination of Records Relating to Inventions 1. The contracting officer or his authorized representative will, until the expiration of three years after final payment under this contract, have the right to examine any books (including laboratory notebooks), records, documents, and other supporting data of the contractor which the contracting officer reasonably deems pertinent to the discovery or identification of subject inventions or to determine compliance with the requirements of this clause. 2. The contracting officer or his authorized representative will have the right to examine all books (including laboratory notebooks), records, and documents of the contractor relating to the conception or first actual reduction to practice of inventions in the same field of technology as the work under this contract, to determine whether any such inventions are subject inventions if the contractor refuses or fails to: (a) establish the procedures of paragraph e.1 of this clause; or (b) maintain and follow such procedures; or (c) correct or eliminate any material deficiency in the procedures within thirty days after the contracting officer notifies the contractor of such a deficiency. Withholding of Payment (Not Applicable to Subcontracts) 1. Any time before final payment of the amount of this contract, the contracting officer may, if he deems such action warranted, withhold payment until a reserve not exceeding $50,000 or five percent of the amount of this contract, whichever is less, will have been set aside if in his opinion the contractor fails to: (a) establish, maintain and follow effective procedures for identifying and disclosing subject inventions pursuant to paragraph e.1 of this clause; or (b) disclose any subject invention pursuant to paragraph e.2.(a) of this clause; or (c) deliver acceptable interim reports pursuant to paragraph e.2.(b) of this clause; or (d) provide the information regarding subcontracts pursuant to paragraph i.5 of this clause. 2. Such reserve or balance will be withheld until the contracting officer has determined that the contractor has rectified whatever deficiencies exist and has delivered all reports, disclosures, and other information required by this clause. 3. Final payment under this contract will not be made before the contractor delivers to the contracting officer all disclosures of subject inventions required by paragraph e.2.(a) of this clause, an acceptable final report pursuant to e.2.(c) of this clause and all past due confirmatory instruments. 4. The contracting officer may, in his discretion, decrease or increase the sums withheld up to the maximum authorized above. If the contractor is a nonprofit organization, the maximum amount that may be withheld under this paragraph will not exceed $50,000 or one percent of the amount of this contract, whichever is less. No amount will be withheld under this paragraph while the amount specified by this paragraph is being withheld under other provisions of the contract. The withholding of any amount or subsequent payment thereof will not be construed as a waiver of any rights accruing to the government under this contract. Subcontracts 1. For the purpose of this paragraph, the term "contractor" means the party awarding a subcontract and the term "subcontractor" means the party being awarded a subcontract, regardless of tier. 2. The contractor must include this patent rights clause in every subcontract hereunder having as a purpose the conduct of experimental, developmental, or research work, unless directed by the contracting officer to include another particular clause. In the event of a refusal by a subcontractor to accept such clause, the contractor: (a) must promptly submit a written notice to the contracting officer setting forth the subcontractor's reasons for such refusal and other pertinent information which may expedite disposition of the matter; and (b) must not proceed with the subcontract without the written authorization of the contracting officer. 3. The contractor must not, in any subcontract or by using a subcontract as consideration therefor, acquire any rights in his subcontractor's subject invention for his own use (as distinguished from such rights as may be required solely to fulfill his contract obligations to the Postal Service in the performance of this contract). 4. All invention disclosures, reports, instruments, and other information required to be furnished by the subcontractor to the contracting officer under the provisions of a patent rights clause in any subcontract hereunder may, at the discretion of the contracting officer, be furnished to the contractor for transmission to the contracting officer. 5. The contractor must promptly notify the contracting officer in writing upon the award of any subcontract containing a patent rights clause by identifying the subcontractor, the applicable patent rights clause, the work to be performed under the subcontract, and the dates of award and estimated completion. Upon request of the contracting officer, the contractor must furnish a copy of the subcontract. If there are no subcontracts containing patent rights clauses, a negative report must be included in the final report submitted pursuant to paragraph e.2.(c) of this clause. 6. The contractor must identify all subject inventions of the subcontractor of which he acquires knowledge in the performance of this contract and must notify the contracting officer promptly upon the identification of the inventions. 7. It is understood that the Postal Service is a third party beneficiary of any subcontract clause granting rights to the Postal Service subject inventions, and the contractor hereby assigns to the Postal Service all rights that he would have to enforce the subcontractor's obligations for the benefit of the Postal Service with respect to subject inventions. The contractor will not be obligated to enforce the agreements of any subcontractor hereunder relating to the obligations of the subcontractor to the Postal Service in regard to subject inventions. Filing of Domestic Patent Applications 1. With respect to each subject invention in which the contractor elects to retain domestic rights pursuant to paragraph b of this clause, the contractor must have a domestic patent application filed within six months after submission of the invention disclosure pursuant to paragraph e.2.(a) of this clause, or such longer period as may be approved in writing by the contracting officer for good cause shown in writing by the contractor. With respect to such invention, the contractor must promptly notify the contracting officer of any decision not to file an application. 2. For each subject invention on which a patent application is filed by or on behalf of the contractor, the contractor must: (a) within two months after such filing, or within two months after submission of the invention disclosure if the patent application previously has been filed, deliver to the contracting officer a copy of the application as filed, including the filing date and serial number; (b) include the following statement in the second paragraph of the specification of the application and any patents issued on the subject invention. "The U.S. Postal Service has rights in this invention pursuant to Contract No. " (c) within six months after filing the application, or within six months after submitting the invention disclosure if the application has been filed previously, deliver to the contracting officer a duly executed and approved instrument on a form specified by the contracting officer fully confirmatory of all rights to which the Postal Service is entitled, and provide the Postal Service an irrevocable power to inspect and make copies of the patent application file; (d) provide the contracting officer with a copy of the patent within two months after a patent issues on the application; and (e) not less than thirty days before the expiration of the response period for any action required by the Patent and Trademark Office, notify the contracting officer of any decision not to continue prosecution of the application and deliver to the contracting officer executed instruments granting the government a power of attorney. 3. For each subject invention in which the contractor initially elects not to retain principal domestic rights, the contractor must inform the contracting officer promptly in writing of the date and identity of any on sale, public use, or publication of such invention which may constitute a statutory bar under 35 U. S.C. 102, which was authorized by or known to the contractor, or any contemplated action of this nature. Filing of Foreign Patent Applications 1. With respect to each subject invention in which the contractor elects to retain principal rights in a foreign country pursuant to paragraph b.1 of this clause, the contractor must have a patent application filed on the invention in such country, in accordance with applicable statutes and regulations, and within one of the following periods: (a) eight months from the date of a corresponding United States application filed by or on behalf of the contractor, or if such an application is not filed, six months from the date the invention is submitted in a disclosure pursuant to paragraph e.2.(a) of this clause; (b) six months from the date a license is granted by the Commissioner of Patents and Trademarks to file foreign applications when such filing has been prohibited by security reasons; or (c) such longer period as may be approved in writing by the contracting officer. 2. The contractor must notify the contracting officer promptly of each foreign application filed and, upon written request, must furnish an English version of such foreign application without additional compensation. Clause 9-16 Postal Service Title in Technical Data and Computer Software (December 1992) (9.2.2) Definitions 1. Data. Data means technical data including drawings, technical reports, studies, and similar documents; computer software and computer software documentation, including but not limited to source code, object code, algorithms, formulas, and, other data that describe design, function, operation, or capabilities, and other recorded information, regardless of the form or the medium on which it may be recorded. It does not include information incidental to contract administration, such as financial, administrative, cost or pricing, or management information. 2. Form, fit, and function data. Data relating to an item or process that are sufficient to enable physical and functional interchangeability, as well as data identifying source, size, configuration, mating and attachment characteristics, functional characteristics, and performance requirements; except that for computer software, it means data identifying origin, functional characteristics, and performance requirements but specifically excludes the source code, algorithm, process, formulas, and machine-level flow charts of the computer software. 3. Limited rights data. Data other than computer software developed at private expense, including minor modifications of these data. 4. Technical data. Data other than computer software, of a scientific or technical nature. 5. Restricted computer software. Computer software developed at private expense that is a trade secret, is commercial or financial and confidential or privileged, or is published copyrighted computer software, including minor modifications of this computer software. 6. Restricted rights. The rights of the Postal Service in restricted computer software, as set forth in a Restricted Rights Notice as provided in paragraph h below, or as otherwise may be provided in a collateral agreement incorporated in and made part of this contract. 7. Unlimited rights. The rights of the Postal Service in technical data and computer software to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform and display publicly, in any manner and for any purpose, and to have or permit others to do so. Rights 1. The Postal Service has title to all data first produced in the performance of this contract. Accordingly, the contractor assigns all rights, title, and interest to the Postal Service in all data first produced in performance of this contract. The contractor, unless directed otherwise by the contracting officer, must place on all such data delivered under this contract the following notice: "This data is the confidential property of the U.S. Postal Service and may not be used, released, reproduced, distributed or published without the express written permission of the U.S. Postal Service." 2. The contractor grants to the Postal Service a royalty-free, nonexclusive, irrevocable license throughout the world to publish, translate, deliver, perform, use, and dispose of in any manner any portion of data that is not first produced in the performance of this contract but in which copyright is owned by the contractor and that is incorporated in the data furnished under this contract, and to authorize others to do so for Postal Service purposes. 3. Unless the contracting officer's written approval is obtained, the contractor may not include in any data prepared for or delivered to the Postal Service under this contract any data which is not owned by the contractor or the Postal Service without acquiring for the Postal Service any right necessary to perfect a license of the scope set forth in subparagraph b.2. Indemnity. The contractor indemnifies the Postal Service (and its officers, agents, and employees acting for the Postal Service) against any liability, including costs and expenses, (1) for violation of proprietary rights, copyrights, or rights of privacy or publicity, arising out of the creation,delivery, or use of any works furnished under this contract, or (2) based upon any libelous or other unlawful matter contained in these works. This provision does not apply to material furnished by the Postal Service and incorporated in the works to which this clause applies. Additional Rights in Technical Data 1. Except as provided in paragraph b, the Postal Service has unlimited rights in: (a) Form fit, and function data, including such data developed at private expense, delivered under this contract, and (b) Technical data delivered under this contract that constitute manuals or instructional and training material for installation, operation, or routine maintenance and repair of items, components, or processes delivered or furnished for use under this contract. 2. Copyright (a) The contracting officer may direct the contractor to establish, or authorize the establishment of, claim to copyright in the technical data and to assign, or obtain the written assignment of, the copyright to the Postal Service or its designated assignee. (b) The contractor may not, without prior written permission of the contracting officer, incorporate in technical data delivered under this contract any data not first produced in the performance of this contract containing the copyright notice of 176 U.S.C. 401 or 402, unless the contractor identifies the data and grants to the Postal Service, or acquires on its behalf at no cost to the Postal Service, a paid-up, nonexclusive, irrevocable worldwide license in such copyright data to reproduce, prepare derivative works, distribute copies to the public, and perform and display the data publicly. (c) The Postal Service agrees not to remove any copyright notices placed on data pursuant to this section d, and to include such notices on all reproductions of the data. Release, Publication, and Use of Technical Data and Computer Software 1. Unless prior written permission is obtained from the contracting officer or to the extent expressly set forth in this contract, the contractor will not use, release to others, reproduce, distribute, or publish any technical data or computer software first produced by the contractor in the performance of the contract. 2. The contractor agrees that if it receives or is given access to data or software necessary for the performance of this contract that contain restrictive markings, the contractor will treat the data or software in accordance with the markings unless otherwise specifically authorized in writing by the contracting officer. Unauthorized Marking of Data or Computer Software 1. If any technical data or computer software delivered under this contract are marked with the notice specified in paragraph h and the use of such a notice is not authorized by this clause, or if the data or computer software bear any other unauthorized restrictive markings, the contracting officer may at any time either return the data or software or cancel the markings. The contracting officer must afford the contractor at least 30 days to provide a written justification to substantiate the propriety of the markings. Failure of the contractor to timely respond, or to provide written justification, may result in the cancellation of the markings. The contracting officer must consider any written justification by the contractor and notify the contractor if the markings are determined to be authorized. 2. The foregoing procedures may be modified in accordance with Postal Service regulations implementing the Freedom of Information Act (5 U.S.C. 552) if necessary to respond to a request thereunder. In addition, the contractor is not precluded from bringing a claim in connection with any dispute that may arise as the result of the Postal Service's action to remove any markings on data or computer sofware, unless this action occurs as the result of a final disposition of the matter by a court of competent jurisdiction. Omitted or Incorrect Markings 1. Technical data or computer software delivered to the Postal Service without the limited rights notice or restricted notice authorized by paragraph h, or the data rights notice required by paragraph b, will be deemed to have been furnished with unlimited rights, and the Postal Service assumes no liability for the disclosure, use, or reproduction of such data or computer software. However, to the extent the data or software have not been disclosed outside the Postal Service, the contractor may request, within six months (or a longer time approved by the contracting officer) after delivery of the data or software, permission to have notices placed on qualifying technical data or computer software at the contractor's expense, and the contracting officer may agree to do so if the contractor: (a) Identifies the technical data or computer software to which the omitted notice is to be applied; (b) Demonstrates that the omission of the notice was inadvertent; (c) Establishes that the use of the proposed notice is authorized; and (d) Acknowledges that the Postal Service has no liability with respect to the disclosure, use, or reproduction of any such data or software made before the addition of the notice or resulting from the omission of the notice. 2. The contracting officer may also (a) permit correction of incorrect notices, at the contractor's expense, if the contractor identifies the technical data or computer software on which correction of the notice is to be made and demonstrates that the correct notice is authorized, or (b) correct any incorrect notices. Protection of Rights 1. Protection of Limited Rights Data. When technical data other than data listed in section d, above, are specified to be delivered under this contract and qualify as limited rights data, if the contractor desires to continue protection of such data, the contractor must affix the following "Limited Rights Notice" to the data, and the Postal Service will thereafter treat the data, subject to paragraphs f and g above, in accordance with the Notice: "LIMITED RIGHTS NOTICE These technical data are submitted with limited rights under Postal Service Contract No. (and subcontract , if appropriate). These data may be reproduced and used by the Postal Service with the express limitation that they will not, without written permission of the contractor, be used for purposes of manufacture or disclosed outside the Postal Service; except that the Postal Service may disclose these data outside the Postal Service for the following purposes, provided that the Postal Service makes such disclosure subject to prohibition against further use and disclosure: 1. Use (except for manufacture) by support service contractors. 2. Evaluation by Postal Service evaluators. 3. Use (except for manufacture) by other contractors participating in the Postal Service's program of which the specific contract is a part, for information and in connection with the work performed under each contract. 4. Emergency repair or overhaul work. This Notice must be marked on any reproduction of these data, in whole or in part." 2. Protection of Restricted Computer Software (a) When computer software is specified to be delivered under this contract and qualifies as restricted computer software, if the contractor desires to continue protection of such computer software, the contractor must affix the following "Restricted Rights Notice" to the computer software, and the Postal Service will thereafter treat the computer software, subject to paragraphs f and g above, in accordance with the Notice: "RESTRICTED RIGHTS NOTICE a. This computer software is submitted with restricted rights under Postal Service Contract No. (and subcontract , if appropriate). It may not be used, reproduced, or disclosed by the Postal Service except as provided below or as otherwise stated in the contract. b. This computer software may be: 1. Used or copied for use in or with the computer or computers for which it was acquired, including use at any Postal Service installation ot which the computer or computers may be transferred; 2. Used or copied for use in a backup computer if any computer for which it was acquired is inoperative; 3. Reproduced for safekeeping (archives) or backup purposes; 4. Modified, adapted, or combined with other computer software, provided that the modified, adapted, or combined portions of any derivative software incorporating restricted computer software are made subject to the same a restricted rights; 5. Disclosed to and reproduced for use by support service contractors in accordance with 1 through 4 above, provided the Postal Service makes such disclosure or reproduction subject to these restricted rights; and 6. Used or copied for use in or transferred to a replacement computer. c. Notwithstanding the foregoing, if this computer software is published copyrighted computer software, it is licensed to the Postal Service, without disclosure prohibitions, with the minimum rights set forth in the preceding paragraph. d. Any other rights or limitations regarding the use, duplication, or disclosure of this computer software are to be expressly stated in, or incorporated in, the contract. e. This Notice must be marked on any reproduction of this computer software, in whole or in part." (b) When it is impracticable to include the above Notice on restricted computer software, the following short-form Notice may be used instead, on condition that the Postal Service's rights with respect to such computer software will be as specified in the above Notice unless otherwise expressly stated in the contract. "RESTRICTED RIGHTS NOTICE (SHORT FORM) Use, reproduction, or disclosure is subject to restrictions set forth in Contract No. (and subcontract , if appropriate) with (name of contractor and subcontractor)." Subcontracting. The contractor has the responsibility to obtain from its subcontractors all computer software and technical data and the rights therein necessary to fulfill the contractor's obligations under this contract. If a subcontractor refuses to accept terms affording the Postal Service such rights, the contractor must promptly bring such refusal to the attention of the contracting officer and may not proceed with subcontract award without further authorization. Standard Commercial License or Lease Agreements. The contractor unconditionally accepts the terms and conditions of this clause unless expressly provided otherwise in this contract or in a collateral agreement incorporated in and made part of this contract. Thus the contractor agrees that, notwithstanding any provisions to the contrary contained in the contractor's standard commercial license or lease agreement pertaining to any restricted computer software delivered under this contract, and irrespective of whether any such agreement has been proposed before or after issuance of this contract or of the fact that such agreement may be affixed to or accompany the restricted computer software upon delivery, the Postal Service has the rights set forth in this clause to use, duplicate, or disclose any restricted computer software delivered under this contract. Relatiionship to Patents. Nothing contained in this clause implies a license to the Postal Service under any patent or may be construed as affecting the scope of any license or other right otherwise granted to the Postal Service. Clause 9-17 Delivery of Limited Rights and Restricted Computer Software (December 1992) (9.3.2) To the extent that the contractor has, in its proposal, identified pre-existing proprietary data or restricted computer software pursuant to the "Representation of Rights in Data" of the solicitation, the contracting officer, or a duly authorized representative, until the expiration of three years after final payment of this contract, will have the right to examine any books, records, documents or other data supporting the contractor's claim(s) hereunder. Notwithstanding the contractor's rights and claims of, and the Postal Service's agreement to protect, pre-existing proprietary data or software, the Postal Service will have unlimited or unrestricted rights without additional contractor compensation, to any data or software identified above, that is: 1. obtained independent of this contract; 2. in the public domain; or 3. determined, subsequent to the effective date of this contract, to not have qualified as pre-existing data or software or a derivative of pre-existing data or software to which the contractor would have such proprietary rights. Clause 9-18 Manufacture of Repair Parts (December 1992) (9.3.2) In addition to the Postal Service rights specified in the "Limited Rights Notice" of the clause entitled "Rights in Technical Data" paragraph g, the Postal Service has the unilateral right to use competitive procedures to procure repair parts or assemblies for the equipment or supply items being developed under this contract. If the repair parts or assemblies have been identified as being subject to protection under "Limited Data Rights" or "Restricted Computer Software" provisions of this contract, the Postal Service will obtain a nondisclosure agreement from interested offerors prior to releasing any drawings, specifications or other descriptive documentation suitable for manufacturing or reproducing such repair parts of assemblies. Clause 10-1 Participation of Small, Minority-owned and Woman-owned Business (December 1989) (10.1.5) The policy of the Postal Service is to encourage the participation of small, minority-owned and woman-owned business in its purchases of supplies and services to the maximum extent practicable consistent with efficient contract performance. The contractor agrees to follow the same policy in performing this contract. The contractor will submit a report to the contracting officer within 10 calendar days after the end of each quarter, describing all subcontract awards to small, minority-owned, or woman-owned businesses. The contractor agrees to cooperate in any studies or surveys related to small, minority-owned and woman-owned business subcontracting that may be conducted by the Postal Service. Clause 10-2 Small, Minority-owned and Woman-owned Business Subcontracting Requirements (February 1992) (10.1.5) Definitions 1. Affiliates. Businesses connected by the fact that one controls or has the power to control the other, or a third party controls or has the power to control both. Factors such as common ownership, common management, and contractual relationships must be considered. Franchise agreements are not considered evidence of affiliation if the franchisee has a right to profit in proportion to its ownership and bears the risk of loss or failure. 2. Commercial product. A product in regular production that is sold in substantial quantities to the general public and/or industry at established catalog or market prices. As used in this clause, it also means any product that, in the opinion of the contracting officer, differs only insignificantly from the contractor's commercial product. 3. Dominant. This includes being a controlling or major influence in a market in which a number of businesses are primarily engaged. Factors such as business volume; number of employees; financial resources; competitiveness; ownership or control of materials, processes, patents, and license agreements; facilities; sales territory; and nature of the business must be considered. 4. Minority-owned business. A business concern at least 51 percent of which is owned by, and whose management and daily business operations are controlled by, one or more members of a socially and economically disadvantaged minority group, namely U.S. citizens who are Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, or Asian-Indian Americans. (Native Americans means American Indians, Eskimos, Aleuts, and Native Hawaiians. Asian-Pacific Americans are U.S. citizens whose origins are Japanese, Chinese, Filipino, Vietnamese, Korean, Somoan, Laotian, Kampuchean, Taiwanese or in the U.S. Trust Territories of the Pacific Islands. Asian-Indian Americans are U.S. citizens whose origins are in the Indian Subcontinent.) 5. Number of employees. Average employment (including domestic and foreign affiliates), based on the number of people employed (whether full-time, part-time, or temporary), during each pay period of the preceding 12 months, or, if the business has been in existence less than 12 months, during each pay period of its existence. 6. Small business.A business, including affiliates, that is independently owned and operated, is not dominant in producing or performing the supplies or services being purchased, and has no more than 500 employees, unless a different size standard has been established by the Small Business Administration (see 13 CFR 121, particularly for different size standards for airline, railroad, and construction companies). For subcontracts of $50,000 or less, a subcontractor having no more than 500 employees qualifies as a small business without regard to other factors. 7. Woman-owned business. A business at least 51 percent of which is owned by a woman (or women) who is a U.S. citizen, controls the firm by exercising the power to make policy decisions, and operates the business by being actively involved in day-to-day management. 8. Subcontract. Any agreement (other than one involving an employer-employee relationship) entered into by a Postal Service contractor or subcontractor calling for supplies or services required for performance of the contract or subcontract. All offerors except small businesses must submit and negotiate a subcontracting plan that separately addresses subcontracting with small, minority-owned and woman-owned businesses. This plan will be included in and made a part of the contract. The subcontracting plan must be negotiated within the time specified by the contracting officer. Failure to submit and negotiate the subcontracting plan will make the offeror ineligible for award. The offeror's subcontracting plan must include the following: 1. Goals, in terms of percentages of total planned subcontracting dollars, for the use of small, minority-owned and woman-owned businesses. The offeror must include all subcontracts that contribute to contract performance, and may include a proportionate share of supplies and services that are normally allocated as indirect costs. 2. A statement of the: (a) Total dollars planned to be subcontracted; and (b) Total dollars planned to be subcontracted to small, minority-owned and woman-owned businesses. (c) The plan may also include goals for small and woman-owned business participation. 3. A description of the principal types of supplies and services to be subcontracted, identifying the types planned for subcontracting to small, minority-owned and woman-owned businesses. 4. A description of the method used to develop the subcontracting goals. 5. A description of the method used to identify potential sources for solicitation purposes. 6. A statement as to whether the offer included indirect costs in establishing subcontracting goals, and a description of the method used to determine the proportionate share of indirect costs to be incurred with small, minority-owned and woman-owned businesses. 7. The name of the individual employed by the offeror who will administer the offeror's subcontracting program, and a description of the individual's duties. 8. A description of efforts the offeror will make to ensure that small, minority-owned and woman-owned businesses have an equitable opportunity to compete for subcontracts. 9. Assurances that the offeror will (a) include this clause in all subcontracts expected to exceed $500,000; and (b) require all subcontractors receiving subcontracts in excess of $1,000,000 ($500,000 for construction) to adopt a plan similar to the plan agreed to by the offeror. 10. A recitation of the types of records the offeror will maintain to demonstrate procedures adopted to comply with the requirements and goals in the plan. The records must include at least the following (on a plant-wide or company-wide basis, unless otherwise indicated); (a) Source lists, guides, and other data identifying small, minorityowned and woman-owned businesses; (b) Organizations contacted in an attempt to locate sources that are small, minority-owned and woman-owned businesses; (c) Records on each subcontract solicitation resulting in an award of more than $100,000, indicating whether small, minority-owned or woman-owned businesses were solicited and if not, why not, and whether award was made to a small, minority-owned or woman-owned business; (d) Records to support subcontract award data, including the name, address, and business size of each subcontractor. Contractors having companyor division-wide annual plans need not comply with this requirement. In order to implement this plan effectively, the contractor must take the following steps: 1. Assist small, minority-owned and woman-owned businesses by arranging solicitations, time for proposal preparation, quantities, specifications, and delivery schedules so as to facilitate their participation. When the contractor's lists of potential small, minority-owned and woman-owned business subcontractors are excessively long, reasonable effort should be made to give all such businesses an opportunity to compete over a period of time. 2. Consider the abilities of small, minority-owned and woman-owned businesses in all "make-or-buy" decisions. 3. Counsel and discuss subcontracting opportunities with representatives of small, minority-owned and woman-owned businesses. A master subcontracting plan on a plantor division-wide basis containing all the elements required by paragraph c above, except goals, may be incorporated by reference as part of the subcontracting plan required by this clause, provided: 1. The master plan has been approved; 2. The offeror provides to the contracting officer copies of the approved master plan and evidence of approval; and 3. Goals and any deviations from the master plan deemed necessary by the contracting officer to satisfy the requirements of this contract are set forth in the individual subcontracting plan. If a commercial product is offered, the subcontracting plan required by this clause may relate to the offeror's production generally, for both commercial and noncommercial products, rather than solely to the Postal Service contract. In these cases, the offeror may, with the concurrence of the contracting officer, submit one company-wide or division-wide annual plan. 1. The annual plan must be reviewed for approval by the Postal Service purchasing office awarding the offeror its prime contract requiring a subcontracting plan during the fiscal year. 2. The approved plan must remain in effect during the offeror's fiscal year for all of the offeror's commercial products. The contractor may rely on written representations by subcontractors regarding their status as small, minority-owned or woman-owned business concerns. In determining the offeror's responsibility, the contracting officer may consider the offeror's compliance with subcontracting plans under previous contracts. Failure of the contractor or subcontractor to comply in good faith with this clause or an approved plan required by this clause will be a material breach of the contract. Clause 10-3 Convict Labor (October 1987) (10.2.2) In connection with the work under this contract, the contractor agrees not to employ any person undergoing sentence of imprisonment, except as provided by Public Law 89-176, September 10, 1965 (18 U.S.C. 4082(c)(2)) and Executive Order 11755, December 29, 1973. Clause 10-4 Contract Work Hours and Safety Standards Act - Overtime Compensation (April 1989) (10.2.3) Overtime Requirements. No contractor or subcontractor contracting for any part of the contract work may require or permit any laborer or mechanic to work more than 40 hours in any workweek on work subject to the provisions of the Contract Work Hours and Safety Standards Act, unless the laborer or mechanic receives compensation at a rate not less than one-and-one-half times the laborer's or mechanic's basic rate of pay for all such hours worked in excess of 40 hours. Violation, Liability for Unpaid Wages, and Liquidated Damages. In the event of any violation of paragraph a above, the contractor and any subcontractor responsible for the violation are liable to any affected employee for unpaid wages. The contractor and subcontractor are also liable to the Postal Service for liquidated damages, which will be computed for each laborer or mechanic at $10 for each day on which the employee was required or permitted to work in violation of paragraph a above. Withholding for Unpaid Wages and Liquidated Damages. The contracting officer may withhold from the contractor, from any moneys payable to the contractor or subcontractor under this or any other contract with the same prime contractor, or any other federally-assisted contract subject to the Contract Work Hours and Safety Standards Act held by the same prime contractor, sums as may administratively be determined necessary to satisfy any liabilities of the contractor or subcontractor for unpaid wages and liquidated damages pursuant to paragraph b above. Records. The contractor or subcontractor must maintain for three years from the completion of the contract for each laborer and mechanic (including watchmen and guards) working on the contract payroll records which contain the name, address, social security number, and classification(s) of each such employee, hourly rates of wages paid, number of daily and weekly hours worked, deductions made, and actual wages paid. The contractor or subcontractor must make these records available for inspection, copying, or transcription by authorized representatives of the contracting officer and the Department of Labor, and must permit such representatives to interview employees during working hours on the job. (The Department of Labor information collection and record keeping requirements in this paragraph d have been approved by the Office of Management and Budget under OMB control numbers 1215-0140 and 1215-0017.) Subcontracts. The contractor must insert paragraphs a through d of this clause in all subcontracts, and must require their inclusion in all subcontracts at any tier. Clause 10-5 Davis-Bacon Act (April 1989) (10.2.4) Minimum Wages. 1. All mechanics and laborers employed in the contract work (other than maintenance work of a recurring, routine nature necessary to keep the building or space in condition to be continuously used at an established capacity and efficiency for its intended purpose) must be paid unconditionally, and not less than once a week, without deduction or rebate (except for deductions permitted by the Copeland Regulations (29 CFR Part 3)), the amounts due at the time of payment computed at rates not less than the aggregate of the basic hourly rates and rates of payments, contributions, or costs for any fringe benefits contained in the wage-determination decision of the Secretary of Labor, attached hereto, regardless of any contractual relationship alleged to exist between the lessor (for construction contracts, use "contractor" instead of "lessor"), or subcontractor and these laborers and mechanics. A copy of the wage-determination decision must be kept posted by the lessor at the site of the work in a prominent place where it can easily be seen by the workers. 2. The lessor may discharge its obligation under this clause to workers in any classification for which the wage-determination decision contains: (a) Only a basic hourly rate of pay, by making payment at not less than that rate, except as otherwise provided in the Copeland Regulations (29 CFR Part 3); or (b) Both a basic hourly rate of pay and fringe-benefit payments, by paying in cash, by irrevocably contributing to a fund, plan, or program for, or by assuming an enforceable commitment to bear the cost of, bona fide fringe benefits contemplated by 40 U.S.C. 276a, or by a combination of these. 3. Contributions made, or costs assumed, on other than a weekly basis (but not less often than quarterly) are considered as having been constructively made for a weekly period. When a fringe benefit is expressed in a wage determination in any manner other than as an hourly rate and the lessor pays a cash equivalent or provides an alternative fringe benefit, the lessor must furnish information with the lessor's payrolls showing how the lessor determined that the cost incurred to make the cash payment or to provide the alternative fringe benefit is equal to the cost of the wage-determination fringe benefits. When the lessor provides a fringe benefit different from that contained in the wage determination, the lessor must show how the hourly rate was arrived at. In the event of disagreement as to an equivalent of any fringe benefit, the contracting officer must submit the question, together with the contracting officer's recommendation, to the Secretary of Labor for final determination. 4. If the contractor does not make payments to a trustee or other third person, the contractor may consider as payment of wages the costs reasonably anticipated in providing bona fide fringe benefits, but only with the approval of the Secretary of Labor pursuant to a written request by the lessor. The Secretary of Labor may require the lessor to set aside assets in a separate account, to meet the lessor's obligations under any unfunded plan or program. 5. The contracting officer will require that any class of laborers or mechanics not listed in the wage-determination but to be employed under the contract will be classified in conformance with the wage determination and report the action taken to the ADMINISTRATOR OF THE WAGE AND HOUR DIVISION EMPLOYMENT STANDARDS ADMINISTRATION US DEPARTMENT OF LABOR WASHINGTON DC 2021-0001 for approval. The contracting officer will approve an additional classification and wage rate and fringe benefits therefor only if: (a) The work to be performed by the classification requested is not performed by a classification in the wage determination; (b) The classification is utilized in the area by the construction industry; and (c) The proposed wage rate, including any bona fide fringe benefits, bears a reasonable relationship to the wage rates contained in the wage determination. 6. If the lessor, the laborers or mechanics to be employed in the classification or their representatives, and the contracting officer do not agree on the proposed classification and wage rate and fringe benefits therefore, the contracting officer must submit the question, together with the views of the interested parties and the contracting officer's recommendation, to the Wage and Hour Administrator for final determination. The Administrator or an authorized representative will, within 30 days of receipt, approve, modify, or disapprove every proposed additional classification action, or issue a final determination if the parties disagree, and so advise the contracting officer or advise that additional time is necessary. The finally approved wage rate (and fringe benefits if appropriate) must be paid to all workers performing work in the classification under the contract from the first day work is performed in the classification. The lessor must post a copy of the final determination of the conformance action with the wage determination at the site of the work. (The Department of Labor information collection and reporting requirements contained in subparagraph a.5 above and in this subparagraph a.6 have been approved by the Office of Management and Budget under OMB control number 1215-0140.) Apprentices and Trainees 1. Apprentices may be permitted to work only when (a) registered, individually, under a bona fide apprenticeship program registered with a state apprenticeship agency recognized by the Bureau of Apprenticeship and Training, U.S. Department of Labor, or, if no such recognized agency exists in a state, under a program registered with the Bureau of Apprenticeship and Training; or (b) if not individually registered in the program, certified by the Bureau of Apprenticeship and Training or state agency (as appropriate) to be eligible for probationary employment as an apprentice. Trainees may be permitted to work only if individually registered in a program approved by the Employment and Training Administration, U.S. Department of Labor. 2. The ratio of apprentices to journeymen or trainees to journeymen in any craft classification must not be greater than that permitted for the lessor's entire work force under the registered apprenticeship or trainee program. Apprentices and trainees must be paid at least the applicable wage rates and fringe benefits specified in the approved apprenticeship or trainee program for the particular apprentice's or trainee's level of progress, expressed as a percentage of the journeyman hourly rate specified in the applicable wage determination. If the apprenticeship or trainee program does not specify fringe benefits, apprentices or trainees must be paid the full amount of fringe benefits listed on the wage determination for the applicable classification unless the Administrator of the Wage and Hour Division determines that a different practice prevails. Any employee listed on a payroll at an apprentice or trainee wage rate but not registered, or performing work on the job site in excess of the ratio permitted under the registered program, must be paid the wage rate on the wage determination for the classification or work actually performed. 3. If the Bureau of Apprenticeship and Training or the state agency recognized by the Bureau (as appropriate) withdraws approval of an apprenticeship program, or if the Employment and Training Administration withdraws approval of a trainee program, the contractor will no longer be permitted to utilize apprentices or trainees (as appropriate) at less than the applicable predetermined rate for the work performed until an acceptable program is approved. (See 29 CFR 5.16 for special provisions that apply to training plans approved or recognized by the Department of Labor prior to August 20, 1975. ) 4. The utilization of apprentices, trainees, and journeymen must be in conformity with the equal employment opportunity requirements of Executive Order 11246, as amended, and 29 CFR Part 30. Overtime Compensation 1. The lessor may not require or permit any laborer or mechanic employed on any work under this contract to work more than 40 hours in any workweek on work subject to the provisions of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333), unless the laborer or mechanic receives compensation at a rate not less than one-and-one-half times the laborer's or mechanic's basic rate of pay for all such hours worked in excess of 40 hours. 2. For violations for subparagraph c.1 above, the lessor is liable for liquidated damages, which will be computed for each laborer or mechanic at $10 for each day on which the employee was required or permitted to work in violation of subparagraph c.1 above. 3. The contracting officer may withhold from the lessor sums as may administratively be determined necessary to satisfy any liabilities of the lessor for unpaid wages and liquidated damages pursuant to subparagraph c.2 above. Payroll and Other Records 1. For all laborers and mechanics employed in the work covered by this clause, the lessor must maintain payrolls and related basic records and preserve them for a period of three years after contract completion. The records must contain the name, address, and social security number of each employee, the employee's correct classification, rate of pay (including rates of contributions for, or costs assumed to provide, fringe benefits), the daily and weekly number of hours worked, deductions made, and actual wages paid. Whenever the lessor has obtained approval from the Secretary of Labor to assume a commitment to bear the cost of fringe benefits under subparagraph a.4 above, the lessor must maintain records showing the commitment and its approval, communication of the plan or program to the employees affected, and the costs anticipated or incurred under the plan or program. Lessors employing apprentices or trainees under approved programs must maintain written evidence of the registration of apprenticeship programs and certification of trainee programs, the registration of the apprentices and trainees, and the ratios and wage rates prescribed in the applicable programs. (The Department of Labor information collection and record keeping requirements in this subparagraph d.1 have been approved by the Office of Management and Budget under OMB control numbers 1215-0140 and 1215-0017). 2. The lessor must submit weekly, for each week in which any work covered by this clause is performed, a copy of all payrolls to the contracting officer. The lessor is responsible for the submission of copies of payrolls of all subcontractors. The copy must be accompanied by a statement signed by the lessor indicating that the payrolls are correct and complete, that the wage rates contained in them are not less than those determined by the Secretary of Labor, and that the classifications set forth for each laborer or mechanic conform with the work the laborer or mechanic performed. Submission of the Weekly Statement of Compliance (see 29 CFR 5.5(a)(3)(ii)) required under this agreement satisfies this requirement. As required by this clause, the lessor must submit a copy of any approval by the Secretary of Labor. (The Department of Labor information collection and reporting requirements in this subparagraph d.2 have been approved by the Office of Management and Budget under OMB control number 1215-0149.) 3. The lessor's records required under this clause must be available for inspection by authorized representatives of the contracting officer and the Department of Labor, and the lessor must permit the representative to interview employees during working hours on the job. 4. The lessor must comply with the Copeland Regulations of the Secretary of Labor (29 CFR Part 3), which are hereby incorporated in this contract by reference. Withholding of Funds.The contracting officer may withhold from the lessor under this or any other contract with the lessor so much of the accrued payments or advances as is considered necessary to pay all laborers and mechanics the full amount of wages required by this contract or any other contract subject to the Davis-Bacon prevailing wage requirements that is held by the lessor. Subcontracts 1. If the lessor or any subcontractor fails to pay any laborer or mechanic employed on the site of the work any of the wages required by the contract, the contracting officer may, after written notice to the lessor, suspend further payments or advances to the lessor until violations have ceased. 2. The lessor agrees to insert this clause, including this paragraph f, in all subcontracts hereunder. The term "lessor" as used in this clause in any subcontract, is deemed to refer to the lower-tier subcontractor. Compliance with Davis-Bacon and Related Act Requirements. All rulings and interpretations of the Davis-Bacon Act and related acts contained in 29 CFR Parts 1, 3, and 5 are hereby incorporated by reference in this contract. Certification of Eligibility 1. By entering into this contract, the lessor certifies that neither it or any person or firm having an interest in the lessor is ineligible to be awarded contracts by virtue of section 3(a) of the Davis-Bacon Act or 29 CFR 5.12(a)(1). 2. No part of this contract will be subcontracted to any person or firm ineligible for contract award by virtue of section 3(a) of the Davis-Bacon Act or 29 CFR 5.12(a)(1). 3. The penalty for making false statements is prescribed in the U.S. Criminal Code, 18 U.S.C. 1001. Contract Termination and Debarment. A breach of this Davis-Bacon Act clause may be grounds for termination of the contract and debarment as a contractor and subcontractor as provided in 29 CFR 5.12. Disputes Concerning Labor Standards. Disputes arising out of the labor standards provisions of this contract are not subject to the Claims and Disputes clause. They will be resolved in accordance with the procedures of the Department of Labor set forth in 29 CFR Parts 5,6, and 7. Disputes within the meaning of this clause include disputes between the lessor (or any of its subcontractors) and the Postal Service, the U.S. Department of Labor, or the employees or their representatives. Clause 10-6 Compliance by States with Labor Standards (October 1987) (10.2.4) The contractor agrees to comply with the Contract Work Hours and Safety Standards Act - Overtime Compensation and Davis-Bacon Act clauses of this contract, to provide for similar compliance in subcontracts with states or political subdivisions thereof, and to insert the clauses in all subcontracts with private persons or firms. Clause 10-7 Contract Work Hours and Safety Standards Act - Safety Standards (April 1989) (10.2.4) To the extent that the work includes construction, alteration, repair, painting, or decorating, the lessor (for construction contracts, use "contractor" instead of "lessor") may not require any laborer or mechanic to work in surroundings or under conditions that are unsanitary, hazardous, or dangerous to the laborer's or mechanic's health or safety, as provided under standards promulgated by the Secretary of Labor under the authority of 40 U.S.C. 333 (see 29 CFR 1910 and 1926). If the lessor fails to comply with this clause, the Postal Service, at its discretion, may cancel this contract, contract for the balance of the work or term, and charge to the lessor any additional costs incurred. The lessor agrees to insert this clause, including this paragraph c, in all subcontracts and to require its inclusion in all subcontracts at any tier. The term "lessor," as used in this clause in any subcontract, is deemed to refer to the lower-tier subcontractor. Clause 10-8 Walsh-Healey Public Contracts Act (October 1987) (10.2.5) All representations and stipulations required by the Act and related regulations issued by the Secretary of Labor (41 CFR chapter 50) are hereby incorporated in this contract by reference. These representations and stipulations are subject to all applicable rulings and interpretations of the Secretary of Labor. All employees whose work relates to this contract must be paid at least the minimum wage prescribed by the Secretary of Labor (41 CFR 50-202.2), except that learners, student learners, apprentices, and handicapped workers may be employed at less than the prescribed minimum wage (see 41 CFR 50-202.3) to the same extent as permitted under Section 14 of the Fair labor Standards Act (41 U. S.C. 40). Clause 10-9 Equal Opportunity (October 1987) (10.2.7) The contractor may not discriminate against employees or applicants because of race, color, religion, sex, or national origin. The contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to race, color, religion, sex, or national origin. This action must include, but not be limited to, employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. The contractor agrees to post in conspicuous places, available to employees and applicants, notices provided by the contracting officer setting forth the provisions of this clause. The contractor must, in all solicitations or advertisements for employees placed by it or on its behalf, state that all qualified applicants will be considered for employment without regard to race, color, religion, sex, or national origin. The contractor must send to each union or workers' representative with which the contractor has a collective bargaining agreement or other understanding, a notice, provided by the contracting officer, advising the union or workers' representative of the contractor's commitments under this clause, and must post copies of the notice in conspicuous places available to employees and applicants. The contractor must comply with all provisions of Executive Order (EO) 11246 of September 24, 1965, as amended, and of the rules, regulations, and relevant orders of the Secretary of Labor. The contractor must furnish all information and reports required by the Executive Order, and by the rules, regulations, and orders of the Secretary, and must permit access to the contractor's books, records, and accounts by the Postal Service and the Secretary for purposes of investigation to ascertain compliance with these rules, regulations, and orders. If the contractor fails to comply with this clause or with any of the said rules, regulations, or orders, this contract may be canceled, terminated, or suspended, in whole or in part; the contractor may be declared ineligible for further contracts in accordance with the Executive Order; and other sanctions may be imposed and remedies invoked under the Executive Order, or by rule, regulation, or order of the Secretary, or as otherwise provided by law. The contractor must insert this clause, including this paragraph g, in all subcontracts or purchase orders under this contract unless exempted by Secretary of Labor rules, regulations, or orders issued under the Executive Order. The contractor must take such action with respect to any such subcontract or purchase order as the Postal Service may direct as a means of enforcing the terms and conditions of this clause (including sanctions for noncompliance), provided, however, that if the contractor becomes involved in, or is threatened with, litigation as a result, the contractor may request the Postal Service to enter into the litigation to protect the interest of the Postal Service. Disputes under this clause will be governed by the procedures in 41 CFR 60-1.1. Clause 10-10 Affirmative Action Compliance Requirements for Construction (October 1987) (10.2.7) Definitions 1. Covered area.The geographical area described in the solicitation for this contract. 2. Director. Director, Office of Federal Contract Compliance Programs (OFCCP), United States Department of Labor, or any person to whom the Director delegates authority. 3. Employer identification number. The federal Social Security number used on the employer's quarterly federal tax return, U.S. Treasury Department Form 941. 4. Minority means: (a) American Indian or Alaskan Native (all persons having origins in any of the original peoples of North America and maintaining identifiable tribal affiliations through membership and participation or community identification); (b) Asian and Pacific Islander (all persons having origins in any of the original peoples of the Far East, Southeast Asia, the Indian Subcontinent, or the Pacific Islands); (c) Black (all persons having origins in any of the Black African racial groups not of Hispanic origin); and (d) Hispanic (all persons of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish culture or origin, regardless of race). If the contractor, or subcontractor at any tier, subcontracts a portion of the work involving any construction trade, each such subcontract in excess of $10,000 must include this clause and the Notice containing the goals for minority and female participation stated in the solicitation for this. If the contractor is participating in a Hometown Plan (41 CFR 60-4) approved by the U.S. Department of Labor in a covered area, either individually or through an association, its affirmative action obligations on all work in the plan area (including goals) must comply with the plan for those trades that have unions participating in the plan. Contractors must be able to demonstrate participation in, and compliance with, the provisions of the plan. Each contractor or subcontractor participating in an approved plan is also required to comply with its obligations under the Equal Opportunity clause, and to make a good-faith effort to achieve each goal under the plan in each trade in which it has employees. The overall good-faith performance by other contractors or subcontractors toward a goal in an approved plan does not excuse any contractor's or subcontractor's failure to make good-faith efforts to achieve the plan's goals. The contractor must implement the affirmative action procedures set forth in paragraph g below. The goals stated in the solicitation for this contract are expressed as percentages of the total hours of employment and training of minority and female utilization that the contractor should reasonably be able to achieve in each construction trade in which it has employees in the covered area. If the contractor performs construction work in a geographical area located outside of the covered area, it must apply the goals established for the geographical area where that work is actually performed. The contractor is expected to make substantially uniform progress toward its goals in each craft. Neither the terms and conditions of any collective bargaining agreement, nor the failure by a union with which the contractor has a collective bargaining agreement, to refer minorities or women will excuse the contractor's obligations under this clause, Executive Order (EO) 11246, as amended, or the regulations under the Executive Order. In order for the nonworking training hours of apprentices and trainees to be counted in meeting the goals, apprentices and trainees must be employed by the contractor during the training period, and the contractor must have made a commitment to employ the apprentices and trainees at the completion of their training, subject to the availability of employment opportunities. Trainees must be trained pursuant to training programs approved by the U.S. Department of Labor. The contractor must take affirmative action to ensure equal employment opportunity. The evaluation of the contractor's compliance with this clause will be based upon its effort to achieve maximum results from its actions. The contractor must document these efforts fully and implement affirmative action steps at least as extensive as the following: 1. Ensure a working environment free of harassment, intimidation, and coercion at all sites and in all facilities where the contractor's employees are assigned to work. The contractor, if possible, will assign two or more women to each construction project. The contractor must ensure that foremen, superintendents, and other onsite supervisory personnel are aware of and carry out the contractor's obligation to maintain such a working environment, with specific attention to minority or female individuals working at these sites or facilities. 2. Establish and maintain a current list of sources for minority and female recruitment. Provide written notification to minority and female recruitment sources and community organizations when the contractor or its unions have employment opportunities available, and maintain a record of the organizations' responses. 3. Establish and maintain a current file of the names, addresses, and telephone numbers of each minority and female off-the-street applicant, referrals of minorities or females from unions, recruitment sources, or community organizations, and the action taken with respect to each individual. If an individual was sent to the union hiring hall for referral and was not referred back to the contractor by the union or, if referred back, not employed by the contractor, this fact must be documented in the file, along with whatever additional actions the contractor may have taken. 4. Immediately notify the Director when the union or unions with which the contractor has a collective bargaining agreement have not referred back to the contractor a minority or woman sent by the contractor, or when the contractor has other information that the union referral process has impended the contractor's efforts to meet its obligations. 5. Develop on-the-job training opportunities and/or participate in training programs for the area that expressly include minorities and women, including upgrading programs and apprenticeship and trainee programs relevant to the contractor's employment needs, especially those programs funded or approved by the Department of Labor. The contractor must provide notice of these programs to the sources complied under subparagraph 2 above. 6. Disseminate the contractor's equal employment policy by: (a) Providing notice of the policy to unions and to training, recruitment, and outreach programs, and requesting their cooperation in assisting the contractor in meeting its contract obligations; (b) Including the policy in any policy manual and in collective bargaining agreements; (c) Publicizing the policy in such publications as the company newspaper and annual report; (d) Reviewing the policy with all management personnel and with all minority and female employees at least one a year; and (e) Posting the policy on bulletin boards accessible to employees at each location where construction work is performed. 7. Review, at least annually, the contractor's equal employment policy and affirmative action obligations with all employees having responsibility for hiring, assignment, layoff, termination, or other employment decisions. Conduct review of this policy with all onsite supervisory personnel before initiating construction work at a job site. A written record must be made and maintained identifying the time and place of these meetings, persons attending, subject matter discussed, and disposition of the subject matter. 8. Disseminate the contractor's equal employment policy externally by including it in any advertising in the news media, specifically including minority and female news media. Provide written notification to, and discuss this policy with, other contractors and subcontractors which with the contractor does or anticipates doing business. 9. Direct recruitment efforts, both oral and written, to minority, female, and community organizations, to schools with minority and female students, and to minority and female recruitment and training organizations serving the contractor's recruitment area and employment needs. Not later than one month before the date for acceptance of applications for apprenticeship or training by any recruitment source, send written notification to organizations such as the above, describing the openings, screening procedures, and tests to be seud in the selection process. 10. Encourage present minority and female employees to recruit minority persons and women. When feasible, provide after-school, summer, and vacation employment to minority and female youth both on the site and in other areas of the contractor's workforce. 11. Validate all tests and other selection requirements when required under 41 CFR 60-3. 12. Conduct, at least annually, an inventory and evaluation of all minority and female personnel for promotional opportunities. Encourage these employees to seek or to prepare for, through appropriate training and other activities, opportunities for promotion. 13. Ensure that seniority practices, job classifications, work assignments, and other personnel practices do not have a discriminatory effect by continually monitoring all personnel and employment-related activities to ensure that the contractor's obligations under this contract are being carried out. 14. Ensure that all facilities and company activities are nonsegregated except that separate or single-user toilet and necessary changing facilities shall be provided to assure privacy between the sexes. 15. Maintain a record of solicitations for subcontracts for minority and female construction contractors and suppliers, including circulation of solicitations to minority and female contractor associations and other business associations. 16. Conduct a review, at least annually, of all supervisors' adherence to and performance under the contractor's equal employment policy and affirmative action obligations. The contractor is encouraged to participate in voluntary associations that may assist in fulfilling one or more of the affirmative action obligations contained in paragraph g above. The efforts of a contractor association, joint contractor-union, contractor-community, or similar group of which the contractor is a member and participant may be asserted as fulfilling one or more of its obligations under paragraph g above, provided the contractor: 1. Actively participates in the group; 2. Makes every effort to ensure that the group has a positive impact on the employment of minorities and women in the industry; 3. Ensures that concrete benefits of the program are reflected in the contractor's minority and female workforce participation; 4. Makes a good-faith effort to meet its individual goals and timetables; and 5. Can provide access to documentation that demonstrates the effectiveness of actions taken on behalf of the contractor. The obligation to comply is the contractor's, and failure of such a group to fulfill an obligation will not be a defense for the contractor's noncompliance. A single goal for minorities and a separate single goal for women must be established. The contractor is required to provide equal employment opportunity and to take affirmative action for all minority groups, both male and female, and all women, both minority and nonminority. Consequently, the contractor may be in violation of EO 11246, if a particular group is employed in a substantially disparate manner. The contractor may not use goals or affirmative action standards to discriminate against any person because of race, color, religion, sex, or national origin. The contractor may not enter into any subcontract with any person or firm debarred from government contracts under EO 11246. The contractor must carry out such sanctions and penalties for violation of this clause and of the Equal Opportunity clause, including suspension, termination, and cancellation of existing subcontracts, as may be imposed or ordered under EO 11246, as amended, and its implementing regulations, by the OFCCP. Any failure to carry out these sanctions and penalties as ordered will be a violation of this clause and EO 11246. The contractor in fulfilling its obligations under this clause must implement affirmative action procedures at least as extensive as those prescribed in paragraph g above, so as to achieve maximum results from its efforts to ensure equal employment opportunity. If the contractor fails to comply with the requirements of EO 11246, the implementing regulations, or this clause, the contracting officer will take action as prescribed in 41 CFR 60-4.8. The contractor must designate a responsible official to: 1. Monitor all employment-related activity to ensure that the contractor's equal employment policy is being carried out; 2. Submit reports as may be required; and 3. Keep records that at least include for each employee the name, address, telephone number, construction trade, union affiliation (if any), employee identification number, social security number, race, sex, status (mechanic, apprentice, trainee, helper, or laborer), dates of changes in status, hours worked per week in the indicated trade, rate of pay, and locations at which the work was performed. Records must be maintained in an easily understandable and retrievable form; however, to the degree that existing records satisfy this requirement, separate records are not required to be maintained. Nothing contained in this clause may be construed as a limitation upon the application of other laws that establish different standards of compliance or upon the requirements for the hiring of local or other area residents (for example, those under the Public Works Employment Act of 1977 and the Community Development Block Grant Program). Clause 10-11 Equal Opportunity Preaward Clearance of Subcontracts (October 1987) (10.2.7) The contractor may not enter into a first-tier subcontract for an estimated or actual amount of $1 million or more without obtaining in writing from the contracting officer a clearance that the proposed subcontractor is in compliance with equal opportunity requirements and therefore eligible for award. Clause 10-12 Service Contract Act (April 1989) (10.2.10) This contract is subject to the Service Contract Act of 1965, as amended (41 U.S.C. 351 et seq.), and to the following provisions and all other applicable provisions of the Act and regulations of the Secretary of Labor issued under the Act (29 CFR Part 4). 1. Each service employee employed in the performance of this contract by the contractor or any subcontractor must be (a) paid not less than the minimum monetary wages and (b) furnished fringe benefits in accordance with the wages and fringe benefits determined by the Secretary of Labor or an authorized representative, as specified in any wage determination attached to this contract. 2. (a) If a wage determination is attached to this contract, the contracting officer must require that any class of service employees not listed in it and to be employed under the contract (that is, the work to be performed is not performed by any classification listed in the wage determination) be classified by the contractor so as to provide a reasonable relationship (that is, appropriate level of skill comparison) between the unlisted classifications and the classifications in the wage determination. The conformed class of employees must be paid the monetary wages and furnished the fringe benefits determined under this clause. (The information collection requirements contained in this paragraph b have been approved by the Office of Management and Budget under OMB control number 1215-0150.) (b) The conforming procedure must be initiated by the contractor before the performance of contract work by the unlisted class of employees. A written report of the proposed conforming action, including information regarding the agreement or disagreement of the authorized representative of the employees involved or, if there is no authorized representative, the employees themselves, must be submitted by the contractor to the contracting officer no later than 30 days after the unlisted class of employees performs any contract work. The contracting officer must review the proposed action and promptly submit a report of it, together with the agency's recommendation and all pertinent information, including the position of the contractor and the employees, to the Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor, for review. Within 30 days of receipt, the Wage and Hour Division will approve, modify, or disapprove the action, render a final determination in the event of disagreement, or notify the contracting officer that additional time is necessary. (c) The final determination of the conformance action by the Wage and Hour Division will be transmitted to the contracting officer, who must promptly notify the contractor of the action taken. The contractor must give each affected employee a written copy of this determination, or it must be posted as a part of the wage determination. (d) (1) The process of establishing wage and fringe benefit rates bearing a reasonable relationship to those listed in a wage determination cannot be reduced to any single formula. The approach used may vary from determination to determination, depending on the circumstances. Standard wage and salary administration practices ranking various job classifications by pay grade pursuant to point schemes or other job factors may, for example, be relied upon. Guidance may also be obtained from the way various jobs are rated under federal pay systems (Federal Wage Board Pay System and the General Schedule) or from other wage determinations issued in the same locality. Basic to the establishment of conformable wage rates is the concept that a pay relationship should be maintained between job classifications on the basis of the skill required and the duties performed. (2) If a contract is modified or extended or an option is exercised, or if a contract succeeds a contract under which the classification in question was previously conformed pursuant to this clause, a new conformed wage rate and fringe benefits may be assigned to the conformed classification by indexing (that is, adjusting) the previous conformed rate and fringe benefits by an amount equal to the average (mean) percentage increase change in the wages and fringe benefits specified for all classifications to be used on the contract that are listed in the current wage determination, and those specified for the corresponding classifications in the previously applicable wage determination. If these conforming actions are accomplished before the performance of contract work by the unlisted class of employees, the contractor must advise the contracting officer of the action taken, but the other procedures in b.2(c) above need not be followed. (3) No employee engaged in performing work on this contract may be paid less than the currently applicable minimum wage specified under section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended. (e) The wage rate and fringe benefits finally determined pursuant to b.2(a) and (b) above must be paid to all employees performing in the classification from the first day on which contract work is performed by them in the classification. Failure to pay unlisted employees the compensation agreed upon by the interested parties and/or finally determined by the Wage and Hour Division retroactive to the date the class of employees began contract work is a violation of the Service Contract Act and this contract. (f) Upon discovery of failure to comply with b.2(a) through (e) above, the Wage and Hour Division will make a final determination of conformed classification, wage rate, and/or fringe benefits that will be retroactive to the date the class of employees commenced contract work. 3. If, as authorized pursuant to section 4(d) of the Service Contract Act, the term of this contract is more than one year, the minimum monetary wages and fringe benefits required to be paid or furnished to service employees will be subject to adjustment after one year and not less often than once every two years, pursuant to wage determinations to be issued by the Wage and Hour Division, Employment Standards Administration of the Department of Labor. The contractor or subcontractor may discharge the obligation to furnish fringe benefits specified in the attachment or determined conformably to it by furnishing any equivalent combinations of bona fide fringe benefits, or by making equivalent or differential payments in cash in accordance with the applicable rules set forth in Subpart D of 29 CFR Part 4, and not otherwise. 1. In the absence of a minimum-wage attachment for this contract, neither the contractor nor any subcontractor under this contract may pay any person performing work under the contract (regardless of whether they are service employees) less than the minimum wage specified by section 6(a)(1) of the Fair Labor Standards Act of 1938. Nothing in this provision relieves the contractor or any subcontractor of any other obligation under law or contract for the payment of a higher wage to any employee. 2. (a) If this contract succeeds a contract subject to the Service Contract Act, under which substantially the same services were furnished in the same locality, and service employees were paid wages and fringe benefits provided for in a collective bargaining agreement, in the absence of a minimum wage attachment for this contract setting forth collectively bargained wage rates and fringe benefits, neither the contractor nor any subcontractor under this contract may pay any service employee performing any of the contract work (regardless of whether or not the employee was employed under the predecessor contract), less than the wages and fringe benefits provided for in the agreement, to which the employee would have been entitled if employed under the predecessor contract, including accrued wages and fringe benefits and any prospective increases in wages and fringe benefits provided for under the agreement. (b) No contractor or subcontractor under this contract may be relieved of the foregoing obligation unless the limitations of section 4.1(b) of 29 CFR Part 4 apply or unless the Secretary of Labor or an authorized representative finds, after a hearing as provided in section 4.10 of 29 CFR Part 4, that the wages and/or fringe benefits provided for in the agreement vary substantially from those prevailing for services of a similar character in the locality, or determines, as provided in section 4.11 of 29 CFR Part 4, that the agreement applicable to service employees under the predecessor contract was not entered into as a result of arm's-length negotiations. (c) If it is found in accordance with the review procedures in 29 CFR 4.10 and/or 4.11 and Parts 6 and 8 that wages and/or fringe benefits in a predecessor contractor's collective bargaining agreement vary substantially from those prevailing for services of a similar character in the locality, and/or that the agreement applicable to service employees under the predecessor contract was not entered into as a result of arm's-length negotiations, the Department will issue a new or revised wage determination setting forth the applicable wage rates and fringe benefits. This determination will be made part of the contract or subcontract, in accordance with the decision of the Administrator, the Administrative Law Judge, or the Board of Service Contract Appeals, as the case may be, irrespective of whether its issuance occurs before or after award (53 Comp. Gen. 401 (1973)). In the case of a wage determination issued solely as a result of a finding of substantial variance, it will be effective as of the date of the final administrative decision. The contractor and any subcontractor under this contract must notify each service employee starting work on the contract of the minimum monetary wage and any fringe benefits required to be paid pursuant to the contract, or must post the wage determination attached to this contract. The poster provided by the Department of Labor (Publication WH 1313) must be posted in a prominent and accessible place at the worksite. Failure to comply with this requirement is a violation of section 2(a)(4) of the Act and of this contract. (Approved by the Office of Management and Budget under OMB control number 1215-0150.) The contractor or subcontractor may not permit services called for by this contract to be performed in buildings or surroundings or under working conditions provided by or under the control or supervision of the contractor or subcontractor that are unsanitary or hazardous or dangerous to the health or safety of service employees engaged to furnish these services, and the contractor or subcontractor must comply with the safety and health standards applied under 29 CFR Part 1925. 1. The contractor and each subcontractor performing work subject to the Act must maintain for three years from the completion of the work records containing the information specified in (a) through (f) following for each employee subject to the Service Contract Act and must make them available for inspection and transcription by authorized representatives of the Wage and Hour Division, Employment Standards Administration of the U.S. Department of Labor (approved by the Office of Management and Budget under OMB control numbers 1215-0017 and 1215-0150): (a) Name, address, and social security number of each employee. (b) The correct work classification, rate or rates of monetary wages paid and fringe benefits provided, rate or rates of fringe benefit payments in lieu thereof, and total daily and weekly compensation of each employee. (c) The number of daily and weekly hours so worked by each employee. (d) Any deductions, rebates, or refunds from the total daily or weekly compensation of each employee. (e) A list of monetary wages and fringe benefits for those classes of service employees not included in the wage determination attached to this contract but for whom wage rates or fringe benefits have been determined by the interested parties or by the Administrator or authorized representative pursuant to paragraph b above. A copy of the report required by b.2(b) above is such a list. (f) Any list of the predecessor contractor's employees furnished to the contractor pursuant to section 4.6(1)(2) of 29 CFR Part 4. 2. The contractor must also make available a copy of this contract for inspection or transcription by authorized representatives of the Wage and Hour Division. 3. Failure to make and maintain or to make available the records specified in this paragraph g for inspection and transcription is a violation of the regulations and this contract, and in the case of failure to produce these records, the contracting officer, upon direction of the Department of Labor and notification of the contractor, must take action to suspend any further payment or advance of funds until the violation ceases. 4. The contractor must permit authorized representatives of the Wage and Hour Division to conduct interviews with employees at the worksite during normal working hours. The contractor must unconditionally pay to each employee subject to the Service Contract Act all wages due free and clear and without subsequent deduction (except as otherwise provided by law or regulations, 29 CFR Part 4), rebate, or kickback on any account. Payments must be made no later than one pay period following the end of the regular pay period in which the wages were earned or accrued. A pay period under the Act may not be of any duration longer than semimonthly. The contracting officer must withhold or cause to be withheld from the Postal Service prime contractor under this or any other contract with the prime contractor such sums as an appropriate official of the Department of Labor requests or the contracting officer decides may be necessary to pay underpaid employees employed by the contractor or subcontractor. In the event of failure to pay employees subject to the Act wages or fringe benefits due under the Act, the Postal Service may, after authorization or by direction of the Department of Labor and written notification to the contractor, suspend any further payment or advance of funds until the violations cease. Additionally, any failure to comply with the requirements of this clause may be grounds for termination of the right to proceed with the contract work. In this event, the Postal Service may enter into other contracts or arrangements for completion of the work, charging the contractor in default with any additional cost. The contractor agrees to insert this clause in all subcontracts subject to the Act. The term "contractor," as used in this clause in any subcontract, is deemed to refer to the subcontractor, except in the term "prime contractor." Service employee means any person engaged in the performance of this contract other than any person employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in Part 541 of Title 29,Code of Federal Regulations as of July 30, 1976, and any subsequent revision of those regulations. The term includes all such persons regardless of any contractual relationship that may be alleged to exist between a contractor or subcontractor and them. 1. If wages to be paid or fringe benefits to be furnished service employees employed by the prime contractor or a subcontractor under the contract are provided for in a collective bargaining agreement that is or will be effective during any period in which the contract is being performed, the prime contractor must report this fact to the contracting officer, together with full information as to the application and accrual of these wages and fringe benefits, including any prospective increases, to service employees engaged in work on the contract, and furnish a copy of the agreement. The report must be made upon starting performance of the contract, in the case of collective bargaining agreements effective at the time. In the case of agreements or provisions or amendments thereof effective at a later time during the period of contract performance, they must be reported promptly after their negotiation. (Approved by the Office of Management and Budget under OMB control number 1215-0150.) 2. Not less than ten days before completion of any contract being performed at a Postal facility where service employees may be retained in the performance of a succeeding contract and subject to a wage determination containing vacation or other benefit provisions based upon length of service with a contractor (predecessor) or successor (section 4.173 of Regulations, 29 CFR Part 4), the incumbent contractor must furnish to the contracting officer a certified list of the names of all service employees on the contractor's or subcontractor's payroll during the last month of contract performance. The list must also contain anniversary dates of employment on the contract, either with the current or predecessor contractors of each such service employee. The contracting officer must turn over this list to the successor contractor at the commencement of the succeeding contract. (Approved by the Office of Management and Budget under OMB control number 1215-0150.) Rulings and interpretations of the Service Contract Act of 1965, as amended, are contained in Regulations, 29 CFR Part 4. 1. By entering into this contract, the contractor and its officials certify that neither they nor any person or firm with a substantial interest in the contractor's firm are ineligible to be awarded government contracts by virtue of the sanctions imposed pursuant to section 5 of the Act. 2. No part of this contract may be subcontracted to any person or firm ineligible for award of a government contract pursuant to section 5 of the Act. 3. The penalty for making false statements is prescribed in the U.S. Criminal Code, 18 U.S.C. 1001. Notwithstanding any of the other provisions of this clause, the following employees may be employed in accordance with the following variations, tolerances, and exemptions, which the Secretary of Labor, pursuant to section 4(b) of the Act before its amendment by Public Law 92-473, found to be necessary and proper in the public interest or to avoid serious impairment of the conduct of government business: 1. Apprentices, student-learners, and workers whose earning capacity is impaired by age, or physical or mental deficiency or injury may be employed at wages lower than the minimum wages otherwise required by section 2(a)(1) or 2(b)(1) of the Service Contract Act without diminishing any fringe benefits or cash payments in lieu thereof required under section 2(a)(2) of the Act, in accordance with the conditions and procedures prescribed for the employment of apprentices, student-learners, handicapped persons, and handicapped clients of sheltered workshops under section 14 of the Fair Labor Standards Act of 1938, in the regulations issued by the Administrator (29 CFR Parts 520, 521, 524, and 525). 2. The Administrator will issue certificates under the Service Contract Act for the employment of apprentices, student-learners, handicapped persons, or handicapped clients of sheltered workshops not subject to the Fair Labor Standards Act of 1938, or subject to different minimum rates of pay under the two Acts, authorizing appropriate rates of minimum wages (but without changing requirements concerning fringe benefits or supplementary cash payments in lieu thereof), applying procedures prescribed by the applicable regulations issued under the Fair Labor Standards Act of 1938 (29 CFR Parts 520, 521, 524, and 525). 3. The Administrator will also withdraw, annul, or cancel such certificates in accordance with the regulations in Parts 525 and 528 of Title 29 of the Code of Federal Regulations. Apprentices will be permitted to work at less than the predetermined rate for the work they perform when they are employed and individually registered in a bona fide apprenticeship program registered with a State Apprenticeship Agency recognized by the U.S. Department of Labor, or if no such recognized agency exists in a state, under a program registered with the Bureau of Apprenticeship and Training, Employment and Training Administration, U.S. Department of Labor. Any employee not registered as an apprentice in an approved program must be paid the wage rate and fringe benefits contained in the applicable wage determination for the journeyman classification of work actually performed. The wage rates paid apprentices may not be less than the wage rate for their level of progress set forth in the registered program, expressed as the appropriate percentage of the journeyman's rate contained in the applicable wage determination. The allowable ratio of apprentices to journeymen employed on the contract work in any craft classification may not be greater than the ratio permitted to the contractor for its entire workforce under the registered program. An employee engaged in an occupation in which he or she customarily and regularly receives more than $30 a month tips may have the amount of tips credited by the employer against the minimum wage required by section 2(a)(1) or section 2(b)(1) of the Act in accordance with section 3(m) of the Fair Labor Standards Act and Regulations, 29 CFR Part 531. However, the amount of this credit may not exceed $1.24 per hour beginning January 1, 1980, and $1.34 per hour after December 31, 1980. To utilize this proviso: 1. The employer must inform tipped employees about this tip credit allowance before the credit is utilized; 2. The employees must be allowed to retain all tips (individually or through a pooling arrangement and regardless of whether the employer elects to take a credit for tips received); 3. The employer must be able to show by records that the employee receives at least the applicable Service Contract Act minimum wage through the combination of direct wages and tip credit (approved by the Office of Management and Budget under OMB control number 1214-0017); and 4. The use of tip credit must have been permitted under any predecessor collective bargaining agreement applicable by virtue of section 4(c) of the Act. Disputes arising out of the labor standards provisions of this contract are not subject to the Claims and Disputes clause but must be resolved in accordance with the procedures of the Department of Labor set forth in 29 CFR Parts 4, 6, and 8. Disputes within the meaning of this clause include disputes between the contractor (or any of its subcontractors) and the Postal Service, the U.S. Department of Labor, or the employees or their representatives. Clause 10-13 Service Contract Act - Short Form (October 1987) (10.2.10) Except to the extent that an exemption, variation, or tolerance would apply if this contract were more than $2,500, the contractor and any subcontractor must pay employees engaged in performing work on the contract at least the minimum wage specified in section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended. Regulations and interpretations of the Service Contract Act of 1965, as amended, are contained in 29 CFR Part 4. Clause 10-14 Fair Labor Standards Act and Service Contract Act - Price Adjustment (October 1987) (10.2.10) The contractor warrants that the contract prices do not include allowance for any contingency to cover increased costs for which adjustment is provided under this clause. The minimum prevailing wage determination, including fringe benefits, issued under the Service Contract Act of 1965 by the Department of Labor, current at the beginning of each renewal period, applies to any renewal of this contract. When no such determination has been made as applied to this contract, the minimum wage established in accordance with the Service Contract Act clause applies to any renewal of this contract. When, as a result of the determination of minimum prevailing wages and fringe benefits applicable at the beginning of the renewal option period, or when an increased or decreased wage determination is otherwise applied to this contract, or when as a result of any amendment to the Fair Labor Standards Act enacted after award that affects minimum wage, and whenever such a determination becomes applicable to this contract under law, the contractor increases or decreases wages or fringe benefits of employees working on the contract to comply, the contract price or unit price labor rates will be adjusted accordingly. This adjustment is limited to increases or decreases in wages or fringe benefits, and the concomitant increases or decreases in Social Security, unemployment taxes, and workers' compensation insurance, but may not otherwise include any amount for general and administrative costs, overhead, or profit. The contractor must notify the contracting officer of any increases claimed under this clause within 30 days after the effective date of the wage change, unless the contracting officer extends this period in writing. In the case of any decrease under this clause, the contractor must promptly notify the contracting officer of the decrease, but nothing herein precludes the Postal Service from asserting a claim within the period permitted by law. The notice must state the amount claimed and give any relevant supporting data that the contracting officer may reasonably require. Upon agreement of the parties, the contract price or unit price labor rates will be modified in writing. Pending agreement on or determination of any such adjustment and its effective date, the contractor must continue performance. The contracting officer or the contracting officer's authorized representative must, for three years after final payment under the contract, be given access to and the right to examine any directly pertinent books, papers, and records of the contractor. Clause 10-15 Affirmative Action for Handicapped Workers (October 1987) (10.2.11) The contractor may not discriminate against any employee or applicant because of physical or mental handicap, in regard to any position for which the employee or applicant is qualified. The contractor agrees to take affirmative action to employ, advance in employment, and otherwise treat qualified handicapped individuals without discrimination in all employment practices, such as employment, upgrading, demotion or transfer, recruitment, advertising, layoff or termination, rates of pay or other forms of compensation, and selection for training (including apprenticeship). The contractor agrees to comply with the rules, regulations, and relevant orders of the Secretary of Labor issued pursuant to the Rehabilitation Act of 1973, as amended. In the event of the contractor's noncompliance with this clause, action may be taken in accordance with the rules and regulations and relevant orders of the Secretary of Labor. The contractor agrees to post in conspicuous places, available to employees and applicants, notices in a form to be prescribed by the Director, Office of Federal Contract Compliance Programs, provided by or through the contracting officer. These notices state the contractor's obligation under the law to take affirmative action to employ and advance in employment qualified handicapped employees and applicants, and the rights of applicants and employees. The contractor must notify each union or worker's representative with which it has a collective bargaining agreement or other understanding that the contractor is bound by the terms of section 503 of the Act and is committed to taking affirmative action to employ, and advance in employment, handicapped individuals. The contractor must include this clause in every subcontract or purchase order over $2,500 under this contract unless exempted by rules, regulations, or orders of the Secretary issued pursuant to section 503 of the Act, so its provisions will be binding upon each subcontractor or vendor. The contractor must take such action with respect to any subcontract or purchase order as the Director of the Office of Federal Contract Compliance Programs may direct to enforce these provisions, including action for noncompliance. Clause 10-16 Affirmative Action for Disabled Veterans and Veterans of the Vietnam Era (July 1995) (10.2.12) The contractor may not discriminate against any employee or applicant because that employee or applicant is a disabled veteran or veteran of the Vietnam era, in regard to any position for which the employee or applicant is qualified. The contractor agrees to take affirmative action to employ, advance in employment, and otherwise treat qualified disabled veterans and veterans of the Vietnam era without discrimination in all employment practices, such as employment, upgrading, demotion or transfer, recruitment, advertising, layoff or termination, rates of pay or other forms of compensation, and selection for training (including apprenticeship). The contractor agrees to list all employment openings which exist at the time of the execution of this contract and those which occur during the performance of this contract, including those not generated by this contract and including those occurring at an establishment of the contractor other than the one where the contract is being performed, but excluding those of independently operated corporate affiliates, at an appropriate local office of the state employment service where the opening occurs. State and local government agencies holding Postal Service contracts of $10,000 or more will also list their openings with the appropriate office of the state employment service. Listing of employment openings with the employment service system will be made at least concurrently with the use of any recruitment source or effort and will involve the normal obligations attaching to the placing of a bona fide job order, including the acceptance of referrals of veterans and nonveterans. The listing of employment openings does not require the hiring of any particular applicant or hiring from any particular group of applicants, and nothing herein is intended to relieve the contractor from any other requirements regarding nondiscrimination in employment. Whenever the contractor becomes contractually bound to the listing provisions of this clause, it must advise the employment service system in each state where it has establishments of the name and location of each hiring location in the state. The contractor may advise the state system when it is no longer bound by this clause. Paragraphs b, c, and d above do not apply to openings the contractor proposes to fill from within its own organization or under a customary and traditional employer/union hiring arrangement. But this exclusion does not apply to a particular opening once the contractor decides to consider applicants outside its own organization or employer/union arrangements for that opening. Definitions 1. All employment openings. This includes all positions except executive and top management, those positions that will be filled from within the contractor's organization, and positions lasting three days or less. This also includes full-time employment, temporary employment of more than three days duration, and part-time employment. Under the most compelling circumstances, an employment opening may not be suitable for listing, including situations in which the needs of the Postal Service cannot reasonably be otherwise supplied, when listing would be contrary to national security. or when listing would not be in the best interest of the Postal Service. 2. Appropriate office of the state employment service. This means the local office of the federal/state national system of public employment offices with assigned responsibility for serving the area where the employment opening is to be filled, including the District of Columbia, Guam, the Commonwealth of Puerto Rico, and the Virgin Islands. 3. Positions that will be filled from within the contractor's own organization. This means employment openings for which no consideration will be given to persons outside the contractor's organization (including any affiliates, subsidiaries and parent companies) and includes any openings which the contractor proposes to fill from regularly established recall lists. 4. Openings the contractor proposes to fill under a customary and traditional employer/union hiring arrangement. Employment openings the contractor proposes to fill from union halls as part of the customary and traditional hiring relationship existing between it and representatives of its employees. The contractor agrees to comply with the rules, regulations, and relevant orders of the Secretary of Labor issued pursuant to the Vietnam Era Veterans Readjustment Assistance Act of 1972, as amended. In the event of the contractor's noncompliance with this clause, action may be taken in accordance with the rules, regulations, and relevant orders of the Secretary. The contractor agrees to post in conspicuous places, available to employees and applicants, notices in a form to be prescribed by the Director, Office of Federal Contract Compliance Programs, provided by or through the contracting officer. These notices state the contractor's obligation under the law to take affirmative action to employ and advance in employment qualified disabled veterans and veterans of the Vietnam era, and the rights of applicants and employees. The contractor must notify each union or workers' representative with which it has a collective bargaining agreement or other understanding that the contractor is bound by the terms of the Act and is committed to taking affirmative action to employ, and advance in employment, qualified disabled veterans and veterans of the Vietnam era. The contractor must include this clause in every subcontract or purchase order of $10,000 or more under this contract unless exempted by rules, regulations, or orders of the Secretary issued pursuant to the Act, so its provisions will be binding upon each subcontractor or vendor. The contractor must take such action with respect to any subcontract or purchase order as the Director of the Office of Federal Contract Compliance Programs may direct to enforce these provisions, including action for noncompliance. Clause 10-17 Preference for Domestic Supplies (January 1991) (10.3.2) A six percent proposal evaluation preference will be given to domestic-source end products in accordance with chapter 10, section 3 of the USPS Procurement Manual. For the purposes of this clause: 1. End products. Articles, materials, and supplies to be acquired under this contract for Postal Service use; 2. Components. Articles, materials, and supplies directly incorporated in end products; and 3. Domestic-source end product. This is (a) an unmanufactured end product mined or produced in the United States, or (b) an end product manufactured in the United States the cost of whose components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. For procurements in excess of $25,000, components of Canadian origin are treated as domestic. Components of foreign origin of the kind referred to in subparagraphs b.2 or b.3 below will be treated as components mined, produced, or manufactured in the United States. The contractor agrees that there will be delivered under this contract only domestic-source end products, except end products: 1. That the Postal Service determines are not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality; 2. For which the vice president of Purchasing and Materials determines that domestic preference is inconsistent with the interest of the Postal Service; or 3. For which the vice president of Purchasing and Materials determines the cost to the Postal Service to be unreasonable. Clause 10-18 Preference for Domestic Construction Materials (December 1989) (10.3.3) Preference will be given to domestic construction materials in accordance with chapter 10, section 3 of the USPS Procurement Manual. For the purposes of this clause: 1. Components. Those articles, materials, and supplies incorporated directly into construction materials; 2. Construction materials. Articles, materials, and supplies brought to the construction site for incorporation into the building or work; and 3. Domestic construction material. This is (a) an unmanufactured construction material mined or produced in the United States, or (b) a construction material manufactured in the United States, if the cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. Components of foreign origin of the same class or kind as those determined to be unavailable under chapter 10, section 3 of the USPS Procurement Manual will be treated as domestic. 4. Foreign construction material. A construction material other than a domestic construction material. The contractor agrees that only domestic construction material will be used by the contractor, subcontractors, materialmen, and suppliers in the performance of this contract, except for foreign construction materials, if any, listed in this contract. Clause 10-19 Clean Air and Water (October 1987) (10.4.2) The contractor agrees: To comply with all the requirements of section 114 of the Clean Air Act (42 U.S.C. 7414) and section 308 of the Clean Water Act (33 U.S.C. 1318) relating to inspection, monitoring, entry, reports, and information, as well as other requirements specified in section 114 of the Clean Air Act and section 308 of the Clean Water Act, and all regulations and guidelines issued to implement those acts before the award of this contract; That no portion of the work required by this contract will be performed in a facility listed on the Environmental Protection Agency List of Violating Facilities on the date when this contract was awarded unless and until the EPA eliminates the name of the fallacy from the listing; To use its best efforts to comply with clean air standards and clean water standards at the facility in which the contract is being performed; and To insert the substance of this clause into any nonexempt subcontract, including this paragraph d. Clause 10-20 Drug-Fee Workplace (December 1989) (10.5.4) Applicability. This clause applies to all contracts with individuals without regard to the dollar amount, and to all other contracts over $50,000. Exceptions. This clause does not apply to those contracts that are to be performed completely outside of the United States, its territories, and possessions. Definitions. As used in this clause: 1. Controlled substance. Those substances identified in schedules I through V, Section 202 of the Controlled Substances Act (21 U.S.C. 812), and as further defined in 21 CFR Section 1308.11 through 1308.15. 2. Conviction. A finding of guilt (including a finding based on a plea of guilty or a plea of nolo contendere) by any judicial body charged with the responsibility to determine violations of criminal drug statutes. 3. Criminal drug statute. A federal or non-federal criminal statute involving drug abuse. 4. Drug abuse. The unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance. 5. Employee. Any person directly engaged in the performance of work under a Postal Service contract. 6. Individual. A contractor with no employees other than himself or herself. 7. Workplace. Any site where work is being done in connection with this contract. Requirements 1. Contractors, except individuals, must provide a drug-free workplace by: (a) Publishing, publicly posting, and furnishing each employee a statement that drug abuse in the workplace is prohibited and specifying what actions will be taken against employees for violations of the prohibition; (b) Establishing a drug-free awareness program to inform all employees about: (1) The dangers of drug abuse in the workplace; (2) The contractor's policy of maintaining a drug-free workplace; (3) Any available drug counseling, rehabilitation, and employee assistance programs; and (4) The penalties that may be imposed upon employees for drug abuse violations occurring in the workplace. (c) Notifying all employees that, as a condition of continued employment on this contract, the employee must: (1) Abide by the contractor's prohibition of drug abuse in the workplace; and (2) Notify the contractor of any criminal drug conviction for a violation occurring in the workplace within five (5) days of such conviction; (d) Notifying the contracting officer within ten (10) days of receiving a notice of a conviction from an employee or otherwise; (e) Instituting appropriate personnel action, up to and including termination, against an employee or requiring the employee to satisfactorily complete a drug abuse assistance or rehabilitation program approved by a federal, state, local health, law enforcement, or other appropriate agency within 30 days of receiving a notice of conviction; and (f) Making consistent and good faith efforts to maintain a drug-free workplace through implementation of paragraphs d.1.(a) through d.1.(e), above. 2. The contractor, if an individual, must not engage in drug abuse in the performance of this contract. Sanctions. Violations of the terms of this clause may be grounds for the suspension of progress payments, termination for default, and suspension or debarment from eligibility for future Postal Service contracts. Clause 11-1 Conditions Affecting the Work (October 1987) (11.5.5) The contractor is responsible for having taken steps reasonably necessary to ascertain the nature and location of the work, and the general and local conditions that can affect the work or its costs. Any failure by the contractor to have done so does not relieve the contractor from responsibility for successfully performing the work without additional expense to the Postal Service. The Postal Service assumes no responsibility for any understanding or representations concerning conditions made by any of its officers or agents before execution of this contract, unless such understanding or representations by the Postal Service are expressly stated in the contract. Clause 11-2 Differing Site Conditions (October 1987) (11.5.5) The contractor must promptly, and before the conditions are disturbed, notify the contracting officer in writing of: 1. Subsurface or latent physical conditions at the site differing materially from those indicated in this contract; or 2. Previously unknown physical conditions at the site of an unusual nature differing materially from those ordinarily encountered and generally recognized as inherent in work of the character required in this contract. The contracting officer will promptly investigate the conditions. If they are found to differ materially from those indicated or anticipated and will cause an increase or decrease in the contractor's cost of, or the time required for, performance of any part of the work under this contract (whether or not changed as a result of such conditions), the contractor will be entitled to an equitable adjustment. No claim by the contractor for an equitable adjustment under this clause will be allowed if asserted after final payment under this contract. Clause 11-3 Performance of Work by Contractor (October 1987) (11.5.5) The contractor must perform on the site, with its own organization, work equivalent to at least 12 percent (unless otherwise set forth in the Schedule) of the total amount of work to be performed under this contract. The percentage of work required to be performed by the contractor may be reduced with written approval of the contracting officer. Clause 11-4 Superintendence by Contractor (October 1987) (11.5.5) The contractor must give personal superintendence to the work or have a competent foreman or superintendent, satisfactory to the contracting officer, on the work at all times during progress, with authority to act for the contractor. Clause 11-5 Materials and Workmanship (June 1988) (11.5.5) Unless otherwise specifically provided, all equipment and materials incorporated in the work must be new and of the most suitable grade for the purpose intended. Unless otherwise specifically provided, reference to any equipment, material, or patented process by brand name, make, or catalog number establishes a standard of quality only. The contractor may substitute any equipment, material, or process that the contracting officer finds to be equal to that named. To obtain approval to use a different equipment, material, or process, the contractor must furnish the contracting officer the manufacturer's name, the model number, and other identifying data and information regarding the nature and performance of the proposed substitute. If requested by the contracting officer, samples must be submitted for approval at the contractor's expense, shipping charges prepaid. Materials or processes substituted without approval may be rejected. In the event of substitution in accordance with paragraph a above, the contractor must furnish to the contracting officer for approval the manufacturer's name, the model number, and any other relevant information on the performance, capacity, nature, and rating of equipment or materials proposed for substitution. The contractor must obtain the contracting officer's approval of the machinery and mechanical equipment incorporated into the work. The contractor must submit samples of all materials and equipment as directed by the contracting officer or as required by the specifications. All work must be performed in a skillful and workmanlike manner. The contracting officer may, in writing, require the contractor to remove from the work any employee the contracting officer deems incompetent, careless, or otherwise objectionable. Clause 11-6 Use of Premises (October 1987) (11.5.5) If the premises are occupied, the contractor, any subcontractors, and their employees must comply with the regulations governing access to, operation of, and conduct while on the premises and must perform the work required under this contract so as not to interfere unreasonably interfere with the conduct of Postal Service business or use and occupancy by Postal Service tenants. Any requests received by the contractor from occupants to change the sequence of work must be referred to the contracting officer for determination. The contractor, any subcontractors, and their employees will not have access to any building outside the scope of this contract, without permission of the contracting officer. Clause 11-7 Other Contracts (October 1987) (11.5.5) The Postal Service may award other contracts for additional work, and the contractor must cooperate fully with the other contractors and Postal Service employees and carefully fit in its own work as may be directed by the contracting officer. The contractor must no commit or permit any act that will interfere with the performance of work by any other contractor or by Postal Service employees. Clause 11-8 Subcontracts (Construction) (October 1987) (11.5.5) Nothing in this contract may be construed to create any contractual relationship between any subcontractors, and the Postal service. The divisions or sections of the specifications are not intended to control the contractor in dividing the work among subcontractor or to limit the work performed by any trade. The contractor is responsible to the Postal Service for acts and omissions of its own employees and of subcontractors and their employees. The contractor is also responsible for the coordination of the work of the trades, subcontractors, and suppliers. The Postal Service will not undertake to settle any differences among the contractor, subcontractors, or suppliers. Clause 11-9 Permits and Responsibilities (Construction) (October 1987) (11.5.5) The contractor is responsible, without additional expense to the Postal Service, for obtaining any necessary licenses and permits, and for complying with any applicable federal, state, and municipal laws, codes, and regulations in connection with the prosecution of the work. The contractor is responsible for all damage to persons or property that occurs as a result of its negligence. The contractor must take proper safety and health precautions to protect the work, the workers, the public, and the property of others. The contractor is responsible also for all materials delivered and work performed until completion and acceptance of the entire construction work, except for any completed unit of construction that may have been accepted. Clause 11-10 Payment (Construction) (October 1987) (11.5.5) The Postal Service will make progress payments monthly or at more frequent intervals as determined by the contracting officer. Bond costs may be included in the contractor's estimates without proration. Before the first progress payment becomes due, the contractor must prepare a breakdown of the contract price acceptable to the contracting officer. The values in the breakdown will be used for determining progress payments. The contractor's overhead and profit must be prorated through the life of the contract. If the contract price is more than $50,000, material delivered that will be incorporated into the structure may be taken into consideration in computing progress payments. Before each payment is made, the contractor must furnish to the contracting officer proof of the quantity, value, and delivery of materials. In making progress payments, the contracting officer will ordinarily retain ten percent of the progress payments earned. However, if the contracting officer, at any time after 50 percent of the work has been completed, finds that satisfactory progress is being made, the contracting officer may authorize payment in full of all progress payment earned. Also, if the contracting officer considers the amount retained to be in excess of that adequate for the protection of the Postal Service, the contracting officer may release to the contractor all or a portion of the excess whenever the work is substantially complete. On completion and acceptance of each separate building, public work, or other division of the contract, on which the price is stated separately in the contract, payment may be made without retention. All material and work covered by progress payments will be the sole property of the Postal Service. However, this paragraph d does not (1) relieve the contractor of responsibility for all material and work for which payment has been made or for restoration of any damaged work or (2) waive the right of the Postal Service to require fulfillment of all the contract terms. Before receiving a progress payment or final payment under this contract, the contractor must certify to the contracting office that payment due subcontractors or suppliers under contractual arrangements with them has been made from the proceeds of prior payments or will be made in timely fashion from the payment then due the contractor. Upon completion and acceptance of all work, the amount due the contractor under this contract must be paid upon the presentation of a properly executed invoice, after the contractor has furnished the Postal Service with a release of all claims against the Postal Service arising by virtue of this contract, other than claims in stated amounts that must be specifically excepted by the contractor from the operation of the release. If the contractor's claim to amounts payable under the contract has been assigned as provided in the Assignment of Claims clause, a release may also be required of the assignee. Clause 11-11 Inspection and Acceptance (Construction) (October 1987) (11.5.5) Postal Service inspection of material and workmanship shall be made at reasonable times at the site or off-site as the contracting officer may direct. If the contractor does not promptly replace rejected material or correct rejected workmanship, the Postal Service may, by contract or otherwise, replace or correct it and charge the cost to the contractor. The contractor must furnish (without charge) all facilities, labor, and materials needed to conduct inspections and tests as required by the contracting officer. The contractor will be charged any additional costs of inspection if material and workmanship are not ready at the time specified by the contractor for inspection. The Postal Service may examine completed work by removing or tearing it out. The contractor must replace or correct any work found not to conform to contract requirements. If work is torn out and found to comply with contract requirements, the contracting officer must make an equitable adjustment for the services provided for the inspection and replacement of the work. The Postal Service will inspect the work as soon as practicable after completion. Acceptance by an authorized Postal Service representative is conclusive except in the case of latent defects, fraud, gross mistakes amounting to fraud, or Postal Service rights under any warranty or guarantee. Clause 11-12 Building Codes, Fees, and Charges (October 1987) (11.5.5) State and local building codes and regulations do not apply as a matter of law to work inside the property lines of Postal Service-owned properties but generally do apply to Postal Service-leased properties. In compliance with Postal Service policy, the contractor must comply with all state and local building code requirements unless otherwise specifically provided. The contractor must pay all fees and charges for connections to outside services and for use of property outside the site. Clause 11-13 Protection of Existing Vegetation, Structures, Utilities and Improvements (October 1987) (11.5.5) The contractor will preserve and protect all existing vegetation (such as trees, shrubs, and grass) and structures on or adjacent to the site of work that are not to be removed and that do not unreasonably interfere with the construction work. Care will be taken in removing trees authorized by the contracting officer for removal, to avoid damage to vegetation that will remain in place. Any limbs or branches of trees broken during such operations or by the careless operation of equipment, or by workmen, will be trimmed with a clean cut and painted with an approved tree pruning compound as directed by the contracting officer. The contractor will protect from damage all existing improvements or utilities at or near the site of the work, the location of which is or should have been known, and will repair or restore any damage to these facilities resulting from failure to comply with the requirements of this contract or to exercise reasonable care in performing the work. If the contractor fails or refuses to repair any such damage promptly, the contracting officer may have the necessary work performed and charge the cost to the contractor. Clause 11-14 Heat (October 1987) (11.5.5) Unless otherwise specified, or unless directed otherwise by the contracting officer, the contractor must: Provide heat as necessary to protect all work materials and equipment against injury form dampness and cold; Protect, cover, and/or heat, as may be necessary to produce and maintain a temperature of not less than 50 degrees Fahrenheit in the concrete during the placing, setting, and curing of concrete, and in the plaster during the application, setting, and curing of plaster; and Provide heat as necessary to produce in the area where the work is to be done a temperature of not less than 70 degrees Fahrenheit for the period beginning 10 days before the placing of interior finishes and finish materials and continuing until completion of beneficial occupancy of the area. Clause 11-15 Debris and Cleanup (October 1987) (11.5.5) The contractor must, during the progress of the work, remove and dispose of the resultant dirt and debris and keep the premises clean. The contractor will, upon completion of the work, remove all construction equipment and surplus materials (except materials or equipment that are to remain Postal Service property as provided by this contract), and leave the premises in a clean, neat, and orderly condition satisfactory to the contracting officer. Clause 11-16 Measurements (October 1987) (11.5.5) The contractor must verify all dimensions shown of existing work, and all dimensions required for work that is to connect with work now in place, by actual measurement of the existing work. Any discrepancies between the contract requirements and the existing conditions must be referred to the contracting officer before the contractor performs any work affected by these discrepancies. Clause 11-17 Survey Monuments and Bench Marks (October 1987) (11.5.5) The Postal Service has established, or will establish, such general reference points as will enable the contractor to proceed with the work. The contractor will provide new monuments where shown or specified. If the contractor finds that any previously established reference points have been destroyed or displaced, or that none has been established, the contractor must promptly notify the contracting officer. The contractor must protect and preserve established bench marks and monuments and make no changes in locations without the written approval of the contracting officer. Established reference points that may be lost, covered, destroyed, or disturbed in the course of performance of the work under this contract, or that require shifting because of necessary changes in grades or locations, must (subject to prior approval of the contracting officer) be replaced and accurately located or relocated (as appropriate) at the contractor's expense, by a licensed engineer or licensed land surveyor. New monuments will be 6 inches square by 3 feet deep (unless otherwise specified), of concrete or stone, with a 3-inch copper or brass pin, 3/8-inch in diameter, in the center, and must be set flush with the ground or pavement in locations indicated on the site plan. Monuments will not be required where lines of buildings are coincident with property lines. The contractor must verify the figures shown on the survey and site plan before undertaking any construction work and will be responsible for the accuracy of the finished work. After completion of construction and before final payment, the contractor must furnish the Postal Service blueprints (in triplicate) of plans showing the exact location of construction survey monuments with reference to true property lines. Clause 11-18 Specifications and Drawings (October 1987) (11.5.5) The contractor must keep at the site, copies of the drawings and specifications and must at all times give the contracting officer access to them. Anything mentioned in the specifications and not shown on the drawings, or shown on the drawings and not mentioned in the specifications, is of like effect as if shown or mentioned in both. In case of difference between drawings and specifications, the specifications will govern. In case of difference between smalland large-scale drawings, the large-scale drawings will govern. Schedules on any contract drawing will take precedence over conflicting information on that or any other contract drawing. On any of the drawings in which a portion of the work is detailed or drawn out and the remainder is shown in outline, the parts detailed or drawn out will apply also to all other like portions of the work. When the word "similar" appears on the drawings, it has a general meaning and must not be interpreted as meaning identical, and all details must be worked out in relation to their location and connection with other parts of the work. In case of discrepancy either in figures, drawings, or specifications, the matter must be promptly submitted to the contracting officer, who will promptly make determination in writing. Any adjustment by the contractor without such a determination will be at the contractor's own risk and expense. The contracting officer must furnish from time to time such detailed drawings and other information as may be necessary. Clause 11-19 Standard References (October 1987) (11.5.5) All publications and other documents (such as manuals, handbooks, codes, standards, and specifications) cited in this contract for the purpose of establishing requirements applicable to equipment, materials, or workmanship are hereby incorporated by reference in the contract as fully as if printed and bound with the specifications of this contract, in accordance with the following: 1. Wherever reference is made to standard Specifications of the Public Buildings Service, Interim Federal Specifications, Interim Amendments to Federal Specifications, Interim Federal Standards, or Interim Amendments to Federal Standards, the contractor must comply with the requirements set forth in the issue or edition identified in this contract except as modified or as otherwise provided in the specifications. 2. Wherever reference is made to any document other than those specified in subparagraph a.1 above, the contractor must comply with the requirements set forth in the edition specified in this contract or, if not specified, the latest edition or revision, as well as the latest amendment or supplement in effect on the date of the solicitation except as modified by the specifications of this contract. Federal Specifications, Federal Standards, and Standard Specifications of the Public Buildings Service can be obtained from the Business Service Center at any GSA Regional Office. Inquiries regarding "Commercial Standards," "Product Standards," and "Simplified Practice Recommendations" should be addressed to: OFFICE OF PRODUCT STANDARDS NATIONAL BUREAU OF STANDARDS WASHINGTON DC 23234-0001 Publications of associations referred to in the specifications can be obtained directly from the associations. Upon request, the contractor must make available at the job site, within a reasonable time, a copy of any trade manual or standard incorporated by reference in this contract that governs quality and workmanship. Clause 11-20 Shop Drawings, Coordination Drawings,a and Schedules (October 1987) (11.5.5) The contractor will submit shop drawings, coordination drawings, and schedules for approval as required by the specifications or requested by the contracting officer, as follows: 1. Shop drawings will include fabrication, erection, and setting drawings, schedule drawings, manufacturer's scale drawings, wiring and control diagrams, cuts or entire catalogs, pamphlets, descriptive literature, and performance and test data. 2. Drawings and schedules, other than catalogs, pamphlets, and similar printed material, must be submitted in reproducible from with two prints made by a process approved by the contracting officer. Upon approval, the reproducible form will be returned to the contractor which must furnish the number of additional prints, not to exceed ten required by the Special Conditions of the specifications. The contractor must submit shop drawings in catalog, pamphlet, and similar printed form in a minimum of four copies plus as many additional copies as the contractor may desire or need or for use by subcontractors. Before submitting shopdrawings on the mechanical and electrical work, the contractor must obtain the contracting officer's approval of lists of mechanical and electrical equipment and materials as required by the specifications. The contractor will check the drawings and schedules and coordinate them (by means of coordination drawings whenever required) with the work of all trades involved before submission, indicating approval on them. Drawings and schedules submitted without evidence of the contractor's approval may be returned for resubmission. Each shop drawing or coordination drawing must have a blank area of 5 by 5 inches, located adjacent to the title block. The title block must display: 1. Number and title of drawing; 2. Date of drawing or revision; 3. Name of project building or facility; 4. Name of contractor and (if appropriate) of subcontractor submitting drawing; 5. Clear identity of contents and location on the work; and 6. Project title and contract number. Unless otherwise provided in this contract, or otherwise directed by the contracting officer, shop drawings, coordination drawings, and schedules must be submitted to the contracting officer, with a letter in triplicate, sufficiently in advance of construction requirements to permit at least 10 working days for checking and appropriate action. Except as otherwise provided in paragraph g below, approval of drawings and schedules will be general and may not be construed as: 1. Permitting any departure from the contract requirements; 2. Relieving the contractor of responsibility for any errors, including details, dimensions, and materials; or 3. Approving departures from full-size details furnished by the contracting officer. If drawings or schedules show variations from the contract requirements because of standard shop practice or for other reasons, the contractor must describe the variations in the letter of transmittal. If acceptable, the contracting officer may approve any or all variations and issue an appropriate change order. If the contractor fails to describe these variations, it will not be relieved of the responsibility for executing the work in accordance with the contract, even though the drawings or schedules have been approved. Clause 11-21 Record "As Built" Drawings (October 1987) (11.5.5) The contractor must, during the progress of the work, keep a master set of prints on the job site, on which is kept a careful and neat record of all deviations from the contract drawings prepared by the architect-engineer made during the course of the work. Upon completion of the project, these "as built" prints must be certified as to their correctness by the signature of the contractor and turned over to the architect-engineer for use in preparing a permanent set of "as built" drawings. Clause 11-22 Spare-Parts Data (October 1987) (11.5.5) The contractor must furnish spare-parts data for each different item of equipment furnished. The data must include a complete list of parts and supplies, with current unit prices and sources of supply; a list of parts and supplies that are either normally furnished at no extra cost with the purchase of the equipment, or specified to be furnished as part of the contract; and a list of additional items recommended by the manufacturer to ensure efficient operation for a period of 180 days at the particular installation. The foregoing does not relieve the contractor of any responsibilities under the guarantees specified. Clause 11-23 Construction Progress Chart (October 1987) (11.5.5) Within 30 days after receiving notice to proceed, the contractor must prepare and submit to the contracting officer for approval six copies of a practical progress chart. The chart must show the principal categories of work, corresponding with those used in the breakdown on which progress payments are based, the order in which the contractor proposes to carry on the work, the date on which it will start each category of work, and the contemplated dates for completion. The chart must be in suitable scale to indicate graphically the total percentage of work scheduled to be in place at any time. At the end of each progress payment period, or at such intervals as directed by the contracting officer, the contractor must: 1. Adjust the chart to reflect any changes in the contract work, completion time, or both, as approved by the contracting officer; 2. Enter on the chart the total percentage of work actually in place; and 3. Submit three copies of the adjusted chart to the contracting officer. If in the opinion of the contracting officer the work actually in place falls behind that scheduled, the contractor must take such action as necessary to improve progress. The contracting officer may require the contractor to submit a revised chart demonstrating its program and proposed plan to make up lag in scheduled progress and to ensure completion of work within the contract time. If the contracting officer finds the proposed planunnacceptable, the contractor may be required to submit a new plan. If a statisfactory plan is not agreed upon, the contracting officer may require the contractor to increase the work force, the construction plan and equipment, or the number of work shifts, without additional cost to the Postal Service. Failure of the contractor to comply with these requirements will be considered grounds for determination by the contracting officer that the contractor is failing to prosecute the work with such diligence as will ensure its completion within the time specified. Clause 11-24 Postal Service Occupancy (October 1987) (11.5.5) The contracting officer reserves the right of partial occupancy or use of facilities, services, and utilities, before final acceptance, without implying completion or acceptance of any part of the project by the Postal Service. Before such occupancy or use, the contracting officer must furnish the contractor an itemized list of work remaining to be performed or corrected. Failure to list an item will not relieve the contractor of the responsibility for complying with the terms of the contract. Costs incurred as a result of such partial occupancy or use of facilities, services, and utilities are subject to equitable adjustment under the Changes clause. Clause 11-25 Warranty (Construction) (October 1987) (11.5.5) Unless otherwise provided in the specifications, the contractor warrants that all work is in accordance with contract requirements and free from defective or inferior materials, equipment, and workmanship for one year after the date of final acceptance under this contract. If, within the warranty period, the contracting officer finds that warranted work needs to be repaired or changed because the materials, equipment, or workmanship were inferior, defective, or not in accordance with the contract terms, the contractor must promptly and without additional expense to the Postal Service: 1. Place in a satisfactory condition all of the warranted work; 2. Satisfactorily correct all damage to equipment, the site, the building, or its contents that is the result of such unsatisfactory work; and 3. Satisfactorily correct any work, materials, or equipment disturbed in fulfilling the warranty. Should the contractor fail to proceed promptly in accordance with the warranty, the Postal Service may have the work performed at the contractor's expense. The contractor must obtain each transferable guarantee or warranty of equipment, materials, or installation furnished by any manufacturer, supplier, or installer in the ordinary course of the business or trade. The contractor must obtain and furnish to the Postal Service all information required to make any such guarantee or warranty legally binding and effective, and must submit both the information and the guarantee or warranty to the Postal Service in sufficient time to permit the Postal Service to meet any time limit requirements specified in the guarantee or warranty or, if no time limit is specified, before completion and acceptance of all work under this contract. Clause 11-26 Changes (Construction) (October 1987) (11.5.5) The contracting officer may at any time, without notice to any sureties, by written order designated or indicated to be a change order, make changes in the work within the general scope of the contract, including changes: 1. In the specifications (including drawings and designs); 2. In the method or manner of performance of the work; 3. In the Postal Service-furnished facilities, equipment, materials, services, or site; or 4. Directing acceleration in the performance of the work. Any other written or oral order (which, as used in this paragraph b, includes direction, instruction, interpretation, or determination) from the contracting officer that causes a change will be treated as a change order under this clause, provided the contractor gives the contracting officer written notice stating (1) the date, circumstances, and source of the order and (2) that the contractor regards the order as a change order. Except as provided in this clause, no order, statement, or conduct of the contracting officer may be treated as a change under this clause or entitle the contractor to an equitable adjustment. If any change under this clause causes an increase or decrease in the contractor's cost of, or the time required for, the performance of any part of the work under this contract, whether or not changed by any order, the contracting officer will make an equitable adjustment and modify the contract in writing. However, except for claims based on defective specifications, no claim for any change under paragraph b above will be allowed for any costs incurred more than 20 days before the contractor gives written notice as required. In the case of defective specifications for which the Postal Service is responsible, the equitable adjustment will include any increased cost reasonably incurred by the contractor in attempting to comply with the defective specifications. The contractor must assert any claim under this clause within 30 days after (1) receipt of a written change order under paragraph a above, or (2) the furnishing of a written notice under paragraph b above, by submitting to the contracting officer a written statement describing the general nature and amount of the claim, unless this period is extended by the Postal Service. The statement of claim may be included in the notice under paragraph b above. No claim by the contractor for an equitable adjustment will be allowed if asserted after final payment under this contract. Clause 11-27 Accident Prevention (June 1988) (11.5.5) In performing this contract, the contractor must comply with the Occupational Safety and Health Act of 1970. The contractor will maintain an accurate record of exposure data and all accidents incident to work performed under this contract resulting in death, traumatic injury, occupational disease, or damage to property, material, supplies, or equipment. The contractor must report the exposure data and accidents as prescribed by the contracting officer. Clause 11-28 Samples (June 1988) (ll.5.5) After contract award, the contractor must furnish samples required by the specifications or by the contracting officer, for the contracting officer's approval. They must be delivered to the contracting officer or to the architect as specified or as directed. The contractor must prepay all shipping charges on samples. Materials or equipment for which samples are required may not be used in the work until the contracting officer approves in writing. Each sample must be labeled to show: 1. Name of project building or facility, project title, and contract number; 2. Name of contractor and (if appropriate) subcontractor; 3. Identification of material or equipment, with specification requirement; 4. Place of origin; and 5. Name of producer and brand (if any). Samples of finish materials must have additional markings that will identify them under the finish schedules. The contractor must mail under separate cover a letter in triplicate submitting each shipment of samples and containing the information required in paragraphs b and c above. The contractor must also enclose a copy of that letter with the shipment and send a copy to the Postal Service representative on the project. Approval of a sample is only for the characteristics or use named in the approval and may not be construed to change or modify any contract requirement. Substitutions are not permitted unless approved in writing by the contracting officer. Approved samples not destroyed in testing will be sent to the Postal Service representative at the project. Approved samples of hardware in good condition will be marked for identification and may be used in the work. Materials and equipment incorporated in the work must match the approved samples. Samples not destroyed in testing and not approved will be returned at the contractor's expense if the contractor so requests at the time of submission. Failure of any material to pass the specified tests will be sufficient cause for refusal to consider, under this contract, any further samples of the same brand or make of that material. The Postal Service reserves the right to disapprove any material or equipment that has previously proved unsatisfactory in service. Samples of materials or equipment delivered on the site or in place may be taken by the Postal Service representative for testing. Failure of a sample to meet contract requirements will automatically void previous approvals of the item tested. The contractor must replace materials or equipment found not to have met contract requirements, or there will be a proper adjustment of the contract price as determined by the contracting officer. Except as otherwise specified, if tests are called for in the specifications, the contractor must pay all costs of these tests. When tests are not specifically called for in the specifications but are required by the Postal Service, the Postal Service will pay all costs of the tests and related engineering services unless the tests indicate that the workmanship or materials used by the contractor are not in conformance with drawings, specifications, approved shop drawings, or the approved materials. In this event, the contractor must pay for the tests, remove all work and material failing to conform, and replace with work and materials in full conformity. All tests pertaining to physical or chemical properties of materials must be made in a laboratory approved by the contracting officer. Appendix C: Forms and Formats Most of the printed forms previously used for Postal Service procurement have been eliminated in favor of computer-generated formats tailored to the requirements of a particular solicitation, contract, or order. The forms and computer-generated formats necessary to implement and supplement the Procurement Manuals are contained in the handbooks referenced in 1.1.1.b. Appendix D: Rules of Practice in Proceedings Relative to Debarment and Suspension from Contracting Appendix D: Rules of Practice in Proceedings Relative to Debarment (Reprint of 39 CFR 957) These rules of practice have been issued by the Judicial Officer as 39 CFR 957, under the authority of 39 U.S.C. 204, 401. They are reprinted here for the convenience of users of the Procurement Manual. References to the Postal Contracting Manual have been changed to refer to chapter 3, section 3, of the Procurement Manual. Section 957.1 Authority for Rules 957.2 Scope of Rules 957.3 Definitions 957.4 Initiation of Debarment Proceedings 957.5 The Request for a Hearing 957.6 Order Relative to Hearing 957.7 Reply 957.8 Service and Filing Documents for the Record 957.9 Respondent Already Debarred by Another Government Agency Respondent's Failure to Appear at the Hearing 957.10 957.11 Amendment of Pleadings 957.12 Continuances and Extensions 957.13 Hearings 957.14 Appearances 957.15 Conduct of the Hearing 957.16 Evidence 957.17 Witness Fees 957.18 Depositions 957.19 Transcript 957.20 Proposed Findings and Conclusions 957.21 Decision 957.22 Motion for Reconsideration 957.23 Modification or Revocation of Orders 957.24 Computation of Time 957.25 Official Record 957.26 Public Information 957.27 Suspension 957.28 Ex Parte Communications 957.1 Authority for rules. The rules in this part are issued by the Judicial Officer of the Postal Service pursuant to authority delegated by the Postmaster General (39 U.S.C. 204, 401; chapter 3, section 3, of the USPS Procurement Manual). 957.2 Scope of rules. The rules in this part shall be applicable in all formal proceedings before the Postal Service pertaining to hearings initiated under chapter 3, section 3, of the USPS Procurement Manual. 957.3 Definitions. 1. (a) The term "Vice President" means a Vice President with purchasing authority in the Postal Service or the Vice President's representative for the purpose of carrying out the provisions of chapter 3, section 3, of the USPS Procurement Manual. (b) The term "General Counsel" includes the General Counsel's authorized representative. (c) The term "Judicial Officer" includes the acting Judicial Officer. (d) "Debarment" means, in general, an exclusion from Government contracting and subcontracting for a reasonable, specified period of time commensurate with the seriousness of the offense or failure, or the inadequacy of performance. (e) "Suspension" means a disqualification from Government contracting and subcontracting for a temporary period of time because a concern or individual is suspected, upon adequate evidence, of engaging in criminal, fraudulent, or seriously improper conduct. (f) "Respondent" means any individual, firm, or other entity, which has been served a written notice of proposed debarment pursuant to chapter 3, section 3, of the USPS Procurement Manual. (g) "The Recorder" means the RECORDER OF THE UNITED STATES POSTAL SERVICE 475 LENFANT PLAZA SW WASHINGTON DC 20260-6100 957.4 Initiation of debarment proceedings. 1. (a) A Vice President initiates a debarment proceeding by serving upon the proposed respondent a written notice of proposed debarment in the manner hereinafter (see 957.8(d)) provided for the service of all other papers. (b) The notice shall state: (1) That debarment is being considered; (2) The reasons for the proposed debarment; (3) The period of debarment and the proposed effective date thereof; (4) That the debarment will not become effective until after a hearing, if such hearing is requested within 20 days following the receipt of the notice; and (5) That the request for a hearing is to be submitted in the manner prescribed by the rules in this part, a copy of which shall be enclosed with the notice. (c) If no hearing is requested within 20 days following the receipt of the notice, the action of the Vice President set forth in the notice shall become the final Postal Service determination without further notice to the respondent. (d) The party against which a final Postal Service determination has been entered pursuant to paragraph (c) of this section shall, however, at any time have the privilege of reopening a case for the limited purpose of contesting the issue of service. Such party's contentions on that issue shall be addressed to the Judicial Officer in the same manner as a request for a hearing (see 957.5). The Judicial Officer may require such additional showings or proof as the Judicial Officer may deem necessary on the issue of service and shall reopen any debarment proceeding previously closed pursuant to paragraph (c) of this section if the Judicial Officer shall find that service was incomplete or otherwise failed to adequately advise of the pendency of the proposed debarment. 957.5 The request for a hearing. A respondent may, within 20 days following the receipt of a written notice of proposed debarment, file a request for a hearing before the Judicial Officer. The request shall be addressed to the Judicial Officer through the Vice President who initiated the debarment proceeding and shall be accompanied by a concise statement admitting, denying, or explaining each of the allegations set forth in the notice of proposed debarment and stating the relief desired. 957.6 Order relative to hearing. 1. (a) The Judicial Officer shall issue an order granting the respondent's request for a hearing, establishing the time and place thereof, and advising the respondent of the consequences of a failure to appear at the hearing (see 957.9). Whenever practicable, the hearing date shall be within 30 days of the date of the Judicial Officer's order relative to hearing. (b) The notice of proposed debarment and the request for a hearing together with the reply, if any, shall become the pleadings in any proceeding in which the Judicial Officer orders a hearing to be held. 957.7 Reply. Not more than 15 days from the service of the request for a hearing, the General Counsel may submit a reply on behalf of the Vice President who initiated the debarment proceeding. 957.8 Service and filing documents for the record. 1. (a) Each party shall file with the Recorder pleadings, motions, orders, and other documents for the record. The Recorder shall cause copies to be served promptly on other parties to the proceeding and on the Judicial Officer. (b) The parties shall submit four copies of all documents unless otherwise ordered by the Judicial Officer. One copy shall be signed as the original. (c) Documents shall be dated and shall state the docket number and title of the proceeding. Any pleading or other document required by order of the Judicial Officer to be filed by a specified date shall be served upon the Recorder on or before such date. The date of such service shall be the filing date and shall be entered thereon by the Recorder. (d) Service of all papers shall be effected by mailing the same, postage prepaid, registered or certified mail, return receipt requested or by causing said notice to be personally served on the proposed respondent by an authorized representative of the department. In the case of personal service, the person making service shall secure from the proposed respondent, or respondent's agent, a written acknowledgment of receipt of said notice, showing the date and time of such receipt. Said acknowledgment (or the return receipt, where service is effected by mail) shall be made a part of the record by the Vice President initiating the debarment proceeding. The date of delivery, as shown by the acknowledgment of personal service or the return receipt, shall be the date of service. 957.9 Respondent's failure to appear at the hearing. If the respondent shall fail to appear at the hearing, the Judicial Officer shall receive the Vice President's evidence and render a Postal Service decision without requirement of further notice to the respondent. 957.10 Respondent already debarred by another government agency. 1. (a) When a Vice President proposes to debar a firm or individual already debarred by another Government agency for a term concurrent with such debarment, the debarment proceedings before the Postal Service may be based entirely upon the record of facts obtained from such other agency, or upon such facts and additional other facts. In such cases, the facts obtained from the other agency shall be considered as established, but the party to be debarred shall have the opportunity to present information to the Judicial Officer and to explain why debarment by the Postal Service should not be imposed. (b) Where the Vice President initiating the debarment proceeding relies: (1) Upon the provisions of paragraph (a) of this section, or (2) Upon all or part of the record of the proposed respondent's previous debarment by another Government agency, in initiating such proceeding, the notice of proposed debarment shall contain a statement so stating in sufficient detail to apprise the respondent of the extent of such reliance. (c) The Vice President's reliance upon provisions of paragraph (a) of this section, stated in conformity with the directions set forth in paragraph (b) of this section, does not deprive the respondent of the right to request the Judicial Officer to grant a hearing pursuant to these rules, nor the Judicial Officer the full discretion to grant or deny such request. 957.11 Amendment of pleadings. 1. (a) By consent of the parties, a pleading may be amended at any time. Also, a party may move to amend a pleading at any time before the close of the hearing, provided that the proposed amendment is reasonably within the scope of the proceeding. (b) When issues not raised by the pleadings but reasonably within the scope of the proceedings initiated by the notice of proposed debarment are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendments as may be necessary to make the pleadings conform to the evidence and to raise such issues shall be allowed at any time upon the motion of any party. (c) If a party objects to the introduction of evidence at the hearing on the ground that it is not within the issues framed by the pleadings, but fails to satisfy the Judicial Officer that an amendment of the pleadings would prejudice the objecting party on the merits, the Judicial Officer may allow the pleadings to be amended and may grant a continuance to enable the objecting party to rebut the evidence presented. (d) The Judicial Officer may, upon reasonable notice and upon such terms as are just, permit service of a supplemental pleading setting forth transactions, occurrences, or events which have transpired since the date of the pleading sought to be supplemented and which are relevant to any of the issues involved. 957.12 Continuances and extensions. Continuances and extensions will not be granted by the Judicial Officer except for good cause shown. 957.13 Hearings. 1. (a) Hearings are held at: US POSTAL SERVICE HEADQUARTERS 475 LENFANT PLAZA SW WASHINGTON DC 20260-6100 or other locations designated by the Judicial Officer. (b) A party may, not later than 7 days before the scheduled date of hearing, file a request that such hearing be held at a place other than that designated in the Judicial Officer's order relative to hearing. The party shall support the request with a statement outlining: (1) The evidence to be offered in such place; (2) The names and addresses of the witnesses who will testify; (3) The reasons such evidence cannot be produced at Washington, D.C. The Judicial Officer shall give consideration to the convenience and necessity of the parties and the relevancy of the evidence to be offered. 957.14 Appearances. 1. (a) A respondent may appear and be heard in person or by attorney. (b) An attorney may practice before the Postal Service in accordance with applicable rules issued by the Judicial Officer. (c) When a respondent is represented by an attorney, all pleadings and other papers subsequent to the notice of proposed department shall be mailed to the attorney. (d) All counsel shall promptly file notices of appearance. Changes of respondent's counsel shall be recorded by notices from retiring and succeeding counsel and from the respondent. (e) After a request for a hearing has been filed pursuant to the rules in this part, the General Counsel shall represent the vice president in further proceedings relative to the hearing and shall in its notice of appearance identify the individual member of such office who has been assigned to handle the case on its behalf. 957.15 Conduct of the hearing. The Judicial Officer shall have authority to: 1. (a) Administer oaths and affirmations; (b) Examine witnesses; (c) Rule upon offers of proof, admissibility of evidence, and matters of procedure; (d) Order any pleading amended upon motion of a party at any time before the close of the hearing; (e) Maintain discipline and decorum and exclude from the hearing any person acting in an indecorous manner; (f) Require the filing of briefs or memoranda of law on any matter upon which the Judicial Officer is required to rule; (g) Order prehearing conferences for the purpose of the settlement or simplification of issues by the parties; (h) Order the proceeding reopened at any time before the Judicial Officer's decision for the receipt of additional evidence; (i) Render a final Postal Service decision; (j) Take such other further action as may be necessary to properly preside over the debarment proceeding and render decision therein. 957.16 Evidence. 1. (a) Except as otherwise provided in the rules in this part, the rules of evidence governing civil proceedings in matters not involving trial by jury in the courts of the United States shall govern. However, such rules may be relaxed to the extent that the Judicial Officer deems proper to ensure a fair hearing. (b) Testimony shall be under oath or affirmation and witnesses shall be subject to cross-examination. (c) Agreed statements of fact may be received in evidence. (d) Official notice or knowledge may be taken of the types of matter of which judicial notice or knowledge may be taken. (e) The written statement of a competent witness may be received in evidence, provided that such statement is relevant to the issues; that the witness shall testify under oath at the hearing that the statement is in all respects true; and in the case of expert witnesses, that the statement correctly states the witness' opinion or knowledge concerning the matters in question. 957.17 Witness fees. The Postal Service does not pay fees and expenses for respondent's witnesses or for depositions requested by respondent. 957.18 Depositions. 1. (a) Not later than 7 days before the scheduled date of the hearing, any party may file application with the Recorder for the taking of testimony by deposition. In support of such application, the applicant shall submit under oath or affirmation a statement setting out the reasons such testimony should be taken by deposition, the time and the place, and the name and address of the witness whose deposition is desired, the subject matter of the testimony of each witness, its relevancy, and the name and address of the person before whom the deposition is to be taken. (b) If the application be granted, the order for the taking of the deposition will specify the time and place thereof, the name of the witness, the person before whom the deposition is to be taken, and any other necessary information. (c) Each witness testifying upon deposition shall be duly sworn, and the adverse party shall have the right to cross-examine. The questions and answers, together with all objections, shall be reduced to writing, and (unless waived by stipulation of the parties) shall be read to and subscribed by the witness in the presence of the deposition officer, who shall certify it in the usual form. The deposition officer shall file the testimony taken by deposition as directed in the order. The deposition officer shall put the witness on oath. All objections made at the time of examination shall be noted by the deposition officer and the evidence objected to shall be taken subject to the objections. In lieu of participating in the oral examination, a party may transmit written interrogatories to the officer, who shall propound them to the witness and record the answers verbatim. Objections to relevancy or materiality of testimony, or to errors and irregularities occurring at the oral examination in the manner of taking the deposition, in the form of the questions or answers, in the oath or affirmation, or in the conduct of the parties and errors of any kind which might be obviated, cured or removed if promptly presented, are waived unless timely objection is made at the taking of the deposition. (d) At the hearing, any part or all of the deposition may be offered in evidence by any party who was present or represented at the taking of the deposition or who had notice thereof. If the deposition is not offered and received in evidence, it shall not be considered as a part of the record in the proceeding. The admissibility of depositions or parts thereof shall be governed by the rules of evidence. (e) The party requesting the deposition shall pay all fees required to be paid to witnesses and the deposition officer; shall provide an original and one copy of the deposition for the official record; and shall serve one copy upon the opposing party. (f) Within the United States or within a territory or insular possession subject to the dominion of the United States, depositions may be taken before an officer authorized to administer oaths by the laws of the United States or of the place where the examination is held; within a foreign country, depositions may be taken before a secretary of an embassy or legation, consul general, vice consul, or consular agent of the United States, or any other person designated in the order for the taking of a deposition. (g) Depositions may also be taken and submitted on written interrogatories in substantially the same manner as depositions taken by oral examination. When a deposition is taken upon written interrogatories and cross-interrogatories, none of the parties shall be present or represented, and no person other than the witness, a stenographic reporter, and the officer shall be present at the examination of the witness, which fact shall be certified by the officer, who shall propound the interrogatories and cross-interrogatories to the witness in their order and reduce the testimony to writing in the witness' own words. 957.19 Transcript. 1. (a) Hearings shall be stenographically reported by a contract reporter of the Postal Service under the supervision of the Judicial Officer. Argument upon any matter may be excluded from the transcript by order of the Judicial Officer. A copy of the transcript shall be a part of the record and the sole official transcript of the proceeding. Copies of the transcript may be obtained by the respondent from the reporter upon the payment to the reporter of a reasonable price therefor. Copies of parts of the official record other than the transcript may be obtained from the librarian of the Postal Service or the Recorder. (b) Changes in the official transcript may be made only when they involve errors affecting substance and then only in the manner herein provided. No physical changes shall be made in or upon the official transcript, or copies thereof, which have been filed with the record. Within 10 days after the receipt by any party of a copy of the official transcript or any part thereof, the party may file a motion requesting correction of the transcript. Opposing counsel shall, within such time as may be specified by the Judicial Officer, notify the Judicial Officer in writing of opposing counsel's concurrence or disagreement with the requested corrections. Failure to interpose timely objection to a proposed correction shall be considered to be concurrence. Thereafter, the Judicial Officer shall, by order, specify the corrections to be made in the transcript. The Judicial Officer, on the Judicial Officer's own initiative, may order corrections to be made in the transcript with prompt notice to the parties of the proceeding. Any changes ordered by the Judicial Officer other than by the agreement of the parties shall be subject to objection and exception. 957.20 Proposed findings and conclusions. 1. (a) Each party to a proceeding, except one who fails to appear at the hearing may (unless, at the discretion of the Judicial Officer, such is not appropriate) submit proposed findings of fact, conclusions of law, and supporting reasons either in oral or written form at the discretion of the Judicial Officer. The Judicial Officer may also require parties to any proceeding to submit proposed findings of fact and conclusions of law with supporting reasons. Unless given orally, the date set for filing of proposed findings of fact and conclusions of law shall be within 15 days after the delivery of the official transcript to the Recorder, who shall notify both parties of the date of its receipt. The filing date for proposed findings shall be the same for both parties. If not submitted by such date, or unless extension of time for the filing thereof is granted, they will not be included in the record or given consideration. (b) Except when presented orally before the close of the hearing, proposed findings of fact shall be set forth in serially numbered paragraphs and shall state with particularity all evidentiary facts in the record, with appropriate citations to the transcript or exhibits supporting the proposed findings. Each proposed conclusion shall be separately stated. 957.21 Decision. The Judicial Officer shall issue a final Postal Service decision. Such decision shall include findings and conclusions, with the reason therefor, upon all the material issues of fact or law presented on the record, and the appropriate order. 957.22 Motion for reconsideration. Within 10 days from the date thereof, or such longer period as may be fixed by the Judicial Officer, either party may file a motion for reconsideration of the final Postal Service decision. Each motion for reconsideration shall be accompanied by a brief clearly setting forth the points of fact and of law relied upon in support of said motion. 957.23 Modification or revocation of orders. A party against whom an order of debarment has been issued may file an application for modification or revocation thereof. The Recorder shall transmit a copy of the application to the General Counsel, who shall file a written reply. A copy of the reply shall be sent to the applicant by the Recorder. Thereafter an order granting or denying such application will be issued by the Judicial Officer. 957.24 Computation of time. A designated period of time under the rules in this part excludes the day the period begins and includes the last day of the period, unless the last day is a Saturday, a Sunday, or legal holiday, in which event the period runs until the close of business on the next business day. 957.25 Official record. The transcript of testimony, together with all pleadings, orders, exhibits, briefs, and other documents filed in the proceeding, shall constitute the official record of the proceeding. 957.26 Public information. The Law Librarian of the Postal Service shall maintain for public inspection in the Law Library copies of all final decisions. The Recorder maintains the complete official record of every proceeding. 957.27 Suspension. 1. (a) Any firm or individual suspended under chapter 3, section 3, of the USPS Procurement Manual, who believes that the suspension has not been in accordance with the provisions thereof or with applicable laws or regulations, may appeal to the Judicial Officer for a review of the suspension. (b) Any such appeal shall be addressed to the Judicial Officer through the vice president who ordered the suspension within 20 days of the date upon which the respondent has been notified of the suspensions. Such appeal shall concisely and in the manner of the pleading set forth the grounds upon which the suspension is contested and may be supported by a brief and such evidence as the respondent may desire to submit. (c) Should the respondent desire oral argument or a hearing before the Judicial Officer in connection with the respondent's appeal, application therefor shall be included in the appeal. In the event that the Judicial Officer grants the respondent's application for a hearing, the notice of suspension and the appeal shall constitute the pleadings defining the issues therein and the hearing shall be regulated in accordance with the rules in this part concerning debarment proceedings. (d) The decision of the Judicial Officer in any appeal shall constitute the final Postal Service determination of the issues presented thereby. Either party thereto may, however, file a motion for reconsideration thereof, in accordance with the provisions of 957.22. 957.28 Ex parte communications. The provisions of 5 U.S.C. 551(14), 556(d), and 557(d) prohibiting ex parte communications are made applicable to the proceedings under these rules of practice. Appendix E: Rules of Practice Before the Postal Service Board of Contract Appeals Appendix E: Rules of Practice Before the Board of Contract Appeals (Reprint of 39 CFR 955) These rules of practice have been issued by the Judicial Officer as 39 CFR 955, under the authority of 39 U.S.C. 204, 401. They are reprinted here for the convenience of users of the Procurement Manual. Section 955.1 Jurisdiction, Procedure, Representation of Parties PRELIMINARY PROCEDURES 955.2 Appeals, How Taken 955.3 Notice of Appeal, Contents of 955.4 Forwarding of Appeals 955.5 Preparation, Contents, Organization, Forwarding, and Status of Appeal File 955.6 Dismissal for Lack of Jurisdiction 955.7 Pleadings 955.8 Amendments of Pleadings or Record 955.9 Hearing Election 955.10 Prehearing Briefs 955.11 Prehearing or Presubmission Conference 955.12 Submission Without a Hearing 955.13 Optional Accelerated Procedure 955.14 Settling the Record 955.15 Discovery-Depositions 955.16 Interrogatories to Parties, Admission of Facts, and Production and Inspection of Documents 955.17 Service of Papers HEARINGS 955.18 Where and When Held 955.19 Notice of Hearings 955.20 Unexcused Absence of a Party 955.21 Nature of Hearings 955.22 Examination of Witnesses 955.23 Copies of Papers 955.24 Posthearing Briefs 955.25 Transcript of Proceedings 955.26 Withdrawal of Exhibits REPRESENTATION 955.27 The Appellant 955.28 The Respondent DECISIONS 955.29 Decisions MOTION FOR RECONSIDERATION 955.30 Motion for Reconsideration 955.31 Dismissal Without Prejudice 955.32 Dismissal for Failure to Prosecute EX PARTE COMMUNICATIONS 955.33 Ex Parte Communications SANCTIONS 955.34 Sanctions EFFECTIVE DATE AND APPLICABILITY 955.35 Effective Date and Applicability OPTIONAL SMALL CLAIMS AND ACCELERATED PROCEDURES 955.36 Optional Small Claims (Expedited) and Accelerated Procedures SUBPOENAS 955.37 Subpoenas 955.1 Jurisdiction, procedure, representation of parties. 1. (a) Jurisdiction for considering appeals . The U.S. Postal Service Board of Contract Appeals (referred to herein as the "Board") shall consider and determine appeals from decisions of contracting officers arising under contracts which contain provisions requiring the determination of appeals by the Postmaster General or his duly authorized representative or board. In addition the Board shall have jurisdiction over other matters assigned to it by the Postmaster General. The Board has authority to determine appeals falling within the scope of its jurisdiction as fully and finally as might the Postmaster General himself. (b) Organization and location of the board. (1) The Board is located in Washington, DC, and its mailing address is: 475 LENFANT PLAZA SW WASHINGTON DC 20260-6120 (2) The Board consists of the Judicial Officer as Chairman, the Associate Judicial Officer as Vice Chairman, and the Administrative Law Judges of the Postal Service. All members of the Board shall be attorneys at law duly licensed by any state, commonwealth, territory, or the District of Columbia. In general the appeals are assigned to a panel of at least three members of the Board. The decision of a majority of the panel constitutes the decision of the Board. (c) Decisions on questions of law. When an appeal is taken pursuant to a Disputes Clause in a contract which limits appeals to disputes concerning questions of fact, the Board may, in its discretion, hear, consider, and decide all questions of law necessary for the complete adjudication of the issue. In the consideration of an appeal, should it appear that a claim is involved which is not cognizable under the terms of the contract, the Board may make findings of fact with respect to such a claim without expressing an opinion on the question of liability. (d) Board of contract appeals procedure. (1) Rules. Appeals referred to the Board are handled in accordance with the rules of the Board. (2) Administration and interpretation of rules. Emphasis is placed upon the sound administration of these rules in specific cases, because it is impracticable to articulate a rule to fit every possible circumstance which may be encountered. These rules will be interpreted so as to secure a just and inexpensive determination of appeals without unnecessary delay. (3) Preliminary procedures. Preliminary procedures are available to encourage full disclosure of relevant and material facts, and to discourage unwarranted surprise. (4) Time, computation, and extensions (i) All time limitations specified for various procedural actions are computed as maximums, and are not to be fully exhausted if the action described can be accomplished in a lesser period. These time limitations are similarly eligible for extension in appropriate circumstances, on good cause shown. (ii) Except as otherwise provided by law, in computing any period of time prescribed by these rules or by any order of the Board, the day of the event from which the designated period of time begins to run shall not be included, but the last day of the period shall be included unless it is a Saturday, Sunday, or a legal holiday in which event the period shall run to the end of the next business day. (iii) Requests for extensions of time from either party shall be made in writing stating good cause therefor. (5) Place of filings. Unless the Board otherwise directs, all notices of appeal, pleadings and other communications shall be filed with the Docket Clerk of the Board at its offices in the UNITED STATES POSTAL SERVICE HEADQUARTERS BUILDING 475 LENFANT PLAZA SW WASHINGTON DC 20260-6120 Communications to the Board shall be addressed to BOARD OF CONTRACT APPEALS UNITED STATES POSTAL SERVICE 475 LENFANT PLAZA SW WASHINGTON DC 20260-6120 (e) Representation of parties. Whenever reference is made to contractor, appellant, contracting officer, respondent and parties, this shall include respective counsel for the parties, as soon as appropriate notices of appearance have been filed with the Board. PRELIMINARY PROCEDURES 955.2 Appeals, how taken. Notice of an appeal must be in writing, and the original, together with two copies, may be filed with the contracting officer from whose decision the appeal is taken. The notice of appeal must be mailed or otherwise filed within the time specified therefor in the contract or allowed by applicable provision of directive or law. 955.3 Notice of appeal, contents of. A notice of appeal should indicate that an appeal is thereby intended, and should identify the contract (by number), the department and agency or bureau cognizant of the dispute, and the decision from which the appeal is taken. The notice of appeal should be signed personally by the appellant (the contractor making the appeal), or by an officer of the appellant corporation or member of the appellant firm, or by the contractor's duly authorized representative or attorney. The complaint referred to in W955.7 may be filed with the notice of appeal, or the appellant may designate the notice of appeal as a complaint, if it otherwise fulfills the requirements of a complaint. 955.4 Forwarding of appeals. When a notice of appeal in any form has been received by the contracting officer,he shall endorse thereon the date of mailing (or date of receipt, if otherwise conveyed) and within 10 days shall forward said notice of appeal to the Board. Following receipt by the Board of the original notice of an appeal (whether through the contracting officer or otherwise), the contractor and contracting officer will be promptly advised of its receipt and the contractor will be furnished a copy of these rules. 955.5 Preparation, contents, organization, forwarding, and status of appeal file. 1. (a) Duties of Contracting Officer. Within 30 days of receipt of an appeal, or advice that an appeal has been filed, the contracting officer shall assemble and transmit to the Board through Postal Service counsel an appeal file consisting of all documents pertinent to the appeal, including: (1) the decision and findings of fact from which appeal is taken; (2) the contract including specifications and pertinent amendments, plans and drawings; (3) all correspondence between the parties pertinent to the appeal, including the letter or letters of claim in response to which decision was issued; (4) transcripts of any testimony taken during the course of proceedings, and affidavits or statements of any witnesses on the matter in dispute made prior to the filing of the notice of appeal with the Board; and (5) any additional information considered pertinent. Within the same time above specified Postal Service counsel shall furnish the appellant a copy of each document he transmits to the Board, except those stated in subparagraph (a)(2) above, as to which a list furnished appellant indicating specific contractual documents transmitted will suffice, and those stated in subparagraph (d) below. (b) Duties of the Appellant. Within 30 days after receipt of a copy of the appeal file assembled by the contracting officer, the appellant shall supplement the same by transmitting to the Board any documents not contained therein which he considers pertinent to the appeal, furnishing two copies of such documents to the Government trial attorney. (c) Organization of appeal file. Documents in the appeal file may be originals or legible facsimile or authenticated copies thereof, and shall be arranged in chronological order where practicable, numbered sequentially, tabbed, and indexed to identify the contents of the file. (d) Lengthy documents. The Board may waive the requirement of furnishing to the other party copies of bulky, lengthy, or out-of-size documents in the appeal file when a party has shown that doing so would impose an undue burden. At the time a party files with the Board a document as to which such a waiver has been granted, he shall notify the other party that the same or a copy is available for inspection at the offices of the Board or of the party filing same. (e) Status of documents in appeal file. Documents contained in the appeal file are considered, without further action by the parties, as part of the record upon which the Board will render its decision, unless a party objects to the consideration of a particular document in advance of hearing or of settling the record in the event there is no hearing on the appeal. If objection to a document is made, the Board will rule upon its admissibility into the record as evidence in accordance with W955.14 and W955.21 hereof. 955.6 Dismissal for lack of jurisdiction. Any motion addressed to the jurisdiction of the Board shall be promptly filed. Hearing on the motion shall be afforded on application of either party, unless the Board determines that its decision on the motion will be deferred pending hearing on both the merits and the motion. The Board shall have the right at any time and on its own motion to raise the issue of its jurisdiction to proceed with a particular case, and shall do so by an appropriate order, affording the parties an opportunity to be heard thereon. 955.7 Pleadings. 1. (a) Appellant. Within 30 days after receipt of notice of docketing of the appeal, the appellant shall file with the Board an original and one copy of a complaint setting forth simple, concise and direct statements of each of his claims, alleging the basis, with appropriate reference to contract provisions, for each claim, and the dollar amount claimed. This pleading shall fulfill the generally recognized requirements of a complaint although no particular form or formality is required. Upon receipt thereof, the Board shall serve a copy upon the respondent. Should the complaint not be received within 30 days, appellant's claim and appeal may, if in the opinion of the Board the issues before the Board are sufficiently defined, be deemed to set forth his complaint and the respondent shall be so notified. (b) Respondent. Within 30 days from receipt of said complaint, or the aforesaid notice from the Board, respondent shall prepare and file with the Board an original and one copy of an answer thereto, setting forth simple, concise, and direct statements of respondent's defenses to each claim asserted by appellant. This pleading shall fulfill the generally recognized requirements of an answer, and shall set forth any affirmative defenses or counter-claims as appropriate. Upon receipt thereof, the Board shall serve a copy upon appellant. Should the answer not be received within 30 days, the Board may, in its discretion, enter a general denial on behalf of the Government, and the appellant shall be so notified. 955.8 Amendments of pleadings or record. 1. (a) The Board upon its own initiative or upon application by a party may, in its discretion, order a party to make a more definite statement of the complaint or answer, or to reply to an answer. (b) The Board may, in its discretion, and within the proper scope of the appeal, permit either party to amend his pleading upon conditions just to both parties. When issues within the proper scope of the appeal, but not raised by the pleadings or the documentation described in W955.5, are tried by express or implied consent of the parties, or by permission of the Board, they shall be treated in all respects as if they had been raised therein. In such instances, motions to amend the pleadings to conform to the proof may be entered, but are not required. If evidence is objected to at a hearing on the ground that it is not within the issues raised by the pleadings or the documentation required pursuant to W955.5 (which shall be deemed part of the pleadings for this purpose), it may be admitted within the proper scope of the appeal, provided, however, that the objecting party may be granted a continuance if necessary to enable him to meet such evidence. 955.9 Hearing election. Upon receipt of respondent's answer or the notice referred to in the last sentence of W955.7(b), above, appellant shall advise whether he desires a hearing as prescribed in WW955.18 through 955.26, or whether, in the alternative, he elects to submit his case on the record without a hearing, as prescribed in W955.12. In appropriate cases, the appellant shall also elect whether he desires the optional accelerated procedure prescribed in W955.13. 955.10 Prehearing briefs. Based on an examination of the documentation described in W955.5, the pleadings, and a determination of whether the arguments and authorities addressed to the issues are adequately set forth therein, the Board may, in its discretion, require the parties to submit prehearing briefs in any case in which a hearing has been elected pursuant to W955.9. In the absence of a Board requirement therefor, either party may, in its discretion and upon appropriate and sufficient notice to the other party, furnish a prehearing brief to the Board. In any case where a prehearing brief is submitted, it shall be furnished so as to be received by the Board at least 15 days prior to the date set for hearing, and a copy shall simultaneously be furnished to the other party as previously arranged. 955.11 Prehearing or presubmission conference. Whether the case is to be submitted pursuant to W955.12, or heard pursuant to WW955.18 through 955.26, the Board may, upon its own initiative or upon the application of either party, call upon the parties to appear before a Board Member for a conference to consider: 1. (a) the simplification or clarification of the issues; (b) the possibility of obtaining stipulations, admissions, agreements on documents, understandings on matters already of record, or similar agreements which will avoid unnecessary proof; (c) the limitation of the number of expert witnesses, or avoidance of similar cumulative evidence, if the case is to be heard; (d) the possibility of agreement disposing of all or any of the issues in dispute; and (e) such other matters as may aid in the disposition of the appeal. The results of the conference shall be reduced to writing by the Board Member and this writing shall thereafter constitute part of the record. 955.12 Submission without a hearing. Either party may elect to waive a hearing and to submit his case upon the record before the Board, as settled pursuant to W955.14. Submission of the case without hearing does not relieve the parties from the necessity of proving the facts supporting their allegations or defenses. Affidavits, depositions, admissions, answers to interrogatories, and stipulations may be employed to supplement other documentary evidence in the Board record. The Board may permit such submission to be supplemented by oral argument (transcribed if requested), and by briefs arranged in accordance with W955.24. 955.13 Optional accelerated procedure. 1. (a) In appeals involving $50,000 or less, either party may elect, in his notice of appeal, complaint, answer, or by separate correspondence or statement prior to commencement of hearing or settlement of the record, to have the appeal processed under a shortened and accelerated procedure. For application of this rule the amount in controversy will be determined by the sum of the amounts claimed by either party against the other in the appeal proceeding. If no specific amount of claim is stated, a case will be considered to fall within this rule if the sum of the amounts which each party represents in writing that it could recover as a result of a Board decision favorable to it does not exceed $25,000. Upon such election, a case shall then be processed under this rule unless the other party objects and shows good cause why the substantive nature of the dispute requires processing under the Board's regular procedures and the Board sustains such objection. In cases proceeding under this rule, parties are encouraged, to the extent possible consistent with adequate presentation of their factual and legal positions, to waive pleadings, discovery, and briefs. (b) Written decision by the Board in cases proceeding under this rule normally will be short and contain summary findings of fact and conclusions only. The Board will endeavor to render such decisions within 30 days after the appeal is ready for decision. Such decisions will be rendered for the Board by a single Board Member with the concurrence of the Chairman or a designated member; except that in cases involving $5,000 or less where there has been a hearing, the single Board Member presiding at the hearing may, in his discretion, at the conclusion of the hearing and after entertaining such oral arguments as he deems appropriate, render on the record oral summary findings of fact, conclusions and decision of the appeal. In the latter instance, the Board will subsequently furnish the parties a typed copy of such oral decision for record and payment purposes and to establish the date from which the period for filing a motion for reconsideration under W955.30 commences. Except as herein modified, these rules otherwise apply in all respects. 955.14 Settling the record. 1. (a) The record upon which the Board's decision will be rendered consists of the appeal file described in W955.5, and to the extent the following items have been filed, pleadings, prehearing conference memoranda or orders, prehearing briefs, depositions or interrogatories received in evidence, admissions, stipulations, transcripts of conferences and hearings, hearing exhibits, posthearing briefs, and documents which the Board has specifically designated be made a part of the record. The record will at all reasonable times be available for inspection by the parties at the office of the Board. (b) Except as the Board may otherwise order in its discretion, no proof shall be received in evidence after completion of an oral hearing or, in cases submitted on the record, after notification by the Board that the case is ready for decision. (c) The weight to be attached to any evidence of record will rest within the sound discretion of the Board. The Board may in any case require either party, with appropriate notice to the other party, to submit additional evidence on any matter relevant to the appeal. 955.15 Discovery-depositions. 1. (a) General policy and protective orders. The parties are encouraged to engage in voluntary discovery procedures. In connection with any deposition or other discovery procedure, the Board may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, and those orders may include limitations on the scope, method, time and place for discovery, and provisions for protecting the secrecy of confidential information or documents. (b) When depositions permitted. After an appeal has been docketed and complaint filed, the parties may mutually agree to, or the Board may, upon application of either party and for good cause shown, order the taking of testimony of any person by deposition upon oral examination or written interrogatories before any officer authorized to administer oaths at the place of examination, for use as evidence or for purpose of discovery. The application for order shall specify whether the purpose of the deposition is discovery or for use as evidence. (c) Orders on depositions. The time, place, and manner of taking depositions shall be as mutually agreed by the parties, or failing such agreement, governed by order of the Board. (d) Use as evidence. No testimony taken by depositions shall be considered as part of the evidence in the hearing of an appeal unless and until such testimony is offered and received in evidence at such hearing. It will not ordinarily be received in evidence if the deponent is present and can testify personally at the hearing. In such instances, however, the deposition may be used to contradict or impeach the testimony of the witness given at the hearing. In cases submitted on the record, the Board may, in its discretion, receive depositions as evidence in supplementation of that record. (e) Expenses. Each party shall bear its own expenses associated with the taking of any deposition. 955.16 Interrogatories to parties, admission of facts, and production and inspection of documents. 1. (a) Interrogatories to parties. After an appeal has been filed with the Board, a party may serve on the other party written interrogatories to be answered separately in writing, signed under oath and returned within 30 days. Upon timely objection by the party, the Board will determine the extent to which the interrogatories will be permitted. The scope and use of interrogatories will be controlled by W955.15. (b) Admission of facts. After an appeal has been filed with the Board, a party may serve upon the other party a request for the admission of specified facts. Within 30 days after service, the party served shall answer each requested fact or file objections thereto. The factual propositions set out in the request shall be deemed admitted upon the failure of a party to respond to the request for admission. (c) Production and inspection of documents. Upon motion of any party showing good cause therefor, and upon notice, the Board may order the other party to produce and permit the inspection and copying or photographing of any designated documents or objects, not privileged, specifically identified, and their relevance and materiality to the cause or causes in issue explained, which are reasonably calculated to lead to the discovery of admissible evidence. If the parties cannot themselves agree thereon, the Board shall specify just terms and conditions in making the inspection and taking the copies and photographs. 955.17 Service of papers. Papers shall be served personally or by mailing the same, addressed to the party upon whom service is to be made. Copies of complaints, answers and simultaneous briefs shall be filed directly with the Board. The party filing any other paper with the Board shall send a copy thereof to the opposing party, noting on the paper filed with the Board, or on the letter transmitting the same, that a copy has been so furnished. HEARINGS 955.18 Where and when held. Hearings will ordinarily be held in the Washington, D.C. area, except that upon request reasonably made and upon good cause shown the Board may set the hearing at another location. Hearings will be scheduled at the discretion of the board with due consideration to the regular order of appeals and other pertinent factors. On request or motion by either party and upon good cause shown, the Board may, in its discretion, advance a hearing. 955.19 Notice of hearings. The parties shall be given at least 15 days notice of the time and place set for hearings. In scheduling hearings, the Board will give due regard to the desires of the parties and to the requirement for just and inexpensive determination of appeals without unnecessary delay. Notices of hearing shall be promptly acknowledged by the parties. 955.20 Unexcused absence of a party. The unexcused absence of a party at the time and place set for hearing will not be occasion for delay. In the event of such absence, the hearing will proceed and the case will be regarded as submitted by the absent party as provided in W955.12. 955.21 Nature of hearings. Hearings shall be as informal as may be reasonable and appropriate under the circumstances. Appellant and respondent may offer at a hearing on the merits such relevant evidence as they deem appropriate and as would be admissible under the generally accepted rules of evidence applied in the courts of the United States in nonjury trials, subject, however, to the sound discretion of the presiding officer in supervising the extent and manner of presentation of such evidence. In general, admissibility will hinge on relevancy and materiality. Letters or copies thereof, affidavits, or other evidence not ordinarily admissible under the generally accepted rules of evidence, may be admitted in the discretion of the presiding officer. The weight to be attached to evidence presented in any particular form will be within the discretion of the Board, taking into consideration all the circumstances of the particular case. Stipulations of fact agreed upon by the parties may be regarded and used as evidence at the hearing. The parties may stipulate the testimony that would be given by a witness if the witness were present. The Board may in any case require evidence in addition to that offered by the parties. 955.22 Examination of witnesses. Witnesses before the Board will be examined orally under oath or affirmation unless the facts are stipulated, or the presiding officer shall otherwise order. If the testimony of a witness is not given under oath, the Board may warn the witness that his statements may be subject to the provisions of Title 18, United States Code, Sections 287 and 1001, and any other provisions of law imposing penalties for knowingly making false representations in connection with claims against the United States or in any matter within the jurisdiction of any department or agency thereof. 955.23 Copies of papers. When books, records, papers, or documents have been received in evidence, a true copy thereof or of such part thereof as may be material or relevant may be submitted therefor, during the hearing or at the conclusion thereof. 955.24 Posthearing briefs. Posthearing briefs may be submitted upon such terms as may be agreed upon by the parties and the presiding officer at the conclusion of the hearing. Ordinarily, they will be simultaneous briefs, exchanged within 30 days after receipt of transcript. 955.25 Transcript of proceedings. Testimony and argument at hearings shall be reported verbatim, unless the Board otherwise orders. Transcripts or copies of the proceedings shall be supplied to the parties at such rates as may be fixed by contract between the Reporter and the U.S. Postal Service. 955.26 Withdrawal of exhibits. After a decision has become final the Board may, upon request and after notice to the other party, in its discretion, permit the withdrawal of original exhibits, or any part thereof, by the party entitled thereto. The substitution of true copies of exhibits or any part thereof may be required by the Board in its discretion as a condition of granting permission for such withdrawal. REPRESENTATION 955.27 The appellant. An individual appellant may appear before the Board in person, a corporation by an officer thereof, a partnership or joint venture by a member thereof, or any of these by an attorney at law duly licensed in any state, commonwealth, territory, or in the District of Columbia. An attorney representing an appellant shall file a written notice of appearance with the Board. 955.28 The respondent. Postal Service counsel, designated by the General Counsel, will represent the interest of the government before the Board. Counsel shall file a notice of appearance with the Board, and notice thereof will be given appellant or his attorney in the form specified by the Board from time to time. Whenever at any time it appears that appellant and Postal Service Counsel are in agreement as to disposition of the controversy, the Board may suspend further processing of the appeal: Provided, however, that if the Board is advised thereafter by either party that the controversy has not been disposed of by agreement, the case shall be restored to the Board's calendar without loss of position. DECISIONS 955.29 Decisions. Decisions of the Board will be made in writing and authenticated copies thereof will be forwarded simultaneously to both parties. The rules of the Board and all final orders and decisions shall be open for public inspection at the offices of the Board in Washington, D.C. Decisions of the Board will be made solely upon the record, as described in W955.14. MOTION FOR RECONSIDERATION 955.30 Motion for reconsideration. A motion for reconsideration, if filed by either party, shall set forth specifically the ground or grounds relied upon to sustain the motion, and shall be filed within 30 days from the date of the receipt of a copy of the decision of the Board by the party filing the motion. DISMISSALS 955.31 Dismissal without prejudice. In certain cases, appeals docketed before the Board are required to be placed in a suspense status and the Board is unable to proceed with disposition thereof for reasons not within the control of the Board. In any such case where the suspension has continued, or it appears that it will continue, for an inordinate length of time, the Board may, in its discretion, dismiss such appeals from its docket without prejudice to their restoration when the cause of suspension has been removed. Unless either party or the Board acts within three years to reinstate any appeal dismissed without prejudice, the dismissal shall be deemed with prejudice. 955.32 Dismissal for failure to prosecute. Whenever a record discloses the failure of either party to file documents required by these rules, respond to notices or correspondence from the Board, comply with orders of the Board, or otherwise indicates an intention not to continue the prosecution or defense of an appeal, the Board may issue an order requiring the offending party to show cause when the appeal should not be either dismissed or granted, as appropriate. If the offending party shall fail to show such cause, the Board may take such action as it deems reasonable and proper under the circumstances. EX PARTE COMMUNICATIONS 955.33 Ex parte communications. No member of the Board or of the Board's staff shall entertain, nor shall any person directly or indirectly involved in an appeal submit to the Board or the Board's staff, off the record, any evidence, explanation, analysis, or advice, whether written or oral, regarding any matter at issue in an appeal. This provision does not apply to consultation among Board members nor to ex parte communications concerning the Board's administrative functions or procedures. SANCTIONS 955.34 Sanctions. If any party fails or refuses to obey an order issued by the Board, the Board may make such order in regard to the failure as it considers necessary to the just and expeditious conduct of the appeal. EFFECTIVE DATE AND APPLICABILITY 955.35 Effective date and applicability. 1. (a) WW955.1 through 955.34 took effect on February 18, 1976. Except as otherwise directed by the Board, these rules shall not apply to appeals docketed prior to their effective date. (b) Pursuant to the Contract Disputes Act of 1978, P.L. 95-563, WW955.36 and 955.37 apply to appeals relating to contracts entered into on or after March 1, 1979. At the election of the appellant, WW955.36 and 955.37 shall also apply to appeals relating to contracts entered into before March 1, 1979, if the Contracting Officer's final decision is dated March 1, 1979, or thereafter. When W955.36 is applicable it supersedes W955.13. OPTIONAL SMALL CLAIMS AND ACCELERATED PROCEDURES 955.36 Optional small claims (expedited) and accelerated procedures. 1. (a) These procedures are available solely at the election of the appellant. (b) Elections to Utilize SMALL CLAIMS (EXPEDITED) and ACCELERATED Procedure. (1) In appeals where the amount of dispute is $10,000 or less, the appellant may elect to have the appeal processed under a SMALL CLAIMS (EXPEDITED) procedure requiring decision of the appeal, whenever possible, within 120 days after the Board receives written notice of the appellant's election to utilize this procedure. The details of this procedure appear in paragraph (c) of this Rule. An appellant may elect the ACCELERATED procedure rather than the SMALL CLAIMS (EXPEDITED) procedure for any appeal eligible for the SMALL CLAIMS (EXPEDITED) procedure. (2) In appeals where the amount in dispute is $50,000 or less, the appellant may elect to have the appeal processed under an ACCELERATED procedure requiring decision of the appeal, whenever possible, within 180 days after the Board receives written notice of the appellant's election to utilize this procedure. The details of this procedure appear in paragraph (d) of this Rule. (3) The appellant's election of either the SMALL CLAIMS (EXPEDITED) procedure or the ACCELERATED procedure may be made either in his notice of appeal or by other written notice at any time thereafter. (4) In deciding whether the SMALL CLAIMS (EXPEDITED) procedure or the ACCELERATED procedure is applicable to a given appeal the Board shall determine the amount in dispute by adding the amount claimed by the appellant against the respondent to the amount claimed by respondent against the appellant. If either party making a claim against the other party does not otherwise state in writing the amount of its claim, the amount claimed by such party shall be the maximum amount which such party represents in writing to the Board that it can reasonably expect to recover against the other. (c) The SMALL CLAIMS (EXPEDITED) Procedure. (1) This procedure shall apply only to appeals where the amount in dispute is $10,000 or less as to which the appellant has elected the SMALL CLAIMS (EXPEDITED) procedure. (2) In cases proceeding under the SMALL CLAIMS (EXPEDITED) procedure, the following time periods shall apply: (i) within ten days from the respondent's first receipt from either the appellant or the Board of a copy of the appellant's notice of election of the SMALL CLAIMS (EXPEDITED) procedure, the respondent shall send the Board a copy of the contract, the contracting officer's final decision, and the appellant's claim letter or letters, if any; (ii) within 15 days after the Board has acknowledged receipt of the notice of election, either party desiring an oral hearing shall so inform the Board. If either party requests an oral hearing the Board shall promptly schedule such a hearing for a mutually convenient time consistent with administrative due process and the 120-day limit for a decision, at a place determined under W955. 18. If a hearing is not requested by either party within the time prescribed by this Rule, the appeal shall be deemed to have been submitted under W955.12 without a hearing. (3) In cases proceeding under the SMALL CLAIMS (EXPEDITED) procedure, pleadings, discovery, and other prehearing activity will be allowed only as consistent with the requirement to conduct the hearing on the date scheduled or, if no hearing is scheduled, to close the record on a date that will allow decision within the 120- day limit. The Board, in its discretion, may shorten time periods prescribed elsewhere in these Rules as necessary to enable the Board to decide the appeal within 120 days after the Board has received the appellant's notice of election of the SMALL CLAIMS (EXPEDITED) procedure. In so doing the Board may reserve whatever time up to 30 days it considers necessary for preparation of the decision. (4) Written decisions by the Board in cases processed under the SMALL CLAIMS (EXPEDITED) procedure will be short and contain only summary findings of fact and conclusions. Decisions will be rendered for the Board by a single Administrative Judge. If there has been a hearing, the Administrative Judge presiding at the hearing may, in his discretion, at the conclusion of the hearing and after entertaining such oral arguments as he deems appropriate, render on the record oral summary findings of fact, conclusions, and a decision of the Appeal. Whenever such an oral decision is rendered, the Board will subsequently furnish the parties a typed copy of such oral decision for the record and payment purposes and to establish the date of commencement of the period for filing a motion for reconsideration under W955.30. (5) Decisions of the Board under the SMALL CLAIMS (EXPEDITED) procedure will not be published, will have no value as precedents, and in the absence of fraud, cannot be appealed. (d) The ACCELERATED Procedure. (1) This procedure shall apply only to appeals where the amount in dispute is $50,000 or less as to which the appellant has made the requisite election. (2) In cases proceeding under the ACCELERATED procedure, the parties are encouraged, to the extent possible consistent with adequate presentation of their factual and legal positions, to waive pleadings, discovery, and briefs. The Board, in its discretion, may shorten time periods prescribed elsewhere in these Rules as necessary to enable the Board to decide the appeal within 180 days after the Board has received the appellant's notice of election of the ACCELERATED procedure, and may reserve 30 days for preparation of the decision. (3) Written decisions by the Board in cases processed under the ACCELERATED procedure will normally be short and contain only summary findings of fact and conclusions. Decisions will be rendered for the Board by a single Administrative Judge with the concurrence of the Chairman or Vice Chairman or other designated Administrative Judge, or by a majority among these two and an additional designated member in case of disagreement. Alternatively, in cases where the amount in dispute is $10,000 or less as to which the ACCELERATED procedure has been elected and in which there has been a hearing, the single Administrative Judge presiding at the hearing may, with the concurrence of both parties, at the conclusion of the hearing and after entertaining such oral arguments as he deems appropriate, render on the record oral summary findings of fact, conclusions, and a decision of the appeal. Whenever such an oral decision is rendered, the Board will subsequently furnish the parties a typed copy of such oral decision for record and payment purposes and to establish the date of commencement of the period for filing a motion for reconsideration under Rule W955.30. (e) Motions for reconsideration in cases arising under W955.36. Motions for Reconsideration of cases decided under either the SMALL CLAIMS (EXPEDITED) procedure or the ACCELERATED procedure need not be decided within the time periods prescribed by this W955.36 for the initial decision of the appeal, but all such motions shall be processed and decided rapidly so as to fulfill the intent of this Rule. SUBPOENAS 955.37 Subpoenas. 1. (a) General. Upon written request of either party filed with the docket clerk or on his own initiative, the Administrative Judge to whom a case is assigned or who is otherwise designated by the Chairman may issue a subpoena requiring: (1) Testimony at a deposition. The deposing of a witness in the city or county where he resides or is employed or transacts his business in person, or at another location convenient for him that is specifically determined by the Board; (2) Testimony at a hearing. The attendance of a witness for the purpose of taking testimony at a hearing; and (3) Production of books and papers. In addition to (1) and (2), the production by the witness at the deposition or hearing of books and papers designated in the subpoena. (b) Voluntary Cooperation. Each party is expected (1) to cooperate and make available witnesses and evidence under its control as requested by the other party, without issuance of a subpoena, and (2) to secure voluntary attendance of desired thirdparty books, papers, documents, or tangible things whenever possible. (c) Requests for subpoenas. (1) A request for a subpoena shall normally be filed at least: (i) 15 days before a scheduled deposition where the attendance of a witness at a deposition is sought; (ii) 30 days before a scheduled hearing where the attendance of a witness at a hearing is sought. In its discretion the Board may honor requests for subpoenas not made within these time limitations. (2) A request for a subpoena shall state the reasonable scope and general relevance to the case of the testimony and of any books and papers sought. (d) Requests to quash or modify. Upon written request by the person subpoenaed or by a party, made within 10 days after service but in any event not later than the time specified in the subpoena for compliance, the Board may (1) quash or modify the subpoena if it is unreasonable and oppressive or for other good cause shown, or (2) require the person in whose behalf the subpoena was issued to advance the reasonable cost of producing subpoenaed books and papers. Where circumstances require, the Board may act upon such a request at any time after a copy has been served upon the opposing party. (e) Form; issuance. (1) Every subpoena shall state the name of the Board and the title of the appeal and shall command each person to whom it is directed to attend and give testimony, and if appropriate, to produce specified books and papers at a time and place therein specified. In issuing a subpoena to a requesting party, the Administrative Judge shall sign the subpoena and may in his discretion, enter the name of the witness and otherwise leave it blank. The party to whom the subpoena is issued shall complete the subpoena before service. (2) Where the witness is located in a foreign country, a letter rogatory or subpoena may be issued and served under the circumstances and in the manner provided in 28 U.S.C. 1781-1784. (f) Service. (1) The party requesting issuance of subpoena shall arrange for service. (2) A subpoena requiring the attendance of a witness at a deposition or hearing may be served at any place. A subpoena may be served by a United States marshal or deputy marshal, or by any other person who is not a party and not less than 18 years of age. Service of a subpoena upon a person named therein shall be made by personally delivering a copy to that person and tendering the fees for one day's attendance and the mileage provided by 28 U.S.C. 1821 or other applicable law. (3) The party at whose instance a subpoena is issued shall be responsible for the payment of fees and mileage of the witness and of the officer who serves the subpoena. The failure to make payment of such charges on demand may be deemed by the Board as sufficient ground for striking the testimony of the witness and the evidence the witness has produced. (g) Contumacy or refusal to obey a subpoena. In case of contumacy or refusal to obey a subpoena by a person who resides, is found, or transacts business within the jurisdiction of a United States District Court, the board will apply to the Court through the Attorney General of the United States for an order requiring the person to appear before the Board or a member thereof to give testimony or produce evidence or both. Any failure of any such person to obey the order of the Court may be punished by the Court as a contempt thereof.