Contract Clauses

[an error occurred while processing this directive]

Clause 2-1 Inspection and Acceptance (March 2006)

a. The supplier must be able to demonstrate that the supplies and services being provided conform to contract requirements. The Postal Service may require correction of defects and nonconformance at no cost to the Postal Service. If the supplier fails or refuses to correct the defects or nonconformance the Postal Service may, in addition to any other remedies provided by this contract:

(1) Acquire replacement supplies or services from other sources at the supplier's expense; or

(2) Accept the supplies or services at a reduced price.

b. The Postal Service may revoke acceptance 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 supplier' assurances, or

(2) on the basis of a reasonable assumption that it would be cured.

c. The Postal Service has the same rights and duties upon revocation as upon rejection. Revocation of acceptance must occur within a reasonable time after the contracting officer discovers the deficiency.

d. The Postal Service, at its option, may at any stage in the performance of this contract, monitor the supplier's activities and efforts in performing the contract, to assure itself that contract requirements are being met. Such Postal Service oversight in no way relieves the supplier from its responsibility to perform in accordance with contract requirements.

Clause 2-2 Quality Management System (March 2006)

a. The supplier must use a documented quality management system to monitor and measure its performance against contract requirements. As a minimum, that quality assurance system must include all of the following:

(1) A process management system that includes documented work processes (including support processes), mechanisms to monitor and measure processes, systematic approaches for addressing nonconformance complaints with an emphasis on root cause analysis and corrective and preventative action, analysis of performance measurement, and regularly scheduled and documented quality management system reviews;

(2) A means of assessing customer satisfaction that includes scheduled customer satisfaction reviews or surveys, customer focus groups, or other means of securing ongoing customer feedback;

(3) Supplier management that includes supplier selection criteria and monitoring and assessing supplier performance; and

(4) A determination of the necessary competencies for personnel performing work during contract performance. Suppliers must:

(a) As necessary, provide training and take other actions to meet this requirement; and

(b) Maintain current records of education, training, skills, and experience.

b. The Postal Service has the right to evaluate the acceptability and effectiveness of the supplier's quality management system prior to award, and to verify that it is in use and effective during contract performance.

c. The supplier must maintain records and metrics pertaining to this quality management system in accordance with the record retention requirements of the contract.

d. The supplier must be able to demonstrate that the supplies and services being purchased conform to contract requirements. The Postal Service may require correction of defects and nonconformance at no cost to the Postal Service. If the supplier fails or refuses to correct the defects or nonconformance the Postal Service may, in addition to any other remedies provided by this contract:

(1) Acquire replacement supplies or services from other sources at the supplier's expense; or

(a) Accept the supplies or services at a reduced price.

Clause 2-3 (Reserved) (March 2006)

Clause 2-4 First Article Approval - Supplier Testing (March 2006)

a. The supplier must test the number of units specified in the Schedule of this contract. The supplier 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.

b. By the date specified in the Schedule, the supplier 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 supplier 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 supplier 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 supplier. A notice of disapproval will cite reasons for the disapproval.

c. If the first article is disapproved, the supplier, upon request of the Postal Service, must repeat any or all first article tests. After each request for additional tests, the supplier 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 supplier, including any and all costs for additional tests following a disapproval. The supplier 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.

d. If the supplier fails to deliver any first article report on time, or the contracting officer disapproves any first article, the supplier will be deemed to have failed to make delivery within the meaning of the Default clause.

e. Unless otherwise provided in the contract, and if the approved first article is not consumed or destroyed in testing, the supplier may deliver the approved first article as part of the contract quantity if it meets all contract requirements for acceptance.

f. 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 supplier, 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.

g. Before first article approval, acquisition of materials or components for the balance of the contract quantity or commencement of production is at the supplier's sole risk.

h. 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
(March 2006)

a. At the time specified for first article testing, the supplier 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.

b. The contracting officer must, by written notice to the supplier 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 supplier 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 supplier. A notice of disapproval will cite reasons for the disapproval.

c. If the first article is disapproved, the supplier 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 supplier 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 supplier. 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.

d. If the supplier 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 supplier of responsibility to meet the delivery schedule for production quantities.

e. When the first article is not consumed or destroyed in testing, and unless otherwise provided in this contract, the supplier:

(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 supplier's expense.

f. The supplier is responsible for spare-parts support and repair of the first article during any first article approval test.

g. Before first article approval, acquisition of materials or components for the balance of the contract quantity or commencement of production is at the supplier's sole risk.

Clause 2-6 Delayed Acceptance (March 2006)

a. Acceptance under this contract will not occur until the supplier has successfully completed the preacceptance tests set forth in the Schedule.

b. The supplier 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.

c. The supplier 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 (March 2006)

The supplier'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 (March 2006)

a. The supplier 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.

b. Within the time specified in the Schedule, the contracting officer must give written notice to the supplier 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.

c. When return for correction or replacement is required, the supplier is responsible for all costs of transportation and for risk of loss in transit.

d. If the supplier 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 supplier any cost to the Postal Service. In addition, the contracting officer may dispose of the nonconforming supplies, with reimbursement from the supplier or from the proceeds for excess costs.

e. Any supplies corrected or furnished in replacement are subject to this clause.

f. Supplies, as used in this clause, includes related services.

g. 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 Supplier's Responsibilities (March 2006)

a. If the contract specifies "f.o.b. destination," the following apply:

(1) "F.o.b. destination" means delivery to the specified delivery point. Transportation costs are included in the contract price.

(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 supplier 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;

(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 U.S. Postal Service 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.

b. If the contract specifies "delivered Postal Service 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 Service facilities having no platforms or private siding;

(b) On the platform at Postal Service facilities having platforms but no private siding; or

(2) In addition to fulfilling the requirements of the Responsibility for Supplies clause, the supplier 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;

(d) Be responsible for loss or damage occurring before delivery to the specified delivery point.

c. If the contract specifies "f.o.b. origin," the following apply:

(1) "F.o.b. origin" means delivery on board the indicated type of conveyance of the carrier (or of the Postal Service), at 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. Transportation costs are borne by the Postal Service.

(2) The supplier 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 supplier, 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 supplier, 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:

(i) A description of the shipment in terms of the governing freight classification or tariff under which the lowest freight rates are applicable;

(ii) The seals affixed to the conveyance, including the serial number on them, or other identification;

(iii) The length and capacity of cars or trucks ordered and furnished;

(iv) Other pertinent information required to effect prompt delivery to the consignee, including the routing and the name, delivery, and postal address of the consignee;

(v) 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

(vi) 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) Where delivery is to be made to points not included above, either of the following apply:

(a) If the Postal Service has not specified otherwise, the supplier 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 the supplier will be required to prepay all transportation charges, as follows:

(i) 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.

(ii) Delivery to siding at destination if not covered under (1) above.

(iii) Delivery to the freight station nearest destination if not covered under (1) or (2) above.

(iv) The supplier must annotate the commercial bill of lading as follows: "Property of the United States Postal Service."

(v) The actual transportation costs will be added to the supplier'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:"

(4) The Postal Service reserves the right to specify the mode of transportation and routing to be employed.

Clause 2-10 Liquidated Damages (March 2006)

a. If the supplier fails to complete the work, deliver the supplies, or perform the services within the time specified in this contract, or any extension, the supplier 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.

b. 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 supplier 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.

c. The supplier 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 supplier.

Clause 2-11 Postal Service Property - Fixed-Price (March 2006)

a. Postal Service-Furnished Property

(1) The Postal Service will deliver to the supplier, 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 supplier 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 supplier 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 supplier, make a determination of any delay occasioned the supplier 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 supplier 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 supplier) 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.

b. 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 supplier for the Postal Service under this contract. The supplier 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 supplier'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.

c. 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 supplier 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 supplier, 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.

d. 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.

e. Utilization, Maintenance, and Repair of Postal Service Property. The supplier 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 supplier must make such repairs as the Postal Service directs; provided, however, that if the supplier cannot effect these repairs within the time required, the supplier will dispose of the property in the manner directed by the contracting officer. The contract price includes no compensation to the supplier 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 supplier is responsible under the provisions of this contract must be accomplished by the supplier at the supplier's own expense.

f. Risk of Loss. Unless otherwise provided in this contract, the supplier 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 supplier 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.

g. 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.

h. 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 supplier 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.

i. Restoration of Supplier'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 supplier'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 (use when contract provides for reimbursement of costs for certain materials)

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 supplier 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.

(3) Title to all material purchased by the supplier for whose cost the supplier 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 supplier by the vendor.

(4) Title to other material whose cost is reimbursable to the supplier 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.

(5) All Postal Service-furnished property, together with all property acquired by the supplier, 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 (March 2006)

a. The Postal Service will deliver to the supplier, 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 supplier, the contracting officer must equitably adjust affected provisions of this contract in accordance with the Changes clause when:

(1) The supplier submits a timely written request for an equitable adjustment; and

(2) The facts warrant an equitable adjustment.

b. Title to Postal Service property remains in the Postal Service. The supplier may use the Postal Service property only in connection with this contract. The supplier 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.

c. Upon delivery of Postal Service property to the supplier, the supplier 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.

d. Upon completing this contract, the supplier 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 supplier 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 (March 2006)

a. Postal Service-Furnished Property

(1) Supplier's managerial personnel, as used in paragraph g of this clause, means any of the supplier's directors and officers and any of the supplier's managers, superintendents, or equivalent representatives who have supervision or direction of:

(a) All or substantially all of the supplier's business;

(b) All or substantially all of the supplier's operation at any one plant or separate location at which the contract is being performed; or

(2) The Postal Service will deliver to the supplier, 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 supplier 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 supplier 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 supplier 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 supplier, 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 supplier's timely written request, make a determination of any delay caused the supplier and will make an equitable adjustment in accordance with paragraph h of this clause.

b. 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 supplier for the Postal Service under this contract. The supplier 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 supplier'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.

c. Title

(1) The Postal Service retains title to all Postal Service-furnished property.

(2) Title to all property purchased by the supplier for which the supplier 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 supplier.

(3) Title to all other property whose cost is reimbursable to the supplier 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

(4) All Postal Service-furnished property and all property acquired by the supplier, 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.

d. 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.

e. Property Administration

(1) The supplier 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 supplier must make such repairs as the Postal Service directs. However, if the supplier cannot affect these repairs within the time required, the supplier 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.

f. 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.

g. Limited Risk of Loss

(1) The supplier 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 supplier 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 supplier is otherwise reimbursed, but only to the extent of such insurance or reimbursement;

(d) That results from willful misconduct or lack of good faith on the part of the supplier's managerial personnel; or

(e) That results from a failure on the part of the supplier, due to willful misconduct or lack of good faith on the part of the supplier'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 supplier fails to act, as described in g.2(e) above, after being notified (by certified mail addressed to one of the supplier'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 supplier'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 supplier can establish by clear and convincing evidence that the loss, destruction, or damage:

(i) Did not result from the supplier's failure to maintain an approved program or system; or

(ii) Occurred while an approved program or system was maintained by the supplier.

(4) If the supplier transfers Postal Service property to the possession and control of a subcontractor, the transfer does not affect the liability of the supplier for loss or destruction of, or damage to, the property. However, the supplier 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 supplier 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 supplier 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;

(d) Any insurance covering any part of or interest in the commingled property.

(6) The supplier 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 supplier's) that separation is impractical, the supplier 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 supplier 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 supplier'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 supplier to carry such insurance under another provision of this contract.

(8) In the event the supplier is reimbursed or otherwise compensated for any loss or destruction of, or damage to, Postal Service property, the supplier 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 supplier 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 supplier 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 supplier must enforce this liability of the subcontractor for the benefit of the Postal Service.

h. 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 supplier'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.

i. 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 supplier 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 supplier 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 supplier 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 supplier's normal practice and account for it as a part of general overhead or other reimbursable costs in accordance with the supplier's established accounting procedures.

j. Abandonment and Restoration of Supplier'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 supplier'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.

k. Communications. All communications under this clause must be in writing.

Alternate Paragraph c (see the Material and Property Accountability topic of the General Practices, from the Postal Service Supplying Practices.)

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 supplier, 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 supplier for which the supplier 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 supplier. Title to all other property whose cost is to be reimbursed to the supplier 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

(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 supplier upon acquisition or as soon thereafter as feasible; provided, that the supplier 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 supplier under this subparagraph c.4, the supplier 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 supplier will furnish the contracting officer a list of all equipment to which title is vested in the supplier 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 supplier 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" (March 2006)

a. 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 supplier pursuant to the solicitation or (if not inspected by the supplier) as when last available for inspection under the solicitation.

b. The supplier may repair any property made available to the supplier "as is." Repair will be at the supplier's expense except as otherwise provided in this clause. Such property may be modified at the supplier'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.

c. 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 supplier, the supplier 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 supplier, 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.

d. 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 (March 2006)

a. 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 supplier 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.

b. Use of Special Tooling. The supplier agrees not to use any items of special tooling purchased or manufactured by the supplier for the performance of this contract except in performing it, or as approved by the contracting officer.

c. 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 supplier must (if the contracting officer so requests) furnish the contracting officer a list of all special tooling acquired or manufactured by the supplier 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 supplier 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.

d. Changes in Design. If any changes in design or specifications affect interchangeability of parts, the supplier 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 supplier, subject to the provisions of paragraph i below, pending disposition under paragraph f below.

e. Supplier's Offer to Retain Special Tooling. When the supplier furnishes a list or notice under paragraph c or d above, the supplier 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 supplier 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 supplier 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.

f. 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 supplier:

(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 supplier 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 supplier under paragraph e above, or a request for further negotiation with respect to it;

(c) A direction to the supplier 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 supplier 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 supplier for which the supplier 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 supplier 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 supplier 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.

g. Proceeds of Retention or Disposition of Special Tooling. If the contracting officer accepts an offer of the supplier 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 supplier under this contract and the contract amended accordingly; or

(2) Otherwise paid as the contracting officer may direct.

h. Property Control. The supplier 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 supplier further agrees that, to the extent practicable, the supplier will identify by appropriate stamp, tag, or other mark all special tooling subject to this clause.

i. Maintenance Pending Disposition. The supplier agrees that, between the date any usable items of special tooling are no longer needed by the supplier, within the meaning of this clause, and the date of their final disposition under this clause, the supplier 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 supplier shall not be required to keep any such items in place.

j. Special Tooling Provisions for Subcontracts. The supplier 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 supplier'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 supplier 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 (March 2006)

a. 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.

b. Supplier Notice of Intent to Acquire Special Equipment. This contract provides that the supplier 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 supplier 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 supplier has not received written notice within the period prescribed, the supplier may proceed to acquire the equipment or components, subject to any other applicable provisions of this contract.

c. 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 supplier could have procured them after expiration of the 30-day notice period prescribed in paragraph b.

d. 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.

e. 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 supplier, and to furnish the items to the supplier and obtain an equitable adjustment of the prime contract therefore, in accordance with paragraphs b, c, and d above, will be preserved.

Clause 2-17 Option for Increased Quantity (March 2006)

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 supplier. 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 (March 2006)

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 supplier. 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 Contract) (March 2006)

The Postal Service may require the supplier 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 supplier. The rates set forth in the Schedule will apply to any extension made under this option clause.

Clause 2-20 Option to Renew (with Preliminary Notice) (March 2006)

This contract is renewable, at the option of the Postal Service, by the contracting officer giving written notice of renewal to the supplier within the period specified in the Schedule; provided that, the contracting officer will have given preliminary notice of the Postal Service's intent to renew at least 60 days before this contract is to expire (such a preliminary notice will not be deemed to commit the Postal Service to renewals). 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 (March 2006)

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 supplier may ask the contracting officer to recognize a supplier-proposed component not included in the specifications as equal to one of the specified components and permit its substitution; provided that the supplier 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 (March 2006)

a. General. The supplier is encouraged to develop and submit Value Engineering Change Proposals (VECPs) voluntarily. The supplier will share in savings realized from an accepted VECP as provided in paragraph (h) below.

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

(i) Deliverable end items only;

(ii) Test quantities due solely to results of previous testing under the instant contract; or

(iii) 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) Supplier's Development and Implementation Costs. Supplier's cost in developing, testing, preparing, and submitting a VECP. Also included are the supplier's cost to make the contractual changes resulting from the Postal Service acceptance of the VECP.

c. 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 supplier'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.

d. Submission. The supplier must submit VECPs to the contracting officer.

e. Postal Service Action

(1) The contracting officer will give the supplier written notification of action taken on a VECP within 60 days after receipt. If additional time is needed, the contracting officer will notify the supplier, 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 supplier, explaining the reasons for rejection.

f. Withdrawal. The supplier may withdraw a VECP, in whole or in part, at any time before its acceptance.

g. 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 supplier 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).

h. Sharing. If a VECP is accepted, the supplier's share is ___ percent of the contract savings. If options are included in the contract, the supplier's share for the additional quantity is ___ percent of the contract savings. The contract savings are calculated by subtracting the estimated cost of the performing the contract with the VECP, Postal Service costs, and the allowable development and implementation costs from the estimated cost of performing the contract with out the VECP. Profit is excluded when calculating contract savings. (Contracting officer inserts the negotiated percentage of shared savings. See the Shared Lessons Learned topic of the Manage Delivery and Contract Performance task of Process Step 5: Measure and Manage Supply, from the Postal Service Supplying Practices.)

i. Data

(1) The supplier 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 supplier or from another source without limitation."

(2) If a VECP is accepted, the supplier 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 the Clarify Data Rights and Intellectual Property Issues topic of the Develop Sourcing Strategy task of Process Step 2: Evaluate Sources of the Supplying Practices.)

Additional Paragraph j (see the Clarify Data rights and Intellectual Property topic of Process Step 2: Evaluate sources, of the Postal Service Supplying Practices.)

j. Subcontracts. The supplier 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 supplier'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 2-23 Reimbursement - Postal Service Testing (March 2006)

a. The supplier will be charged at the rate of $60 per work-hour for:

(1) The total time, including round-trip travel time, lost by Postal Service representatives when the supplier is not ready for inspection at the time inspection and testing is requested by the supplier; and

(2) The total time, including round-trip travel time, required by Postal Service representatives for reinspection and retesting resulting from rejection.

a. Other out-of-pocket expenses incurred by the Postal Service as a consequence of the activities described in this clause will be billed to the supplier.

Clause 2-24 (Reserved) (March 2006)

Clause 2-25 Unpriced Options (March 2006)

The Postal Service may elect to exercise the unpriced option described 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 supplier. The price for this option will be negotiated at the time the option is exercised.

Clause 2-26 Payment - Fixed Price (March 2006)

The Postal Service will pay the supplier, 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:

a. The amount due on the deliveries warrants it; or

b. The supplier 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 2-27 Incentive Price Revision (March 2006)

a. 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).

b. Definition. Costs means allowable costs in accordance with the Conduct Price/Cost Analysis topic of the Evaluate Proposals task of Process Step 2: Evaluate Sources, of the Postal Service Supplying Practices.

c. Submission of Data

(1) Within days (Contracting officer insert number of days) after the end of the month in which the supplier has delivered the last unit of supplies and completed the services called for by those items referred to in paragraph a above, the supplier 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

(2) If the supplier fails to submit the data required within the time specified and it is later determined that the Postal Service has overpaid the supplier, the supplier 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.

d. 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 supplier 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.

e. Adjusted Billing Price

(1) Pending execution of the contract modification described in subparagraph d.3 above, the supplier 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 supplier'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.

f. 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 supplier'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 supplier 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 supplier, as computed in accordance with f.1(a), (b) and (c) above, the supplier must immediately refund or credit to the Postal Service the amount of the excess. The supplier 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 supplier must provide complete details to support any claimed reductions in refunds.

(3) If the supplier 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 supplier, the supplier 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.

g. Subcontracts. No subcontract placed under this contract may provide for payment on a cost-plus-a-percentage-of-cost basis. The supplier 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 supplier 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.

h. Disagreements. If the supplier 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.

i. 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.

j. 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.

k. 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.

l. 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.

m. 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 supplier 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 supplier's profit or loss on this contract.

n. 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 2-28 Economic Price Adjustment - Labor and Materials
(March 2006)

a. 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 supplier 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 supplier'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 supplier's proposal for an equitable adjustment.

b. Promptly upon receipt of any notice and data described in paragraph a above, the supplier 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 supplier shall continue performance.

c. 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 supplier's failure to deliver in accordance with the delivery schedule results from causes beyond the control and without the fault or negligence of the supplier 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.

d. 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.

e. The final invoice submitted under this contract must include a certification that the supplier has not experienced a decrease in rates of pay for labor or unit prices for materials set forth in the Schedule or that the supplier has given notice of all such decreases in compliance with paragraph a above.

f. The contracting officer may examine the supplier's books, records, and other supporting data relevant to the cost of labor and materials during all reasonable times until the expiration of 3 years from the date of final payment under the contract.

g. No subcontract placed under this contract may provide for payment on a cost-plus-a-percentage-of-cost basis.

Clause 2-29 Economic Price Adjustment (Index Method) (March 2006)

Regardless of actual changes in the cost of labor and material during the performance period of this contract, price adjustments necessitated by such changes shall be made only as provided in this clause. The contracting officer shall place in the contract Schedule an adjustment formula that describes the elements that will be used to determine the adjusted contract price. The adjustment formula may identify some or all of the following as appropriate:

(1) Contract line items, cycles, production runs or such other portion of the contract that will be subject to adjustment according to this clause;

(2) Base unit price to be adjusted;

(3) Portion of the base unit price subject to adjustment;

(4) Index that will be used for the adjustment, paying particular attention to describe the index to avoid confusion over which release (i.e., preliminary, seasonally adjusted, subsequently revised, or final), issue, or date will be applicable;

(5) Percent of the price governed by the chosen index;

(6) Adjustment period;

(7) Base period; and

(8) Degree of specificity of the result (i.e., number of decimal places to be used).

(9) Should the selected index be discontinued or substantially altered, both parties shall agree upon an appropriate replacement.

Clause 2-30 Allowable Cost and Payment (March 2006)

a. Invoicing. The Postal Service will make payments to the supplier when requested as work progresses, but not more than monthly, in amounts determined to be allowable by the contracting officer in accordance with the Conduct Price/Cost Analysis topic of the Evaluate Proposals task of Process Step 2: Evaluate Sources, of the Postal Service Supplying Practices in effect on the date of this contract, and the terms of this contract. The supplier 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.

b. 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 supplier has paid by cash, check, or other form of actual payment for items or services purchased directly for the contract;

(b) When the supplier is not delinquent in paying costs of contract performance in the ordinary course of business, costs incurred, but not necessarily paid, for:

(i) Materials issued from the supplier's inventory and placed in the production process for use on the contract;

(ii) Direct labor;

(iii) Direct travel;

(iv) Other direct in-house costs; and

(v) Properly allocable and allowable indirect costs, as shown in the records maintained by the supplier for purposes of obtaining reimbursement under Postal Service contracts.

(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 supplier's expense or at no cost to the Postal Service will be disregarded for purposes of cost reimbursement under this clause.

c. Final Indirect Cost Rates

(1) Final annual indirect cost rates and the appropriate bases will be established in accordance with the Conduct Price/Cost Analysis topic of the Evaluate Proposals task of Process Step 2: Evaluate Sources, of the Postal Service Supplying Practices in effect for the period covered by the indirect cost rate proposal.

(2) The supplier 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 supplier's actual cost experience for that period. The contracting officer or contracting officer's representative and the supplier must establish the final indirect cost rates as promptly as practical after receipt of the supplier'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;

(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.

d. Billing Rates. Until final annual indirect cost rates are established for any period, the Postal Service will reimburse the supplier 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.

e. Audit. At any time or times before final payment, the contracting officer may have the supplier'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.

f. Final Payment

(1) The supplier 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 supplier'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 supplier must pay to the Postal Service any refunds, rebates, credits, or other amounts (including interest, if any) accruing to or received by the supplier or any assignee under this contract, to the extent that those amounts are properly allocable to costs for which the supplier has been reimbursed by the Postal Service. Reasonable expenses incurred by the supplier for securing refunds, rebates, credits, or other amounts are allowable costs if approved by the contracting officer. Before final payment under this contract, the supplier 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 supplier 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:

(i) Specified claims stated in exact amounts, or in estimated amounts when the exact amounts are not know;

(ii) Claims (including reasonable incidental expenses) based upon liabilities of the supplier to third parties arising out of the performance of this contract, but only if the claims are not known to the supplier on the date of the execution of the release, and only if the supplier gives notice of the claims in writing to the contracting officer within 6 years following the release date or notice of final payment date, whichever is earlier; and

(iii) Claims for reimbursement of costs, including reasonable incidental expenses, incurred by the supplier under the patent clauses of this contract, excluding, however, any expenses arising from the supplier's indemnification of the Postal Service against patent liability.

Clause 2-31 Limitation of Cost (March 2006)

a. 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 supplier agrees to use its best efforts to perform the work specified in the Schedule and all obligations under this contract within this estimated cost.

b. Whenever the supplier 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 the estimated cost then set forth in the Schedule, the supplier must notify the contracting officer in writing to that effect, giving its revised estimate of the total cost for performing the contract.

c. 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 supplier for costs incurred in excess of the estimated cost set forth in the Schedule, and the supplier 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 supplier 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 supplier 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.

d. 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.

e. If this contract is terminated or the estimated cost not increased, the Postal Service and the supplier must negotiate an equitable distribution of all property produced or purchased under the contract, based upon the share of costs incurred by each.

Clause 2-32 Limitation of Funds (March 2006)

a. 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 supplier agrees to use its best efforts to perform the work specified in the Schedule and all obligations under this contract within this estimated cost.

b. 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 supplier 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.

c. Whenever the supplier 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 supplier 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 supplier 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 therefore, the contracting officer will, upon written request by the supplier, terminate this contract on that date, under the Termination clause. If the supplier, exercising reasonable judgment, estimates that the funds available will allow it to continue to discharge its obligations for a period extending beyond that date, the supplier 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.

d. 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 supplier for costs incurred in excess of the total amount from time to time allotted to the contract, and the supplier 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 supplier 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 supplier 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.

e. 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.

f. 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 supplier must negotiate an equitable distribution of all property produced or purchased under the contract, based upon the share of costs incurred by each.

g. If sufficient funds are not allotted to this contract to allow completion of the work contemplated, the supplier 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.

Note:
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 2-33 Cost Contract - No Fee (March 2006)

a. The Postal Service will not pay the supplier a fee for performing this contract.

b. 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 2-34 Cost-Sharing Contract - No Fee (March 2006)

a. The Postal Service will not pay the supplier a fee for performing this contract.

b. 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 2-35 Incentive Fee (March 2006)

a. General. The Postal Service will pay the supplier for performing this contract a fee determined as provided in the contract.

b. 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.

c. Withholding Payment. Normally, the Postal Service will pay the fee to the supplier as specified in the Schedule. However, when the contracting officer considers that performance or cost indicates that the supplier will not achieve target, the Postal Service will pay on the basis of an appropriate lesser fee. When the supplier demonstrates that performance or cost clearly indicates that the supplier 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.

d. 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.

e. Fee Payable

(1) The fee payable under this contract will be the target fee increased by cents (contracting officer insert supplier's participation) for every dollar that the total allowable cost is less than the target cost or decreased by cents (contracting officer insert supplier'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 supplier 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 supplier'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 supplier'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 supplier 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.

f. 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 supplier and the contracting officer.

g. 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 2-36 Fixed Fee (March 2006)

a. The Postal Service will pay the supplier for performing this contract the fixed fee specified in the Schedule.

b. 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 2-37 Award Fee (March 2006)

The estimated cost for this contract is $_____________.

The base fee is $____________.

The award fee is $____________.

The total estimated cost plus base and award fees is $______________.

This contract will be modified to reflect the award fee as award fee determinations are made.

The amount of award fee the supplier earns, if any, is based on a subjective evaluation by the Postal Service of the quality of the supplier's performance in accordance with the award fee plan. The Postal Service will determine the amount of award fee at the intervals stated in the award fee plan that is applicable to this contract. The Fee Determination Official (FDO), who is identified in the award fee plan, will unilaterally determine the amount of award fee. The FDO's determination will be in writing to the supplier and is not subject to the Disputes clause. The Postal Service may unilaterally change the award fee plan at any time, and will provide such changes in writing to the supplier prior to the beginning of the applicable evaluation period. The supplier must submit a voucher or invoice for the earned award fee. Available award fee not earned during one period does not carry over to subsequent periods.

Clause 2-38 Payment (Time-and-Materials and Labor-Hour Contracts) (March 2006)

The Postal Service will pay the supplier as follows upon submission of invoices or vouchers approved by the contracting officer:

a. 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 supplier 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 supplier.

(3) Unless the Schedule prescribes otherwise, the hourly rates in the Schedule must not be varied by virtue of the supplier 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.

b. Materials and Subcontracts

(1) Allowable costs of direct materials will be determined by the contracting officer in accordance with the Conduct Price/Cost Analysis topic of the Evaluate Proposals task of Process Step 2: Evaluate Sources of the Postal Service Supplying Practices 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 supplier 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 supplier 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 supplier, or would have accrued except for the fault or neglect of the supplier. The benefits lost without fault or neglect on the part of the supplier, or lost through no fault of the contracting officer, will not be deducted from gross costs.

c. 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 supplier agrees to use its best efforts to perform the work within this ceiling price. Whenever the supplier has reason to believe that the hourly rate payments and material costs that will accrue in performing the contract in the next 60 days, if added to all other payments and costs previously accrued, will exceed the ceiling price, the supplier must notify the contracting officer, giving any revised estimate of the total price for performing this contract, with supporting reasons and documentation. Whenever the supplier 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 supplier 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 supplier, giving a revised estimate of the total amount of effort to be required under the contract.

d. Ceiling Price. The Postal Service is not obligated to pay the supplier any amount in excess of the ceiling price in the Schedule, and the supplier is not obligated to continue performance if to do so would exceed the ceiling price, until the contracting officer notifies the supplier 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.

e. 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 supplier as the completion voucher or completion invoice and substantiating material, and upon compliance by the supplier 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 supplier 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 2-39 Ordering (March 2006)

a. Supplies or services to be furnished under this contract will be ordered by authorized Postal Service credit card, or issuance of delivery orders, during the period and by the activities specified in the Schedule.

b. Orders may be issued in writing, by written telecommunication, electronic data interchange (EDI), or orally. Oral orders, other than authorized Postal Service credit card orders, must be confirmed in writing. Orders sent by mail are considered issued when placed in the mail.

c. The supplier must report to the contracting officer in the format and intervals specified in the Schedule all orders charged to an authorized Postal Service credit card.

d. All orders are subject to the terms and conditions of this contract. If there is any conflict between an order and this contract, the contract is controlling.

Clause 2-40 Delivery-Order Limitations (March 2006)

a. 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 supplier is not obligated to furnish, those supplies or services under this contract.

b. The supplier 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.

c. If this is a requirements contract, the Postal Service is not required to order a part of any one requirement from the supplier if that requirement exceeds the limitations stated in paragraph b above.

d. If it is the supplier's intent not to honor an order received that exceeds the limitations stated in paragraph b above, the supplier 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 supplier does not return the order with a notice of rejection as required, the supplier must honor the order as issued.

Clause 2-41 Definite Quantity (March 2006)

a. This is a definite-quantity contract. The Postal Service will order the quantity of supplies or services specified in the Schedule, and the supplier 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.

b. Any order issued during the effective period of this contract and not completed within that period must be completed by the supplier within the time specified in the order, and the rights and obligations of the supplier 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 2-42 Indefinite Quantity (March 2006)

a. This is an indefinite-quantity contract; the quantities of supplies or services specified in the Schedule are not purchased until ordered. If this contract resulted from multiple awards under a single solicitation for the same or similar supplies or services to two or more sources, some or all of the orders issued will be subject to the competitive procedures described in this contract.

b. Delivery or performance must be as directed in orders issued in accordance with the Ordering clause and the contract Schedule. The supplier 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.

c. Any order issued during the effective period of this contract and not completed within that period must be completed by the supplier within the time specified in the order, and the rights and obligations of the supplier 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 2-43 Requirements (March 2006)

a. 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.

b. Delivery or performance must be as directed in orders issued in accordance with the Ordering clause and the contract Schedule. The supplier 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.

c. Except as otherwise provided in this contract, the Postal Service must order from the supplier 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.

d. The Postal Service is not required to purchase from the supplier requirements in excess of any limit on total orders under this contract.

e. If the Postal Service urgently requires delivery or performance before the earliest date specified under this contract, and if the supplier 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.

f. Any order issued during the effective period of this contract and not completed within that period must be completed by the supplier within the time specified in the order, and the rights and obligations of the supplier 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 the Select Contract Type topic of the Develop Sourcing Strategy task of Process Step 2: Evaluate Sources from the Supplying Practices)

c. The estimated quantities are not the total requirements of the activities specified in the Ordering clause or the Schedule, but are estimates of either specified portions of requirements or 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 supplier either the portion of a designated activity's requirements for supplies and services specified in the Schedule or the requirements that exceed the quantities the activity can itself furnish within its own capabilities.

Clause 2-44 Contract Definitization (March 2006)

a. A _______________ (Contracting officer insert type of contract contemplated) definitive contract is contemplated. The supplier 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 Postal Service Supplying Practices 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.

b. The schedule for definitizing this contract is as follows:

(1) Proposal submission date:___________________.

(2) Beginning of negotiations:___________________.

(3) Definitization target date:__________________.

c. 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 the Conduct Price/Cost Analysis topic of the Evaluate Proposals task of Process Step 2: Evaluate Sources, of the Postal Service Supplying Practices, subject to appeal by the supplier as provided in the Claims and Disputes clause. In any event, the supplier 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 Postal Service Supplying Practices 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.

d. The price of the definitive contract resulting from this letter contract will in no event exceed $_______________. (See the Select Contract Type topic of the Develop Sourcing Strategy task of Process Step 2: Evaluate Sources from the Supplying Practices.)

Clause 2-45 Execution and Commencement of Work (March 2006)

The supplier 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 supplier must proceed with performance of the work, including purchase of necessary materials.

Clause 2-46 Limitation of Postal Service Liability (March 2006)

a. The supplier is not authorized to make expenditures or to incur obligations in performing this contract exceeding $ _________ (Contracting officer insert limit).

b. The maximum amount for which the Postal Service will be liable if this contract is terminated is $ _______________ (Contracting officer insert maximum liability).

Clause 2-47 Payment of Allowable Costs Before Definitization
(March 2006)

a. Pending the definitization of this letter contract, the Postal Service will promptly reimburse the supplier 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 cost reimbursement subcontracts, but not exceeding 85 percent of the allowable costs of those subcontractors.

(3) 85 percent of all other approved costs.

b. To determine amounts payable to the supplier under this letter contract, allowable costs will be determined by the contracting officer in accordance with the Conduct Price/Cost Analysis topic of the Evaluate Proposals task of Process Step 2: Evaluate Sources, of the Postal Service Supplying Practices 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.

c. Once each month (or more often if approved by the contracting officer), the supplier 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 supplier in performance of this contract.

d. 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 supplier has paid by cash, check, or other form of actual payment for items or services purchased directly for the contract;

(2) When the supplier 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 supplier's inventory and placed in the production process for use on the contract;

(b) Direct labor;

(d) Other direct in-house costs; and

(e) Properly allocable and allowable indirect costs, as shown in the records maintained by the supplier for purposes of obtaining reimbursement under Postal Service contracts; and

(3) The amount of progress payments that have been paid to the supplier's subcontractors under similar cost standards.

e. At any time or times before final payment, the contracting officer may have the supplier'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 2-48 Most Favored Customer Pricing (March 2006)

During the term of this contract, prices for the goods and services required under this contract must be the equal to or lower than those offered the most favorable customer for similar quantities under comparable terms and conditions. When requested by the contracting officer, the supplier must show that the prices offered the Postal Service match or are less than those offered the supplier's most favored customers for those quantities under those terms and conditions, and such pricing data must be available for review by the Postal Service throughout the term of the contract. Any price reductions offered to other customers must be offered to the Postal Service if similar item quantities are involved.

Clause 2-49 Cost/Price Reduction (March 2006)

During the term of this contract, the Postal Service reserves the right to negotiate price reductions for any good or service being purchased. During the term of this contract, the Postal Service expects the supplier to continually seek to improve production and performance processes and method, and to report on these efforts to the Postal Service. Additionally, price reductions may be sought by the Postal Service as a result of changes in market conditions, industry trends and indexes, or in cost/price indexes, and their impact on the supplier's cost elements or overall cost. The Postal Service may terminate this contract for convenience if it feels price reductions are warranted, but the parties cannot reach an agreement on such price reductions.

Who We Are

What We're Doing

Newsroom

Careers

Doing Business with Us

LEGAL

ON ABOUT.USPS.COM

ON USPS.COM

OTHER USPS SITES