Far 52.216-7

52.216-7

FEDERAL ACQUISITION REGULATION

the Government (including amounts applied or to be applied
to liquidate progress payments).
(2) Notwithstanding any provision of this contract
authorizing greater payments, if on any quarterly statement
the amount under subdivision (g)(1)(iv) of this section
exceeds the sum due the Contractor, as computed in accordance with subdivisions (g)(1)(i), (ii), and (iii) of this section,
the Contractor shall immediately refund or credit to the Government the amount of this excess. The Contractor may, when
appropriate, reduce this refund or credit by the amount of any
applicable tax credits due the contractor under
26 U.S.C. 1481 and by the amount of previous refunds or
credits effected under this clause. If any portion of the excess
has been applied to the liquidation of progress payments, then
that portion may, instead of being refunded, be added to the
unliquidated progress payment account, consistent with the
Progress Payments clause. The Contractor shall provide complete details to support any claimed reduction in refunds.
(3) If the Contractor fails to submit the quarterly statement within 45 days after the end of each quarter and it is later
determined that the Government has overpaid the Contractor,
the Contractor shall repay the excess to the Government
immediately. Unless repaid within 30 days after the end of the
statement submittal period, the amount of the excess shall
bear interest, computed from the date the quarterly statement
was due to the date of repayment, at the rate established in
accordance with the Interest clause.
(h) Subcontracts. No subcontract placed under this contract may provide for payment on a cost-plus-a-percentage-ofcost basis.
(i) Disagreements. If the Contractor and the Contracting
Officer fail to agree upon redetermined prices within 60 days
(or within such other period as the parties agree) after the date
on which the data required by paragraph (c) of this section are
to be submitted, the Contracting Officer shall promptly issue
a decision in accordance with the Disputes clause. For the purpose of paragraphs (e), (f), and (g) of this section, and pending
final settlement of the disagreement on appeal, by failure to
appeal, or by agreement, this decision shall be treated as an
executed contract modification.
(j) Termination. If this contract is terminated before price
redetermination, prices shall be established in accordance
with this clause for completed supplies and services not terminated. All other elements of the termination shall be
resolved in accordance with other applicable clauses of this
contract.
(End of clause)
52.216-7 Allowable Cost and Payment.
As prescribed in 16.307(a), insert the following clause:
ALLOWABLE COST AND PAYMENT (DEC 2002)
52.2-70

(a) Invoicing. (1) The Government will make payments to
the Contractor when requested as work progresses, but
(except for small business concerns) not more often than once
every 2 weeks, in amounts determined to be allowable by the
Contracting Officer in accordance with Federal Acquisition
Regulation (FAR) Subpart 31.2 in effect on the date of this
contract and the terms of this contract. The Contractor may
submit to an authorized representative of the Contracting
Officer, in such form and reasonable detail as the representative may require, an invoice or voucher supported by a statement of the claimed allowable cost for performing this
contract.
(2) Contract financing payments are not subject to the
interest penalty provisions of the Prompt Payment Act.
Interim payments made prior to the final payment under the
contract are contract financing payments, except interim payments if this contract contains Alternate I to the clause at
52.232-25.
(3) The designated payment office will make interim
payments for contract financing on the _________ [Contracting Officer insert day as prescribed by agency head; if not prescribed, insert "30th"] day after the designated billing office
receives a proper payment request. In the event that the Government requires an audit or other review of a specific payment request to ensure compliance with the terms and
conditions of the contract, the designated payment office is
not compelled to make payment by the specified due date.
(b) Reimbursing costs. (1) For the purpose of reimbursing
allowable costs (except as provided in paragraph (b)(2) of this
clause, with respect to pension, deferred profit sharing, and
employee stock ownership plan contributions), the term
“costs” includes only—
(i) Those recorded costs that, at the time of the
request for reimbursement, the Contractor has paid by cash,
check, or other form of actual payment for items or services
purchased directly for the contract;
(ii) When the Contractor is not delinquent in paying
costs of contract performance in the ordinary course of business, costs incurred, but not necessarily paid, for—
(A) Supplies and services purchased directly for
the contract and associated financing payments to subcontractors, provided payments determined due will be made—
(1) In accordance with the terms and conditions of a subcontract or invoice; and
(2) Ordinarily within 30 days of the submission of the Contractor’s payment request to the Government;
(B) Materials issued from the Contractor’s inventory and placed in the production process for use on the
contract;
(C) Direct labor;
(D) Direct travel;
(E) Other direct in-house costs; and

SUBPART 52.2—TEXT OF PROVISIONS AND CLAUSES
(F) Properly allocable and allowable indirect
costs, as shown in the records maintained by the Contractor
for purposes of obtaining reimbursement under Government
contracts; and
(iii) The amount of financing payments that have
been paid by cash, check, or other forms of payment to
subcontractors.
(2) Accrued costs of Contractor contributions under
employee pension plans shall be excluded until actually paid
unless—
(i) The Contractor’s practice is to make contributions
to the retirement fund quarterly or more frequently; and
(ii) The contribution does not remain unpaid 30 days
after the end of the applicable quarter or shorter payment
period (any contribution remaining unpaid shall be excluded
from the Contractor’s indirect costs for payment purposes).
(3) Notwithstanding the audit and adjustment of
invoices or vouchers under paragraph (g) of this clause,
allowable indirect costs under this contract shall be obtained
by applying indirect cost rates established in accordance with
paragraph (d) of this clause.
(4) Any statements in specifications or other documents
incorporated in this contract by reference designating performance of services or furnishing of materials at the Contractor’s expense or at no cost to the Government shall be
disregarded for purposes of cost-reimbursement under this
clause.
(c) Small business concerns. A small business concern may
receive more frequent payments than every 2 weeks.
(d) Final indirect cost rates. (1) Final annual indirect cost
rates and the appropriate bases shall be established in accordance with Subpart 42.7 of the Federal Acquisition Regulation (FAR) in effect for the period covered by the indirect cost
rate proposal.
(2)(i) The Contractor shall submit an adequate final
indirect cost rate proposal to the Contracting Officer (or cognizant Federal agency official) and auditor within the 6-month
period following the expiration of each of its fiscal years. Reasonable extensions, for exceptional circumstances only, may
be requested in writing by the Contractor and granted in writing by the Contracting Officer. The Contractor shall support
its proposal with adequate supporting data.
(ii) The proposed rates shall be based on the Contractor’s actual cost experience for that period. The appropriate
Government representative and the Contractor shall establish
the final indirect cost rates as promptly as practical after
receipt of the Contractor’s proposal.
(3) The Contractor and the appropriate Government
representative shall execute a written understanding setting
forth the final indirect cost rates. The understanding shall
specify (i) the agreed-upon final annual indirect cost rates,
(ii) the bases to which the rates apply, (iii) the periods for
which the rates apply, (iv) any specific indirect cost items

52.216-7
treated as direct costs in the settlement, and (v) the affected
contract and/or subcontract, identifying any with advance
agreements or special terms and the applicable rates. The
understanding shall 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.
(4) Failure by the parties to agree on a final annual indirect cost rate shall be a dispute within the meaning of the Disputes clause.
(5) Within 120 days (or longer period if approved in
writing by the Contracting Officer) after settlement of the
final annual indirect cost rates for all years of a physically
complete contract, the Contractor shall submit a completion
invoice or voucher to reflect the settled amounts and rates.
(6)(i) If the Contractor fails to submit a completion
invoice or voucher within the time specified in
paragraph (d)(5) of this clause, the Contracting Officer may—
(A) Determine the amounts due to the Contractor
under the contract; and
(B) Record this determination in a unilateral modification to the contract.
(ii) This determination constitutes the final decision
of the Contracting Officer in accordance with the Disputes
clause.
(e) Billing rates. Until final annual indirect cost rates are
established for any period, the Government shall reimburse
the Contractor at billing rates established by the Contracting
Officer or by an authorized representative (the cognizant auditor), subject to adjustment when the final rates are established.
These billing rates—
(1) Shall be the anticipated final rates; and
(2) May be prospectively or retroactively revised by
mutual agreement, at either party’s request, to prevent substantial overpayment or underpayment.
(f) Quick-closeout procedures. Quick-closeout procedures
are applicable when the conditions in FAR 42.708(a) are
satisfied.
(g) Audit. At any time or times before final payment, the
Contracting Officer may have the Contractor’s invoices or
vouchers and statements of cost audited. Any payment may
be—
(1) Reduced by amounts found by the Contracting
Officer not to constitute allowable costs; or
(2) Adjusted for prior overpayments or underpayments.
(h) Final payment. (1) Upon approval of a completion
invoice or voucher submitted by the Contractor in accordance
with paragraph (d)(5) of this clause, and upon the Contractor’s compliance with all terms of this contract, the Government shall promptly pay any balance of allowable costs and
that part of the fee (if any) not previously paid.
(2) The Contractor shall pay to the Government any
refunds, rebates, credits, or other amounts (including interest,
52.2-71

52.216-8

FEDERAL ACQUISITION REGULATION

if any) accruing to or received by the Contractor or any
assignee under this contract, to the extent that those amounts
are properly allocable to costs for which the Contractor has
been reimbursed by the Government. Reasonable expenses
incurred by the Contractor for securing refunds, rebates, credits, or other amounts shall be allowable costs if approved by
the Contracting Officer. Before final payment under this contract, the Contractor and each assignee whose assignment is in
effect at the time of final payment shall execute and deliver—
(i) An assignment to the Government, in form and
substance satisfactory to the Contracting Officer, of refunds,
rebates, credits, or other amounts (including interest, if any)
properly allocable to costs for which the Contractor has been
reimbursed by the Government under this contract; and
(ii) A release discharging the Government, its officers, agents, and employees from all liabilities, obligations, and
claims arising out of or under this contract, except—
(A) Specified claims stated in exact amounts, or
in estimated amounts when the exact amounts are not known;
(B) Claims (including reasonable incidental
expenses) based upon liabilities of the Contractor to third parties arising out of the performance of this contract; provided,
that the claims are not known to the Contractor on the date of
the execution of the release, and that the Contractor gives
notice of the claims in writing to the Contracting Officer
within 6 years following the release date or notice of final
payment date, whichever is earlier; and
(C) Claims for reimbursement of costs, including
reasonable incidental expenses, incurred by the Contractor
under the patent clauses of this contract, excluding, however,
any expenses arising from the Contractor’s indemnification of
the Government against patent liability.
(End of clause)
Alternate I (Feb 1997). As prescribed in 16.307(a)(2), substitute
the
following
paragraph (b)(1)(iii)
for
paragraph (b)(1)(iii) of the basic clause:
(iii) The amount of progress and other payments to the
Contractor’s subcontractors that either have been paid, or that
the Contractor is required to pay pursuant to the clause of this
contract entitled “Prompt Payment for Construction Contracts.”
Payments shall be made by cash, check, or other form of payment to the Contractor’s subcontractors under similar cost
standards.

52.216-8 Fixed Fee.
As prescribed in 16.307(b), insert the following clause:
FIXED FEE (MAR 1997)
(a) The Government shall pay the Contractor for performing this contract the fixed fee specified in the Schedule.
(b) Payment of the fixed fee shall be made as specified in
the Schedule; provided that after payment of 85 percent of the
52.2-72

fixed fee, the Contracting Officer may withhold further payment of fee until a reserve is set aside in an amount that the
Contracting Officer considers necessary to protect the Government’s interest. This reserve shall not exceed 15 percent of
the total fixed fee or $100,000, whichever is less. The Contracting Officer shall release 75 percent of all fee withholds
under this contract after receipt of the certified final indirect
cost rate proposal covering the year of physical completion of
this contract, provided the Contractor has satisfied all other
contract terms and conditions, including the submission of the
final patent and royalty reports, and is not delinquent in submitting final vouchers on prior years’ settlements. The Contracting Officer may release up to 90 percent of the fee
withholds under this contract based on the Contractor’s past
performance related to the submission and settlement of final
indirect cost rate proposals.
(End of clause)
52.216-9 Fixed Fee—Construction.
As prescribed in 16.307(c), insert the following clause:
FIXED FEE—CONSTRUCTION (MAR 1997)
(a) The Government shall pay to the Contractor for performing this contract the fixed fee specified in the Schedule.
(b) Payment of the fixed fee shall be made in installments
based upon the percentage of completion of the work as determined from estimates submitted to and approved by the Contracting Officer, but subject to the withholding provisions of
paragraph (c) of this section.
(c) After the payment of 85 percent of the fixed fee, the
Contracting Officer may withhold further payment of fee until
a reserve is set aside in an amount that the Contracting Officer
considers necessary to protect the Government’s interest. This
reserve shall not exceed 15 percent of the total fixed fee or
$100,000, whichever is less. The Contracting Officer shall
release 75 percent of all fee withholds under this contract after
receipt of the certified final indirect cost rate proposal covering the year of physical completion of this contract, provided
the Contractor has satisfied all other contract terms and conditions, including the submission of the final patent and royalty reports, and is not delinquent in submitting final vouchers
on prior years’ settlements. The Contracting Officer may
release up to 90 percent of the fee withholds under this contract based on the Contractor’s past performance related to the
submission and settlement of final indirect cost rate proposals.
(End of clause)
52.216-10 Incentive Fee.
As prescribed in 16.307(d), insert the following clause:
INCENTIVE FEE (MAR 1997)