Office of the Secretary of Defense §3.3 (b) Programs in which commercial or §3.1 Purpose. non-developmental items can satisfy This part consolidates rules that im- the military requirement are preferred plement section 845 of the National De- as candidate programs. A nominated fense Authorization Act for Fiscal Year program will address which standard 1994, Public Law 103–160, 107 Stat. 1547, commercial, industrial practices will as amended, and have a significant im- be used in the pilot program and how those practices will be applied. pact on the public. Section 845 author- (c) Nomination of candidate pro- izes the Secretary of a Military Depart- grams must be accompanied by a list of ment, the Director of Defense Ad- waivers being requested to Statutes, vanced Research Projects Agency, and FAR, DFARS, DoD Directives4 and In- any other official designated by the structions,5 and where applicable, DoD Secretary of Defense, to enter into Component regulations. Waivers being transactions other than contracts, requested must be accompanied by ra- grants, or cooperative agreements in tionale and justification for the waiver. certain situations for prototype The justification must include: projects that are directly relevant to (1) The provision of law proposed to weapons or weapon systems proposed be waived or limited. to be acquired or developed by the De- (2) The effects of the provision of law partment of Defense. on the acquisition, including specific [67 FR 54956, Aug. 27, 2002] examples. (3) The actions taken to ensure that §3.2 Background. the waiver or limitation will not re- duce the efficiency, integrity, and ef- ‘‘Other transactions’’ is the term fectiveness of the acquisition process commonly used to refer to the 10 U.S.C. used for the defense acquisition pro- 2371 authority to enter into trans- gram; and actions other than contracts, grants or (4) A discussion of the efficiencies or cooperative agreements. ‘‘Other trans- savings, if any, that will result from actions’’ are generally not subject to the waiver or limitation. the Federal laws and regulations lim- (d) No nominated program shall be ited in applicability to contracts, accepted until the Under Secretary of grants or cooperative agreements. As Defense has determined that the can- such, they are not required to comply didate program is properly planned. with the Federal Acquisition Regula- tion (FAR) and its supplements (48 PART 3—TRANSACTIONS OTHER CFR). THAN CONTRACTS, GRANTS, OR [67 FR 54956, Aug. 27, 2002] COOPERATIVE AGREEMENTS FOR PROTOTYPE PROJECTS §3.3 Applicability. This part applies to the Secretary of Sec. a Military Department, the Directors 3.1 Purpose. of the Defense Agencies, and any other 3.2 Background. official designated by the Secretary of 3.3 Applicability. Defense to enter into transactions 3.4 Definitions. other than contracts, grants or cooper- 3.5 Appropriate use. 3.6 Limitations on cost-sharing. ative agreements for prototype 3.7 Comptroller General access. projects that are directly relevant to 3.8 DoD access to records policy. weapons or weapon systems proposed 3.9 Follow-on production contracts. to be acquired or developed by the De- AUTHORITY: Sec. 845, Pub. L. 103–160, 107 partment of Defense, under authority Stat. 1547, as amended. of 10 U.S.C. 2371. Such transactions are commonly referred to as ‘‘other trans- SOURCE: 66 FR 57383, Nov. 15, 2001, unless action’’ agreements and are hereafter otherwise noted. referred to as agreements. 4See footnote 3 to §2.4(b). [65 FR 35576, June 5, 2000. Redesignated at 67 5See footnote 3 to §2.4(b). FR 54956, Aug. 27, 2002] 11 VerDate Sep<11>2014 16:22 Oct 01, 2025 Jkt 265134 PO 00000 Frm 00021 Fmt 8010 Sfmt 8010 Y:\SGML\265134.XXX 265134 RFC htiw DORP32NT121KSD no sraepsj §3.4 32 CFR Ch. I (7–1–25 Edition) §3.4 Definitions. Nontraditional Defense contractor. A business unit that has not, for a period Agency point of contact (POC). The in- of at least one year prior to the date of dividual identified by the military de- the OT agreement, entered into or per- partment or defense agency as its POC formed on (1) any contract that is sub- for prototype OTs. ject to full coverage under the cost ac- Agreements Officer. An individual with counting standards prescribed pursuant the authority to enter into, admin- to section 26 of the Office of Federal ister, or terminate OTs for prototype Procurement Policy Act (41 U.S.C. 422) projects and make related determina- and the regulations implementing such tions and findings. section; or (2) any other contract in ex- Approving Official. The official re- cess of $500,000 to carry out prototype sponsible for approving the OTs acqui- projects or to perform basic, applied, or sition strategy and resulting OT agree- advanced research projects for a Fed- ment. This official must be at least one eral agency, that is subject to the Fed- level above the Agreements Officer and eral Acquisition Regulation. at no lower level than existing agency Procurement contract. A contract thresholds associated with procure- awarded pursuant to the Federal Ac- ment contracts. quisition Regulation. Awardee. Any business unit that is Project Manager. The government the direct recipient of an OT agree- manager for the prototype project. ment. Qualified Independent Public Account- Business unit. Any segment of an or- ant. An accountant that is licensed or ganization, or an entire business orga- works for a firm that is licensed in the nization which is not divided into seg- state or other political jurisdiction ments. where they operate their professional Contracting activity. An element of an practice and comply with the applica- agency designated by the agency head ble provisions of the public account- and delegated broad authority regard- ancy law and rules of the jurisdiction ing acquisition functions. It includes where the audit is being conducted. elements designated by the Director of Segment. One of two or more divi- a Defense Agency which has been dele- sions, product departments, plants, or gated contracting authority through other subdivisions of an organization its agency charter. reporting directly to a home office, Contracting Officer. A person with the usually identified with responsibility authority to enter into, administer, for profit and/or producing a product or and/or terminate contracts and make service. related determinations and findings as Senior Procurement Executive. The fol- defined in Chapter 1 of Title 48, CFR, lowing individuals: Federal Acquisition Regulation, Sec- (1) Department of the Army—Assist- tion 2.101(b). ant Secretary of the Army (Acquisi- Cost-type OT. Agreements where pay- tion, Logistics and Technology); ments are based on amounts generated (2) Department of the Navy—Assist- from the awardee’s financial or cost ant Secretary of the Navy (Research, records or that require at least one Development and Acquisition); third of the total costs to be provided (3) Department of the Air Force—As- by non-Federal parties pursuant to sistant Secretary of the Air Force (Ac- statute or require submittal of finan- quisition). cial or cost records/reports to deter- (4) The Directors of Defense Agencies mine whether additional effort can be who have been delegated authority to accomplished for the fixed amount. act as Senior Procurement Executive Fixed-price type OT. Agreements for their respective agencies. where payments are not based on Single Audit Act. Establishes uniform amounts generated from the awardee’s audit requirements for audits of state financial or cost records. and local government, universities, and Head of the contracting activity (HCA). non-profit organizations that expend The official who has overall responsi- Federal awards. bility for managing the contracting ac- Subawardee. Any business unit of a tivity. party, entity or subordinate element 12 VerDate Sep<11>2014 16:22 Oct 01, 2025 Jkt 265134 PO 00000 Frm 00022 Fmt 8010 Sfmt 8010 Y:\SGML\265134.XXX 265134 RFC htiw DORP32NT121KSD no sraepsj Office of the Secretary of Defense §3.7 performing effort under the OT agree- (1) The awardee or subawardee in- ment, other than the awardee. curred the costs in anticipation of en- Traditional Defense contractor. Any tering into the OT agreement; and business unit that does not meet the (2) It was appropriate for the awardee definition of a nontraditional Defense or subawardee to incur the costs before contractor. the OT agreement became effective in order to ensure the successful imple- [68 FR 27457, May 20, 2003, as amended at 69 mentation of the OT agreement. FR 16482, Mar. 30, 2004] (b) As a matter of policy, these limi- tations on cost-sharing apply any time §3.5 Appropriate use. cost-sharing may be recognized when In accordance with statute, this au- using OT authority for prototype thority may be used only when: projects. (a) At least one nontraditional De- [67 FR 54956, Aug. 27, 2002] fense contractor is participating to a significant extent in the prototype §3.7 Comptroller General access. project; or (a) A clause must be included in so- (b) No nontraditional Defense con- licitations and agreements for proto- tractor is participating to a significant type projects awarded under authority extent in the prototype project, but at of 10 U.S.C. 2371, that provide for total least one of the following cir- government payments in excess of cumstances exists: $5,000,000 to allow Comptroller General (1) At least one third of the total cost access to records that directly pertain of the prototype project is to be paid to such agreements. out of funds provided by non-Federal (b) The clause referenced in para- parties to the transaction. graph (a) of this section will not apply (2) The Senior Procurement Execu- with respect to a party or entity, or tive for the agency determines in writ- subordinate element of a party or enti- ing that exceptional circumstances jus- ty, that has not entered into any other tify the use of a transaction that pro- contract, grant, cooperative agreement vides for innovative business arrange- or ‘‘other transaction’’ agreement that ments or structures that would not be provides for audit access by a govern- feasible or appropriate under a procure- ment entity in the year prior to the ment contract. date of the agreement. The clause must be included in all agreements described [67 FR 54956, Aug. 27, 2002] in paragraph (a) of this section in order to fully implement the law by covering §3.6 Limitations on cost-sharing. those participating entities and their (a) When a nontraditional Defense subordinate elements which have en- contractor is not participating to a sig- tered into prior agreements providing nificant extent in the prototype project for Government audit access, and are and cost-sharing is the reason for using therefore not exempt. The presence of OT authority, then the non-Federal the clause in an agreement will not op- amounts counted as provided, or to be erate to require Comptroller General provided, by the business units of an access to records from any party or awardee or subawardee participating in participating entity, or subordinate the performance of the OT agreement element of a party or participating en- may not include costs that were in- tity, or subordinate element of a party curred before the date on which the OT or participating entity, which is other- agreement becomes effective. Costs wise exempt under the terms of the that were incurred for a prototype clause and the law. project by the business units of an (c)(1) The right provided to the awardee or subawardee after the begin- Comptroller General in a clause of an ning of negotiations, but prior to the agreement under paragraph (a) of this date the OT agreement becomes effec- part, is limited as provided by subpara- tive, may be counted as non-Federal graph (c)(2) of this part in the case of a amounts if and to the extent that the party to the agreement, an entity that Agreements Officer determines in writ- participates in the performance of the ing that: agreement, or a subordinate element of 13 VerDate Sep<11>2014 16:22 Oct 01, 2025 Jkt 265134 PO 00000 Frm 00023 Fmt 8010 Sfmt 8010 Y:\SGML\265134.XXX 265134 RFC htiw DORP32NT121KSD no sraepsj §3.7 32 CFR Ch. I (7–1–25 Edition) that party or entity, if the only cooper- payment is made by the government ative agreements or ‘‘other trans- under such an agreement. actions’’ that the party, entity, or sub- (g) The clause referenced in para- ordinate element entered into with graph (a) of this section, must provide government entities in the year prior for the following: to the date of that agreement are coop- (1) The Comptroller General of the erative agreements or transactions United States, in the discretion of the that were entered into under 10 U.S.C. Comptroller General, shall have access 2371 or Section 845 of the National De- to and the right to examine records of fense Authorization Act for Fiscal Year any party to the agreement or any en- 1994 (Pub. L. 103–160; 10 U.S.C. 2371 tity that participates in the perform- note). ance of this agreement that directly (c)(2) The only records of a party, pertain to, and involve transactions re- other entity, or subordinate element lating to, the agreement. referred to in subparagraph (c)(1) of (2) Excepted from the Comptroller this part that the Comptroller General General access requirement is any may examine in the exercise of the party to this agreement or any entity right referred to in that subparagraph, that participates in the performance of are records of the same type as the the agreement, or any subordinate ele- ment of such party or entity, that, in records that the government has had the year prior to the date of the agree- the right to examine under the audit ment, has not entered into any other access clauses of the previous coopera- contract, grant, cooperative agree- tive agreements or transactions re- ment, or ‘‘other transaction’’ agree- ferred to in such subparagraph that ment that provides for audit access to were entered into by that particular its records by a government entity. party, entity, or subordinate element. (3)(A) The right provided to the (d) The head of the contracting activ- Comptroller General is limited as pro- ity (HCA) that is carrying out the vided in subparagraph (B) in the case of agreement may waive the applicability a party to the agreement, any entity of the Comptroller General access re- that participates in the performance of quirement if the HCA determines it the agreement, or a subordinate ele- would not be in the public interest to ment of that party or entity if the only apply the requirement to the agree- cooperative agreements or ‘‘other ment. The waiver will be effective with transactions’’ that the party, entity, or respect to the agreement only if the subordinate element entered into with HCA transmits a notification of the government entities in the year prior waiver to the Committees on Armed to the date of that agreement are coop- Services of the Senate and the House of erative agreements or transactions Representatives, the Comptroller Gen- that were entered into under 10 U.S.C. eral, and the Director, Defense Pro- 2371 or Section 845 of the National De- curement before entering into the fense Authorization Act for Fiscal Year agreement. The notification must in- 1994 (Pub. L. 103–160; 10 U.S.C. 2371 clude the rationale for the determina- note). tion. (B) The only records of a party, other (e) The HCA must notify the Direc- entity, or subordinate element referred tor, Defense Procurement of situations to in subparagraph (A) that the Comp- where there is evidence that the Comp- troller General may examine in the ex- troller General Access requirement ercise of the right referred to in that caused companies to refuse to partici- subparagraph are records of the same pate or otherwise restricted the De- type as the records that the govern- partment’s access to companies that ment has had the right to examine typically do not do business with the under the audit access clauses of the Department. previous agreements or transactions (f) In no case will the requirement to referred to in such subparagraph that examine records under the clause ref- were entered into by that particular erenced in paragraph (a) of this section party, entity, or subordinate element. apply to an agreement where more (4) This clause shall not be construed than three years have passed after final to require any party or entity, or any 14 VerDate Sep<11>2014 16:22 Oct 01, 2025 Jkt 265134 PO 00000 Frm 00024 Fmt 8010 Sfmt 8010 Y:\SGML\265134.XXX 265134 RFC htiw DORP32NT121KSD no sraepsj Office of the Secretary of Defense §3.8 subordinate element of such party or STAT. 1396–1404, when a business unit entity, that participates in the per- that will perform the OT agreement, or formance of the agreement, to create a subawardee, meets the criteria for an or maintain any record that is not oth- audit pursuant to the Single Audit Act, erwise maintained in the ordinary the DoD must have sufficient access to course of business or pursuant to a pro- the entity’s records to assure compli- vision of law. ance with the provisions of the Act. (5) The Comptroller General shall (ii) Traditional Defense contractors. have access to the records described in The DoD shall have access to records this clause until three years after the on cost-type OT agreements with tradi- date the final payment is made by the tional Defense contractors that provide United States under this agreement. for total Government payments in ex- (6) The recipient of the agreement cess of $5,000,000. The content of the ac- shall flow down this provision to any cess to records clause shall be in ac- entity that participates in the perform- cordance with paragraph (c) of this sec- ance of the agreement. tion. The value establishing the thresh- [65 FR 35576, June 5, 2000. Redesignated at 67 old is the total value of the agreement FR 54956, Aug. 27, 2002] including all options. (iii) Nontraditional Defense contrac- §3.8 DoD access to records policy. tors. The DoD should have access to (a) Applicability. This section provides records on cost-type OT agreements policy concerning DoD access to award- with nontraditional Defense contrac- ee and subawardee records on OT tors that provide for total Government agreements for prototype projects. payments in excess of $5,000,000. The This access is separate and distinct content of the access to records clause from Comptroller General access. should be in accordance with paragraph (1) Fixed-price type OT agreements. (i) (c) of this section. The value estab- General—DoD access to records is not lishing the threshold is the total value generally required for fixed-price type of the agreement including all options. OT agreements. In order for an agree- (iv) DoD access below threshold. The ment to be considered a fixed-price Agreements Officer has the discretion type OT agreement, it must adequately to determine whether to include DoD specify the effort to be accomplished access to records when the OT does not for a fixed amount and provide for de- meet any of the requirements in fined payable milestones, with no pro- (a)(2)(i) through (a)(2)(iii) of this sec- vision for financial or cost reporting tion. The content of that access to that would be a basis for making ad- records clause should be tailored to justment in either the work scope or meet the particular circumstances of price of the effort. the agreement. (ii) Termination considerations. The (v) Examples of cost-type OT agree- need to provide for DoD access to ments. (A) An agreement that requires records in the case of termination of a at least one-third cost share pursuant fixed-price type OT can be avoided by to statute. limiting potential termination settle- (B) An agreement that includes pay- ments to an amount specified in the able milestones, but provides for ad- original agreement or to payment for justment of the milestone amounts the last completed milestone. However, based on actual costs or reports gen- if a fixed-price agreement provides that erated from the awardee’s financial or potential termination settlement cost records. amounts may be based on amounts (C) An agreement that is for a fixed- generated from cost or financial Government amount, but the agree- records and the agreement exceeds the ment provides for submittal of finan- specified threshold, the OT should pro- cial or cost records/reports to deter- vide that DoD will have access to mine whether additional effort can be records in the event of termination. accomplished for the fixed amount. (2) Cost-type OT agreements. (i) Single (3) Subawardees. When a DoD access Audit Act—In accordance with the re- to records provision is included in the quirements of Public Law 98–502, as OT agreement, the awardee shall use amended by Public Law 104–156, 110 the criteria established in paragraphs 15 VerDate Sep<11>2014 16:22 Oct 01, 2025 Jkt 265134 PO 00000 Frm 00025 Fmt 8010 Sfmt 8010 Y:\SGML\265134.XXX 265134 RFC htiw DORP32NT121KSD no sraepsj §3.8 32 CFR Ch. I (7–1–25 Edition) (a)(2)(i) through (a)(2)(iii) of this sec- priate for an agreement below the tion to determine whether DoD access $5,000,000 threshold, the content, length to records clauses should be included in and extent of access may be mutually subawards. agreed to by the parties, without docu- (b) Exceptions—(1) Nontraditional De- menting reasons for departing from the fense contractors—(i) The Agreements policy of this section. Officers may deviate, in part or in (4) Flow down provisions. The awardee whole, from the application of this ac- shall submit justification for any ex- cess to records policy for a nontradi- ception to the DoD access to records tional Defense contractor when appli- policy to the Agreements Officer for cation of the policy would adversely subawardees. The Agreements Officer impact the government’s ability to in- will review and obtain appropriate ap- corporate commercial technology or proval, as set forth in paragraphs (b)(1) execute the prototype project. and (b)(2) of this section. (ii) The Agreements Officer will doc- (c) Content of DoD access to records ument: clause. When a DoD access to records (A) What aspect of the audit policy clause is included as part of the OT was not applied; agreement, address the following areas (B) Why it was problematic; during the negotiation of the clause: (C) What means will be used to pro- (1) Frequency of audits. Audits will be tect the Government’s interest; and performed when the Agreements Offi- (D) Why the benefits of deviating cer determines it is necessary to verify from the policy outweigh the potential statutory cost share or to verify risks. amounts generated from financial or (iii) This determination will be re- cost records that will be used as the viewed by the approving official as part basis for payment or adjustment of of the pre-award approval of the agree- payment. ment and submitted to the agency POC (2) Means of accomplishing audits. (i) within 10 days of award. Business units subject to the Single Audit (iv) The agency POC will forward all Act—When the awardee or subawardee such documentation received in any is a state government, local govern- given fiscal year, to the Director, De- ment, or nonprofit organization whose fense Procurement by 15 October of Federal cost reimbursement contracts each year. and financial assistance agreements (2) Traditional Defense contractor. (i) are subject to the Single Audit Act Any departure from this policy for (Public Law 98–502, as amended by Pub- other than nontraditional Defense con- lic Law 104–156, 110 STAT. 1396–1404), tractors must be approved by the Head the clause must apply the provisions of of the Contracting Activity prior to that Act for purposes of performing au- award and set forth the exceptional cir- dits of the awardee or subawardee cumstances justifying deviation. under the agreement. (ii) Additionally, the justification (ii) Business units not subject to the will document: Single Audit Act currently performing on (A) What aspect of the policy was not procurement contracts. The clause must applied; provide that DCAA will perform any (B) Why it was problematic; necessary audits if, at the time of (C) What means will be used to pro- agreement award, the awardee or sub- tect the Government’s interest; and awardee is not subject to the Single (D) Why the benefits of deviating Audit Act and is performing a procure- from the policy outweigh the potential ment contract that is subject to the risks. Cost Principles Applicable to Commer- (iii) The HCA will forward docu- cial Organizations (48 CFR part 31.2) mentation associated with such waiv- and/or the Cost Accounting Standards ers in any given fiscal year, to the Di- (48 CFR part 99). rector, Defense Procurement by 15 Oc- (iii) Other business units. DCAA or a tober of each year. qualified IPA may perform any nec- (3) DoD access below the threshold. essary audit of a business unit of the When the Agreements Officer deter- awardee or subawardee if, at the time mines that access to records is appro- of agreement award, the business unit 16 VerDate Sep<11>2014 16:22 Oct 01, 2025 Jkt 265134 PO 00000 Frm 00026 Fmt 8010 Sfmt 8010 Y:\SGML\265134.XXX 265134 RFC htiw DORP32NT121KSD no sraepsj Office of the Secretary of Defense §3.8 does not meet the criteria in (c)(2)(i) or ments Officer should take action (c)(2)(ii) of this section. The clause promptly once the Agreements Officer must provide for the use of a qualified determines that the audit is not being IPA if such a business unit will not ac- accomplished in a timely manner or cept the agreement if the Government the audit is not performed in accord- has access to the business unit’s ance with GAGAS but generally no records. The Agreements Officer will later than twelve (12) months of the include a statement in the file that the date requested by the Agreements Offi- business unit is not performing on a cer. The awardee or subawardee may procurement contract subject to the take corrective action by having the Cost Principles or Cost Accounting IPA correct any deficiencies identified Standards at the time of agreement by the Agreements Officer, having an- award, and will not accept the agree- other IPA perform the audit, or elect- ment if the government has access to ing to have the Government perform the business unit’s records. The Agree- the audit. If corrective action is not ments Officer will also prepare a report taken, the Agreements Officer has the (Part III to the annual report submis- right to take one or more of the fol- sion) for the Director, Defense Procure- lowing actions: ment that identifies, for each business (1) Withhold or disallow a specified unit that is permitted to use an IPA: percentage of costs until the audit is the business unit’s name, address and completed satisfactorily. The agree- the expected value of its award. When ment should include a specified per- the clause provides for use of an IPA to centage that is sufficient to enhance perform any necessary audits, the performance of corrective action while clause must state that: also not being unfairly punitive. (A) The IPA will perform the audit in (2) Suspend performance until the accordance with Generally Accepted audit is completed satisfactorily; and/ Government Auditing Standards or (GAGAS). Electronic copies of the (3) Terminate the agreement if the standards may be accessed at agreements officer determines that im- www.gao.gov. Printed copies may be position of either (c)(2)(iii)(E)(1) or purchased from the U.S. Government (c)(2)(iii)(e)(2) of this section is not Printing Office (for ordering informa- practical. tion, call (202) 512–1800 or access the Internet Site at www.gpo.gov). (F) If it is found that the awardee or (B) The Agreements Officers’ author- subawardee was performing a procure- ized representative has the right to ex- ment contract subject to Cost Prin- amine the IPA’s audit report and work- ciples Applicable to Commercial Orga- ing papers for 3 years after final pay- nizations (48 CFR part 31.2) and/or Cost ment or three years after issuance of Accounting Standards (48 CFR part 99) the audit report, whichever is later, at the time of agreement award, the unless notified otherwise by the Agree- Agreements Officer, or an authorized ments Officer. representative, has the right to audit (C) The IPA will send copies of the records of the awardee or subawardee audit report to the Agreements Officer to verify the actual costs or reporting and the Assistant Inspector General information used as the basis for pay- (Audit Policy and Oversight) ment or to verify statutorily required [AIG(APO)], 400 Army Navy Drive, cost share under the agreement, and Suite 737, Arlington, VA 22202. the IPA is to be paid by the awardee or (D) The IPA will report instances of subawardee. The cost of an audit per- suspected fraud directly to the DoDIG. formed in accordance with this policy (E) The Government has the right to is reimbursable based on the business require corrective action by the award- unit’s established accounting practices ee or subawardee if the Agreements Of- and subject to any limitations in the ficer determines (subject to appeal agreement. under the disputes clause of the agree- (3) Scope of audit. The Agreements Of- ment) that the audit has not been per- ficer should coordinate with the audi- formed or has not been performed in tor regarding the nature of any audit accordance with GAGAS. The Agree- envisioned. 17 VerDate Sep<11>2014 16:22 Oct 01, 2025 Jkt 265134 PO 00000 Frm 00027 Fmt 8010 Sfmt 8010 Y:\SGML\265134.XXX 265134 RFC htiw DORP32NT121KSD no sraepsj §3.9 32 CFR Ch. I (7–1–25 Edition) (4) Length and extent of access—(i) GAO are granted the same access to Clauses that do not provide for use of an those records. IPA. The clause must provide for the [68 FR 27457, May 20, 2003] Agreements Officer’s authorized rep- resentative to have access to directly §3.9 Follow-on production contracts. pertinent records of those business units of the awardee or subawardee’s (a) Authority. A competitively award- performing effort under the OT agree- ed OT agreement for a prototype ment, when needed to verify the actual project that satisfies the condition set costs or reporting used as the basis for forth in law that requires non-Federal payment or to verify statutorily re- parties to the OT agreement to provide quired cost share under the agreement. at least one-third of the costs of the (ii) Clauses that provide for use of an prototype project may provide for the IPA to perform the audits. The clause award of a follow-on production con- must: tract to the awardee of the OT proto- (A) Provide the Agreements Officer’s type agreement for a specific number authorized representative access to the of units at specific target prices, with- IPA’s audit reports and working papers out further competition. to ensure that the IPA has performed (b) Conditions. The Agreements Offi- the audit in accordance with GAGAS. cer must do the following in the award (B) State that the Government will of the prototype project: make copies of contractor records con- (1) Ensure non-Federal parties to the tained in the IPA’s work papers if OT prototype agreement offer at least needed to demonstrate that the audit one-third of the costs of the prototype was not performed in accordance with project pursuant to subsection GAGAS. (d)(1)(B)(i), 10 U.S.C. 2371 note. (C) State that the Government has (2) Use competition to select parties no direct access to any awardee or sub- for participation in the OT prototype awardee records unless it is found that agreement and evaluate the proposed the awardee or subawardee was per- quantity and target prices for the fol- forming a procurement contract sub- low-on production units as part of that ject to Cost Principles (48 CFR part 31) competition. and/or Cost Accounting Standards (48 (3) Determine the production quan- CFR part 99) at the time of agreement tity that may be procured without fur- award. ther competition, by balancing of the (iii) Business Units subject to the Single level of the investment made in the Audit Act. The clause must provide ac- project by the non-Federal parties with cess to the extent authorized by the the interest of the Federal Government Single Audit Act. in having competition among sources (iv) Record Retention/Period of Access. in the acquisition of the product or The clause must require that the products prototyped under the project. awardee and subawardee retain, and (4) Specify the production quantity provide access to, the records referred and target prices in the OT prototype to in (c)(4)(i) and (c)(4)(ii) of this sec- agreement and stipulate in the agree- tion for three years after final pay- ment that the Contracting Officer for ment, unless notified of a shorter or the follow-on contract may award a longer period by the Agreements Offi- production contract without further cer. competition if the awardee successfully (5) Awardee flow down responsibilities. completes the prototype project and Agreements must require awardees to agrees to production quantities and include the necessary provisions in prices that do not exceed those speci- subawards that meet the conditions set fied in the OT prototype agreement (see forth in this DoD access to records pol- part 206.001 of the Defense Federal Ac- icy. quisition Regulation Supplement). (d) DoDIG and GAO access. In accord- (c) Limitation. As a matter of policy, ance with statute, if an agreement establishing target prices for produc- gives the Agreements Officer or an- tion units should only be considered other DoD component official access to when the risk of the prototype project a business unit’s records, the DoDIG or permits realistic production pricing 18 VerDate Sep<11>2014 16:22 Oct 01, 2025 Jkt 265134 PO 00000 Frm 00028 Fmt 8010 Sfmt 8010 Y:\SGML\265134.XXX 265134 RFC htiw DORP32NT121KSD no sraepsj Office of the Secretary of Defense §3.9 without placing undue risks on the (iii) The percentage of cost-share; awardee. and (d) Documentation. (1) The Agree- (iv) The production quantities and ments Officer will need to provide in- target prices set forth in the OT agree- formation to the Contracting Officer ment. from the agreement and award file that (3) The Project Manager will provide the conditions set forth in paragraph evidence of successful completion of (b) of this section have been satisfied. the prototype project to the Con- (2) The information shall contain, at tracting Officer. a minimum: (i) The competitive procedures used; [69 FR 16482, Mar. 30, 2004] (ii) How the production quantities and target prices were evaluated in the PARTS 4–8 [RESERVED] competition; SUBCHAPTER B [RESERVED] 19 VerDate Sep<11>2014 16:22 Oct 01, 2025 Jkt 265134 PO 00000 Frm 00029 Fmt 8010 Sfmt 8010 Y:\SGML\265134.XXX 265134 RFC htiw DORP32NT121KSD no sraepsj