DFARS 252.242-7005 Contractor Business Systems. Basic (Feb 2012) (Current)

As prescribed in 242.7001, use the clause at 252.242-7005, Contractor Business Systems, in solicitations and contracts (other than in contracts with educational institutions, Federally Funded Research and Development Centers (FFRDCs), or University Associated Research Centers (UARCs) operated by educational institutions) when—

      (a)  The resulting contract will be a covered contract as defined in 242.7000(a); and 

      (b)  The solicitation or contract includes any of the following clauses: 

            (1)  252.215-7002, Cost Estimating System Requirements.

            (2)  252.234-7002, Earned Value Management System.

            (3)  252.242-7004, Material Management and Accounting System.

            (4)  252.242-7006, Accounting System Administration.

            (5)  252.244-7001, Contractor Purchasing System Administration.

            (6)  252.245-7003, Contractor Property Management System Administration.

CONTRACTOR BUSINESS SYSTEMS (FEB 2012)

      (a)  This clause only applies to covered contracts that are subject to the Cost Accounting Standards under 41 U.S.C. chapter 15, as implemented in regulations found at 48 CFR 9903.201-1 (see the FAR Appendix).

      (b)  Definitions.  As used in this clause—

“Acceptable contractor business systems” means contractor business systems that comply with the terms and conditions of the applicable business system clauses listed in the definition of "contractor business systems" in this clause.

“Contractor business systems” means—

              (1)  Accounting system, if this contract includes the clause at 252.242-7006, Accounting System Administration;

              (2)  Earned value management system, if this contract includes the clause at 252.234-7002, Earned Value Management System;

              (3)  Estimating system, if this contract includes the clause at 252.215-7002, Cost Estimating System Requirements;

              (4)  Material management and accounting system, if this contract includes the clause at 252.242-7004, Material Management and Accounting System;

              (5)  Property management system, if this contract includes the clause at 252.245-7003, Contractor Property Management System Administration; and

              (6)  Purchasing system, if this contract includes the clause at 252.244-7001, Contractor Purchasing System Administration.

“Significant deficiency,” in the case of a contractor business system, means a shortcoming in the system that materially affects the ability of officials of the Department of Defense to rely upon information produced by the system that is needed for management purposes.

      (c)  General.  The Contractor shall establish and maintain acceptable business systems in accordance with the terms and conditions of this contract.

      (d)  Significant deficiencies.  (1)  The Contractor shall respond, in writing, within 30 days to an initial determination that there are one or more significant deficiencies in one or more of the Contractor’s business systems.

              (2)  The Contracting Officer will evaluate the Contractor's response and notify the Contractor, in writing, of the final determination as to whether the Contractor’s business system contains significant deficiencies.  If the Contracting Officer determines that the Contractor’s business system contains significant deficiencies, the final determination will include a notice to withhold payments.

      (e)  Withholding payments.  (1)  If the Contracting Officer issues the final determination with a notice to withhold payments for significant deficiencies in a contractor business system required under this contract, the Contracting Officer will withhold five percent of amounts due from progress payments and performance-based payments, and direct the Contractor, in writing, to withhold five percent from its billings on interim cost vouchers on cost-reimbursement, labor-hour, and time-and-materials contracts until the Contracting Officer has determined that the Contractor has corrected all significant deficiencies as directed by the Contracting Officer’s final determination.  The Contractor shall, within 45 days of receipt of the notice, either correct the deficiencies or submit an acceptable corrective action plan showing milestones and actions to eliminate the deficiencies.

              (2)  If the Contractor submits an acceptable corrective action plan within 45 days of receipt of a notice of the Contracting Officer’s intent to withhold payments, and the Contracting Officer, in consultation with the auditor or functional specialist, determines that the Contractor is effectively implementing such plan, the Contracting Officer will reduce withholding directly related to the significant deficiencies covered under the corrective action plan, to two percent from progress payments and performance-based payments, and direct the Contractor, in writing, to reduce the percentage withheld on interim cost vouchers to two percent until the Contracting Officer determines the Contractor has corrected all significant deficiencies as directed by the Contracting Officer’s final determination.  However, if at any time, the Contracting Officer determines that the Contractor has failed to follow the accepted corrective action plan, the Contracting Officer will increase withholding from progress payments and performance-based payments, and direct the Contractor, in writing, to increase the percentage withheld on interim cost vouchers to the percentage initially withheld, until the Contracting Officer determines that the Contractor has corrected all significant deficiencies as directed by the Contracting Officer’s final determination.

              (3)  Payment withhold percentage limits.

                    (i)  The total percentage of payments withheld on amounts due under each progress payment, performance-based payment, or interim cost voucher, on this contract shall not exceed--

                            (A)  Five percent for one or more significant deficiencies in any single contractor business system; and

                            (B)  Ten percent for significant deficiencies in multiple contractor business systems.

                    (ii)  If this contract contains pre-existing withholds, and the application of any subsequent payment withholds will cause withholding under this clause to exceed the payment withhold percentage limits in paragraph (e)(3)(i) of this clause, the Contracting Officer will reduce the payment withhold percentage in the final determination to an amount that will not exceed the payment withhold percentage limits.

              (4)  For the purpose of this clause, payment means any of the following payments authorized under this contract:

                    (i)  Interim payments under—

                            (A)  Cost-reimbursement contracts;

                            (B)  Incentive type contracts;

                            (C)  Time-and-materials contracts;

                            (D)  Labor-hour contracts.

                    (ii)  Progress payments.

                    (iii)  Performance-based payments.

              (5)  Payment withholding shall not apply to payments on fixed-price line items where performance is complete and the items were accepted by the Government.

              (6)  The withholding of any amount or subsequent payment to the Contractor shall not be construed as a waiver of any rights or remedies the Government has under this contract.

              (7)  Notwithstanding the provisions of any clause in this contract providing for interim, partial, or other payment withholding on any basis, the Contracting Officer may withhold payment in accordance with the provisions of this clause.

              (8)  The payment withholding authorized in this clause is not subject to the interest-penalty provisions of the Prompt Payment Act.

      (f)  Correction of deficiencies.  (1)  The Contractor shall notify the Contracting Officer, in writing, when the Contractor has corrected the business system’s deficiencies.

              (2)  Once the Contractor has notified the Contracting Officer that all deficiencies have been corrected, the Contracting Officer will take one of the following actions:

                    (i)  If the Contracting Officer determines that the Contractor has corrected all significant deficiencies as directed by the Contracting Officer’s final determination, the Contracting Officer will, as appropriate, discontinue the withholding of progress payments and performance-based payments, and direct the Contractor, in writing, to discontinue the payment withholding from billings on interim cost vouchers under this contract associated with the Contracting Officer’s final determination, and authorize the Contractor to bill for any monies previously withheld that are not also being withheld due to other significant deficiencies.  Any payment withholding under this contract due to other significant deficiencies, will remain in effect until the Contracting Officer determines that those significant deficiencies are corrected.

                    (ii)  If the Contracting Officer determines that the Contractor still has significant deficiencies, the Contracting Officer will continue the withholding of progress payments and performance-based payments, and the Contractor shall continue withholding amounts from its billings on interim cost vouchers in accordance with paragraph (e) of this clause, and not bill for any monies previously withheld.

                    (iii)  If the Contracting Officer determines, based on the evidence submitted by the Contractor, that there is a reasonable expectation that the corrective actions have been implemented and are expected to correct the significant deficiencies, the Contracting Officer will discontinue withholding payments, and release any payments previously withheld directly related to the significant deficiencies identified in the Contractor notification, and direct the Contractor, in writing, to discontinue the payment withholding from billings on interim cost vouchers associated with the Contracting Officer’s final determination, and authorize the Contractor to bill for any monies previously withheld.

                    (iv)  If, within 90 days of receipt of the Contractor notification that the Contractor has corrected the significant deficiencies, the Contracting Officer has not made a determination in accordance with paragraphs (f)(2)(i), (ii ), or (iii) of this clause, the Contracting Officer will reduce withholding directly related to the significant deficiencies identified in the Contractor notification by at least 50 percent of the amount being withheld from progress payments and performance-based payments, and direct the Contractor, in writing, to reduce the payment withholding from billings on interim cost vouchers directly related to the significant deficiencies identified in the Contractor notification by a specified percentage that is at least 50 percent, but not authorize the Contractor to bill for any monies previously withheld until the Contracting Officer makes a determination in accordance with paragraphs (f)(2)(i), (ii), or (iii) of this clause.

                    (v)  At any time after the Contracting Officer reduces or discontinues the withholding of progress payments and performance-based payments, or directs the Contractor to reduce or discontinue the payment withholding from billings on interim cost vouchers under this contract, if the Contracting Officer determines that the Contractor has failed to correct the significant deficiencies identified in the Contractor's notification, the Contracting Officer will reinstate or increase withholding from progress payments and performance-based payments, and direct the Contractor, in writing, to reinstate or increase the percentage withheld on interim cost vouchers to the percentage initially withheld, until the Contracting Officer determines that the Contractor has corrected all significant deficiencies as directed by the Contracting Officer’s final determination.

(End of clause)

NONE

Subcontractor ✖ 41 U.S.C. chapter 15, as implemented in regulations found at 48 CFR 9903.201-1

52.203-16 Preventing Personal Conflicts of Interest.

52.209-3 First Article Approval-Contractor Testing.

52.209-4 First Article Approval-Government Testing.

52.212-3 Offeror Representations and Certifications—Commercial Products and Commercial Services.

52.215-17 Waiver of Facilities Capital Cost of Money.

52.219-18 Notification of Competition Limited to Eligible 8(a) Participants.

52.219-4 Notice of Price Evaluation Preference for HUBZone Small Business Concerns..

52.219-6 Notice of Total Small Business Set-Aside.

52.219-7 Notice of Partial Small Business Set-Aside.

52.222-36 Equal Opportunity for Workers with Disabilities.

52.225-7 Waiver of Buy American Statute for Civil Aircraft and Related Articles.

52.227-5 Waiver of Indemnity.

52.228-15 Performance and Payment Bonds-Construction.

52.228-4 Workers’ Compensation and War-Hazard Insurance Overseas.

52.232-12 Advance Payments.

52.234-4 Earned Value Management System.

52.237-8 Restriction on Severance Payments to Foreign Nationals.

52.237-9 Waiver of Limitation on Severance Payments to Foreign Nationals.

52.209-13 Violation of Arms Control Treaties or Agreements-Certification.

252.215-7010 Requirements for Certified Cost or Pricing Data and Data Other Than Certified Cost or Pricing Data.

252.203-7001 Prohibition on Persons Convicted of Fraud or Other Defense-Contract-Related Felonies.

252.225-7016 Restriction on Acquisition of Ball and Roller Bearings.

252.225-7019 Restriction on Acquisition of Anchor and Mooring Chain.

252.225-7032 Waiver of United Kingdom Levies-Evaluation of Offers.

252.225-7033 Waiver of United Kingdom Levies.

252.225-7037 Evaluation of Offers for Air Circuit Breakers.

252.247-7023 Transportation of Supplies by Sea.

252.225-7062 Restriction on Acquisition of Large Medium-Speed Diesel Engines.

252.209-7011 Representation for Restriction on the Use of Certain Institutions of Higher Education.

1852.204-76 Security Requirements for Unclassified Information Technology Resources.

1852.227-70 New Technology-Other than a Small Business Firm or Nonprofit Organization.

1852.227-71 Requests for Waiver of Rights to Inventions.

1852.227-88 Government-furnished computer software and related technical data.

1852.228-76 Cross-Waiver of Liability for International Space Station Activities.

1852.228-78 Cross-Waiver of Liability for Science or Space Exploration Activities Unrelated to the International Space Station.

1852.234-2 Earned Value Management System.

1852.245-78 Physical inventory of capital personal property

5252.204-9503 Expediting Contract Closeout (NAVAIR)

5252.209-9510 ORGANIZATIONAL CONFLICTS OF INTEREST (SERVICES) (NAVAIR)(MAR 2007)

5252.209-9513 ORGANIZATIONAL CONFLICT OF INTEREST INSTRUCTIONS (SERVICES) (NAVAIR)

3052.209-70 Prohibition on contracts with corporate expatriates

5152.225-5902 Fitness for Duty and Medical/Dental Care Limitations

652.228-71 Worker’s Compensation Insurance (Defense Base Act) - Services.

752.231-71 Salary supplements for HG employees.

952.209-72 Organizational conflicts of interest.

952.227-84 Notice of right to request patent waiver.

952.250-70 Nuclear hazards indemnity agreement.

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