Organization and Functions of The Renegotiation Board....... 1450 Employee Responsibilities and Conduct____ 1451 Scope of Renegotiation Board Regulations Under the Renegotia- 1452 Prime Contracts and Subcontracts Within the Scope of the Act__ 1453 Mandatory Exemptions From Renegotiation.. 1454 Partial Mandatory Exemption of Prime Contracts and Subcon- 21 1456 Methods of Segregating Renegotiable and Nonrenegotiable Sales - 1459 Costs Allocable to and Allowable Against Renegotiable Business.. 1460 Principles and Factors in Determining Excessive Profits.. 1463 Interim Prepayment of Excessive Profits Sec. Organization and Functions of The Renegotiation Board 6 Copies of the Renegotiation Board Regulations. 1 Creation and authority.-The Renegotiation Board was created by the Renegotiation Act of 1951 (65 Stat. 7, 50 U.S.C. App. 1211) as an independent establishment in the executive branch of the Government and was organized on October 8, 1951 to administer such act. The Renegotiation Act of 1951 transferred to The Renegotiation Board certain powers, functions and duties conferred upon the War Contracts Price Adjustment Board by the Renegotiation Act (58 Stat. 78, as amended; 50 U.S.C. App. 1191). In addition, the Secretary of Defense delegated to The Renegotiation Board, effective January 20, 1952 (17 F.R. 736), all powers, functions and duties conferred upon the Secretary of Defense by the Renegotiation Act of 1948 (62 Stat. 259, as amended and extended; 50 U.S.C. App. 1193). 2 Purpose. The objective of the Renegotiation Act of 1951 and the previous renegotiation statutes is to eliminate excessive profits derived by contractors and subcontractors in connection with the national defense program. 3 Organization.-(a) The Renegotiation Board is composed of five members. Each is appointed by the President by and with the advice and consent of the Senate. The Secretaries of the Army, the Navy and the Air Force, subject to the approval of the Secretary of Defense, and the Administrator of General Services each recommend to the President for his consideration one person from civilian life to serve as a member of the Board. The President designates one member to serve as Chairman. The principal office of the Board is located at 1910 K Street NW., Washington, D.C., 20446. (b) The Board maintains two regional boards with authority to conduct renegotiation proceedings in cases assigned to them. Each of the regional boards is composed of a chairman and additional board members as appointed by the Board. After the Board determines that a contractor should be assigned for renegotiation, the case is assigned to a regional board selected according to its proximity, its relative work load, and its experience and special skills. The locations of the regional boards are as follows: Location (1) Eastern Regional Renegotiation Board, 1634 Eye Street NW., Washington, D.C., 20447. (2) Western Regional Renegotiation Board, 320 North Vermont Avenue, Los Angeles, California, 90004. 4 Activities. (a) The Renegotiation Act of 1951 is applicable to contracts with the military departments and certain other agencies of the Government named in the act, and to related subcontracts. As originally enacted, the act applied also to contracts with such other agencies of the Government exercising functions having a direct and immediate connection with the national defense as the President might designate. Various additional agencies were designated by the President in Executive Orders 10260, June 27, 1951 (16 F.R. 6271); 10294, September 28, 1951 (16 F.R. 9927); 10299, October 31, 1951 (16 F.R. 11136); 10367, June 30, 1952 (17 F.R. 5932); and 10567, September 29, 1954 (F.R. 6361). (b) By amendment to the act effective December 31, 1956, all agencies so named or designated ceased to be "Departments" for the purposes of the act, except the Departments 1 of Defense, Army, Navy and Air Force, the Maritime Administration, the Federal Maritime Board, the General Services Administration, and the Atomic Energy Commission. The President was given the power, during a national emergency proclaimed by the President or declared by the Congress after the date of such amendment, to designate as a Department any other agency of the Government exercising functions having a direct and immediate connection with the national defense, any such designation ceasing to be in effect on the last day of the month during which such emergency is terminated. By amendment approved September 6, 1958, the National Aeronautics and Space Administration was added as a Department under the act. (c) For fiscal years ending on or before June 30, 1956, every contractor is required to file an annual report with respect to its receipts or accruals from renegotiable prime contracts and subcontracts during its fiscal year. For fiscal years ending after June 30, 1956, this report is required to be filed only by those contractors whose renegotiable sales exceed the minimum amount prescribed in the act, but it may be filed by any other contractor. The mandatory filing includes detailed financial and other information. Additional pertinent information is accumulated by the Board in the course of meetings with contractors whose renegotiable sales exceed the statutory minimum. If the Board and the contractor are unable to agree upon the amount of excessive profits, if any, to be refunded by the contractor for such fiscal year, the Board issues and enters an order determining such amount. The order is reviewable in The Tax Court of the United States. (d) Cases are normally assigned in the first instance to one of the regional boards, to which the Board has delegated authority to make determinations of excessive profits in cases involving a net profit on renegotiable business not in excess of $800,000 for a fiscal year and to make recommended determinations to the Board of excessive profits in cases exceeding that amount, for final determination by the Board. (e) The administration of renegotiation agreements and orders under the Renegotiation Act of 1951 is carried out by the heads of the agencies whose contracts are subject to such act; the administration of renegotiation agreements and orders under the Renegotiation Act of 1948 has been delegated to the Secretary of Defense, who in turn has redelegated such function to the Secretaries of the Army, the Navy, and the Air Force; the administration of renegotiation agreements and orders under the Renegotiation Act has been delegated to the heads of the agencies whose contracts were subject to the act. (f) The Board maintains liaison with the various agencies whose contracts are subject to the Renegotiation Act of 1951, and with the Department of Justice, the Internal Revenue Service, and other agencies whose jurisdiction or activities relate to the functions of the Board. The Board also disseminates renegotiation results and information to Government procurement personnel for use in reprocurement, forward pricing and price redetermination proceedings, as a a means of avoiding excessive profits to contractors and excessive costs to the Government in the execution of the national defense program. 5 Official copies.-Official copies of the statutes referred to herein may be obtained from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C., 20402. Official copies of Executive Orders cited herein are set out in the Federal Register, which may also be procured from the Superintendent of Documents. 6 Copies of the Renegotiation Board Regulations. The Renegotiation Board Regulations and current supplements thereto may be obtained from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C., 20402. 7 Seal. The seal of the Board shall be judicially noticed. 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