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1455.4 Contracts when contractual provisions adequate to prevent excessive profits.—(a) Statutory authority.-Section 106 (d) (3) of the act authorizes the Board in its discretion to exempt from some or all of the provisions of the act the following:

(3) any contract or subcontractor performance thereunder during a specified period or periods if, in the opinion of the Board, the provisions of the contract are otherwise adequate to prevent excessive profits;

(b) Exemptions.—Pursuant to the foregoing authority, the Board has exempted from renegotiation the following:

(1) Maritime Administration.--All operating differential subsidy contracts of the Maritime Administration which are let under authority of 46 U.S. C. 1171, 1173, as amended, whenever such contracts contain or incorporate by reference or are subject to the redetermination and recapture provisions of 46 U. S. C. 1176. This exemption applies only to receipts and accruals derived from the United States in the form of subsidy payments. It does not exempt renegotiable receipts or accruals otherwise derived, including payments by shippers for freight charges.

(2) Defense Minerals Exploration Administration.—Removed to Appendix.

(3) Small Defense Plants Administration.Removed to Appendix.

(4) Small Business Administration. All prime contracts entered into by the Small Business Administration under the authority of section 207 (c) of the Small Business Act of 1953, Public Law 163, 83d Congress, First Session, with any of the Departments named in or deg. ignated pursuant to section 103 of the act. This exemption shall not extend to subcontracts related to such prime contracts.

(c) Exemption of individual prime contracts and subcontracts.—The Board will exempt an individual prime contract or subcontract, or performance thereunder during a specified period or periods if, in the opinion of the Board, the provisions of the contract are otherwise adequate to prevent excessive profits. The Board will make such an exemption only after it has received from the agency entering into the prime contract sought to be exempted, or the prime contract to which the subcontract sought to be exempted relates, a request for the exemp. tion of such prime contract or subcontract and

information which would support the conclusion that the provisions of the prime contract or subcontract are otherwise adequate to prevent excessive profits. Accordingly, prime contractors or subcontractors who believe that their prime contracts or subcontracts should be exempted under this provision should address requests to the agencies entering into the prime contracts involved.

1455.5 Contracts and subcontracts of a secret nature.--(a) Statutory authority.Section 106 (d) (4) of the act authorizes the Board in its discretion to exempt from some or all of the provisions of Title I of the act the following:

(4) any contract or subcontract the renegotiation of which would jeopardize secrecy required in the public interest;

(b) Exemption of individual prime contracts and subcontracts.-The Board will exempt any prime contract or subcontract the renegotiation of which would jeopardize secrecy required in

ne public interest. Requests for exemption of individual contracts under this section will be entertained only if made by the agency entering into the prime contract sought to be exempted or the prime contract to which the subcontract sought to be exempted relates.

1455.6 Subcontracts as to which it is not administratively feasible to segregate prof. its.-(a) Statutory authority.--Section 106 (d) (5) of the act authorizes the Board in its discretion to exempt from some or all of the provisions of Title I of the act the following:

(6) any subcontract or group of subcontracts not otherwise exempt from the provisions of this section, If, in the opinion of the Board, it is not administratively feasible in the case of sucb subcontract or in the case of sucb group of subcontracts to determine and segregate the proits attributable to such subcontract or group of subcontracts from the profits attribOtable to activities not subject to renegotiation.

(b) “Stock item" exemption; amounts received or accrued before July 1, 1966.The Board has found that it is not administratively feasible to determine and segregate the profits attributable to activities subject to renegotiation from those not so subject in the case of the following and has, therefore, exempted from the provisions of the act, to the extent of amounts received or accrued prior to July 1, 1966, all subcontracts subject to the act which

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are for materials (including maintenance, re- formance of renegotiable contracts or sub-
pair and operating supplies) customarily pur- contracts.
chased for stock in the normal course of the (iii) That the purchaser represented to the
purchaser's business, except when such mate

supplier that the article was required for the rials are specially purchased for use in perform- performance of military or other renegotiable ing one or more prime contracts or higher tier contracts or subcontracts, or extended to the gubcontracts subject to the act.

supplier a preference rating or allotment sym(c) Application of exemption.-(1) When bol applicable only to such contracts or subthe purchaser customarily carries an article contracts. in stock and purchases a supply of it to be

(iv) That the amount of the purchase coinplaced in stock, the purchase is not subject to

cided substantially with the purchaser's rorenegotiation merely because the purchaser

quirements for performance of his renegotiable knows that some portion of the stock thus re

contracts or subcontracts, or those he expected plenished will inevitably be used in the per- to obtain and was abnormal to his usual reformance of renegotiable contracts or subcon

quirements. tracts then on hand, but when materials have

(v) That all or substantially all of the purbeen specially purchased for use in performing chaser's business in the plant or other facility one or more renegotiable contracts or subcon

to which the article was delivered was subject tracts, the subcontract for such a purchase is to renegotiation. subject to renegotiation, notwithstanding that 1455.7 Subcontracts related to exempt the article may be customarily carried in stock prime contracts and subcontracts. The by the purchaser, and irrespective of the amount Board has exempted all subcontracts related to customarily carried. When items are specially the prime contracts and subcontracts exempted purchased for use in performing one or more pursuant to the authority of section 106 (d) of renegotiable contracts or subcontracts, it is im- the act, except (a) subcontracts related to prime material that the purchaser does not know at contracts and subcontracts exempted in section

1455.2 and (b) other subcontracts, when the the time of purchase the specific contract or subcontract in tho performance of which such Board, in exempting prime contracts or subcon

tracts, determines that the exemption will not articles or any portion of them will be used, or

extend to some or all of the subcontracts related even that the contract or subcontract has not

to such prime contracts or subcontracts. yet been let; the purchase is subject to renego

1455.8 Renegotiation clause in exempt tiation in its entirety.

contracts. The renegotiation clause provided (2) Any one or more of the following cir.

for by section 104 of the act shall not be incumstances normally would indicate that the

serted in prime contracts and subcontracts exarticle was “specially purchased” and not

empted in this part, except that there shall be exempt :

inserted in prime contracts and subcontracts ex(i) That the specifications of the article were empted in section 1455.2 a provision requiring adapted to the purchaser's renegotiable busi- the prime contractor or subcontractor, as the ness only.

case may be, to insert a renegotiation clause in (ü) That the article was segregated or ear each subcontract into which it enters and which marked, either in whole or in part, for the per is not exempt from the provisions of the act.

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not more than $25,000, the receipts or accruals from Bec.

such subcontracts shall not, for such fiscal year, be 1458.1 Statutory provision.

renegotiated under this title. If the aggregate of such 1458.2 Computation of aggregate receipts and ac

amounts received or accrued during the fiscal year cruals.

under such subcontracts is more than $25,000, no de 1458.3 No reduction by refund below statutory

termination of excessive profits to be eliminated for minimum.

such year with respect to such subcontracts shail be 1458.4 Proration of statutory minimum

in an amount greater than the amount by which such 1458.5 Statutory minimum not an exemption.

aggregate exceeds $25,000. 1458.6 Tests of "control".

(3) Computation. In computing the aggregate of AUTHORITY: Sections 1458.1 to 1458.6 issued under

the amounts received or accrued during any fiscal year sec. 109, Pub. Law 9, 82d Cong. Interpret or apply

for the purposes of paragraph (1) of this subsection, sec. 105, Pub. Law 9, 82d Cong.

there shall be eliminated all amounts received or ac1458.1 Statutory provision-Section 105

crued by a contractor or subcontractor from all persons

under control of or controlling or under common con(f) of the act provides as follows:

trol with the contractor or subcontractor and all (1) In general.-If the aggregate of the amounts

amounts received or accrued by each sucb person from received or accrued during a fiscal year (and on or

such contractor or subcontractor and from each other after the applicable effective date specified in section

sucb person. If the fiscal year is a fractional part of 102 (a)) by a contractor or subcontractor, and all

twelve months, the $250,000 amount, the $500,000 persons under control of or controlling or under com

amount, the $1,000,000 amount, and the $25,000 amount mon control with the contractor or subcontractor,

shall be reduced to the same fractional part thereof under contracts with the Departments and subcon

for the purposes of paragraphs (1) and (2). In the tracts described in section 103 (g) (1) and (2), is not

case of a fiscal year beginning in 1950 and ending in more than $250,000, in the case of a fiscal year ending

1951, the $250,000 amount and the $25,000 amount shall before June 30, 1959, or $500,000, in the case of a fiscal

be reduced to an amount which bears the same ratio to year ending on or after June 30, 1953, or $1,000,000, in

$250,000 or $25,000, as the case may be, as the numthe case of a fiscal year ending after June 30, 1956, the

ber of days in such fiscal year after December 31, receipts or accruals from such contracts and subcon

1950, bears to 365, but this sentence shall have no tracts shall not, for such fiscal year, be renegotiated

application if the contractor or subcontractor has made under this title. If the aggregate of such amounts re

an agreement with the Board pursuant to section 102 ceived or accrued during the fiscal year under such

(c) for the application of the provisions of this title to contracts and subcontracts is more than $250,000, in the

receipts or accruals prior to January 1, 1951, during case of a fiscal year ending before June 30, 1953, or

such fiscal year. In the case of a fiscal year beginning $500,000, in the case of a fiscal year ending on or after

on or before the termination date and ending after the June 30, 1953, or $1,000,000, in the case of a fiscal year

termination date, the $1,000,000 amount and the $ 25,000 ending after June 30, 1956, no determination of exces

amount shall be reduced to an amount which bears the sive profits to be eliminated for such year with respect

same ratio to $1,000,000 or $25,000, as the case may be, to such contracts and subcontracts shall be in an

as the number of days in such fiscal year before the amount greater than the amount by which such aggre.

closing of the termination date bears to 365. (Matter gate exceeds $250,000, in the case of a fiscal year ending

in italics added by Pub. Law 764, 83d Cong., approved before June 30, 1959, or $500,000, in the case of a fiscal

September 1, 1954, as amended by sec. 6 (a) and (b) year ending on or after June 30, 1953, or $1,000,000, in

and sec. 7 (a) of Pub. Law 870, 84th Cong., approved the case of a fiscal year ending after June 30, 1956.

August 1, 1956. The latter amendment added the ref(2) Subcontracts described in section 10(0) (3).If the aggregate of the amounts received or accrued

erences to $1,000,000 for fiscal years ending after June during a fiscal year (and on or after the applicable

30, 1956; and, in paragraph (3), changed "for the effective date specified in section 102 (a)) by a sub

purposes of paragraphs (1) and (2)" to "for the purcontractor, and all persons under control of or control.

poses of paragraph (1)", effective only with respect ling or under common control with the subcontractor,

to fiscal years ending on or after June 30, 1956, and under subcontracts described in section 103 (8) (3) is

added the last sentence.)

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1458.2 Computation of aggregate receipts accrued by the contractor from related contracand accruals.-(a) Paragraphs (1) and (2) tors and all amounts received or accrued by of section 105 (f) of the act, quoted in section each such related contractor from the contractor 1458.1, are not mutually exclusive. That is, and from each other such related contractor. every contractor having receipts or accruals However, in making such computation for the subject to the act will be renegotiated there purposes of paragraph (2) of section 105 (f) under unless such contractor meets both of the

of the act (relating to subcontracts described in following conditions:

section 103 (g) (3) of the act, held chiefly by (1) The aggregato renegotiable receipts or brokers and manufacturers' agents), inter-comaccruals of the contractor and any related con- pany sales shall be included. This means that tractors for the fiscal year of the contractor whenever a broker, manufacturers' agent, or under contracts with the Departments and sub- other person holding a subcontract described contracts described in section 103 (g) (1) and in section 103 (g) (3) of the act receives com(2) of the act do not exceed $250,000, in the case missions or other compensation from its parent of a fiscal year ending before June 30, 1953, or or other related principal, all such amounts $500,000, in the case of a fiscal year ending on or which are referable to renegotiable prime conafter June 30, 1953, or $1,000,000 in the case of tracts or subcontracts must be included in coma fiscal year ending after June 30, 1956; and puting the aggregate renegotiable receipts or

(2) The aggregate renegotiable receipts or accruals of such broker, agent or other person accruals of the contractor and any related con- for the purpose of applying the $25,000 “floor.” tractors for the fiscal year of the contractor (c) When the fiscal years of the contractor under subcontracts described in section 103 (g) and any of the related contractors differ, the (3) of the act do not exceed $25,000.

test will be whether, during the twelve-month If the contractor meets one of the above con

period (or fraction thereof) which is the fiscal ditions but not the other, renegotiation will be

year of the contractor, the aggregate receipts conducted only with respect to the receipts or

or accruals of the contractor and related con

tractors accruals as to which the condition is not met.

in excess of the statutory

minimum. (b) The aggregate receipts or accruals of the contractor and related contractors under (d) In computing the receipts or accruals subject prime contracts and subcontracts shall of a contractor and any related contractor that be determined in accordance with the method controlled or was under control of or under comof accounting used for purposes of renegotia- mon control with the contractor during only a tion. Total receipts or total billings under part of the fiscal year of the contractor, the recost-plus-a-fixed-fee contracts shall be included ceipts or accruals of the contractor during its in computing such aggregate receipts or ac- entire fiscal year shall be aggregated with all cruals. There shall be excluded from such amounts received or accrued by such related computation (1) all receipts or accruals of the contractor in that part of the fiscal year of the contractor and related contractors under primo contractor during which the relationship be

tween the contractor and such related contraccontracts and subcontracts which are exempt

tor existed, and there shall be excluded from from renegotiation under section 106 (a), (d),

such computation all amounts received or acand (e) of the act (see Parts 1453, 1455 and

crued by such related contractor in that part of 1467 of this subchapter), and (2) that part of

the fiscal year of the contractor during which the receipts or accruals of the contractor and

such relationship did not exist. related contractors under prime contracts and

Example. Corporation A, for its fiscal year subcontracts for new durable productive equip

ended December 31, has renegotiable sales of ment which is exempt from renegotiation under

$900,000, of which $500,000 is received or acsection 106(c)of the act. (See Part 1454 of this

crued in the first half of the year, and subchapter.) In making such computation for

$100,000 in the second half. Corporation B, the purposes of paragraph (1) of section 105 (f)

for the same fiscal year, has renegotiable sales of the act, there shall also be excluded all “inter- of $800,000, of which $600,000 is received or company sales”-i. e., all amounts received or

accrued in the first half of the year, and $200,000

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in the second half. A acquires all the stock of B on June 30. A is subject to renegotiation because its sales of $900,000, plus B’s sales of $200, 000 during the period of relationship, exceed the “floor.” B is subject to renegotiation because its sales of $800,000, plus A's sales of $400,000 during the period of relationship, exceed the floor.

1458.3 No reduction by refund below statutory minimum.-(a) No determination of excessive profits to be eliminated from the aggregate amount of receipts or accruals of the contractor and related contractors for the period of time which is the fiscal year of the contractor, under contracts with the Departments and subcontracts described in section 103 (g)

(1) and (2) of the act (see sec. 1452.4 to 1452.6 of this subchapter), shall be in an amount greater than the amount by which such aggregate exceeds $250,000, in the case of a fiscal year ending before June 30, 1953, or $500,000, in the case of a fiscal year ending on or after June 30, 1953, or $1,000,000 in the case of a fiscal year ending after June 30, 1956.

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(b) No determination of excessive profits to be eliminated from the aggregate amount of receipts or accruals of the contractor and related contractors for the period of time which is the fiscal year of the contractor, under subcontracts described in section 103 (g) (3) of the act (see sec. 1452.7 of this subchapter), shall be in an

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