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accomplished. Singer Manufacturing Co. v. Rahn, 132, U.S. 518, 523. An "independent contractor" is most frequently defined as one who contracts to do certain work according to his own methods and without being subject to the control of his employer, except as to the product or result of his work. 27 Am. Jur., Independent Contractor, § 2, p. 481.

(c) Often the employment contract will aid in establishing whether a person is an employee or an independent agent or contractor. The fact that compensation is paid wholly on a commission basis is not decisive either way. 1499.1-38 Renegotiation Ruling No. 38: Brokers and manufacturers' agents; commission sales (interprets act section 103(g) (1) and (3) and § 1490.6 of this chapter).—

(a) This section concerns the manner in which receipts or accruals of a manufacturer's agent are classified for purposes of renegotiation.

(b) A sales agent for a manufacturer of precision equipment is paid a commission on his sales of the manufacturer's products, some of which sales are renegotiable. Commissions paid to an agent for his services in obtaining contracts are subject to renegotiation under section 103 (g) (3) of the act, in the same proportion as the sales of the manufacturer on which the commissions are paid. This is the case where the manufacturer receives the proceeds of the sales and remits the commissions to the agent. To the agent, it is only the commissions that constitute renegotiable receipts or accruals.

(c) On the other hand, if the agent acquires title to the products he sells, and thus assumes the risk of buying and reselling them, then he is a principal and his sales of such products to other contractors are subcontracts within the scope of section 103 (g) (1) of the act to the extent that the products are applied to renegotiable use by such other contractors.

1499.2 Renegotiation Bulletins.-This section contains Renegotiation Bulletins, consisting of statements of general policy formulated and adopted by the Board. The bulletins state Board policy with respect to specific provisions of the Renegotiation Act of 1951, as amended, or of these regulations, or other matters related to the conduct of

renegotiation; some include interpretations of general applicability. They may be cited by section number (e.g., RBR 1499.2-12) or by bulletin number (e.g., R. Bull. No. 12). 1499.2-1 Renegotiation Bulletin No. 1: Advertising. This section explains how § 1459.7 (b) (2) (ii) of this chapter will be applied in renegotiation proceedings.

(a) Regulation. Section 1459.7 (b) (2) (ii) provides as follows:

(ii) In cases in which it can be demonstrated that a prime contractor or subcontractor engaged in renegotiable business to the detriment of its normal commercial business in the year under review, and thereby incurred the risk of loss of its competitive position in the industry concerned, the Board will allocate to renegotiable business that portion of the prime contractor's or subcontractor's normal advertising expense which the Board deems properly attributable to the effort by the prime contractor or subcontractor to forestall such loss of competitive position.

(b) Application. (1) A contractor will be regarded as having engaged in renegotiable business to the detriment of its normal commercial business when and to the extent that the volume of its normal commercial business decreases or is otherwise adversely affected as a direct result of its having accepted renegotiable prime contracts or subcontracts.

(2) Such a contractor will be regarded as having incurred the risk of loss of its competitive position in the industry concerned when any competitor during the same period continues to manufacture products which fill the same need as those of the contractor.

(3) However, a contractor who sells all or some of its normal commercial production to the Government under renegotiable prime contracts and subcontracts instead of to its customary civilian market will not be considered to have engaged in renegotiable business to the detriment of its normal commercial business, or to have incurred the risk of loss of its competitive position, if all other companies in the same industry have, to substantially the same extent, devoted their facilities to renegotiable business.

(c) Examples. The following are examples of situations in which the Board will allocate to renegotiable business a portion of the contractor's normal advertising expense:

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subchapter." This bulletin sets forth such identification symbols and suggests the manner in which they may be used as an aid to the segregation of subcontract sales.

(b) Program identification symbols under the Defense Materials System are issued by the Business and Defense Services Administration of the Department of Commerce. These symbols are set forth in Schedule II to DMS Reg. 1, as follows:

SCHEDULE II TO DMS REG. 1-AUTHORIZED PROGRAM IDENTIFICATIONS AND ALLOTTING AGENCIES

**

*

**

The program identification symbols listed in this schedule are the only ones authorized for use under the Defense Materials System and must be used in accordance with this regulation and other applicable regulations and orders of BDSA.

For Department of Defense and associated programs

Aircraft

Missiles

Ships

**

The symbols are not listed in alphabetical or numerical sequence but are grouped by Allotting Agencies. Within each group, the Allotting Agencies listed in Column 3 are authorized to make allotments under one or more of the programs listed in Column 2 and to assign allotment numbers and ratings containing one or more of the program identifications listed in Column 1. Communications concerning rating, self-authorization and allotment authority should be addressed to the named agency, its procuring element, or as directed by the procuring element. The full names of the Allotting Agencies shown by initials in the following list are:

AEC-Atomic Energy Commission.

BDSA-Business and Defense Services Adminis

tration.

CIA-Central Intelligence Agency.
FAA Federal Aviation Agency.
NASA-National Aeronautics and Space Adminis-
tration.

Weapons

Ammunition

Electronic and Communications Equipment
Military Building Supplies.

*

Production Equipment (for defense contractor's account)

Production Equipment (Government-owned).

Department of Defense Construction.

Maintenance, Repair and Operating Supplies (MRO) for De

partment of Defense Facilities.

Controlled Materials for Naval Stock Account.
Miscellaneous.

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(c) Program identification symbols in some cases, are indicative of renegotiability, but in no case is such a symbol conclusive evidence of renegotiability. To illustrate : Program identification symbol A-7 is for the electronic and communications equipment program; but if used by CIA, for example, for the acquisition of such equipment, it would not indicate renegotiability. Other symbols, for example, D-2, D-4, D-5, and K-1, ordinarily denote nonrenegotiable programs. The absence of a symbol on an order does not necessarily mean that the order is nonrenegotiable.

1499.2-3 Renegotiation Bulletin No. 3: Letter not to proceed.

An assigned case will be concluded by a letter from the Regional Board notifying the contractor that the Regional Board will not proceed further with the case (see § 1498.8 of this chapter) when it has been determined that:

(a) The renegotiable sales of the contractor and all related contractors, if any, were

AEC.

BDSA.

by the Office of Assistant Secretary of Defense (Installations and Logistics) and specific approval by BDSA.

below the statutory minimum for the year under review. This may result from the making of a special accounting agreement, as well as from the correction of errors.

(b) The contractor had no renegotiable sales in the year under review, irrespective of the amount of renegotiable sales of related characters. If a contractor having no renegotiable sales is a member of a consolidated group, it will be separated from the consolidated proceeding in accordance with § 1464.6 of this chapter. The foregoing shall not apply to the common parent corporation in a consolidated affiliated group.

1499.2-4 Renegotiation Bulletin No. 4: the stock item exemption.-(a) Amounts received or accrued on or before October 31, 1968. Section 105(d) (5) of the Act authorizes the Board to exempt any subcontract or group of subcontracts if, in the opinion of the Board, it is not administratively feasible to determine and segregate the profits therefrom between renegotiable and nonrenegotiable business. Pursuant to this authority,

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in part for a particular renegotiable order is a special purchase. The sale of such materials is not exempt even though the purchaser places them in stock until he needs to use them. On the other hand, if materials are customarily acquired for stock and are not specially purchased for renegotiable use, exemption is not precluded by the fact that some portion of the materials is ultimately used by the purchaser on a renegotiable order.

(ii) Paragraph (c) (2) of § 1455.6 of this chapter sets forth certain common indications of a special purchase; other indicia may I be found in the circumstances of the particular transaction. Among other things, a special purchase is indicated when all or substantially all the business in the purchaser's plant or facility is subject to renegotiation. By the term "substantially all" is meant such a preponderance of renegotiable business in a plant that only a negligible amount of purchased materials is used to fill nonrenegotiable orders. In applying this provision of the regulations, the Board employs the following working rule, subject to variation in special circumstances: If 90 percent or more of the business in a plant is subject to renegotiation, it will be considered, for purposes of the stock item exemption only, that all or substantially all the business in that plant is subject to renegotiation, and sales to that plant will not be allowed the exemption.

(iii) Generally, the fact that a purchase order includes an allotment symbol indicates that the transaction is a special purchase, but this is not so if the purchaser has used the allotment symbol, as he is entitled to do, to replenish his customary stock after withdrawing materials thereform to fill a renegotiable order.

(5) Customer information. To determine whether sales under a subcontract are within the exemption, the contractor must obtain the necessary information from his customer, either through the order received from him or by direct inquiry. The Board will scrutinize with particular care representations by a contractor with respect to the purchasing practices of a customer in the same corporate family or other related group.

(b) Amounts received or accrued after October 31, 1968. With respect to amounts received or accrued after October 31, 1968, the Board has changed the rules governing the stock item exemption in several important respects. The new rules are set forth in paragraph (d) of § 1455.6 of this chapter, and are as follows:

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(ii) In the opinion of the Board, based upon the circumstances of the particular case, it is not administratively feasible to segregate the contractor's sales of such materials betwen renegotiable and nonrenegotiable sales.

1499.2-5 Renegotiation Bulletin No. 5: Entertainment expenses, gratuities, and sales commissions.(a) It is the purpose of the Board in issuing this section to insure that entertainment, gratuities, sales commissions, or other expenses which are not proper deductions for tax purposes or are not properly allocable to renegotiable business are not allowed in renegotiation. In the renegotiation process, careful scrutiny is given to such expenses to avoid improper allowances. Adjustments will be made for those items of a significant amount which are deemed to be unallowable.

(b) Entertainment, gratuities, and similar expenses, unless incurred for business purposes, are not allowable deductions for

tax purposes, and therefore are not allowable under section 103 (f) of the Renegotiation Act of 1951, as amended. For example, expenses incurred in the operation of a yacht for the contractor's personal enjoyment are not allowable in renegotiation. Of importance is the fact that even though an expense is deductible under the Internal Revenue Code, it may not be properly allocable to renegotiable business. Therefore, it is essential that the details of entertainment, gratuities, and similar expenses be made known to the Board so that proper allocation may be made. The contractor must demonstrate that the expenses were required for obtaining or performing renegotiable business and must establish the reasonableness of the amount allocated to renegotiable business.

(c) In renegotiation proceedings, Board personnel will endeavor to eliminate any improper charges for entertainment, gratuities, and similar expenses included in selling, general and administrative expenses, or otherwise charged in whole or in part to renegotiable business. Section 1459.7 (a) of this chapter provides that selling expense will be allocated to renegotiable business only to the extent that it relates to certain specified purposes, none of which includes entertainment of or gratuities to persons acting on behalf of the Government. Irrespective of the classification, the allocation of entertainment expenses or gratuities to renegotiable business is subject to the limitations set forth herein.

(d) Section 1459.2 (c) of this chapter provides that commissions paid or payable to brokers or agents, if estimated to be deductible under the Internal Revenue Code, will be allowed as a cost in renegotiation to the extent allocable to renegotiable business. Particular attention will be given to the specific tests prescribed in § 1459.2 (c). If a commission arrangement violates the "covenant against contingent fees" required in practically all Government contracts, it must be disallowed as a charge against renegotiable business.

(e) The commissions received by an agent or broker are also subject to renegotiation. In renegotiating an agent or broker, any improper selling expenses incurred by him

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