exceed the administrative cost of developing a cost estimate and computing a
paymentdeduction. If the value of the service not performed is minor,
relative to the administrative cost, full price is paid and corrective
action is sought through communication with the contractor.
(b) Second, if the value of the service not performed is significantly
greater than the administrative cost, the value of the work requirement
should be compared with the value of the associated contract requirement.
If exercising good business judgement, it appears to be in the Government's
best interest to conclude that in the aggregate the contract requirement is
substantially complete the service is accepted as performed, full price is
paid and corrective action is sought through communication with the
(c) Third, if the requirement is considered not to be substantially
complete and the cost of preparing an estimate does not exceed the value of
the nonperformed work, a cost estimate should be prepared. This cost
estimate should be prepared in accordance with established cost estimating
methods available to the public. Alternatively, the Engineered Performance
Standards prepared for use by the Army, Navy, and Air Force may be used,
provided provision for their use has been made in the contract documents.
Liquidated damages to compensate the Government for administrative costs are
included in the estimate in accordance with the "Consequences of
Contractor's Failure to Perform Required Services" clause.
6-670 Other Adjustments. Adjustments may include payment for rework
from a prior billing period. This may occur when a late customer complaint
is received, and the contractor reworked it after the invoice was
processed. Payment would be calculated for the rework using the unit price
established in the month it was billed. This calculation should be rarely
needed but is included for completeness. An example of an adjustment for
rework in a prior billing period is contained in the sample calculations at
6-680 Typical Payment Calculations.
(a) 100 Percent Inspection. The following data, contained from the
performance requirements summary (PRS) and the schedule of deductions or
from the performance requirements summary (PRS) and the schedule of
indefinite quantity work, is used to illustrate a typical payment
calculation when surveillance is by 100 percent inspection. When 100
percent inspection is used, deductions are made for all observed defects not
completed (or reworked) in a satisfactory and timely manner. Liquidated
damages are applied to all defects in accordance with the "Consequences"
clause. Figure 6-2 lists the steps in the calculation.