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 (a) The Government, at its election, may reduce the price of a
fixed-price type contract or contract modification and the total cost and
fee under a cost-type contract or contract modification by the amount of
profit or fee determined as set forth in paragraph (b) of this clause if
the head of the contracting activity or his or her designee determines that
there was a violation of subsection 27(a) of the Office of Federal
Procurement Policy Act, as amended (41 U.S.C. 423), as implemented in the
FAR. In the case of a contract modification, the fee subject to reduction
is the fee specified in the particular contract modification at the time of
execution, except as provided in subparagraph (b) (5) of this clause-
(b) The price or fee reduction referred to in paragraph (a) of this
clause shall be--
(1) For cost-plus-fixed-fee contracts, the amount of the fee
specified in the contract at the time of award;
(2) For cost-plus-incentive-fee contracts, the target fee
specified in the contract at the time of award, notwithstanding any minimum
fee or "fee floor" specified in the contract;
(3) For cost-plus-award-fee contracts--
(i)
The base fee established in the contract at the time of
contract award)
(ii) If no base fee is specified in the contract, 30 percent
of the amount of each award fee otherwise payable to the Contractor for
each award fee evaluation period or at each award fee determination point.
(4) For fixed-price-incentive contracts, the Government may--
(i) Reduce the contract target price and contract target
profit both by an amount equal to the initial target profit specified in
the contract at the time of contract award; or
(ii) If an immediate-adjustment to the contract target price
and contract target profit would have a significant adverse impact on the
incentive price revision relationship under the contract, or adversely
affect the contract financing provisions, the Contracting Officer may defer
such adjustment until establishment of the total final price of the
contract. The total final price established in accordance with the
incentive price revision provisions of the contract shall be reduced by an
amount equal to the initial target profit specified in the contract at the
time of contract award and such reduced price shall be the total final
contract price.
(5) For firm-fixed-price contracts or contract modifications, by
10 percent of the initial contract price; 10 percent of the contract
modification price; or a profit amount determined by the Contracting
Officer from records or documents in existence prior to the date of the
contract award or modification.
(c) The Government may, at its election, reduce a prime contractor's
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