5201.690 Requirements to be met before entering into contracts.

(a) Contract actions must be subject to review prior to award. The formal review process is conducted and documented through the use of the business clearance. The purpose of the business clearance is to demonstrate that the proposed decision on a contract action conforms to law, regulation, good business practices and DOD/DON acquisition policy.

(b) HCAs shall establish written procedures defining the types of contract actions that will require a business clearance, the applicable dollar thresholds, and the review and approval process. At a minimum, HCA procedures shall address business clearance requirements for the actions listed below. HCAs should expand this list, as appropriate.

(1) Contracts (including task and delivery orders against indefinite-delivery contracts, basic ordering agreements, blanket purchase agreements, and other contract tools).

(2) Contract modifications not within the scope or under the terms of an existing contract.

(3) Undefinitized contract actions (see DFARS Subpart 217.74.)

(4) Modifications and changes issued pursuant to the Changes, Disputes, Economic Price Adjustment, Fair Labor Standards Act and Service Contract Act-Price Adjustment, Government Delay of Work, Government Property, Incentive Price Revision, Over and Above Work, Stop-Work Order, Termination, and Value Engineering contract clauses.

(5) Settlement of claims or requests for equitable adjustment no addressed under paragraph (4) above.

(6) Retroactive pricing after completion, including final price determination.

(7) Definitization of any undefinitized or unpriced contract action, including change orders, Engineering Change Proposals, Value Engineering Change proposals, and Over and Above Work.

(8) Advance agreements on special or unusual cost items (see 5231.109.)

(9) Actions that result in the establishment, modification or rescission of a guarantee of performance on a government contract by a third party.

(c) The following contract actions do not require a business clearance, but the file must include the rationale for award sufficiently documented in a format prescribed by HCA procedures:

(1) Contract actions awarded using simplified acquisition procedures.

(2) Task orders or delivery orders issued under FAR Subpart 8.4, Federal Supply Schedules.

(3) Task orders or delivery orders issued on a firm-fixed price basis against indefinite-delivery type contracts for

(i) supplies for which unit prices are established in the contract; or

(ii) services for which unit prices are established in the contract for specific tasks to be performed and where a statement of work/statement of objectives is not required.

(d) HCAs must establish business clearance approval levels at least one level above the individual responsible for conducting the negotiations; or, if negotiations are not required, for handling the proposed contract action. The degree and complexity of documentation required, and approval levels/thresholds, for various actions should be governed by the magnitude and complexity of the action being reviewed.

(e) The format at Annex 2, Business Clearance Memorandum, shall be used to document decisions on contract actions that are subject to business clearance requirements, unless an alternative format has been approved by DASN(AP).