N00024-18-R-4300_Amendment_0003.pdf

N0002418NR91616

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT

Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect.

15A. NAME AND TITLE OF SIGNER (Type or print)

30-105-04EXCEPTION TO SF 30

APPROVED BY OIRM 11-84

STANDARD FORM 30 (Rev. 10-83) Prescribed by GSA

FAR (48 CFR) 53.243

The purpose of this amendment to solicitation N00024-18-R-4300 is to incorporate changes as a result of bidders questions. Accordingly, said solicitation is hereby modif ied as follow s:

1. CONTRACT ID CODE PAGE OF PAGES

1 66

16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)

16C. DATE SIGNED

BY 17-May-2018

16B. UNITED STATES OF AMERICA15C. DATE SIGNED15B. CONTRACTOR/OFFEROR

(Signature of Contracting Officer)(Signature of person authorized to sign)

8. NAME AND ADDRESS OF CONTRACTOR (No., Street, County, State and Zip Code) X N0002418R4300

X 9B. DATED (SEE ITEM 11)

25-Apr-2018

10B. DATED (SEE ITEM 13)

9A. AMENDMENT OF SOLICITATION NO.

11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS

X The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offer is extended, X is not extended.

Offer must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended by one of the following methods:

(a) By completing Items 8 and 15, and returning 5 copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted;

or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified.

12. ACCOUNTING AND APPROPRIATION DATA (If required)

13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS.

IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.

A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE

CONTRACT ORDER NO. IN ITEM 10A.

B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(B).

C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:

D. OTHER (Specify type of modification and authority)

E. IMPORTANT: Contractor is not, is required to sign this document and return copies to the issuing office.

14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)

10A. MOD. OF CONTRACT/ORDER NO.

2. AMENDMENT/MODIFICATION NO. 5. PROJECT NO.(If applicable)

6. ISSUED BY

3. EFFECTIVE DATE

17-May-2018

CODE

NAVAL SEA SYSTEMS COMMAND (HQ)

1333 ISAAC HULL AVE SE

WASHINGTON NAVY YARD DC 20376-2030

N00024 7. ADMINISTERED BY (If other than item 6)

4. REQUISITION/PURCHASE REQ. NO.

CODE

See Item 6

FACILITY CODECODE

EMAIL:TEL:

N0002418R4300

SECTION SF 30 BLOCK 14 CONTINUATION PAGE

SUMMARY OF CHANGES

SECTION B - SUPPLIES OR SERVICES AND PRICES

CLIN 0007

The CLIN description has changed from EXECUTION PLANNING CIA/PIA to PIA

EXECUTION PLANNING.

CLIN 0008

The CLIN description has changed from CIA/PIA EXECUTION to PIA

EXECUTION.

CLIN 0012 is added as follows:

ITEM NO SUPPLIES/SERVICES MAX

QUANTITY

UNIT UNIT PRICE MAX AMOUNT

CLIN

Number

UNDEFINED

CIA EXECUTION PLANNING

COST

ACCOMPLISH THE EXECUTION PLANNING FOR THE REPAIR AND

ALTERATION REQUIREMENTS FOR CVN INCREMENTATAL

AVAILABILITIES (CIA) - (FY19-FY24) - APPLICABLE CONTRACT

TYPES AUTHORIZED -- CPIF, CPFF, COST, CPAF SEE NOTE C

FOB: Destination

MAX COST

CLIN 0013 is added as follows:

ITEM NO SUPPLIES/SERVICES MAX

QUANTITY

UNIT UNIT PRICE MAX AMOUNT

CLIN

Number

UNDEFINED

CIA EXECUTION

COST

ACCOMPLISH THE REPAIRS AND ALTERATIONS FOR CVN

INCREMENTAL AVAILABILITIES (CIA) (FY19-FY24) - APPLICABLE

CONTRACT TYPES AUTHORIZED - CPAF, CPIF CPFF, COST SEE NOTE

A&C FOB: Destination

MAX COST

The following have been modified:

APPLICABILITY

THE FOLLOWING CLAUSES ARE APPLICABLE TO ALL ORDERS ISSUED UNDER THIS CONTRACT

DIRECT AND INDIRECT RATE CAP

In accordance with the Contractor’s Proposal, dated (FILL-IN)*, and Attachment J-7, the Contractor’s direct rates are capped for the full five Contractor fiscal years of scheduled performance and indirect rates are capped for the full three Contractor fiscal years of scheduled performance. Direct labor rates shall be capped for the full five Contractor fiscal years as follows:

For purposes of estimating cost, Offerors should utilize an award date of 13 March 2019 and completion 60 months from date of award, 12 March 2024.

Capped Direct Labor *

Direct Labor Category

Year 1

GFY2019

Year 2

GFY2020

Year 3

GFY2021

Year 4

GFY2022

Year 5

GFY2023

Year 6

GFY2024

In the event there are material changes resulting from the Navy’s future ship repair workload during the contract’s period of performance, at the discretion of the ACO, the ACO may re-assess the limitations of the capped labor rates to determine whether the terms of the capped labor rates require revision. In the event a revision to the capped labor rates is required, the ACO and Contractor shall negotiate to determine the rate ceilings to be applied, provided that no agreement shall be made which would increase the costs paid by the United States under this contract.

For the first three years of contract performance, the indirect rates under this contract are capped in accordance with the requirements of the contract clause included herein, “LIMITATIONS ON INDIRECT COST RATES” (NAVSEA) (OCT 1990). Indirect rates shall be capped for the full three Contractor fiscal years as follows:

Capped Indirect Rates*

Indirect Rate Category Year 1

GFY2019

Year 2

GFY2020

Year 3

GFY2021

(To be filled-in by Offeror, using Government Fiscal Year Calendar)

SECTION C - DESCRIPTIONS AND SPECIFICATIONS

The following have been added by full text:

HQ C-2-0064 CEREMONIAL COSTS (NAVSEA) (SEP 2016)

In accordance with FAR 31.205-1(e)(5), ceremonial costs related to keel laying, ship launching, and commissioning will be allowable costs under this contract to the extent provided in the Navy Financial Management Policy Manual (Section 03242.2.d-h) and NAVSEA Instruction 7042.7 ( ).

SECTION E - INSPECTION AND ACCEPTANCE

The following Acceptance/Inspection Schedule was added for CLIN 0012:

INSPECT AT INSPECT BY ACCEPT AT ACCEPT BY

N/A N/A N/A Government

The following Acceptance/Inspection Schedule was added for CLIN 0013:

INSPECT AT INSPECT BY ACCEPT AT ACCEPT BY

N/A N/A N/A Government

HQ E-2-0011 INSPECTION OF SUPPLIES AND CORRECTION OF DEFECTS (NAVSEA) (SEP 2016)

(a) Definitions

(1) Supplies: the word "supplies" as used in this requirement includes without limitation raw materials, components, intermediate assemblies, end products, and (when the contract does not include the clause entitled "WARRANTY OF DATA" (DFARS 252.246-7001)) technical data.

(2) Defects: the word "defects" as used in this requirement, means any and all defects, deficiencies, deteriorations and failures, except deficiencies, deteriorations or failures caused by Government misuse or mishandling.

(3) Acceptance: the word "acceptance" as used in this requirement is deemed to be preliminary acceptance as defined in the requirement of this contract entitled "PRELIMINARY ACCEPTANCE".

(b) Inspection

All supplies shall be subject to inspection and test by the Government, to the extent practicable at all times and places including the period of manufacture, and in any event prior to final acceptance. The Contractor shall provide and maintain an inspection system acceptable to the Government covering the supplies, fabricating methods, and special tooling hereunder. The Government, through any authorized representative, may inspect the plant or plants of the Contractor or of any of his subcontractors engaged in the performance of this contract. If any inspection or test is made by the Government on the premises of the Contractor or a subcontractor, the Contractor shall provide and shall require subcontractors to provide all reasonable facilities and assistance for the safety and convenience of the Government inspectors in the performance of their duties. All inspections and tests by the Government shall be performed in such a manner as will not unduly delay the work. Except as otherwise provided in this contract, acceptance of any supplies or lots of supplies shall be made as promptly as practicable after delivery thereof and shall be deemed to have been made no later than sixty (60) days after the date of such delivery, unless the Government has refused to accept all or any of the supplies or, if acceptance has not been made earlier within such period.

(c) Guaranty

The Contractor guarantees that at any time during performance of this contract, and for a period of ( ) months after acceptance of the vessel, all supplies furnished under this contract will be free from defects in material and workmanship and will conform with the specifications and all other requirements of this contract; provided, however that with respect to Government furnished property, the Contractor's guarantee shall extend only to its proper installation, unless the Contractor performs some modification or other work on such property, in which case the Contractor's guarantee shall extend to such modification or other work. During the guaranty period, the Contractor shall have an engineer on board the vessel. Such engineer shall have every reasonable opportunity to inspect the working of the vessel in all its parts, but shall have no power to direct or control its operation.

(d) Remedies

(1) Right to corrective or replacement action. In the event of a defect within the scope of the Contractor's guarantee in paragraph (c) above, the Government may: (i) require the Contractor to repair or replace, at the Contractor's election, defective or nonconforming supplies, or (ii) require the Contractor to furnish such materials or parts and installation instructions as may be required to successfully accomplish the required correction or replacement. The Contractor shall also prepare and furnish to the Government data and reports applicable to any correction or replacement required under this contract requirement (including revision and updating of all affected data called for under this contract). Except as otherwise provided in paragraph (3) hereof, the cost of any action taken pursuant to this subparagraph for replacement or correction shall be included in computing allowable cost determined as provided in the clause of this contract entitled "ALLOWABLE COST AND PAYMENT" (FAR 52.216-7), but no additional fee shall be payable with respect thereto. Such supplies or lots of supplies shall not be tendered thereafter for acceptance unless the former requirement of correction is disclosed.

(2) Right if Contractor fails to proceed. If the Contractor fails to proceed with reasonable promptness to replace or correct such supplies or lots of supplies, the Government (i) may by contract or otherwise replace or correct such supplies and charge to the Contractor any increased cost occasioned the Government thereby, or may reduce any fee payable under this contract (or require repayment of any fee theretofore paid) in such amount as may be equitable under the circumstances, or (ii) may terminate this contract for default as provided in the clause of this contract entitled "TERMINATION (COST-REIMBURSEMENT)" (FAR 52.249-6). Failure to agree to the amount of any such increased cost to be charged to the Contractor or to such reduction in, or repayment of, the fee shall be a dispute within the meaning of the clause of this contract entitled "DISPUTES" (FAR 52.233-1).

(3) Additional Remedy. Notwithstanding the provisions of paragraphs (c) and (d) hereof, the Government may at any time require the correction or replacement by the Contractor, without cost to the Government, of supplies or lots of supplies which are defective in material or workmanship, or otherwise not in conformity with the requirements of this contract, if such defects or failures are due to fraud, lack of good faith, or willful misconduct on the part of any of the Contractor's directors or officers, or on the part of any of his managers, superintendents, or other equivalent representatives, who has supervision or direction of (i) all or substantially all of the Contractor's business, or (ii) all or substantially all of the Contractor's operations at any one plant or separate location in which this contract is being performed, or (iii) a separate and complete major industrial operation in connection with the performance of this contract. The Government may at any time also require correction or replacement by the Contractor, without cost to the Government, of any such defective supplies or lots of supplies if the defects or failures are caused by one or more individual employees selected or retained by the Contractor after any such supervisory personnel has reasonable grounds to believe that such employee is habitually careless or otherwise unqualified.

(e) Corrected or Replaced Supplies.

(1) Any supplies or parts thereof corrected or furnished in replacement pursuant to this requirement shall also be subject to all the provisions of this requirement to the same extent as supplies initially delivered. The guarantee with respect to such supplies or parts thereof shall be six (6) months from the date of delivery and/or correction of such corrected or replaced supplies or until the expiration of the original guaranty period (whichever period is longer).

(2) The guaranty period set forth in (c) above shall be extended by the time during which the vessel is not available for unrestricted service by reason of any breach of the guarantee in paragraph (c) above. This requirement applies to individual subcontractor furnished supplies only to the extent that each individual supply is the cause of the vessel not being available for such service.

(f) Additional Provisions

(1) All implied warranties of merchantability and "fitness for a particular purpose" are hereby excluded from any obligation contained in this contract.

(2) The rights and remedies of the Government provided in this requirement are in addition to and do not limit any rights afforded to the Government by any other requirement or clause of the contract.

(3) The Contractor shall make its records of all inspection work available to the Government during the performance of this contract and for such longer period as may be specified in this contract.

SECTION H - SPECIAL CONTRACT REQUIREMENTS

ECONOMIC PRICE ADJUSTMENTS – BASIC (SEP 2016)

a) Economic price adjustments (EPA) shall only be made in accordance with this contract requirement. The provisions of this contract requirement shall result in no adjustment to the SECTION B amounts of the target cost, target profit, target price, or ceiling price for any ship awarded under this contract. The tables referenced within this contract requirement are contained in Attachment J- , Economic Price Adjustment Tables. The Contractor hereby agrees that the indices (including composite weights) used herein are proper and appropriate for this contract’s requirements.

(1) Cost Categories

For each ship, costs subject to EPA include one hundred percent (100%) of allowable direct labor, ninety five percent (95%) of allowable indirect costs, and one hundred percent (100%) of allowable direct material costs.

“Material costs,” “Labor costs,” “direct costs,” and “indirect costs” shall have the meanings set forth in Parts 2 and 31 of the Federal Acquisition Regulation (FAR) and Parts 202 and 231 of the Defense FAR Supplement in effect on the effective date of this contract.

Note: Facilities Capital Cost of Money (FCCM) is not to be included; or otherwise subject to EPA.

(2) Period Costs

The actual costs considered for an EPA are those identified in paragraph 1. “Cost Categories” that are to be incurred from Contract Award, or obligation of installment funding, as applicable, for the Ship Construction CLIN, through twelve (12) months after the last day of the month in which the applicable ship’s delivery is scheduled to occur as specified in SECTION F of this contract; or twelve (12) months after the last day of the month in which the applicable ship’s actual delivery occurs; or the point at which the applicable ship’s total costs incurred less EPA, after application of the shareline provision, exceeds the ceiling price as specified in SECTION B, whichever is earliest. In no event shall an EPA be applied to costs incurred subsequent to said earliest event.

(3) Computations

EPA shall be computed on an individual ship basis. EPA shall be made on a comparison of the average projected index value and average actual index value of the specified “Cost Category Index.” Projected index values are those determined in accordance with paragraph (d)2 of this contract requirement and shown in Tables 1, 2 and 3. Actual index values used in an EPA under this contract requirement shall be determined from the indices identified below:

a) Direct Labor Cost Index: Bureau of Labor Statistics (BLS) Labor Index of Straight-Time Average Hourly

Earnings for Selected Shipyards for Steel Vessel Construction – All Regions. (Base: ** = 100 including Lump Sum Payments)

b) Indirect Cost Index: A composite of the following (Composite Index base: ** = 100):

INDEX COMPOSITE

WEIGHT

Note: Contract Specialist shall insert appropriate BLS Index description and Composite Weight percentage.

Total of Composite Weights must equal 100%

XX%

XX%

XX%

XX%

Note: Tables 7a and 7b describe the method for calculating actual and projected monthly Composite Indirect Cost Index values.

c) Direct Material Cost Index: A composite of the following (Composite Index base: ** = 100):

Note: Contract Specialist shall insert appropriate BLS Index description and Composite Weight percentage. Total of Composite Weights must equal 100%

XX%

XX%

XX%

XX%

XX%

Note: Tables 8a and 8b describe the method for calculating actual and projected monthly Composite Direct Material Cost Index values.

d) Worksheets for making EPA calculations are provided as Tables 1, 2, and 3, entitled, “Economic Price

Adjustment for Direct Labor Costs,” “Economic Price Adjustment for Indirect Costs” and “Economic Price Adjustment for Direct Material Costs,” respectively. Tables 1, 2, and 3 shall be completed for each ship as follows:

1. Column (1) – Computation Period: EPA for direct labor, indirect, and direct material costs shall be computed on a calendar year basis for each ship awarded or any option ship for which the option is exercised, under this contract. The computation periods for each ship shall begin, and end, as specified in paragraph 2 above entitled, “Period Costs.” If necessary, computation periods will be modified to account for partial year periods. Column (1), if necessary to account for partial periods, is to be modified for partial year computation periods.

2. Column (2) – Projected Index Value: The projected index value shall be the index value as set forth in Column (2) for each computation period. The projected index values in column (2) reflect the average of the projected index values for the months of January through December, rounded to one decimal place, for each Cost Category Index (Direct Labor, Indirect Cost, and Direct Material) of the applicable computation period, as set out in Tables 4, 5, and 6. For partial year computation periods, the projected index value is calculated by averaging the projected value indexes, set out in Tables 4, 5, and 6 for the applicable months within the partial year computation period using the formula set forth in paragraph d)3 below. Column (2) is to be modified, if necessary to account for partial periods, using the resultant partial year projected index value.

Note: Tables 7b and 8b describe the method for calculating projected monthly Composite Indirect Cost Index values and Composite Direct Material Cost Index values, respectively.

3. Partial Year Index Formula

PYIV = X/N

Where:

PYIV = Partial Year Index Value X = Sum of each monthly index value within the partial year computation period.

N = Number of months in the partial year computation period.

4. Column (3) - Tolerance Band: The tolerance band values are set forth in column (3) for each computation period and each cost category. For the period from Contract Award /obligation of installment funding, as applicable, through calendar year 20XX, a tolerance band of plus or minus ( .0%)*** of the projected index values is established by multiplying ( .0%) and ( .0%)*** by the projected index values determined in accordance with paragraph d)2. For calendar years 20XX through 20XX, a tolerance band of plus or minus ( .0%)*** of the projected index values is established by multiplying ( .0% and .0%) *** by the projected index values determined in accordance with paragraph d)2. For calendar years 20XX and beyond, a tolerance band of plus or minus ( .0%)*** of the projected index values is established by multiplying ( .0% and .0% ) *** by the projected index values determined in accordance with paragraph d) 2.

5. Column (4) – Actual Index Value: When actual monthly index values for an entire computation period have been published, the average of the actual index values for the months of January through December, rounded to one decimal place, of the applicable year for each specified Cost Category Index (Direct Labor, Indirect Cost, and Direct Material) shall be entered in the actual index value column (4) of Tables 1, 2, and 3 respectively (see note below). If necessary, to account for partial year computation periods, see paragraph d) 3 above. The resultant value for each Cost Category Index (Direct Labor, Indirect Cost, and Direct Material) shall be entered in the Actual Index Value column

(4) of Tables 1, 2, and 3 respectively. If the actual index value falls within the tolerance band, no economic price adjustment will be entered in Column (8) for the computation period.

Note: BLS indices ECI – Benefits and ECI – Wages are published quarterly. For purposes of this contract requirement, the quarterly published index value shall be the value for each month within that quarter. Tables 7a and 8a describe the method for calculating actual monthly Composite Indirect Cost Index values and Composite Direct Material Cost Index values, respectively.

6. Column (5) – Index Difference: If the actual index value is outside the tolerance band, the index difference is the difference between the actual index value and, (a) the lower tolerance band index value if the actual index value is less than the lower tolerance band index value or (b) the upper tolerance band index value if the actual index value is greater than the upper tolerance band index value.

7. Column (6) – Index change: The index change is the index difference divided by the applicable (lower or upper) tolerance band index value described in the preceding paragraph d)6.

8.Column (7) – Actual Costs: For the applicable computation period, the applicable “Cost Category” actual costs as defined in paragraph 1, entitled “Cost Categories” shall be entered in Tables 1, 2 and 3.

“Actual costs” shall include only “incurred” costs and “allowable” costs as defined in paragraph (f) of the SECTION H contract requirement entitled “PAYMENTS”, except that “incurred” costs for material is to include the valid amounts of billings received from vendors during the specified computation period involved irrespective of whether the Contractor has paid the full amount of such billings. Further, for this contract requirement, the imputed cost of facilities capital shall not be considered as “incurred indirect cost.” All actual costs identified in column (7) shall be subject to audit and inspection by the Contracting Officer in accordance with paragraph (h) of the SECTION H contract requirement entitled “PAYMENTS”.

9.Column (8) – Period Adjustment: Period Adjustment for each computation period is determined by multiplying the index change (column (6)) by the actual costs (column (7)) for the computation period as defined in this contract requirement. An entry of zero will be made if the Actual Index Value falls within the tolerance band. Period adjustments where the actual index value is less than the lower tolerance band value shall be a negative number. Period adjustments where the actual index value is greater than the upper tolerance band shall be a positive number.

e) Total EPA Amount: Total EPA Amount is the sum of the period adjustments for all computation periods for all cost categories covered by this requirement.

(4) Administrative Procedures:

Calculations required by this contract requirement will be made by the Contractor using Tables 1, 2, and 3 as applicable and submitted on an annual basis to the Administrative Contracting officer within thirty (30) days after publication of all the specified indices for the computation period.

The Administrative Contracting officer (ACO) shall verify calculations provided by the Contractor and forward copies of Tables 1, 2, and 3 to the Procuring Contracting Officer and the Program Office Financial Manager. The parties agree to execute a bilateral modification each year reflecting the updated cumulative EPA adjustments as of the date of agreement on Tables 1, 2, and 3.

Any subsequent changes resulting from (a) the publication of revised or final indices, (b) revised actual costs, or (c) an agreed to “Total Final Negotiated Cost” in accordance with the Incentive Price Revision clause of this contract shall be reflected in updated Tables 1, 2, and 3.

Nothing contained in this contract requirement shall be considered as prohibiting changes in the contract prices made pursuant to any other provisions of this contract.

In the event the Bureau of Labor Statistics discontinues publication or changes the content of any index used in this contract requirement, the parties shall mutually agree on an appropriate substitute for the affected index for use in determining economic price adjustments in accordance with this contract requirement. In the event the BLS alters its methods of calculating or reporting an index used in this requirement (including a change in the base period), the appropriate adjustments shall be made by the parties to put the revised index on a comparable basis with the index as calculated before the change.

Further, the Contractor agrees that if it makes material changes to its accounting system that materially alter the effect of this contract requirement, it will disclose and agree to enter into good faith negotiations to equitably account for such changes.

Any dispute arising under this contract requirement shall be determined in accordance with and subject to the provisions of the “DISPUTES” clause of this contract.

ECONOMIC PRICE ADJUSTMENTS - -ALTERNATE I (SEP 2016)

a) Economic price adjustments (EPA) shall only be made in accordance with this contract requirement. The provisions of this contract requirement shall result in no adjustment to the SECTION B amounts of the target cost, target profit, target price, or ceiling price for any ship awarded under this contract. The tables referenced within this contract requirement are contained in Attachment J- , Economic Price Adjustment Tables. The Contractor hereby agrees that the indices (including composite weights) used herein are proper and appropriate for this contract’s requirements.

(5) Cost Categories

1) For each ship, costs subject to EPA include one hundred percent (100%) of allowable direct labor, ninety five percent (95%) of allowable indirect costs, and one hundred percent (100%) of allowable direct material costs excluding material listed in Attachment J-XX entitled Class Standard Equipment. All direct labor, direct material, and indirect costs incurred pursuant to Section H contract requirement H-XX (i.e. Long-Lead Time Material) shall be excluded from costs subject to EPA calculations. “Material costs,” “Labor costs,” “direct costs,” and “indirect costs” shall have the meanings set forth in Parts 2 and 31 of the Federal Acquisition Regulation (FAR) and Parts 202 and 231 of the Defense FAR Supplement in effect on the effective date of this contract.

Note: Facilities capital Cost of Money (FCCM) is not to be included; or otherwise subject to EPA.

(6) Period Costs

The actual costs considered for an EPA are those identified in paragraph 1. “Cost Categories” that are to be incurred from Contract Award of the base ship CLIN, option exercise of any option ship CLINs, or provision of annual funding for all multi-year ships CLINs as applicable, through twelve (12) months after the last day of the month in which the applicable ship’s delivery is scheduled to occur as specified in Section F of this contract; or twelve (12) months after the last day of the month in which the applicable ship’s actual delivery occurs; or the point at which the applicable ship’s total costs incurred less EPA, after application of the shareline provision, exceeds the ceiling price as specified in Section B, whichever is earliest. In no event shall an EPA be applied to costs incurred subsequent to said earliest event.

(7) Computations

EPA shall be computed on an individual ship basis. EPA shall be made on a comparison of the average projected index value and average actual index value of the specified “Cost Category Index.” Projected index values are those determined in accordance with paragraph (d)2 of this contract requirement and shown in Tables 1, 2 and 3. Actual index values used in an EPA under this contract requirement shall be determined from the indices identified below:

c) Direct Labor Cost Index: Bureau of Labor Statistics (BLS) Labor Index of Straight-Time Average Hourly

Earnings for Selected Shipyards for Steel Vessel Construction – All Regions. (Base: ** = 100 including Lump Sum Payments)

d) Indirect Cost Index: A composite of the following (Composite Index base: ** = 100):

Note: Contract Specialist shall insert appropriate BLS Index description and Composite Weight percentage.

Total of Composite Weights must equal 100%

XX%

XX%

XX%

XX%

Note: Tables 7a and 7b describe the method for calculating actual and projected monthly Composite Indirect Cost Index values.

e) Direct Material Cost Index: A composite of the following (Composite Index base:

** = 100):

Note: Contract Specialist shall insert appropriate BLS Index description and Composite Weight percentage. Total of Composite Weights must equal 100%

XX%

XX%

XX%

XX%

XX%

Note: Tables 8a and 8b describe the method for calculating actual and projected monthly Composite Direct Material Cost Index values.

e) Worksheets for making EPA calculations are provided as Tables 1, 2, and 3, entitled, “Economic Price

Adjustment for Direct Labor Costs,” “Economic Price Adjustment for Indirect Costs” and “Economic Price Adjustment for Direct Material Costs,” respectively. Tables 1, 2, and 3 shall be completed for each ship as follows:

1. Column (1) – Computation Period: EPA for direct labor, indirect, and direct material costs shall be computed on a calendar year basis for each ship awarded or any option ship for which the option is exercised, under this contract. The computation periods for each ship shall begin, and end, as specified in paragraph 2 above entitled, “Period Costs.” If necessary, computation periods will be modified to account for partial year periods. Column (1), if necessary to account for partial periods, is to be modified for partial year computation periods.

2. Column (2) – Projected Index Value: The projected index value shall be the index value as set forth in Column (2) for each computation period. The projected index values in column (2) reflect the average of the projected index values for the months of January through December, rounded to one decimal place, for each Cost Category Index (Direct Labor, Indirect Cost, and Direct Material) of the applicable computation period, as set out in Tables 4, 5, and 6. For partial year computation periods, the projected index value is calculated by averaging the projected value indexes, set out in Tables 4, 5, and 6 for the applicable months within the partial year computation period using the formula set forth in paragraph d)3 below. Column (2) is to be modified, if necessary to account for partial periods, using the resultant partial year projected index value.

Note: Tables 7b and 8b describe the method for calculating projected monthly Composite Indirect Cost Index values and Composite Direct Material Cost Index values, respectively.

3. Partial Year Index Formula

PYIV = X/N

Where:

PYIV = Partial Year Index Value X = Sum of each monthly index value within the partial year computation period.

N = Number of months in the partial year computation period.

4. Column (3) - Tolerance Band: The tolerance band values are set forth in column (3) for each computation period and each cost category. For the period from Contract Award /obligation of installment funding, as applicable, through calendar year 20XX, a tolerance band of plus or minus ( .0%)*** of the projected index values is established by multiplying ( .0%) and ( .0%)*** by the projected index values determined in accordance with paragraph d)2. For calendar years 20XX through 20XX, a tolerance band of plus or minus ( .0%)*** of the projected index values is established by multiplying ( .0% and .0%) *** by the projected index values determined in accordance with paragraph d)2. For calendar years 20XX and beyond, a tolerance band of plus or minus ( .0%)*** of the projected index values is established by multiplying ( .0% and .0% ) *** by the projected index values determined in accordance with paragraph d) 2.

5. Column (4) – Actual Index Value: When actual monthly index values for an entire computation period have been published, the average of the actual index values for the months of January through December, rounded to one decimal place, of the applicable year for each specified Cost Category Index (Direct Labor, Indirect Cost, and Direct Material) shall be entered in the actual index value column (4) of Tables 1, 2, and 3 respectively (see note below). If necessary, to account for partial year computation periods, see paragraph d) 3 above. The resultant value for each Cost Category Index (Direct Labor, Indirect Cost, and Direct Material) shall be entered in the Actual Index Value column

(4) of Tables 1, 2, and 3 respectively. If the actual index value falls within the tolerance band, no economic price adjustment will be entered in Column (8) for the computation period.

Note: BLS indices ECI – Benefits and ECI – Wages are published quarterly. For purposes of this contract requirement, the quarterly published index value shall be the value for each month within that quarter. Tables 7a and 8a describe the method for calculating actual monthly Composite Indirect Cost

Index values and Composite Direct Material Cost Index values, respectively.

6. Column (5) – Index Difference: If the actual index value is outside the tolerance band, the index difference is the difference between the actual index value and, (a) the lower tolerance band index value if the actual index value is less than the lower tolerance band index value or (b) the upper tolerance band index value if the actual index value is greater than the upper tolerance band index value.

7. Column (6) – Index change: The index change is the index difference divided by the applicable (lower or upper) tolerance band index value described in the preceding paragraph d)6.

8.Column (7) – Actual Costs: For the applicable computation period, the applicable “Cost Category” actual costs as defined in paragraph 1, entitled “Cost Categories” shall be entered in Tables 1, 2 and 3.

“Actual costs” shall include only “incurred” costs and “allowable” costs as defined in paragraph (f) of the SECTION H contract requirement entitled “PAYMENTS”, except that “incurred” costs for material is to include the valid amounts of billings received from vendors during the specified computation period involved irrespective of whether the Contractor has paid the full amount of such billings. Further, for this contract requirement, the imputed cost of facilities capital shall not be considered as “incurred indirect cost.” All actual costs identified in column (7) shall be subject to audit and inspection by the Contracting Officer in accordance with paragraph (h) of the SECTION H contract requirement entitled “PAYMENTS”.

9.Column (8) – Period Adjustment: Period Adjustment for each computation period is determined by multiplying the index change (column (6)) by the actual costs (column (7)) for the computation period as defined in this contract requirement. An entry of zero will be made if the Actual Index Value falls within the tolerance band. Period adjustments where the actual index value is less than the lower tolerance band value shall be a negative number. Period adjustments where the actual index value is greater than the upper tolerance band shall be a positive number.

e) Total EPA Amount: Total EPA Amount is the sum of the period adjustments for all computation periods for all cost categories covered by this requirement.

(8) Administrative Procedures:

Calculations required by this contract requirement will be made by the Contractor using Tables 1, 2, and 3 as applicable and submitted on an annual basis to the Administrative Contracting officer within thirty (30) days after publication of all the specified indices for the computation period.

The Administrative Contracting officer (ACO) shall verify calculations provided by the Contractor and forward copies of Tables 1, 2, and 3 to the Procuring Contracting Officer and the Program Office Financial Manager. The parties agree to execute a bilateral modification each year reflecting the updated cumulative EPA adjustments as of the date of agreement on Tables 1, 2, and 3.

Any subsequent changes resulting from (a) the publication of revised or final indices, (b) revised actual costs, or (c) an agreed to “Total Final Negotiated Cost” in accordance with the Incentive Price Revision clause of this contract shall be reflected in updated Tables 1, 2, and 3.

Nothing contained in this contract requirement shall be considered as prohibiting changes in the contract prices made pursuant to any other provisions of this contract.

In the event the Bureau of Labor Statistics discontinues publication or changes the content of any index used in this contract requirement, the parties shall mutually agree on an appropriate substitute for the affected index for use in determining economic price adjustments in accordance with this contract requirement. In the event the BLS alters its methods of calculating or reporting an index used in this requirement (including a change in the base period), the appropriate adjustments shall be made by the parties to put the revised index on a comparable basis with the index as calculated before the change.

Further, the Contractor agrees that if it makes material changes to its accounting system that materially alter the effect of this contract requirement, it will disclose and agree to enter into good faith negotiations to equitably account for such changes.

Any dispute arising under this contract requirement shall be determined in accordance with and subject to the provisions of the “DISPUTES” clause of this contract.

PAYMENTS—ALTERNATE I (SEP 2016)

(a) Computation of Payments

(1) Until such time as physical progress in the performance of work on a vessel is fifty percent (50%) complete, the Government, upon submission by the Contractor of invoices certified by the Contractor as hereinafter provided, will promptly make payments, on account of the total contract price, at ninety percent (90%) of the amount determined by multiplying the total contract price of such vessel by the percentage of physical progress in the performance of work on such vessel as certified by the Contractor subject to the approval of the Supervisor; provided, that no such payment shall be made in an amount which when added to the total of all payments previously made with respect to such vessel under

(i) paragraph (a) of this contract requirement and (ii) the “ECONOMIC PRICE ADJUSTMENT” contract requirement exceeds one hundred percent (100%) of the allowable costs certified by the Contractor on the related invoice to have been incurred in the performance of work on such vessel.

(2) After the percentage of physical progress in the performance of work on a vessel has reached fifty percent (50%), the Government, upon submission by the Contractor of invoices certified by the Contractor as hereinafter provided, will promptly make payments, on account of the total contract price, of one hundred percent (100%) of the amount determined by: (i) multiplying the total contract price of such vessel by the percentage of physical progress in the performance of work on such vessel as certified by the Contractor subject to the approval of the Supervisor, and (ii) subtracting from that product five percent (5%) of the total contract price of such vessel; provided, that no such payment shall be made in an amount which when added to the total of all payments made previously with respect to such vessel under (i) paragraph (a) of this contract requirement and (ii) the “ECONOMIC PRICE ADJUSTMENT” contract requirement exceeds one hundred five percent (105%) of the allowable costs certified by the Contractor on the related invoice to have been incurred in the performance of work on such vessel; provided, further, that the Contractor furnishes data on actual cumulative costs and estimated future costs acceptable to the Supervisor which demonstrates to the satisfaction of the Supervisor that the Contractor will make a profit of at least five percent (5%) on completion of the contract, and the Contractor provides updated information on a quarterly basis. If updated data indicate the Contractor will not make a profit of at least five percent (5%) on completion of the contract, the progress payments shall be adjusted retroactively so that the total of all payments made with respect to the vessel under (i) paragraph (a) of this contract requirement and (ii) the “ECONOMIC PRICE ADJUSTMENT” contract requirement shall not exceed one hundred percent (100%) of the allowable costs certified by the Contractor on the related invoice to have been incurred in the performance of work on such vessel.

(b) Invoices

Invoices may be submitted every two weeks, but not more frequently; provided, however, that if after contract award more frequent progress payments are approved by the cognizant Government authority, this requirement shall be modified accordingly without additional consideration by the Contractor to the Government for such modification. No payment will be required to be made upon invoices aggregating less than five thousand dollars ($5,000). The Contractor shall certify on each invoice:

(1) the percentage of physical progress in the performance of work on the vessel as a decimal carried to four places;

and

(2) the allowable costs incurred in the performance of the work on the vessel as of the date the invoice is submitted.

Such certification shall provide for cost category reporting in accordance with the Contractor's normal accounting system and shall be broken down into direct material, direct labor, and indirect costs.

(c) Physical Progress and Weighting Factors

(1) Within sixty (60) days after contract award the Contractor shall submit a progressing system description for review and approval by the Contracting Officer. Upon approval of such system, progress payments shall be in accordance with the approved system. Subsequent revisions to the approved system shall be submitted to the Contracting Officer for approval prior to implementation.

(2) The mutually agreed upon weighting factors for the categories of labor and material for each vessel are set forth in Attachment * to this contract. The weighting factors shall be revised quarterly. Notwithstanding the above, revision of weighting factors may be requested by either party when factual data indicate that the weighting factors then in use are no longer representative of the actual labor and material distribution. Revisions of weighting factors shall be supported by detailed (estimated final) direct material, direct labor, and indirect costs and additional data concerning the cause of the change in the weighting factors. Any change in the weighting factors shall be set forth in a supplemental agreement to this contract.

(d) Incurred Costs

For the purpose of this contract requirement, "incurred costs" are those costs identified through the use of the accrual method of accounting, as supported by the records maintained by the Contractor and which are allowable in accordance with Part 31 of the Federal Acquisition Regulation (FAR) and Part 231 of the Department of Defense FAR Supplement (DFARS) in effect on the effective date of this contract and include only:

(1) Costs for items or services purchased directly for the contract that have been paid by cash, check, or other form of actual payment; or when the Contractor is not delinquent in paying costs of contract performance in the ordinary course of business, costs incurred, but not necessarily paid, for items or services purchased directly for the contract and associated financing payments to subcontractors provided payments will be made;

(i) In accordance with the terms and conditions of a subcontract or invoice; and

(ii) Ordinarily prior to the submission of the Contractor's next payment request to the Government; and

(2) Costs incurred, but not necessarily paid, for materials issued from the Contractor's stores inventory and placed in the production process for use on the contract, for direct labor, for direct travel, for other direct in-house costs and for properly allocable and allowable overhead (indirect) costs, all as shown by records maintained by the Contractor for the purpose of obtaining payment under Government contracts, provided that the Contractor is not delinquent in payment of costs of contract performance in the ordinary course of business; and

(3) With respect to allocated and allowable costs of pension contributions, when pension contributions are paid by the Contractor to the retirement fund less frequently than quarterly, accruals of the costs of these pension contributions shall be excluded from the Contractor's incurred costs until such costs are paid. If pension contributions are paid on a quarterly or more frequent basis, accruals of such costs may be included in the Contractor's incurred costs, provided that the pension contributions are paid to the retirement fund within thirty (30) days after the close of the period covered by payment. If payments are not paid within such thirty (30) day period, pension contributions shall be excluded from the Contractor's incurred costs until payment therefor has been made.

(4) Incurred costs shall not include any costs which are required under any requirement of this contract (other than the “ECONOMIC PRICE ADJUSTMENT” contract requirement) to be reimbursed or paid by the Government to the Contractor or by the Contractor to the Government other than through an equitable adjustment in the contract price.

(5) If an overpayment is made relative to this paragraph (d), interest shall be charged at the prevailing per annum rate established by the Secretary of the Treasury, pursuant to Public Law 92-41, from the date such overpayment is made until the date the overpayment if fully recovered.

(e) Retentions

(1) Upon preliminary acceptance of each vessel and upon the submission of properly certified invoices, the Government will pay to the Contractor the amount withheld under paragraph (a) of this requirement in respect of that vessel in excess of (i) a performance reserve in the amount of one and one-half percent (1.5%) of the total contract price for such vessel, or (ii) one hundred thousand dollars ($100,000), whichever is greater. If at any time it shall appear to the Government that the amount of performance reserve may be insufficient to meet the cost to the Government of finishing any unfinished work under the contract for which the Contractor is responsible, or of correcting defects for which the Contractor is responsible which are discovered prior to preliminary acceptance or during the guaranty period of any vessel, the Government may, in making payments under this requirement, deduct or withhold such additional amounts as it may determine to be necessary to render such reserve adequate; provided, that any additional amounts deducted or withheld on account of defects which are discovered during the guaranty period of the vessel shall not exceed the limit of the Contractor's liability as set forth in the contract requirement entitled "LIMITATION OF CONTRACTOR'S LIABILITY FOR CORRECTION OF DEFECTS", reduced by the amounts of the cost incurred by the Contractor for work on such vessel because of Contractor responsible deficiencies which are discovered during the guaranty period of the vessel.

(2) The Government may, in its discretion, make payments prior to final settlement on account of the reserves established under this requirement, subject to such conditions precedent as the Contracting Officer may prescribe.

(3) The Government shall, at the time of final settlement, in accordance with the provisions of the contract requirement entitled "FINAL SETTLEMENT", pay the Contractor the balance owing to it under the contract promptly after the amount of such balance shall have…