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What parts of the FAR apply to me?

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We are a large business, DoD prime contractor, and have an approved procurement system (CPSR).

Vern's recent post in regards to T&M rates relating to a "Prime - Sub" relationship brings up a good question.

I've gotten similar "does not apply to you" answers here in the past but, , , , have gotten rather dirty looks when I have talked about it at work. I work for/with a lot of Old School types who believe that the FAR is the final word in all concerned matters, even though we are a private company, versus being Government.

I do understand that it is a good idea to "follow" the FAR and to otherwise perhaps write our own policies and procedures to "parrot" the FAR; given that the DCMA and DCAA auditor types are looking for things they recognize, etc. . .

"Public Law", as in CAS, EEO, TINA, etc., is no problem but, just like the T&M discussion, what else really does apply to a "contractor - subcontractor" relationship, aside from flowdowns in the Prime Contract? Is there a published writing that would be helpful?

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May take is the primary direction for prime contractors and higher tier subcontracts are provided in the contract. If there is a contractual clause citing a regulatory requirement then that section(s) of the regulation applies to the prime contractor and higher tier subcontractors.

I think the mistake that is often made in reading the regulations is substituting the term ?contractor? when the regulations use the term ?Contracting Officer?. It seems to me that the regulations reserve the term ?Contracting Officer? for U.S.G. personnel with authority to award or execute Government prime contracts. When the regulations place requirements on contractors, as opposed to the Contracting Officer, the regulations state such by using the terms ?contractor? or ?subcontractor. Using the terms ?contractor? and ?Contracting Officer? interchangeably lead to a confused and incoherent reading, and selective substitution is arbitrary.

Having said that there do appear to be statutory requirements that penetrate down to the contractor subcontractor relationship absent any contractual language. I am not real clear on the rule for that application.

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The FAR does not apply to contractors. It applies to government personnel who conduct acquisitions. If the government wants to impose some part of FAR on a contractor, it does so by inserting provisions in solicitations, such as FAR 52.215-1, or clauses in contracts, such as FAR 52.215-12. Contractors are bound by the terms of their contracts. However, if a contracting officer enters into a contract that is not consistent with FAR, a board or court might impose the requirements of FAR in order to bring the contract into conformity with FAR, as under the Christian Doctrine. Alternatively, a board or court might declare a that a nonconforming contract is void ab initio.

FAR implements certain regulations that do apply to contractors, such as the Department of Labor's rules under the Service Contract Act of 1965, as amended, which are in 29 CFR Part 4. Those rules apply to the public and, unlike FAR, are promulgated under the authority of the Administrative Procedures Act. FAR, being internal rules that do not apply to the public, is promulgated under the authority of the Office of Federal Procurement Policy Act.

Government personnel often try to impose the FAR on contractors, demanding, for example, that they comply with FAR Part 15 when selecting subcontractors. They have no authority to do so unless a contract clause requires the contractor to comply. However, many contractors are intimidated by the government personnel and go along with their demands rather than assert their contractual rights. That's a business decision.

Contractors should know the rules in FAR so that they can understand what is required of government personnel and what government personnel must do in order to comply with the law, and to know what clauses COs must insert into their contracts.

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Vern,

In your first sentence, didn't you mean to write "The FAR does not apply to contractors."

Yes, Don. Thanks, I fixed it.

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How is it we can state categorically the FAR in its entirety does not apply to contractors. If FAR has a provision that specifically requires some action of a contractor why would that not be controlling absent any contractual requirement?

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How is it we can state categorically the FAR in its entirety does not apply to contractors. It FAR has a provision that specifically requires some action of a contractor why would that not be controlling absent any contractual requirement?

FAR was written to establish rules for "agencies." See FAR 1.101: "The Federal Acquisition Regulations System is established for the codification and publication of uniform policies and procedures for acquisition by all executive agencies."

By "agencies," not by contractors. Now see FAR 1.104, Applicability:

"The FAR applies to all acquisitions as defined in Part 2 of the FAR, except where expressly excluded."

Now see the definition of acquisition in FAR 2.101:

?'Acquisition' means the acquiring by contract with appropriated funds of supplies or services (including construction) by and for the use of the Federal Government...." Read the rest of the definition. It refers to the "award of contracts," but not to the award of subcontracts.

Private firms must comply with FAR only as imposed upon them by solicitation provisions and contract clauses, unless a rules is otherwise established in statute and in other rules in the Code of Federal Regulations which address members of the public and are promulgated pursuant to the authority of the Administrative Procedures Act, 5 USC ? 500 et seq., in which case it is the statute or other regulation with which they must comply. If a CO tells a contractor that it must comply with FAR Part this or that, an appropriate question is: Where does it say that in my contract, or where is it otherwise provided by law, or are you simply saying that if I don't go along with you, you will make trouble for us?

FAR addresses agencies.

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Thanks Vern that helps. In light of that how do we read subparts like 27.304-3.

27.304-3 -- Subcontracts.

(a) The policies and procedures in this subpart apply to all subcontracts at any tier.

(B) Whenever a prime contractor or a subcontractor considers including a particular clause in a subcontract to be inappropriate or a subcontractor refuses to accept the clause, the contracting officer, in consultation with counsel, shall resolve the matter.

? It is Government policy that contractors shall not use their ability to award subcontracts as economic leverage to acquire rights for themselves in inventions resulting from subcontracts.

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FAR 27.304-3 is nothing but a statement of government policy. It is a set of statements addressed to agency personnel. The policy is imposed upon contractors and subcontractors through the patents rights clauses. See FAR 52.227-11, Patent Rights - Ownership By The Contractor (DEC 2007), which reads in part as follows:

(k) Subcontracts.

(1) The Contractor shall include the substance of this clause, including this paragraph (k), in all subcontracts for experimental, developmental, or research work to be performed by a small business concern or nonprofit organization.

(2) The Contractor shall include in all other subcontracts for experimental, developmental, or research work the substance of the patent rights clause required by FAR Subpart 27.3.

(3) At all tiers, the patent rights clause must be modified to identify the parties as follows: references to the Government are not changed, and the subcontractor has all rights and obligations of the Contractor in the clause. The Contractor shall not, as part of the consideration for awarding the subcontract, obtain rights in the subcontractor?s subject inventions.

(4) In subcontracts, at any tier, the agency, the subcontractor, and the Contractor agree that the mutual obligations of the parties created by this clause constitute a contract between the subcontractor and the agency with respect to the matters covered by the clause; provided, however, that nothing in this paragraph is intended to confer any jurisdiction under the Contract Disputes Act in connection with proceedings under paragraph (h) of this clause.

See also the clause at FAR 52.227-13, Patent Rights - Ownership By The Government (DEC 2007), which reads in part as follows:

(i) Subcontracts.

(1) The Contractor shall include the substance of the patent rights clause required by FAR Subpart 27.3 in all subcontracts for experimental, developmental, or research work. The prescribed patent rights clause must be modified to identify the parties as follows: references to the Government are not changed, and the subcontractor has all rights and obligations of the Contractor in the clause. The Contractor shall not, as part of the consideration for awarding the subcontract, obtain rights in the subcontractor?s subject inventions.

(2) In the event of a refusal by a prospective subcontractor to accept the clause, the Contractor?

(i) Shall promptly submit a written notice to the Contracting Officer setting forth the subcontractor?s reasons for such refusal and other pertinent information that may expedite disposition of the matter; and

(ii) Shall not proceed with such subcontract without the written authorization of the Contracting Officer.

(3) In subcontracts at any tier, the agency, the subcontractor, and the Contractor agree that the mutual obligations of the parties created by the patent rights clause constitute a contract between the subcontractor and the agency with respect to those matters covered by this clause.

(4) The Contractor shall promptly notify the Contracting Officer in writing upon the award of any subcontract at any tier containing a patent rights clause by identifying the subcontractor, the applicable patent rights clause, the work to be performed under the subcontract, and the dates of award and estimated completion. Upon request of the Contracting Officer, the Contractor shall furnish a copy of such subcontract, and, no more frequently than annually, a listing of the subcontracts that have been awarded.

Those passages implement FAR 27.304-3. I say again: The FAR states policy and prescribes procedures to be followed by government agencies. Contractors do not have to comply with those policies or adhere to those procedures except as provided in solicitation provisions and binding contract clauses. If FAR applied directly to contractors and subcontractors, there would be no need to prescribe solicitation provisions or contract clauses--FAR would speak for itself. There are many places in FAR where the text seems to address contractors ("the contractor shall" "contractors shall"), but those are merely statements of policy telling contracting officers what they must impose upon contractors. Such statements are without effect unless and until included in a government solicitation or contract, except as otherwise imposed by statute or by a regulation with which the public must comply.

For an example of a regulation that applies directly to the public, see 33 CFR ? 66.01-5:

To establish and maintain, discontinue, change, or transfer ownership of a private aid to navigation, you must apply to the Commander of the Coast Guard District in which the aid is or will be located. You can find application form CG-2554 at http://www.uscgboating.org/safety/aton/aids.htm. You must complete all parts of the form applicable to the aid concerned, and must forward the application to the District Commander. You must include the following information....

Emphasis added.

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Vern,

How about the provision in FAR 15.404-3 Subcontract pricing considerations that states:

?(B) The prime contractor or subcontractor shall?

(1) Conduct appropriate cost or price analyses to establish the reasonableness of proposed subcontract prices;

(2) Include the results of these analyses in the price proposal; and

(3) When required by paragraph c of this subsection, submit subcontractor cost or pricing data to the Government as part of its own cost or pricing data.

c Any contractor or subcontractor that is required to submit cost or pricing data also shall obtain and analyze cost or pricing data before awarding any subcontract, purchase order, or modification expected to exceed the cost or pricing data threshold, unless an exception in 15.403-1(B) applies to that action.?

This seems to read as directing prime contractors or subcontractors to perform specific actions over and above the TINA statute and what is contractually required.

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Vern,

How about the provision in FAR 15.404-3 Subcontract pricing considerations that states:

?(B) The prime contractor or subcontractor shall?

(1) Conduct appropriate cost or price analyses to establish the reasonableness of proposed subcontract prices;

(2) Include the results of these analyses in the price proposal; and

(3) When required by paragraph c of this subsection, submit subcontractor cost or pricing data to the Government as part of its own cost or pricing data.

c Any contractor or subcontractor that is required to submit cost or pricing data also shall obtain and analyze cost or pricing data before awarding any subcontract, purchase order, or modification expected to exceed the cost or pricing data threshold, unless an exception in 15.403-1(B) applies to that action.?

This seems to read as directing prime contractors or subcontractors to perform specific actions over and above the TINA statute and what is contractually required.

Notwithstanding the wording of FAR 15.404-3, a prime contractor must do only what its contract requires it to do. The government's only remedy for refusal to comply is through contract enforcement. The government cannot enforce the FAR provisions that you cite except through enforcement of a contract clause or by rejection of a proposal from a prime contractor for legitimate reasons.

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Vern,

How about the provision in FAR 15.404-3 Subcontract pricing considerations that states:

?(B) The prime contractor or subcontractor shall?

(1) Conduct appropriate cost or price analyses to establish the reasonableness of proposed subcontract prices;

(2) Include the results of these analyses in the price proposal; and

(3) When required by paragraph c of this subsection, submit subcontractor cost or pricing data to the Government as part of its own cost or pricing data.

c Any contractor or subcontractor that is required to submit cost or pricing data also shall obtain and analyze cost or pricing data before awarding any subcontract, purchase order, or modification expected to exceed the cost or pricing data threshold, unless an exception in 15.403-1(B) applies to that action.?

This seems to read as directing prime contractors or subcontractors to perform specific actions over and above the TINA statute and what is contractually required.

See FAR 52.215-20, which references Table 15-2, then read the Table. This solicitation provision addresses this pre-award requirement.

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Note that 15.404-3 applies to "prime contractors and subcontractors," i.e., firms that already have contracts or subcontracts. It applies when the prime submits a "price proposal." The question is, under what circumstance does a prime submit a "price proposal." That would happen if the government is adding new work. What about a request for equitable adjustment following a change order? Is an REA a "proposal"? I would think that depends on how the REA is worded. If it is worded as a claim, i.e., as a demand or assertion for a sum certain, then one might argue that it is not a "proposal." I would make that argument, since the boards and courts have made a distinction between a claim and a proposal for adjustment. On the other hand, if the CO is contemplating making a within scope change, he or she might ask the contractor to propose the price of the adjustment, in which case the submission is almost certainly a proposal.

I read 15.404-3 as nothing more than an instruction to contracting officers to make primes support their proposals when the proposals include subcontract costs. The idea is that the prime should evaluate proposed subcontract prices instead of merely passing them on to the government to evaluate.

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Thanks ReTreadFed. It makes a little more sense now.

In light of that, I guess 15.404-3(B) can be read ? as Vern stated ? as guidance to the contracting office as to what is required of the prime contractor in the prime proposal process. As the contracting officer has the option of including Alternate 1 to 52.215-20/21 - specifying a format other than Table 15-2 - 15.404-3(B) could be interpreted as requiring the contracting officer to require the prime contractor to perform an analysis on their subcontractors proposal and include that analysis in the prime proposal, if an alternate format is specified .

But how is the requirement placed on higher tiered subcontractors? 15.404-3(B) requires not only the prime to perform an analysis and included that analysis in their proposals, but it places the same requirement on subcontractors. It does not appear that 52.215-20/21 are required flowdowns and 15.404-3c allows for a subcontractors format to be in something other than 15-2.

So with regard with the requirement being place on subcontractors doesn?t it still seems to go beyond what is required by the contact or statutes?

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If the CO cannot get the cooperation of a prime or sub, the only ultimate remedy is to reject the proposal.

Look, if the prime is proposing something to the government, that must mean that there is business in the air. Unless the prime is being compelled to submit a proposal that it does not want to submit, why would the prime, or the sub, refuse?

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Ok, here is another one. This seems to attempt to place the requirement of following the FAR Part 31 cost principles on a contractor or subcontractor in pricing FFP proposals whenever a cost analysis is required OR a contract clause is included.

And I was not able to find a standard solicitation provision or contract clause that requires contractors or subs to follow the cost principles in pricing FFP contracts.

31.102 Fixed-price contracts.

The applicable subparts of Part 31 shall be used in the pricing of fixed-price contracts, subcontracts, and modifications to contracts and subcontracts whenever (a) cost analysis is performed, or (B) a fixed-price contract clause requires the determination or negotiation of costs.

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Ok, here is another one. This seems to attempt to place the requirement of following the FAR Part 31 cost principles on a contractor or subcontractor in pricing FFP proposals whenever a cost analysis is required OR a contract clause is included.

And I was not able to find a standard solicitation provision or contract clause that requires contractors or subs to follow the cost principles in pricing FFP contracts.

31.102 Fixed-price contracts.

The applicable subparts of Part 31 shall be used in the pricing of fixed-price contracts, subcontracts, and modifications to contracts and subcontracts whenever (a) cost analysis is performed, or (B) a fixed-price contract clause requires the determination or negotiation of costs.

Cost analysis is done by the government. See FAR 15.404-1©(2)(iv). You are correct that there is no FAR solicitation provision that requires a contractor to price a proposal for an FFP contract in accordance with the cost principles.

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COs "price" contracts, not contractors. Such pricing includes consideration of proposed subcontract costs. FAR 31.102 does not tell contractors what they can and can't propose. It tells COs what they must consider when analyzing proposals. But see FAR 31.103(B) about incorporating the cost principles into contracts for post-award pricing purposes. The go read DFARS 252.243-7001 Pricing of Contract Modifications. Other agencies have such clauses of their own.

How long are you gonna keep coming back on this, garth?

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Contractual disputes are best resolved by applying specific facts to specific contract terms and (occasionally) specific rules. To say the FAR does not apply to a contractor--while true--is not to say that there aren't several decisions by boards and courts whose outcome hinged on whether a contractor's action conformed with language contained in the FAR.

That said (and at the risk of rephrasing points already made by others), perhaps this might be instructive:

A variety of clauses incorporate rules by reference, obligating contractors to act in compliance with those rules. For instance, FAR 52.230-2(a) incorporates the Cost Accounting Standards. (Even absent the Christian doctrine, a decent argument can be made that a contractor must comply with applicable CAS even in the absence of FAR 52.230-2. See, 48 CFR 9901.306 (CAS mandatory for use by all executive agencies and by contractors and subcontractors); 48 CFR 9901.305(e) (properly promulgated CAS have the force and effect of law).) For DoD contracts, DFARS 252.243-7001 make the cost principles applicable to any cost adjustment under the contract. It is not surprising, then, we see "contractor shall" language in Part 31 or in the CAS.

Certifications can effectly incorporate FAR requirements by reference. For instance, FAR 52.243-4 the Certification of Final Indirect Costs (52.242-4) includes a certification that the "proposal does not include any costs which are expressly unallowable under applicable cost principles of the FAR or its supplements."

Several rules require a CO to consider things within the contractor's control, e.g., in negotiating or granting an approval, and a contractor who ignores the rules that inform a CO's judgment shouldn't expect prompt action on those requests (to say the least). See, e.g., partial release of security (FAR 28.204(B)), advance payments (FAR 32.408), novations (FAR Subpart 42.12). Other clauses expressly permit certain contractor actions with CO approval, and leave the considerations that inform that approval decision to the FAR. For instance, FAR 52.228-7 permits self-insurance with CO approval, and FAR 28.308 calls out what the contractor has to do in order for the CO to approve. Even when a contractor is entitled to relief as a matter of right, a contract clause can require the contractor to provide information in a form required by the Contracting Officer or in conformity with the FAR. See, e.g., FAR 52.249-2, Termination for Convenience of the Government (Fixed-Price) (May 2004), at para (e) (final termination settlement agreement in the form prescribed by the Contracting Officer). The CO's judgment, again, would be informed by the FAR.

Finally, as already noted, if a regulation requires a clause, or forbids its use, if the contracting officer fails to follow the regulation, and either includes a forbidden clause, or omits a required one, the government CO is acting beyond his authority. If the clause is "important" enough, and the rule was properly promulgated, the boards and courts can in certain circumstances impose the proper clause or omit the improperly included clause. See both Christian and Charles Beseler Co., 78-2 BCA P 13483, Sept. 22, 1978. (Excuse the oversimplification.)

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B) Jacques, you are really working overtime to establish a rep at Wifcon Forum in as short a time as possible. Good for you. If you made things clearer to garth, more power to you.

Welcome to a bold new voice. Too bad that you've chosen to post anonymously.

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Jacques:

One thing. You wrote:

To say the FAR does not apply to a contractor--while true--is not to say that there aren't several decisions by boards and courts whose outcome hinged on whether a contractor's action conformed with language contained in the FAR.

What does that mean? Would you clarify things by discussing one of the "several decisions"? That would help us understand your point.

Also, what does this mean?

Even absent the Christian doctrine, a decent argument can be made that a contractor must comply with applicable CAS even in the absence of FAR 52.230-2. See, 48 CFR 9901.306 (CAS mandatory for use by all executive agencies and by contractors and subcontractors); 48 CFR 9901.305(e) (properly promulgated CAS have the force and effect of law).

Don't tantalize us! Please make that "decent argument," absent the Christian Doctrine, so we can know what you're talking about.

Also, please decipher this sentence of yours:

For instance, FAR 52.243-4 the Certification of Final Indirect Costs (52.242-4) includes a certification that the "proposal does not include any costs which are expressly unallowable under applicable cost principles of the FAR or its supplements."

I'm confused. FAR 52.243-4 is a changes clause and makes no mention of certification of final indirect costs. Typo? As for FAR 52.242-4, which you mention in parentheses, my response is: So? Isn't that simply an instance of a clause implementing a policy? Hasn't it already been said that policies are imposed on contractors through solicitation provisions and contract clauses? Are you making an additional point? If so, would you tell us what it is?

A suggestion: Slow down. Think through what you want to say. Write it in Word, and then, when you're sure you've got it right, copy it and paste it into a post. You don't help if you post something that is not clear or leaves arguments hanging in the air unfinished.

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Vern, I appreciate your patience with me on this, and Jacques thanks for those citations.

Notwithstanding Vern?s argument outlining the authority (OFPP Act) under which the FAR system was created and operates, and the statements of applicability in the Part 1, what I continue to struggle with is the concept that if a statement in the FAR requires a contractor or subcontractor to ?do something? it is not enforceable absent a contractual clause.

I agree with Vern that CO's price contracts, but I would argue that contractors price subcontracts and 31.102 reads to me as in the pricing of new fixed-price contracts and subcontracts (not just modifications) the contractor shall follow the cost principles. This seems to be placing a requirement on the subcontractor to price the proposal honoring the cost principles and a requirement on the contractor to ensure as much. This is all prior to the award of a contact, outside the scope of the COs task and independent of the negotiation of FPRAs or final indirect cost.

Whereas some of the previous example provided in this discussion could be interpreted as direction to the CO to place a requirement on the contractor by inserting a clause, Part 31.102 appears to be different in that it is placing a requirement on the contractor and subcontractor if one of two conditions exits, and only the second condition is the presences of a contract clause - the first condition being a FFP contract or subcontract requiring cost analysis.

If this reading is correct I guess one could argue that the drafters exceed their authority under the OFPP Act?

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Garth, I'd encourage you to take a look at Nash & Cibinic, Formation of Government Contracts (3d Ed. 1998), at 59-63.

what I continue to struggle with is the concept that if a statement in the FAR requires a contractor or subcontractor to “do something” it is not enforceable absent a contractual clause.

The short answer is that contractual rights and remedies should be grounded in contract (and the agreement of the parties).

The longer answer is that an agency has to have authority to promulgate the rules that it does, and the primary statutory basis for the FAR is as has been previously stated. While there is not unanimity in the decisions, some have held where a rule directly relates to the congressional purpose of achieving an "economical and efficient system" of procurement (a reference to FPASA, the primary civilian procurement authority), then there is a sufficient nexus between the rule and the statute that the rule has the force and effect of law, and is binds a class of folks called "contractors" without regard to the terms of any specific contract. However, even under that standard, the nexus must be incredibly direct. See Chamber of Commerce v. Reich, 74 F.3d 1322 (D.C. Cir. 1996). The government avoids all this heartburn by using a clause and generally grounding its requirements and remedies in contract. The Councils also try, near as I can tell, to avoid having a hodge-podge of rules, some having their basis in mutual assent of the parties, others in regulating a class of businesses. Should COs be regulators, charged with enforcing Department of Labor (Part 22), Small Business Administration (Part 19, etc.), Commerce/State export control rules, etc.? Or should a contractor's violation of these rules provide a basis for an adverse action related to the contract (in addition to any action by the regulator)? I would suggest the scale generally tips to the later.

I'll respond to Vern's comments when I have a couple more minutes.

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