Schedule A. <project name> Ship Long Lead Items. General Conditions (CCV)

Transcription

1 Document Identifier Number: [* insert VSY Document #] Rev: 1 Title: General Conditions (CCV) Ship applicability: All Document Owner: [* insert name] Document Approver: [* insert name] Master Template Ref: Schedule A (General Conditions) (CCV) Project: [*insert name] Type Organisation Area Supplier VSY Supplier Code SWBS Contract SCM Subcontracts / SCM [* insert name] [* insert VSY number] [* insert VSY number] Schedule A <project name> Ship Long Lead Items General Conditions (CCV) Prepared by: Vancouver 50 Pemberton Ave. North Vancouver, BC V7P 2R2 Tel: (604) Fax: (604) Vancouver 2016 Unclassified Page 1 of 74

2 1.0 INTRODUCTION 1.1 Definitions 1 Unless otherwise defined in the Articles of Agreement, Schedule D1 (SOW), Schedule D2 (SDRL) and Schedule D3 (DIDs), capitalised terms, singular or plural, used in the Subcontract shall have the meaning set out in section 1 of Annex A attached to these General Conditions. 2 The construction and interpretation of the Subcontract, except where expressly stated to the contrary or the context otherwise requires, shall be interpreted in accordance with the provisions of section 2 of Annex A attached to these General Conditions. 1.2 Counterparts The Subcontract may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. A Party may enter the Subcontract by signing any such counterpart. 2.0 STATEMENT OF REQUIREMENTS 2.1 Supplier s Obligations 1 The Supplier s obligation to perform the Work includes, without limitation and for greater certainty: (a) performing the Work diligently and, in the performance of the Work, providing, procuring and employing all the resources, facilities, labour, management, services and equipment, jigs, materials, drawings, technical and ILS Data, Technical Information, Information, technical assistance, engineering liaison, effective inspection and quality control procedures, configuration management, general management systems and detailed planning necessary for it to perform the Work in accordance with the Subcontract; (b) supplying and delivering, in accordance with the Technical Requirements, Schedule D1 (SOW) and Schedule C (Supplier s Specifications), the Equipment, On Loan Items, SPT, Deliverable Software and Spares listed in Schedule E on or before the Delivery Dates; (c) granting the licenses to its intellectual property in accordance with the provisions of the Supplemental General Conditions 4007 (attached as Annex D); (d) granting the licenses to the Deliverable Software listed in Schedule E in accordance with the provisions of the Supplemental General Conditions 4003 (Attachment 1 to Annex D); (e) performing the tasks set out in Schedule D1 (SOW) in accordance with Schedule F(Supplier s Level 1 Schedule), the Supplier s Master Schedule (see Part 2 (Project Management) of Schedule D1 (SOW) and the Delivery Dates; (f) preparing, delivering and maintaining the Data Items in accordance with the requirements of Schedule D1 (SOW), Schedule D2 (SDRL) and Schedule D3 (DIDs); (g) satisfying the Industrial and Regional Benefit obligations; (h) ensuring and maintaining Compatibility of the Work throughout the Term of the Subcontract; (i) where the Deliverables are exported (or disclosed in the case or Services) to Canada, obtaining all necessary export licenses from the country of origin and meeting all the requirements of the export legislation and regulations; (j) where the Deliverables are imported to Canada, obtaining all necessary import exemptions; Unclassified Page 2 of 74

3 (k) insuring to the limits and under the terms specified in the Subcontract and, diligently using all reasonable commercial efforts, reporting claims to the insurers and pursuing the processing of claim(s) thereunder; (l) co-ordinating and integrating the Work with that of the Purchaser, other suppliers to the Purchaser, and the Third Party Beneficiaries; (m) permitting the Purchaser and the Third Party Beneficiaries reasonable access to its design Data and Technical Information, models, completed or under preparation by it or on its behalf in connection with the Subcontract at any time with reasonable notice; (n) permitting the Purchaser and Third Party Beneficiaries reasonable access to its staff relating to the performance of the Work; (o) providing a Parent Company Guarantee in the form set out in Part 2 (Project Management) of Schedule D1 (SOW); (p) granting the Options as set out in Schedule G2 (Price Itemisation, Charge Out Rates and Option Prices) to the Purchaser and Canada; and (q) where applicable, certifying that the Price is based on costs computed in accordance with General Conditions (attached as Annex C to these General Conditions). 2 Any minor part or parts, components, connectors, free end connectors, back shells or connecting shells, plugs, leads, cables, and other such items not mentioned in the Technical Requirements or not listed in Schedule E, but which are necessary for the satisfactory completion of the Work, shall be deemed to be part of the Equipment or System to be supplied under the Subcontract and shall be deemed to be within the Price. In the event such items are identified after the EDS, they shall be added to Schedule E on a no cost, no schedule impact basis through a Change Order Request initiated by the Supplier (see Part 2 (Project Management) of Schedule D1 (SOW). 3 All SPT shall be the property of the Purchaser and be deemed to be within the Price. In the event SPT is identified after the EDS, it shall be added to Schedule E on a no cost, no schedule impact basis through a Change Order Request initiated by the Supplier (see Part 2 (Project Management) of Schedule D1 (SOW)). 4 All Equipment SPT and Spares shall be New. 5 In the event that the Purchaser operates a Shared Data Environment (SDE) now or in the future, the Supplier shall provide, maintain and share Data with the Purchaser, other suppliers to the Purchaser and the Third Party Beneficiaries under confidentiality, database access and electronic information and sharing agreements to be mutually agreed. In the event that the SDE requires additional hardware or Software, there will be an equitable adjustment to the Price. 6 In the event the Supplier delivers, provides or performs Deliverables that are subsequently altered, changed, or supplemented in either composition, quality or quantity by the Supplier in order to meet its obligations under the Subcontract, then, in such circumstances, such re-work, substitution and replacement shall be completed expeditiously by the Supplier, at its cost and risk. 7 The Supplier shall maintain Compatibility of the Work throughout the Term of the Subcontract. 8 Unless specifically stated otherwise in the Subcontract, the Model Sequence of Key Events set out in Appendix B of the Articles of Agreement shall apply. 9 Unless specifically stated otherwise in Part 3 (Engineering) of Schedule D1 (SOW), Acceptance of the Equipment shall be as set out in Appendix C of the Articles of Agreement. 10 Continuity of Supply (a) The Purchaser may, during the Support Period, desire to place Underlying Purchase Orders for additional Deliverables. In such circumstances, the Supplier shall ensure that: Unclassified Page 3 of 74

4 i. the additional Deliverables, either in their original form, or in a mechanical, electrical and functional interchangeable form, are made available to the Purchaser; ii. the additional Deliverables conform to the issue of the applicable drawing(s), Specifications and/or part numbers specified in any Underlying Purchase Order; and iii. the additional Deliverables conform to the Technical Requirements. (b) The Supplier shall offer all proposals for additional Deliverables on a Fair and Reasonable Basis. (c) For the purposes of this section 10 (Continuity of Support), the Subcontract shall be deemed to be an Enabling Agreement. 11 Discontinuance and Obsolescence During the Support Period, if the Supplier becomes aware that any goods and services not of its own design and/or manufacture, but which forms part of the Deliverables may or will become obsolete, or if the Supplier desires to discontinue the availability of any Deliverables of its own design and/or manufacture, it shall, in accordance with Part 2 (Project Management) of Schedule D1 (SOW), advise the Purchaser of such action being taken so that the Purchaser or Canada may, in its absolute discretion, make a purchase of such quantity as the Purchaser or Canada considers necessary to enable and ensure the continued support and use of the Ships. 3.0 STANDARD CANADIAN GOVERNMENT CLAUSES AND CONDITIONS 1 SACC General Conditions (a) General Conditions 2023 apply to and form part of these General Conditions (Schedule A). The General Conditions 2030 are set out in the attached Annex B. (b) General Conditions apply to and form part of these General Conditions (Schedule A). The General Conditions are set out in the attached Annex C. 2 SACC Supplemental General Conditions (a) Supplemental General Conditions 4007 apply to and form part of these General Conditions (Schedule A). The Supplemental General Conditions 4007 are set out in the attached Annex D. (b) Supplemental General Conditions 4003 apply to and form part of these General Conditions (Schedule A). The Supplemental General Conditions 4003 are set out in Attachment 1 of Annex D. 3 The Industrial and Reginal Benefits Terms and Conditions are set out in the attached Annex F. 4.0 PRIORITY OF DOCUMENTS In the event of a discrepancy between or among wordings of any document forming part of the Subcontract, the order of precedence is dictated by section 5.3 of the Articles of Agreement. 5.0 SECURITY REUIREMENTS The security requirements relating to the Subcontract are set out in Appendix H (Security Requirements) of the Articles of Agreement. 6.0 TERM OF THE AGREEMENT 1 The duration of the Subcontract shall commence upon EDS and expire when the Supplier has discharged its contractual obligations or when the Subcontract is otherwise terminated in accordance with its terms (Term). Unclassified Page 4 of 74

5 2 Time is of the essence in the Subcontract. 7.0 AUTHORITIES AND REPRESENTATIVE OF THE SUPPLIER 1 The Purchaser s Authorities, together with their contact details and responsibilities, are identified in Appendix E of the Articles of Agreement. 2 The Representative of the Supplier, together with his/her contact details and authority, are identified in Appendix E of the Articles of Agreement. The Representative of the Supplier shall be: (a) appropriately experienced, trained and a qualified project manager with technical knowledge of the Deliverables; (b) authorised to bind the Supplier; and (c) authorised to sign amendments to the Subcontract. 3 The Supplier shall not replace or substitute the Representative of the Supplier without the prior written approval of the Purchaser, such approval not to be unreasonably withheld or delayed. 8.0 LIMITATION OF EXPENDITURE 1 The Purchaser s total payment liability under the Subcontract shall not exceed the Price. Customs duties are included and Applicable Taxes are extra. 2 No increase in the total liability of the Purchaser or in the price of Work resulting from any design changes, modifications or interpretations of Specifications, made by the Supplier, will be authorized or paid to the Supplier unless: (a) such changes, modifications or interpretations, have been approved, in writing, by the Subcontract Authority, prior to their incorporation into the Work; and (b) such changes, modifications or interpretations, have been incorporated into a Change Order. 9.0 PAYMENT 1 Basis of Payment (a) The Supplier will be paid a Price for achievement of the Work. (b) Firm Price Subcontract: in consideration of the Supplier satisfactorily completing all of its obligations under the Subcontract, the Supplier will be paid the Milestones set out in Schedule G1. Customs duties are included, unless otherwise specified in the Subcontract, and Applicable Taxes are extra. (c) Other than in accordance with the express provisions of the Subcontract, the Price is not subject to any change, amendment, addition or increase. (d) Open Book: The Supplier shall permit the Purchaser and Canada to have Open Book with respect to any Change Order requests, or any other proposals relating to additional work under the Subcontract. The information shall be provided to the Purchaser and Canada in Microsoft Excel electronic format within a reasonable timescale specified by the Purchaser or Canada. (e) The Parties recognise the importance of reducing both the internal costs of managing the Subcontract and performing the Work. (f) The Parties agree to full and Open Book access principles relating to the Work and costs, employing joint working groups to achieve ongoing reductions in the cost of supplying the Deliverables and the establishment of world class practices. (g) The Parties agree to work together throughout the period or performance to improve quality; cost; technical performance; and responsiveness to Non Conformance Reports, Warranty Defect Reports, queries, closure of Action Items, timely Unclassified Page 5 of 74

6 payment, timely review of documentation, continued innovation and technical excellence, and continued relationship management. 2 Customs Duties (a) As the Deliverables to be supplied under the Subcontract are defence supplies, customs duties on importation to Canada may be remitted under the Tariff Item Number of the Schedule to the Customs Tariff. (b) Remission of customs duties payable may be granted under the Tariff Item Number when the total value of the defence supplies is two hundred and fifty thousand dollars ($250,000 CAD) or more. This reflects the import value of the Items plus the duty that would be applicable in the absence of the Customs Tariff. (c) The Supplier shall be responsible for pre-arranging remission on importation or for paying customs duties on importation and applying to Canada Border Services Agency for a refund. The Supplier shall also be responsible for applying to PWGSC in sufficient time to allow the Deliverables to be delivered by the Delivery Dates. (d) Where the Supplier places Sub-subcontracts for goods and services to be imported into Canada for incorporation into the Deliverables, the Supplier shall similarly instruct its lower tier suppliers to incorporate the substance of this section 2 into any relevant Sub-subcontracts. (e) Where the relief from the application of Canadian import duties has been obtained, such duties shall not be included in the Price or Payment Claims. (f) Should the Supplier fail to comply with its obligations as set out in this section 2, it shall be liable to pay such import duty as may be levied in respect of the Deliverables that would not otherwise have been levied but for the Supplier's failure. (g) If the Deliverables (other than Services) are being imported, the Supplier shall certify on all packing, advice notes, delivery notes and invoices that the goods and services being imported in aid of a contract with Canada for defence equipment for military use. 3 Foreign Exchange (a) The Supplier shall enter into contracts with Sub-Subcontract in Dollars ($CAD) wherever possible. In instances where it is not possible, or where the Supplier recommends it would be better value for the Purchaser to assume the risk for foreign exchange rate fluctuation, the Purchase Order shall define the foreign currency expenses as follows: i. the Supplier s proposal must be based on the Bank of Canada noon exchange rate dated no earlier than ten (10) Working Days before the proposal is submitted to the Purchaser; and ii. foreign exchange expenses incurred by the Supplier shall be converted to Dollars ($CAD) using the Bank of Canada noon exchange rate on the date the invoice claiming reimbursement is submitted to the Purchaser. (b) Canada and the Purchaser reserve the right to audit any revision to costs and prices under this section 3. 4 Method of Payment The Purchaser will pay the Supplier upon the achievement of each Milestone in sequence as set out in Schedule G1 if: (a) the Purchaser has received payment from Canada for the particular Work performed by the Supplier for which the Supplier has claimed payment from the Purchaser; (b) an accurate and complete Payment Claim, Milestone Acceptance Certificate (MAC) and any other supporting documents required by the Subcontract have been submitted by the Supplier in accordance with the terms of the Subcontract; Unclassified Page 6 of 74

7 (c) the Payment Claim, the MAC and required supporting documents have been verified by the Purchaser; and (d) the pre-conditions set out in section 5 to 6 inclusive have been satisfied. 5 Prior to submitting a Payment Claim, the Representative of the Supplier shall contact the Subcontract Authority for the purpose of agreeing: (a) whether the Supplier is entitled to submit a Payment Claim; and if so; (b) the value of the Payment Claim. 6 In determining whether the Supplier is entitled to submit a Payment Claim, the Subcontract Authority will consider the following evaluation criteria relevant up to the date of claim: (a) to what extent has the Work for which the claim is being made been achieved; (b) to what extent has the Work specified in the Supplier s Level 1 Schedule been achieved; (c) to what extent has the Supplier resolved Defects (if any) relating to the Deliverables; (d) has the Supplier provided evidence of compliance to the CGP (if applicable); (e) has the Supplier executed and returned all Change Orders; (f) has the Supplier completed of all material Action Items; (g) has the Supplier achieved all earlier Milestones; (h) to what extent is the claim in advance of the relevant Milestone payment date set out in Schedule G1; and (i) are there any adjustments to be made for reimbursement, over payment, back charges, Damages and/or Set Off. 7 If the Subcontract Authority and the Representative of the Supplier: (a) agree that the Supplier is entitled to submit a Payment Claim; and (b) agree the amount to be paid equals the value of the relevant Milestone, then in such circumstances, the Supplier shall submit a Payment Claim for the full amount of the Milestone, together with a MAC and any other required supporting documents. 8 If the Subcontract Authority and the Representative of the Supplier do not: (a) agree that the Supplier is entitled to submit a Payment Claim; and (b) do not agree the amount to be paid, then in such circumstances: (a) the Subcontract Authority and the Representative of the Supplier shall (acting in good faith) attempt to resolve the matter; (b) if the Representative of the Supplier and the Subcontract Authority cannot resolve the matter, then the Purchaser shall: (i) advise the Supplier that the Supplier is: i. not entitled to submit a Payment Claim; or, if so, ii. direct the Supplier to prepare a Payment Claim for the undisputed amount; (ii) unilaterally amend the Payment Claim into parts: one matching the undisputed amount, the other the disputed amount (i.e. a and b ); (iii) direct the Supplier to submit a Payment Claim and any required supporting documentation for the undisputed amount against the revised claim number (i.e. [*] a ; and Unclassified Page 7 of 74

8 (iv) direct the Supplier to section 32.0 (Subcontract Disputes) with respect to the disputed amount (i.e. [*] b ). 9 For the avoidance of doubt, in the event that the Supplier has not satisfactorily performed any or all of his obligations under the Subcontract, the Purchaser may adjust or suspend any payments otherwise payable to the Supplier to the extent and for the time required to remedy the condition or conditions giving rise to such non-achievement, reduction or suspension. Such suspension and withholding is not a breach of the Subcontract. 10 A Payment Claim conforming to the requirements of the Subcontract shall become valid at the end of the month in which it is received. 11 The Purchaser shall pay, on account of the Price, all conforming Payment Claims within the Payment Period. 12 In the event that a Deliverable previously found to be in conformance to the requirements of the Subcontract and paid for subsequently proves not to be in conformance to the requirements of the Subcontract, then, in such circumstances, any payments made in respect of that Defective Deliverable shall be refunded to the Purchaser on demand or may be set-off against sums due to the Supplier, at the Purchaser s discretion. 13 In the event that a payment has been made against a Milestone and it subsequently transpires that the Milestone has not, in fact, been achieved as previously declared by the Supplier, then the amount of the Milestone shall be re-payable to the Purchaser on demand or may be set-off against sums due to the Supplier, at the Purchaser s discretion. 14 For the avoidance of doubt, payment shall not be deemed to indicate either Provisional Acceptance or Final Acceptance of the Deliverables. 15 All Payment Claims shall be submitted within two (2) years following entitlement otherwise the Supplier is deemed to have waived any claim for payment Invoicing Instructions 1 Payment Claims shall be prepared and submitted in accordance with Part 8 (Finance) of Schedule D1. 2 By submitting a Payment Claim, the Supplier certifies that the invoice is consistent with the Work achieved and is in accordance with the Subcontract. If a Payment Claim is received by the Purchaser later than ninety (90) calendar days following achievement of a Milestone, the Supplier shall grant the Purchaser a discount of two percent (2%) for each ninety (90) calendar day period up to the expiry of the date described in section Covering Purchase Order 1 The Purchaser s payment obligation with respect to the Work is limited to the total amount of the actual Work performed by the Supplier pursuant to the Subcontract. 2 The Covering Purchase Order is an administrative tool used by the Purchaser to link the essential elements of the Subcontract to other management and control systems used by the Purchaser. It holds the minimum amount of information required to receive Deliverables and make payments to the Supplier. The Subcontract takes precedence over the Covering Purchase Order (see section 5.3 of the Articles of Agreement) Amendments and Variations 1 The Purchaser will not pay the Supplier for any design changes, modifications or interpretations of the Work, unless they have been authorised, in writing, by the Subcontract Authority before the earlier of the Work is undertaken or before its incorporation into a Deliverable. 2 Changes in the Work (a) The Subcontract shall only be amended, changed or varied by a Change Order. Unclassified Page 8 of 74

9 (b) Unless otherwise provided for in a Change Order signed by the Subcontract Authority, no change shall be made to the Equipment, Deliverable Software or the Spares following the completion of the Design Reviews. (c) Unless otherwise specifically provided for in Schedule D2 (SDRL), no change shall be made to a Data Item following an assessment by the Purchaser that the Data Item was assessed to be in conformance to the requirements of the Subcontract. (d) The Purchaser shall be entitled, in its absolute discretion, to refuse a Change Order request submitted by the Supplier. (e) Notwithstanding the above, at any time and from time to time, the Purchaser may direct the Supplier, by written Notice, to promptly prepare and deliver, at no additional cost to the Purchaser, a cost estimate for a change to the Work, covering the necessary and reasonably change (increase or decrease) to the Price. If the Purchaser Notifies the Supplier that the cost estimate is urgent, the Supplier will prepare and deliver the estimate to the Purchaser within twenty-four (24) hours. The following will apply to such proposed changes to the Work: i. the Charge Out Rates identified in Schedule G2 shall be the only rates that are used to form the Supplier s cost estimate unless otherwise agreed by the Subcontract Authority in writing; ii. if the Purchaser agrees with the cost estimate provided by the Supplier, the Purchaser may advise the Supplier in writing to perform the change. Upon receipt of such advice, the Supplier shall perform the change in accordance with the terms of the Subcontract and the Subcontract Authority will issue a written Change Order for such change, including an adjustment to the Supplier s Price by the agreed amount and relief to the schedule if required; iii. if the Purchaser does not agree with the cost estimate provided by the Supplier, the Subcontract Authority may nevertheless direct the Supplier by Notice to perform the change. Upon receipt of such Notice, the Supplier shall perform the change in accordance with the terms of the Notice and the Subcontract Authority will determine the appropriate adjustment to the Supplier s compensation and schedule of activities, provided that if the Supplier disagrees with the amount determined by the Subcontract Authority, or the relief to the schedules of activities, the Supplier may dispute this amount in accordance with section 32.0 (Subcontract Disputes); iv. all change to the Work must be offered on a Fair and Reasonable Basis; and v. all changes to the Work are subject to the operation of section 9.1(d). (f) Where the net value of a Change Order is less than twenty thousand Canadian dollars (<$20, CAD), it may be recorded by the Purchaser in a trading list maintained by the Parties and, when the cumulative net value of multiple authorised Change Orders surpasses this amount, or in any event at the end of each quarter (whichever event first occurs), the Subcontract may be unilaterally amended by the Subcontract Authority to reflect the agreed amendments. (g) Where the net value of a Change Order is more than twenty thousand Canadian dollars (>$20, CAD), the Subcontract shall be updated forthwith to reflect the agreed amendment to the Subcontract. (h) In the event an authorised Change Order amends the Statement of Requirements or Price, the Options listed in Schedule G2 shall be automatically adjusted accordingly so as to preserve the benefit to the Purchaser and Canada Price Certification 1 The Supplier certifies to Canada and the Purchaser, and will provide such certification to each of them when requested by Canada or the Purchaser, that the Charge Out and Price: (a) are not in excess of the lowest rates and prices the Supplier has charged anyone else before or during the Term, including the Supplier s most favoured customer (other than its affiliates as defined in the Canada Business Corporations Act, R.S.C. 1985, C-44, as amended, or individuals or trusts for individuals who do not deal with Supplier at arm s length as defined in Unclassified Page 9 of 74

10 the Income Tax Act, R.S.C. 1985, C-1, as amended) for the like quality and quantity of the goods or services, taking into consideration the comparability of the payment terms; (b) does not include an element of profit on the sale in excess of that normally obtained by the Supplier on the sale of goods, licenses, software, documentation or services of like quality and quantity; (c) does not include any provision for discounts to selling agents; and (d) is based on costs computed in accordance with Canada s General Conditions (see Annex C), and includes the applicable estimated amount of profit. 2 Upon the request of Canada or the Purchaser, the Supplier will certify to Canada and the Purchaser as to the amount of mark-up included in its Prices, and that this mark-up is the only mark-up or profit to the Supplier and that there shall be no additional mark-up for any inter- or intra-company transactions, and that there is no mark-up for lower tier suppliers other than what is disclosed by the Supplier to the Purchaser and accepted by the Purchaser. The Supplier will obtain certifications in favour of Canada and the Purchaser from its Sub-subcontractors as to the amount of mark-up included in their prices and certifying in addition that this is the only mark-up or profit to the Sub-subcontractors, and except as disclosed in the certification, there are no other mark-ups or profits to the Sub-subcontractors or their affiliates included in those prices. 3 This Price certification described in this section 13.0 must be included in all Sub-subcontracts, except that the price certification is not required for Sub-subcontracts: (a) referred to in General Conditions , sections 2 (a), (b), or (e) (see Annex B); (b) less than a total value of one hundred thousand dollars ($100,000 CAD) including all Options; or (c) for any portion of the Work to Sub-subcontractors chosen by means of a reasonable and successful open competitive tender process designed and employed by the Supplier for the purpose of obtaining best value for money and best quality of goods and service Accounts 1 The Supplier shall keep financial accounts and records relating to the Subcontract and the Work and all expenditures and/or financial commitments made by the Supplier in respect thereto for the Data Retention Period. All such financial accounts and records shall be maintained by the Supplier in accordance with the requirements of internationally recognised and accepted Generally Accepted Accounting Practices and any industry specific guidance issued from time to time. 2 The Supplier shall permit Canada s pricing group to review, audit and copy its accounts and records relating to the Subcontract at any time during the Term and for a period thereafter equivalent to the Data Retention Period. 3 The Supplier shall permit the Purchaser s Vice President of Finance, or delegate, sight of the Information made available to the Canada s pricing group(s) pursuant to section 2 as is sufficient to allow the Purchaser to confirm that the Pricing is being undertaken in accordance with the requirements of the Subcontract and may make copies of the information, subject to an obligation of confidentiality in respect of such disclosed information Discretionary Audit 1 The following are subject to audit by Canada and the Purchaser, either at the request of Canada or the Purchaser, before or after payment is made until six (6) years after the date the Subcontract expires or has been terminated in accordance with its terms: (a) the amount claimed under the terms and conditions of the Subcontract, as computed in accordance with Schedule G1, including time charged and salaries paid for labour; (b) the adequacy and accuracy of the Supplier s and its affiliates time recording system; Unclassified Page 10 of 74

11 (c) where there is a negotiated arrangement (non-competitive), or amendment to the Subcontract, the estimated amount of profit in any element (the purpose of the audit is to determine whether the actual profit earned on the Subcontract during a particular period selected, or claimed as part an amendment to the Subcontract, is reasonable and justifiable based on the estimated amount of profit included in the Price or rate certification(s), as required. If the audit demonstrates that the actual profit is not reasonable or justifiable, as defined above, the Supplier must repay the Purchaser the amount found to be in excess); (d) any firm price element, firm time rate, firm overhead rate, or firm salary multiplier for which the Supplier has provided a most favoured customer certification (the purpose of such audit is to determine whether the Supplier has charged anyone else before or during the Term of the Subcontract, including the Supplier s most favoured customer (other than its affiliates as defined in the Canada Business Corporations Act, R.S.C. 1985, C-44, as amended, or individuals or trusts for individuals who do not deal with the Supplier at arm s length as defined in the Income Tax Act, R.S.C. 1985, C-1, as amended), lower prices, rates or multipliers, for like quality and quantity of goods, licenses, software or services taking into consideration the comparability of the payment terms; (e) the Exchange Rate adjustment, if applicable; (f) the Supplier s performance against the IRB commitments if applicable to the Subcontract; (g) the Supplier s performance against the Value Proposition commitments if applicable to the Subcontract; (h) compliance with Contract Cost Principles (Annex C) if applicable to the Subcontract; (i) any amounts owed by or owing to the Purchaser as a result of a termination of the Subcontract under the provisions of the Subcontract; and (j) compliance with any other certification given by the Supplier. 2 Any payments made that are subject to such an audit must be regarded as interim payments only and must be adjusted to the extent necessary to reflect the results of the audit. If there has been any overpayment, the Supplier must repay the Purchaser the amount found to be in excess or set off that amount against monies owing by the Purchaser to the Supplier under the Subcontract. 3 Nothing in this section 15.0 (Discretionary Audit) shall be interpreted as limiting the rights and remedies the Purchaser or Canada may otherwise have in relation to or pursuant to this Subcontract or at law. 4 Subject to section 5, the Supplier must, unless the Subcontract Authority waives this requirement in relation to a particular Subsubcontractor in writing, ensure that its Sub-subcontractors are bound by the Sub-subcontract to provide the access by Canada and the Purchaser to their accounts and records relating to the Work under the Subcontract stipulated in this section 15.0 (Discretionary Audit). 5 This section 15.0 (Discretionary Audit) must be included in all Sub-subcontracts, except that the foregoing shall not apply to Subsubcontracts: (a) referred to in General Conditions , subsections 2 (a) or (b); or (b) less than one hundred thousand dollars ($100,000 CAD) including all options; or (c) for any portion of the Work to Sub-subcontractors chosen by means of a reasonable and successful open competitive tender process designed and employed by the Supplier for the purpose of obtaining best value and best quality of goods and service. 6 For Sub-subcontracts referred to in (e), such audit rights shall be the same or compatible with and, in the opinion of the Subcontract Authority (acting reasonably and in good faith), not less favorable to Canada and the Purchaser than the conditions as provided in this section 15.0 (Discretionary Audit). Unclassified Page 11 of 74

12 16.0 LIENS - SECTION 427 OF THE BANK ACT 1 If any lien under section 427 of the Bank Act exists in respect to any materials, parts, work-in-process, finished Work or Deliverables for which the Supplier intends to claim payment, the Supplier agrees to inform the Subcontract Authority, in writing, without delay and agrees, unless otherwise instructed by the Subcontract Authority, either (a) to cause the bank to remove such lien and to furnish the Subcontract Authority with written confirmation from the bank; or, (b) to furnish or cause to be furnished to the Subcontract Authority an undertaking from the bank to the Purchaser that the bank will not make any claim under section 427 of the Bank Act on materials, parts, work-in-process, or finished Work in respect of which payment is made to the Supplier under this Subcontract. 2 Failure to inform the Subcontract Authority of such lien or failure to implement section 16.1(a) or (b) shall constitute default of a material obligation under General Conditions (Default by the Supplier) for which Purchaser will have the remedies available under that section CLASSIFICATION SOCIETY 1 Where applicable, the Supplier must deliver to the Purchaser, in accordance with Part 3 (Engineering) of Schedule D1 (SOW) certification or proof of compliance with the standards, rules, regulations and requirements of the Classification Society or submit the applicable Work to the Classification Society or its authorized representative. 2 The Supplier must authorize the Classification Society to release to Canada and the Purchaser, upon Canada s or the Purchaser s request, any and all correspondence exchanged between the Classification Society and the Supplier or between the Classification Society and a Sub-subcontractor on activities and Work or work as the case may be related to this Subcontract in a timely manner as the Work progresses. The Supplier must incorporate this requirement into all Sub-subcontracts where the nature of the work requires correspondence with the Classification Society, including any Subcontract relating to the purchase of Deliverables. 3 The Supplier must provide all items, labour, material, testing, trials, deliveries and approvals requiring Classification Society review or approval in a timely manner to allow the Classification Society to conduct its review and issue its proof of compliance or certificate and all such expenses must be to the account of the Supplier and included in the Price. 4 Whenever DNV-GL certification is required under the Subcontract, the Supplier must obtain certification from DNV-GL for the applicable Deliverable. The Supplier must provide evidence of DNV-GL certification to the Purchaser at least ten (10) Working Days before delivery to the Purchaser for all applicable Deliverables EXPORT LICENCES Where a Deliverable is to be imported into Canada, the Supplier is responsible for obtaining all necessary export licences from the country of origin in sufficient time to enable the export or disclosure (in the case of Services) to be delivered or performed by the Delivery Dates ACCESS TO THE WORK 1 The Supplier acknowledges that the Purchaser and the Third Party Beneficiaries may enter into separate contract(s) with consultant(s) and other contractor(s) to assist and/or advise the Purchaser or a Third Party Beneficiary during the performance of the Work and the Supplier agrees that, in addition to the Purchaser s and the Third Party Beneficiaries respective rights of access to the Work specified under General Conditions 2030, the Supplier shall also, upon the written request of the Subcontract Authority, provide equal access to the Work, on a non-interference basis, to the Purchaser s and Third Party Beneficiaries respective consultants, along with the assistance to the Purchaser, the Third Party Beneficiary and their respective consultants of the Supplier s or its Sub-subcontractors personnel for explanations and other information as may be reasonably necessary for such consultants and the Purchaser and the Third Party Beneficiaries to review the Work, and that right of access shall include the right to take photographs. Unclassified Page 12 of 74

13 2 The Supplier must provide reasonable facilities and equipment to enable the Purchaser, Third Party Beneficiaries and their representatives to comply with the applicable safety and security regulations to access the Work at its worksite, and must, on request by the Purchaser or a Third Party Beneficiary, arrange for the same at any other site where any Work is being conducted. 3 If the Purchaser terminates the Subcontract pursuant to the provisions of the Subcontract, the Supplier shall provide the Purchaser and Canada full and free access to the Work for the purpose of removing any or all Issued Property from the Supplier s facility or that of any Sub-subcontractor, and the Supplier must provide access for that purpose CERTIFICATIONS COMPLIANCE 1 Compliance with the certifications and related documentation provided by the Supplier to the Purchaser s Approved Supplier Portal and provided by the Supplier to the Purchaser in its proposal for the Subcontract is a condition of the Subcontract and subject to verification by Canada or the Purchaser during the Term of the Subcontract. If the Supplier has not complied or does not comply with any submitted certification and provide the related documentation, or if it is determined that any certification made by the Supplier in its proposal was or is untrue, whether made knowingly or unknowingly, The Purchaser has the right, pursuant to the default provision of this Subcontract, to terminate the Subcontract for default and seek Damages INSPECTION OF THE WORK 1 Inspection by Canada or the Purchaser, without limiting Canada s or the Purchaser s rights of inspection, is generally performed with a view to verify the proper functioning of the Supplier s quality assurance measures and is not a substitute for in-process control of quality by the Supplier, nor does it replace or supersede Regulatory Body approvals. Inspection may consist of the audit of the Supplier s quality control system and records, a series of inspections and the witnessing of tests, trials and demonstrations deemed necessary by Canada and/or the Purchaser to verify that the Work has been performed in compliance with the provisions of the Subcontract. 2 All Deliverables supplied or performed under this Subcontract shall be subject to inspection by Canada and the Purchaser. 3 Should a Defect be found in a Deliverable, whether as a result of an inspection or otherwise, and in the event that a Defect occurs: (a) during the Defect Rectification Period, the Purchaser will issue to the Supplier a Non Conformance Report describing the Defect; (b) during the Warranty Period, the Purchaser will issue to the Supplier a Warranty Defect Report describing the Defect; and (c) the Non-Conformance Report and the Warranty Defect Report will refer to the Deliverable inspected, will describe the nonconformance and be signed by the Subcontract Authority. 4 Upon receipt of a Non Conformance Report or a Warranty Defect Report, the Supplier shall, within the timeframe stipulated therein (and, in any event - unless otherwise agreed in writing - within twenty five (25) Working Days of receipt of the Non Conformance Report or Warranty Report): (a) with respect to Deliverables (other than Software), commence such Rectification of the Defect as is necessary to eliminate the Defect and such Rectification shall be made to both delivered and to-be-delivered Items of the Deliverables in order to maintain the Computability of Work Obligation; (b) with respect to Deliverable Software: i. set out in such detail as may be available, the nature of the Defect and the circumstances in which it manifests itself; ii. state whether the Supplier is able to confirm the existence of the Defect and, where a Defect is acknowledged, propose a remedy which may in the first instance constitute a Software correction, an up-issue or amendment to the Deliverable Software and/or Data Item relating to the Software in accordance with Part 3 (Engineering) of Schedule D1 (SOW), or other interim solution to enable the Deliverable Software to function safely and correctly; Unclassified Page 13 of 74

14 iii. where an interim solution is offered, the Supplier shall, within a reasonable period of time from being advised of the Defect, provide the Purchaser with a revised or corrected version of the Deliverable Software and/or associated Data Item; and iv. replace, where possible, at its own cost and risk, all lost or corrupted data caused by the Defect as soon as practicable in the circumstances; and (c) with regard to all Defects: (i) re-conduct, at its own cost and risk, all tests and trials as is necessary in the circumstances in respect of the Rectified Item as soon as practicable after the Rectification is complete; (ii) ensure that the Compatibility of the Work obligation is satisfied with respect to all Deliverables; and (iii) conduct an analysis of the Defect to determine its root cause and take all reasonable measures to ensure that it does not re-occur. 5 When the non-conformance has been corrected by the Supplier and has been re-inspected and the corrective actions accepted by the Purchaser, the Subcontract Authority will issue a letter to indicate acceptance of the corrective actions. 6 If the Purchaser subsequently agrees that a Non Conformance Report or Warranty Defect Report was not valid, then the Purchaser will reimburse the Supplier its reasonable costs of the diagnostic testing, un-installing, freight, transportation, insurance, taxes, duties, levies, repairs, labour, packaging, re-installing and re-testing of the Item and the sub-system or system in which the Item forms a part. 7 All Defects in the Deliverables shall be corrected at the Supplier s cost and risk as the Purchaser may direct either: (a) on board the Ship at its location; or (b) at the most convenient repair facility to the Ship s location; or (c) wherever and whenever the Rectification, in the reasonable opinion of the Purchaser, will not interfere with the continued building, setting to work, commissioning, testing, trialling or operation of the Ship, at a facility designated by the Supplier. 8 For the avoidance of doubt, a Defect is an Event of Default and where such Defect and Defect Rectification results in, or contributes to, a Claim relating to any tests or trials being conducted by other suppliers to the Purchaser, or a Claim for any tests and trials of the Ship as a whole, then the Supplier shall be liable for any Damages suffered by the Purchaser. 9 In the event that the Supplier objects to a Non Conformance Report or a Warranty Defect Report, it shall, within ten (10) Working Days of receipt of the relevant report and in accordance with Part 2 (Project Management) of Schedule D1 submit an Objection Advice. 10 In the event that the Purchaser does not concur with an Objection Advice within ten (10) Working Days of receipt of the Objection Advice, the Parties shall be governed by section 32.0 (Subcontract Disputes). 11 Upon Rectification of a Defect, the Supplier shall, in accordance with Part 7 (Commissioning, Test & Trials) of Schedule D1 (SOW), provide a Defect Rectification Report. 12 The Supplier shall, in accordance with Part 7 (Commissioning, Test & Trials) of Schedule D1 (SOW), operate, populate, maintain and update DRACAS. 13 The Supplier shall not be liable for any Defects which have arisen as a result of: Unclassified Page 14 of 74

15 (a) failure of the Purchaser, or agent of the Purchaser, to store, transport, install, commission, operate, maintain or use the Equipment, SPT, Spare and/or Deliverable Software in accordance with the Supplier s Data Items; or (b) faults arising from systems, sub-systems or equipment supplied by other suppliers to the Purchaser; or (c) modifications to the Equipment, SPT, Spares and/or Deliverable Software carried out without the Supplier s authorisation. 14 Any communication with the Supplier regarding rejection or correction of Work performed pursuant to the Subcontract must be undertaken by official correspondence (i.e. on company letterhead) through the Subcontract Authority. 15 The Supplier must properly set up, prepare, provide access to and present Work for inspection and give adequate notice to the Purchaser that the Work is complete, and having been pre-tested or inspected by the Supplier, is ready for formal inspection. The Supplier must plan in-process inspections necessary where subsequent work will cover up areas requiring inspection, or where the results of the inspection may affect subsequent work. The Supplier must provide all applicable test data, technical data, test pieces and samples as may reasonably be required by Canada or the Purchaser to verify conformity to the requirements of the Subcontract. The Supplier must forward such test Data, Technical Information, test pieces and samples to such location as the Purchaser may direct at the Supplier s own cost. 16 Inspection will be done by the Purchaser at the most appropriate location. In most cases, the most appropriate location will be: (a) for the Equipment, SPT, Spares and Deliverable Software at the Supplier s and/or the Sub-subcontractors facilities; and (b) for most Data Items, at Canada s or the Purchaser s facilities. 17 Notwithstanding the above, failure by the Purchaser to discover a Defect during the Defect Rectification Period does not relieve the Supplier of its obligations to satisfy the requirements of this Subcontract APPLICABLE LAWS 1 The Subcontract must be interpreted and governed, and the relations between the Parties determined, by the laws in force in British Columbia and the laws of Canada applicable therein. 2 The Supplier must comply with all applicable legislation and regulations in performing Work under this Subcontract DEFENCE CONTRACT 1 The Subcontract is a defence Contract within the meaning of the Defence Production Act, R.S.C. 1985, c. D-1 (Defence Production Act) and must be governed accordingly. 2 Title to any government Issued Property, or establishment or facility made available to the Supplier or be obtained or constructed by the Supplier with money provided by Canada belongs to Canada free and clear of all claims, liens, attachments, charges or encumbrances and Canada is entitled, at any time, to remove, sell or dispose of the government Issued Property or building in accordance with section 20 of the Defence Production Act ISSUED PROPERTY 1 All Issued Property is listed in Appendix F of the Articles of Agreement. All of Canada s or the Purchaser s rights, as the case may be, title and interest to the Issued Property must remain vested always in Canada or the Purchaser, as the case may be, and the Supplier must maintain it free and clear of all claims, liens, charges and encumbrances caused by the Supplier or any of its Subsubcontractors. 2 If, during the course of this Subcontract, additional requirements for Issued Property are identified by the Supplier, the Supplier may, in accordance with Part 2 (Project Management) of Schedule D1 (SOW), submit a request for such Issued Property. Following a Unclassified Page 15 of 74