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EXHIBIT 

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DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

LARGE BUSINESS AND
INTERNATIONAL DIVISION

September 10, 2014
Microsoft Corporation and Subsidiaries
One Microsoft Way
Redmond, WA 98052
ATTN : Michael J. Bernard , U.S. Tax Counsel

SUBJECT: Scheduling of 200406-200606 Examination Interviews
Dear Mike:
This letter is in response to your letter of September 10, 2014, regarding scheduling of
examination interviews and our communications thus far regarding procedures for those
consensual interviews.
First, thank you for agreeing to arrange for conference call equipment in the interview
room. In response to your request, in addition to being instructed not to ask
interviewees questions over the phone, the experts participating remotely also will be
instructed that they are not permitted to record the interviews so there is no doubt as to
that point.
Second, my commitment to not having experts ask questions over the phone was and
remains limited to persons who are listening remotely during the consensual interviews.
In other words, all persons supporting the Service's examination (whether LB&I
employees, Counsel or contractors) who are in the room during the consensual
interviews may fully participate in the interviews including, but not limited to, asking
questions. Once again , I invite you to see the temporary regulation to Section 7602 .
In response to your concerns about Quinn Emanuel 's engagement, I have enclosed a
complete copy of Section C of the contract with QE. Section C contains the full and
unredacted performance work statement/scope of work for all phases of the contract
(the contract has one phase only). In addition to the QE attorneys whose names I have
already provided to you (John Quinn , John Gordon and Jeremy Andersen) , the only
other QE attorneys expected to work on supporting the IRS's examination are Noah
Helpern and Jack Baumann. What I can represent now is the same as I represented in
the past; namely, that none of them are working on matters currently adverse to
Microsoft, that they are bound by Section 6103, and that they are committed to not
using in their support of the IRS's examination any confidential information that QE has

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access to from other, unrelated matters in which QE is adverse to Microsoft. As you
indicated you have done already with the others, you are welcome to consult with your
General Counsel to confirm that none of the QE attorneys supporting the IRS's
examination have made an appearance adverse to Microsoft Corporation.
Per the schedule you shared yesterday, there are eight (8) interviews scheduled for
next week (September 15-19). We are hopeful that these will go forward and our team
is planning to attend those interviews as scheduled. Furthermore, no QE attorneys will
attend these eight interviews in person or by phone and our remaining experts'
attendance is anticipated to be limited to participation via phone. Recognizing that
these are among the consensual interviews on which I have offered commitments
regarding remote participation and based on all of the concerns that you have shared to
date, it appears that we are in full agreement that these interviews will go ahead as
scheduled. Please confirm whether you concur no later than tomorrow (September 11,
2014) at 11AM Pacific, and my colleagues and I look forward to seeing you on Monday.
For all other interviews (those scheduled on September 22 and later), I have in good
faith provided you with robust responses on each of the concerns you have stated and
provided you with a great deal of insight into the QE engagement, including providing a
full copy of the scope of work, identifying all relevant QE attorneys, and commitments
on the use of confidential information. With that in mind, we are at a decision point now.
Without further qualifications other than those already offered in my letters, does
Microsoft agree to proceed with the remaining consensual interviews as scheduled and
with, at the IRS's option, QE attorneys and other IRS experts in attendance and/or
participating (for those attending in-person)? Please communicate your decision to me
no later than tomorrow (September 11, 2014) at 2:00PM Pacific. If you do not agree or
do not respond, the Service will consider alternatives.
Given the effort that has been invested on both of our parts in working toward a
reasonable framework for consensual interviews that responds to your stated concerns
while still permitting the Service to have the support of its experts, I remain hopeful that
we will be able to move forward with the interviews and I look forward to your response.
If you have any questions, please feel free to contact me at (202) 515-4315.
Sincerely,

Eli Hoory
Special Projects Deputy, Transfer Pricing Operations

cc:

Walter Choi, IE Team Manager
Cheryl P. Claybaugh, Industry Director, CTM
Sharon R. Porter, Director, IBC
Kenneth Wood, Acting Director, TPO

Encl:

Section C of TIRNE-14-C-00013

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SECTIONC
PERFORMANCE WORK STATEMENT
INTRODUCTION/ BACKGROUND
The Internal Revenue Service (the "IRS" or the "Service") requires the services of a contractor
who is an expert in commercial litigation (the "Contractor") to assist with the evaluation, analysis,
presentation and defense of claims or adjustments related to the issues under examination. The
services to be rendered under this Contract include but are not limited to investigation, document
review, and research so as to be able to consult with the Service and/or advise the Service. The
subject matter of the services required to be rendered under this Contract include but are not
limited to transfer pricing issues relating to the license of intangible property rights in association
with a cost sharing arrangement and related transactions.
The Contractor is a law firm and the Key Personnel (including "Contractor 1" and "Contractor
2," collectively the "Key Personnel") are highly skilled commercial litigation attorneys with
extensive complex litigation experience evaluating, preparing and presenting cases dealing with
multifaceted facts, complex economics and multiple legal issues. The Key Personnel will perform
the work describe below and will oversee and direct any other personnel of the Contractor who
work on this project. The Key Personnel will verbally report facts, conclusions and
recommendations to the Service, and, if desired by the Service, the Key Personnel will prepare
written reports and cause such reports to be sent or delivered to the Service. If desired by the
Service, the Contractor agrees that the Key Personnel will assist in preparing for and attend
meetings, presentations and interviews.
The Service is analyzing a set of intercompany transactions (the "Transactions") between the
taxpayer and its U.S. affiliates (together, the "Taxpayer") and Taxpayer's foreign affiliate. As part
of the Transactions, the Taxpayer and its foreign affiliate did the following: (1) effective July 2005,
the Taxpayer licensed to its foreign affiliate rights to 'technology intangibles' embodied in certain
software products sold by the Taxpayer to third-parties in the Americas geographic region; (2) the
foreign affiliate made a buy-in payment (the "Buy-In Payment") to compensate the Taxpayer for
the value of the rights that it received and assumed responsibility for funding future research and
development associated with the technology intangibles; and (3) the Taxpayer and the affiliate
established a transfer price (the "Transfer Price") to determine how to share revenues that are
collected, after licensing of the technology intangibles to the foreign affiliate, on future sales of the
software products in question to third-parties.
The Service is considering whether the Buy-In Payment and Transfer Price amounts
determined by the Taxpayer reliably and accurately determine the arm's length transfer prices
between the related entities. Together, the Buy-In and the Transfer Price issues impact two
currently open examination periods, the first examination period for Taxpayer's fiscal years ended
June 30, 2004 through June 30, 2006 and the second for Taxpayer's fiscal years ended June 30,
2007 through June 30, 2009. To the extent the Taxpayer continues to apply the Transfer Price
proposed after fiscal year ended June 30, 2009, the issue may have continuing relevance, as well.

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In addition to the Transactions, the Service is also analyzing other intercompany transactions
by the Taxpayer that may raise similar transfer pricing issues or share overlapping facts.

SCOPE
The Contractor shall provide all management, supervision, labor, materials, supplies, and
equipment (unless otherwise stated), and shall plan, schedule, coordinate, and assure effective
performance of all services described herein.
The Contractor shall provide the services and deliver the outcomes described in Phase 1. Phase
1 will commence upon award of the Contract or as required by the Government based on its
schedule.
This Phase for Evaluation & Case Support is non-severable and will not exceed the period
during which fiscal year funds applied to this contract are available.
The Contractor is required to furnish all labor and materials associated with the requirements of
the contract except where otherwise specified.
The Contractor shall be expected to perform travel as necessary to meet the requirements of the
contract. Authorized travel and related expenses shall be reimbursed to the Contractor/Expert
subject to the contract terms outlined herein.
The Contractor/Expert shall obtain written permission from the COR prior to making any
"Third Party" investigative contacts. The Contractor/Expert shall provide the COR with details
regarding "Third Party" contacts. The details of the "Third Party" contact shall be provided to the
COR in writing within ten working days after the contact. The COR shall provide guidance as to
what information is required to be reported regarding "Third Party" contacts by the
Contractor/Expert.
The Contractor/Expert shall strictly protect the taxpayer's rights to privacy by adhering to
Federal "Privacy" and "Non-Disclosure" of taxpayer information regulations and requirements
outlined herein.

I. PERFORMANCE REQUIREMENTS
The Contractor is expected to perform according to the terms of this Contract, even ifthe time
frames are delayed. The Contract is subject to termination and/or Contract payment deduction, if
the performance standards are not met.
In the event the Contractor is not needed at any point, the Service will terminate services
in accordance with Contract terms and payment will be made for that portion of work performed.
The Contractor is expected to perform according to the terms of this Contract, even if the time
frames are delayed. The Contract is subject to termination and/or Contract payment deduction, if
the performance standards are not met.

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Contract performance requirements are identified in Phase 1 and under the Monthly Status
Report Section below.
Phase 1 - Evaluation & Case Support
Required Service(s)
For ease ofreference, the required services in this phase are described in two categories:
(A) "Evaluation" services and (B) "Case Support" services. In practice, the Evaluation and the
Case Support services described below may overlap (e.g., distinct Evaluation and Case Support
services may be performed in parallel/contemporaneously or the same service may simultaneously
support both service categories).
Phase 1 Category A Services: Evaluation: The Contractor will review all of the key documents
(including reports, position papers, IDR responses, etc., prepared by or on behalf of the Taxpayer
or the Service) and all relevant legal authorities to build a thorough understanding of the factual
and legal issues and the record to date. This will entail independent research, as appropriate, and
attending meetings as requested by the POC or the COR. After completing a thorough review of
the record at the time of contract award, the Key Personnel will deliver to the Service an in-person
detailed briefing assessing the case based on the existing record and will give their
recommendations.
It is anticipated that this phase will consist of but not be limited to the following steps:
Step 1: The Contractor shall have a preliminary meeting with the Service to obtain a clear
understanding of the scope of the Contract requirements. The meeting will be held in person or by
teleconference and is anticipated not to exceed one full day. Records identified by the Service as
central to the assessment of the Transactions will be made available to the Contractor.
Step 2: Review initial package of documentation and request additional documentation. The
Contractor will review an initial package of documentation provided by the Service. The
Contractor will inform the POC if there are additional materials that the Contractor believes would
be helpful and would like to review before completing the preliminary analyses described above
and, if available, the Service will attempt to secure the requested records. However, it is possible
that some of the additional materials requested, if any, may not exist or otherwise be unobtainable.
Step 3: As appropriate, subsequent ad hoc meetings or telephone calls will be scheduled and held
with the Contractor to facilitate the assessment of the Transactions and to plan and begin executing
follow-up steps that are appropriate to accomplish the goals of this phase. Travel may be required.
Step 4: The Key Personnel will present to the Service a detailed in-person verbal detailed briefing
of the Key Personnel's findings, assessment, and recommendations with respect to the factual and
legal state of the case, identifying strengths, weakness, and areas for further development. The
Service may require the Key Personnel to travel. If requested by the Service, the Key Personnel
may need to repeat the briefing or parts of the briefing via conference calls or via in-person
meetings to other Service stakeholders.

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Phase 1 Category (B) Services: Case Support: The Contractor will support continued
development, analysis, evaluation, and preparation of the issues under examination. The
Contractor will assist the Service in preparing, organizing and presenting the factual record and
legal analysis of the case. The Contractor will work collaboratively with the Service to support the
examination. Contractor's assistance may include but not be limited to consulting on the analysis
and theory of the case; identifying additional information deemed necessary to develop clearly
defensible positions, including any necessary data, documents, or interviews; assisting with
further factual development through document review, identifying and preparing new document
requests, preparing for or participating in interviews; performing independent research; consulting
on position papers/reports prepared by or on the behalf of the Service or the Taxpayer; preparing,
consulting on or assisting with presentations; and reviewing and providing analysis and critique of
Taxpayer's supplemental positions or responses, if any. Travel may be required.
For both Category (A) and (B) services, the Contractor agrees to verbally report conclusions
and findings to the Service. After discussion with the Service, if desired by the Service, the
Contractor will prepare a written summary or report on identified sub-issues and cause it to be
presented or delivered to the Service

Performance Standards:
•
•
•
•
•
•
•
•
•

•
•
•

Demonstrate effective verbal communication and interpersonal team skills.
Perform independent research and analysis of all relevant legal authorities,
demonstrating an in-depth understanding of all legal aspects of the case.
Develop and demonstrate an in-depth and thorough understanding of the facts and
economics of the Transactions and relevant aspects of the Taxpayer's business.
Timely respond to the Service's oral or written inquiries.
Timely request through the Service required information from the Taxpayer.
Timely identify legal and factual issues relevant to evaluating the Taxpayer's and the
Service's theory of the case.
Timely notify the POC of the need for meetings or conference calls helpful to support
of the case.
Timely schedule and participate in conference calls and in-person meetings with the
Service when requested by the POC or COR.
Explain in a clear and professional manner the quality and thoroughness of facts and
analyses relied on to form the assessment and recommendations presented in the
detailed verbal briefing.
If requested by the POC or the COR, prepare written analysis of clearly identified
issues or sub-issues related to the case.
Thoroughly document, as appropriate, factual development and due diligence.
Develop and demonstrate thorough familiarity and understanding of all relevant legal
authorities, including but not limited to tax, commercial, intellectual property, and
procedural authorities.

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Additional Performance Standards:
•

•

As part of the Evaluation services, the Key Personnel shall verbally deliver the detailed
briefing in-person to the Service at the time and place requested by the POC (and, if
requested by POC, the Key Personnel shall repeat the detailed briefing or a sub-part of
the briefing in-person or by conference call).
As part of the Case Support services, the Key Personnel shall on an as-needed basis
deliver oral recommendations in person or by conference call to the POC and other
selected members of the Exam team. The Key Personnel shall clearly and
professionally present the Contractor's analysis, and clearly explain the quality and
thoroughness of the facts and analyses relied on to form the Contractor's
recommendations.

Desired Outcomes
The Contractor will perform a thorough initial factual, economic and legal assessment of the
record and theory of the case. Following completion of this initial assessment, the Key Personnel
will present to the Service a detailed briefing presenting the Contractor's assessment of the case
and giving the Contractor's recommendations. During and after the initial assessment, the
Contractor will consult with and support the Service on an as-needed basis to assist in assessing,
preparing, organizing and presenting the issues under examination. Required Contract services
shall be provided in accordance with the Delivery Schedule outlined below.

Monthly Status Report
The Contractor shall include with the monthly invoices, a written status report to the COR. The
status report shall, at a minimum, address the following items:
•
•
•
•
•
•
•
•

Current target dates and progress for providing deliverable(s),
Any problems or expected problems with delivery of services or products,
Completed items,
Outstanding issues,
Report of direct labor hours expended for the month,
Accounting of project cost by phase:
Total amount invoiced and
Total amount of delivered but not invoiced services.

The Contractor shall be required to promptly provide written notification to the COR and the POC
when his or her efforts have reached:
•

Respectively, 25%, 50% and 75% of the awarded amount of Phase I.

After reaching 50% of the awarded amount in Phase 1, the Contractor shall be required to
receive written notification from the COR to proceed before performing additional services
in Phase 1. After reaching 75% the awarded amount in Phase 1, the Contractor shall be

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required to receive written notification from the COR to proceed before performing
additional services in Phase 1.
In no event may the Contractor's services exceed the awarded amount of said phase without
the prior written authorization of the Contracting Officer.
Performance Standards:
•
•
•

Complete and accurate monthly status reports.
Provide notification when the specified percentages of the awarded amounts for each
phase are reached.
Timely deliver the report to the COR.

II. APPLICABLE DEFINITIONS, DIRECTIVES and/or DOCUMENTS
Applicable Definitions, Directives and/or Documents
Definitions
Third Party Contacts Defined
If the Contractor needs information from a third party, the Contractor shall first obtain permission
for the IRS and the IRS will provide additional guidance as needed on a specific case-by-case
basis.
Third party contacts are defined and explained in I.R.C. § 7602(c) and the IRS Restructuring and
Reform Act of 1998, Pub. L. 105-206, § 3417. Third party contact definitions and requirements
are described generally in the IRS's Internal Revenue Manual (IRM) Part 4.10.1.6.12 (available at
www.irs.gov). For third-party information gathering, see I.R.C. § 7609 (providing special
procedures for third-party summonses); and IRM Part 25.5.6 (summonses on third-party
witnesses) (available at www.irs.gov).
For Directives about Third Party Contacts, see below.

Disclosure and Privacy Act Requirements and Definitions
Generally, I.R.C. § 6103 limits disclosure of taxpayers' returns and return information to third
parties. Privacy Act (5 U.S.C. 552a) requirements are described in detail in IRM Part 11, and
I.R.C. §§ 6103, 6104, 6110, 7213, 7213A, and 7431. Applicable clauses are incorporated herein.
The IRM can be accessed at www.irs.gov.

IRS Property and Records Defined
Government property shall include all government equipment and records and documents,
including Taxpayer records and documents, provided to the Contractor by the Government or by

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the Taxpayer and shall include all Contractor generated work products and workpapers associated
with the requirements of this Contract. It is anticipated that the Service may, at its option, furnish
secure electronic storage media or laptops which will have security software for data encryption.

Reference Materials and Purchased Documents
The Service's property shall include reference materials, books, documents and supplies
purchased by the Contractor as necessary for performing the requirements of this Contract if the
Contractor is reimbursed by the Service for such purchases on an actual cost basis documented
with copies of receipts for the purchases.

Directives
Contract Administration
All contacts by the Contractor regarding the administration of technical details within the scope of
this Contract shall be addressed to the COR for advice and coordination. All Contractor contacts
with the Service's audit team and with the Taxpayer shall be coordinated through the POC.
Also see G.l IR1052-96-019 Authority - Contracting Officer, Contractor Officer's Representative
And Contractor's Project Manager.

"Contractor" Is All Inclusive
The requirements, responsibilities, liabilities and limitations of this Contract shall apply to the
Contractor, employees of the Contractor, the Key Personnel, and any subcontractors of the
Contractor.

Third Party Contacts
Generally, any investigative-type third party contacts will be made by the Service. See, I.R.C. §
7602(c) (requiring the Service to notify the taxpayer about contact with third parties), I.R.C. §
7609 (providing special procedures for third-party summonses). For procedures, see IRM Part
4.10.1.6.12 (third party contacts) and IRM Part 25.5.6 (summonses on third-party witnesses)
(available at www.irs.gov).
The Contractor will obtain written permission from the POC or COR prior to making any Third
Party Contacts related to performance of this Contract. If the Service determines that the
Contractor may make a particular Third Party Contact, the Contractor will provide the COR with
details regarding the Third Party contact. The Contract will provide details of the Third Party
contact to the COR in writing within ten working days after the contact. The COR will provide
guidance as to what information is required to be reported regarding Third Party contacts by the
Contractor.

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Also see Section H - Disclosure, Safeguards and Security. - Addressing l.R.C. § 6 I 03 (stating
that taxpayers' returns and return infonnation are confidential and may not be disclosed to third
parties).
Materials to be Relied Upon
The Contractor will examine publicly available information as well as documents and materials
obtained by the POC or examination team.

Comply With All Security Policies
The contractor shall comply with all IRS security and safeguard policies and procedures as
described in Pub. 4812 - Contractor Security Controls (and in IRM 10.8.1, Information
Technology (IT) Security, Policy and Guidance if the contractor has access to, and/or uses or
operates IRS infonnation systems containing IRS information at facilities controlled by IRS). This
shall include full cooperation with all government security and safeguard related requests and
activities that are within the scope of these policies and procedures including but not necessarily
limited to:
• Post-award conferences,
• Security self-assessments,
• Contractor and Contractor employee background investigations (see IRM 1.23.2,
Security Investigations, Contractor Investigations),
• Training,
• On-site security reviews, and
• Preparing and implementing a "Plan of Action and Milestones" (POA&M) to
adequately mitigate or otherwise address unacceptable risks identified by the
Government.

Basic Security and Safeguard Concepts
The following basic concepts are applicable under the terms of this Contract, however it should be
understood that this is not an all-inclusive listing of requirements that may apply.
The Contractor shall implement management, operational and technical controls to incorporate the
following security and safeguard concepts in his/her business operations:
• ID Media/Card Keys/Keys
• Document Security
• Incident Reporting
• Security Awareness
Guidance is provided in Pub. 4812 - Contractor Security Controls (and in IRM 10.8.1,
Information Technology (IT) Security, Policy and Guidance ifthe contractor has access to,
and/or uses or operates IRS information systems containing IRS information at facilities
controlled by IRS).

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A copy of Pub. 4812 - Contractor Security Controls can be found on www.irs.gov by performing
a search on "Procurement".
A copy ofIRM 10.8.1, Information Technology (IT) Security, Policy and Guidance can be found
on www.irs.gov by performing a search on "Internal Revenue Manual" followed by clicking on the
Internal Revenue Manual link and then clicking on the "Part 10 - Security, Privacy and
Assurance" link.

Contractor Background Investigations
The Service requires all persons with access to Taxpayer information to pass a background
investigation. The investigation requires the individuals to provide significant information to the
investigation team. It will also require each person to provide a set of fingerprints. This activity
requires several hours of effort for each individual and this time is not chargeable to the Contract.
Unless other arrangements are made with the COR, the Contractor must complete and return the
background investigation paperwork data to Contractor Security Management (CSM) within 5
calendar days of Contract award.
The Contractor personnel must receive either "interim approval" or a "final decision" for staff-like
access before being provided with unescorted access to sensitive information.

Contractor Training Requirements
The Key Personnel and the Contractor's employees and, if applicable, sub-contractors shall be
required to complete "Security" awareness training to be provided by the Service prior to being
granted unescorted access to sensitive information.
Contractor personnel performing technical security roles requiring specialized training shall
receive a minimum of twelve (12) hours of continuing professional education annually at the cost
of the Contractor.
Contractor personnel performing non-technical security responsibilities requiring specialized
training shall receive a minimum of eight (8) hours of continuing professional education
annually at the cost of the Contractor.

Contractor Security Self-Assessment
The Service may, at its option, require the Contractor to perform a security self-assessment prior to
being granted unescorted access to sensitive information. If requested, the security self-assessment
must be completed and returned to the Contracting Officer's Representative (COR) within two
weeks of the date of award of the Contract.

See Section J - Exhibit 5 - Contractor Security Self-Assessment for an example of a security
self-assessment check sheet.
Meetings

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Meetings involving the Contractor called or scheduled by the POC or COR and may be in the
nature of conference telephone calls or on-site, face-to-face meetings, at the election of the POC or
COR. The POC or COR shall provide reasonable advance notification to the Contractor regarding
the location and expected duration of meetings, conference calls, etc.

Records, Reports and Workpaper Maintenance and Organization
Records, Reports and Workpapers shall be maintained and organized in accordance with the
requirements set forth in IRM 4.46.6, LB&! Guide for Quality Examinations, Workpapers and
Reports Resources. IRMs may be accessed at www.irs.gov.

Return of Service Property
All property of the Service in the possession of the Contractor in direct relation to the requirements
of this Contract shall be returned to the Service prior to final payment for services rendered by the
Contractor.

Abbreviations and Acronyms
AQL =Acceptable Quality Level
CFR =Code of Federal Regulations
CO = Contracting Officer
COR =Contract Officer's Representative
CSM =(IRS) Contractor Security Management (Formerly CSLP)
CSLP =Contractor Security Lifecycle Program (Currently CSM)
FAR= Federal Acquisition Regulations
FIPS = Federal Information Processing Standard
FISMA = Federal Information Security Management Act
GSA= General Services Administration
IP =Intellectual Property
IT =Information Technology
I.R.C. =Internal Revenue Code
IRM = Internal Revenue Manual
IRS or Service =Internal Revenue Service
LB&I =Large Business and International Division of the IRS
NIST =National Institute of Standards and Technology
NBIC =National Background Investigation Center
POC = Point of Contact
PRST =Performance Requirements Summary Table
PWS = Performance-based work statement
QASP =Quality Assurance Surveillance Plan
SBU = Sensitive but unclassified
RRA98 =Revenue Reform Act of 1998
TC =Team Coordinator
USC= United States Code (also U.S.C.)

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Documents
Quality Assurance Surveillance Plan (QASP)
A QASP may be utilized by the Service and sets forth guidelines that may be used in evaluating the
technical performance of the Contractor. The procedures set forth in the QASP are not
contractually binding on the Service or on the Contractor. The Contractor will be provided a copy
of the QASP for informational purposes only- See below - Section F2 Quality Assurance
Surveillance Plan (QASP).

Surveillance Activity Checklist
A "Surveillance Activity Checklist" may be used by the COR/Evaluator to document Contractor 's
performance - See Section J, Exhibit 1 - Surveillance Activity Checklist.

Decision Table
A "Decision Table" may be used by the COR/Evaluator in documenting symptoms and in
identifying possible sources of performance problems as well as assisting in the determination of
contributing factors - See Section J, Exhibit 2 - Decision Table.

Performance Requirements Summary Table (PRST)
A PRST may be utilized by the Government and describes to the Contractor how the Service will
monitor the Contractor's performance. The weights found in the table represent the maximum of
the contract value that the Government can deduct for nonperformance or unsatisfactory
performance of a service requirement. The Government has the unilateral right to change the
Method oflnspection found in the table without notice to the Contractor - See Section J, Exhibit
3 - Performance Requirements Summary Table.

III. METHOD OF PAYMENT
Evaluation of Services (See Section F - Quality Assurance Surveillance Plan - QASP))
The Contractor's services will be evaluated by the Internal Revenue Service upon completion of all
services directed by the Service under this Contract.

Hold back Provision:
For purposes of FAR 52.232-7(a)(2), the amount withheld shall be 0% of the amount due.

IV.GENERAL PROVISIONS
Disclosure Prohibitions

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The Contractor may, to the extent authorized by the Internal Revenue Code (l.R.C.) for tax
administration purposes, and as necessary for the performance of his or her duties under this
Contract, be given access to confidential tax returns and return information, as those terms are
defined in l.R.C. § 6103(b)(1) and (2), respectively. Unauthorized disclosures of tax returns or
return information may subject the Contractor to personal liability for civil damages under l.R.C. §
7431 (a)(2), criminal prosecution under l.R.C . § 7213, or both.

Also see Section H - Disclosure, Safeguards and Security.
Limited Authority of the Contractor
The Contractor shall not have the authority to perform inherently governmental functions as
described in OFPP Policy Letter 11-01 including, but not necessarily limited to, any government
policy-making, decision-making, portraying the Contractor as a representative of the government
or performing governmental managerial responsibilities.
(http://www.whitehouse.gov/omb/procurement index work performanceD

Also see Gl IR1052-96-019 Authority - Contracting Officer, Contractor Officer's
Representative and Contractor's Project Manager.
Relationship with Office of Chief Counsel for the IRS
It is clearly understood that the Office of Chief Counsel for the Internal Revenue Service, the
attorneys assigned to this matter, are the representatives of the Service and are not the legal
representative of the Contractor and cannot provide legal advice to the Contractor.

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