H-15 52.248-1 - VALUE ENGINEERING (FEB 2000)
(a) General. The Contractor
is encouraged to develop, prepare, and submit value engineering change
proposals (VECP's) voluntarily. The Contractor shall share in any net
acquisition savings realized from accepted VECP's, in accordance with the
incentive sharing rates in paragraph (f) below.
(b) Definitions. "Acquisition savings,'' as used
in this clause, means savings resulting from the application of a VECP to
contracts awarded by the same contracting office or its successor for
essentially the same unit. Acquisition savings include--
(1) Instant contract savings, which are the net cost
reductions on this, the instant contract, and which are equal to the instant
unit cost reduction multiplied by the number of instant contract units affected
by the VECP, less the Contractor's allowable development and implementation
(2) Concurrent contract savings, which are net
reductions in the prices of other contracts that are definitized
and ongoing at the time the VECP is accepted; and
(3) Future contract savings, which are the product of
the future unit cost reduction multiplied by the number of future contract
units in the sharing base. On an instant contract, future contract savings
include savings on increases in quantities after VECP acceptance that are due
to contract modifications, exercise of options, additional orders, and funding
of subsequent year requirements on a multiyear contract.
"Collateral costs," as used in this clause, means
agency cost of operation, maintenance, logistic support, or
"Collateral savings," as used in this clause,
means those measurable net reductions resulting from a VECP in the agency's
overall projected collateral costs, exclusive of acquisition savings, whether
or not the acquisition cost changes.
"Contracting office" includes any contracting
office that the acquisition is transferred to, such as another branch of the
agency or another agency's office that is performing a joint acquisition
"Contractor's development and implementation
costs," as used in this clause, means those costs the Contractor incurs on
a VECP specifically in developing, testing, preparing, and submitting the VECP,
as well as those costs the Contractor incurs to make the contractual changes
required by Government acceptance of a VECP.
"Future unit cost reduction," as used in this
clause, means the instant unit cost reduction adjusted as the Contracting
Officer considers necessary for projected learning or changes in quantity
during the sharing period. It is calculated at the time the VECP is accepted
and applies either (1) throughout the sharing period, unless the Contracting
Officer decides that recalculation is necessary because conditions are
significantly different from those previously anticipated or (2) to the
calculation of a lump-sum payment, which cannot later be revised.
"Government costs," as used in this clause, means
those agency costs that result directly from developing and implementing the
VECP, such as any net increases in the cost of testing, operations,
maintenance, and logistics support. The term does not include the normal
administrative costs of processing the VECP or any increase in this contract's
cost or price resulting from negative instant contract savings.
"Instant contract," as used in this clause, means
this contract, under which the VECP is submitted. It does not include increases
in quantities after acceptance of the VECP that are due to contract
modifications, exercise of options, or additional orders. If this is a
multiyear contract, the term does not include quantities funded after VECP
acceptance. If this contract is a fixed-price contract with prospective price redetermination,
the term refers to the period for which firm prices have been established.
"Instant unit cost reduction" means the amount of
the decrease in unit cost of performance (without deducting any Contractor's
development or implementation costs) resulting from using the VECP on this, the
instant contract. If this is a service contract, the instant unit cost
reduction is normally equal to the number of hours per line-item task saved by
using the VECP on this contract, multiplied by the appropriate contract labor
"Negative instant contract savings" means the
increase in the cost or price of this contract when the acceptance of a VECP
results in an excess of the Contractor's allowable development and
implementation costs over the product of the instant unit cost reduction
multiplied by the number of instant contract units affected.
"Net acquisition savings" means total acquisition
savings, including instant, concurrent, and future contract savings, less
"Sharing base," as used in this clause, means the
number of affected end items on contracts of the contracting office accepting
Sharing period, as used in this clause, means the period
beginning with acceptance of the first unit incorporating the VECP and ending
at a calendar date or event determined by the contracting officer for each
"Unit," as used in this clause, means the item or
task to which the Contracting Officer and the Contractor agree the VECP
"Value engineering change proposal (VECP)" means a
(1) Requires a change to this, the instant contract, to
(2) Results in reducing the overall projected cost to the
agency without impairing essential functions or characteristics; provided, that
it does not involve a change--
(i) In deliverable end item
(ii) In research and development (R&D) end items or
R&D test quantities that is due solely to results of previous testing under
this contract; or
(iii) To the contract type only.
(c) VECP preparation. As a minimum, the Contractor
shall include in each VECP the information described in subparagraphs (1)
through (8) below. If the proposed change is affected by contractually required
configuration management or similar procedures, the instructions in those
procedures relating to format, identification, and priority assignment shall
govern VECP preparation. The VECP shall include the following:
(1) A description of the difference between the existing
contract requirement and the proposed requirement, the comparative advantages
and disadvantages of each, a justification when an item's function or
characteristics are being altered, the effect of the change on the end item's
performance, and any pertinent objective test data.
(2) A list and analysis of the contract requirements that
must be changed if the VECP is accepted, including any suggested specification
(3) Identification of the unit to which the VECP applies.
(4) A separate, detailed cost estimate for (i) the affected portions of the existing contract requirement
and (ii) the VECP. The cost reduction associated with the VECP shall take into
account the Contractor's allowable development and implementation costs,
including any amount attributable to subcontracts under the Subcontracts
paragraph of this clause, below.
(5) A description and estimate of costs the Government may
incur in implementing the VECP, such as test and evaluation and operating and
(6) A prediction of any effects the proposed change would
have on collateral costs to the agency.
(7) A statement of the time by which a contract modification
accepting the VECP must be issued in order to achieve the maximum cost
reduction, noting any effect on the contract completion time or delivery
(8) Identification of any previous submissions of the VECP,
including the dates submitted, the agencies and contract numbers involved, and
previous Government actions, if known.
(d) Submission. The Contractor shall submit VECP's to
the Contracting Officer, unless this contract states otherwise. If this
contract is administered by other than the contracting office, the Contractor
shall submit a copy of the VECP simultaneously to the Contracting Officer and
to the Administrative Contracting Officer.
(e) Government action.
(1) The Contracting Officer will notify the Contractor of
the status of the VECP within 45 calendar days after the contracting office
receives it. If additional time is required, the Contracting Officer will
notify the Contractor within the 45-day period and provide the reason for the
delay and the expected date of the decision. The Government will process VECP's
expeditiously; however, it shall not be liable for any delay in acting upon a
(2) If the VECP is not accepted, the Contracting Officer
will notify the Contractor in writing, explaining the reasons for rejection.
The Contractor may withdraw any VECP, in whole or in part, at any time before
it is accepted by the Government. The Contracting Officer may require that the
Contractor provide written notification before undertaking significant
expenditures for VECP effort.
(3) Any VECP may be accepted, in whole or in part, by the
Contracting Officer's award of a modification to this contract citing this
clause and made either before or within a reasonable time after contract
performance is completed. Until such a contract modification applies a VECP to
this contract, the Contractor shall perform in accordance with the existing
contract. The decision to accept or reject all or part of any VECP is a
unilateral decision made solely at the discretion of the Contracting Officer.
(f) Sharing rates. If a VECP is accepted, the
Contractor shall share in net acquisition savings according to the percentages
shown in the table below. The percentage paid the Contractor depends upon (1)
this contract's type (fixed-price, incentive, or cost-reimbursement), (2) the
sharing arrangement specified in paragraph (a) above (incentive, program
requirement, or a combination as delineated in the Schedule), and (3) the
source of the savings (the instant contract, or concurrent and future
contracts), as follows:
Contractor's Share of Net Acquisition Savings
[Figures in Percent]
Incentive (voluntary) Program requirement (mandatory)
Con-current and Con-current and
Instant future contract Instant future contract contract rate rate contract rate rate
Fixed-price (includes fixed-price-award-fee; \1\ 50 \1\ 50
25 25 excludes other fixed-price incentive contracts)
Incentive (fixed-price or cost) (other than (\2\) \1\ 50
(\2\) 25 award fee)
Cost-reimbursement (includes cost-plus-award- \3\ 25 \3\ 25
15 15 fee; excludes other cost-type incentive contracts)
\1\ The Contracting Officer may increase the Contractor's
sharing rate to as high as 75 percent for each VECP.
\2\ Same sharing arrangement as the
contract's profit or fee adjustment formula.
\3\ The Contracting Officer may increase the Contractor's
sharing rate to as high as 50 percent for each VECP.
(g) Calculating net acquisition savings.
(1) Acquisition savings are realized when (i) the cost or price is reduced on the instant contract,
(ii) reductions are negotiated in concurrent contracts, (iii) future contracts
are awarded, or (iv) agreement is reached on a lump-sum payment for future
contract savings (see subparagraph (i)(4) below). Net
acquisition savings are first realized, and the Contractor shall be paid a
share, when Government costs and any negative instant contract savings have
been fully offset against acquisition savings.
(2) Except in incentive contracts, Government costs and any
price or cost increases resulting from negative instant contract savings shall
be offset against acquisition savings each time such savings are realized until
they are fully offset. Then, the Contractor's share is calculated by
multiplying net acquisition savings by the appropriate Contractor's percentage
sharing rate (see paragraph (f) above). Additional Contractor shares of net
acquisition savings shall be paid to the Contractor at the time realized.
(3) If this is an incentive contract, recovery of Government
costs on the instant contract shall be deferred and offset against concurrent
and future contract savings. The Contractor shall share through the contract
incentive structure in savings on the instant contract items affected. Any
negative instant contract savings shall be added to the target cost or to the
target price and ceiling price, and the amount shall be offset against
concurrent and future contract savings.
(4) If the Government does not receive and accept all items
on which it paid the Contractor's share, the Contractor shall reimburse the
Government for the proportionate share of these payments.
(h) Contract adjustment. The modification accepting
the VECP (or a subsequent modification issued as soon as possible after any
negotiations are completed) shall--
(1) Reduce the contract price or estimated cost by the
amount of instant contract savings, unless this is an incentive contract;
(2) When the amount of instant contract savings is negative,
increase the contract price, target price and ceiling price, target cost, or
estimated cost by that amount;
(3) Specify the Contractor's dollar
share per unit on future contracts, or provide the lump-sum payment;
(4) Specify the amount of any Government costs or negative
instant contract savings to be offset in determining net acquisition savings
realized from concurrent or future contract savings; and
(5) Provide the Contractor's share of any net acquisition
savings under the instant contract in accordance with the following:
(i) Fixed-price contracts--add to
(ii) Cost-reimbursement contracts--add to contract fee.
(i) Concurrent and future
(1) Payments of the Contractor's share of concurrent and
future contract savings shall be made by a modification to the instant contract
in accordance with subparagraph (h)(5) above. For incentive contracts, shares
shall be added as a separate firm-fixed-price line item on the instant
contract. The Contractor shall maintain records adequate to identify the first
delivered unit for 3 years after final payment under this contract.
(2) The Contracting Officer shall calculate the Contractor's
share of concurrent contract savings by (i)
subtracting from the reduction in price negotiated on the concurrent contract
any Government costs or negative instant contract savings not yet offset and
(ii) multiplying the result by the Contractor's sharing rate.
(3) The Contracting Officer shall calculate the Contractor's
share of future contract savings by (i) multiplying
the future unit cost reduction by the number of future contract units scheduled
for delivery during the sharing period, (ii) subtracting any Government costs
or negative instant contract savings not yet offset, and (iii) multiplying the
result by the Contractor's sharing rate.
(4) When the Government wishes and the Contractor agrees,
the Contractor's share of future contract savings may be paid in a single lump
sum rather than in a series of payments over time as future contracts are awarded.
Under this alternate procedure, the future contract savings may be calculated
when the VECP is accepted, on the basis of the Contracting Officer's forecast
of the number of units that will be delivered during the sharing period. The
Contractor's share shall be included in a modification to this contract (see
subparagraph (h)(3) above) and shall not be subject to
(5) Alternate no-cost settlement method. When, in accordance
with subsection 48.104-4 of the Federal Acquisition Regulation, the Government
and the Contractor mutually agree to use the no-cost settlement method, the
(i) The Contractor will keep all
the savings on the instant contract and on its concurrent contracts only.
(ii) The Government will keep all the savings resulting from
concurrent contracts placed on other sources, savings from all future
contracts, and all collateral savings.
(j) Collateral savings. If a VECP is accepted, the
Contracting Officer will increase the instant contract amount, as specified in
paragraph (h)(5) of this clause, by a rate from 20 to 100 percent, as
determined by the Contracting Officer, of any projected collateral savings
determined to be realized in a typical year of use after subtracting any
Government costs not previously offset. However, the Contractor's share of
collateral savings will not exceed the contract's firm-fixed-price, target
price, target cost, or estimated cost, at the time the VECP is accepted, or
$100,000, whichever is greater. The Contracting Officer will be the sole
determiner of the amount of collateral savings.
(k) Relationship to other incentives. Only those
benefits of an accepted VECP not rewardable under performance, design-to-cost
(production unit cost, operating and support costs, reliability and
maintainability), or similar incentives shall be rewarded under this clause.
However, the targets of such incentives affected by the VECP shall not be
adjusted because of VECP acceptance. If this contract specifies targets but
provides no incentive to surpass them, the value engineering sharing shall
apply only to the amount of achievement better than target.
(l) Subcontracts. The Contractor shall include an
appropriate value engineering clause in any subcontract of $100,000 or more and
may include one in subcontracts of lesser value. In calculating any adjustment
in this contract's price for instant contract savings (or negative instant
contract savings), the Contractor's allowable development and implementation
costs shall include any subcontractor's allowable development and
implementation costs, and any value engineering incentive payments to a
subcontractor, clearly resulting from a VECP accepted by the Government under
this contract. The Contractor may choose any arrangement for subcontractor value
engineering incentive payments; provided, that the payments shall not reduce
the Government's share of concurrent or future contract savings or collateral
(m) Data. The Contractor may restrict the
Government's right to use any part of a VECP or the supporting data by marking
the following legend on the affected parts:
"These data, furnished under the Value Engineering
clause of contract . . . . . . . . . . , shall not be disclosed outside the
Government or duplicated, used, or disclosed, in whole or in part, for any
purpose other than to evaluate a value engineering change proposal submitted
under the clause. This restriction does not limit the Government's right to use
information contained in these data if it has been obtained or is otherwise
available from the Contractor or from another source without limitations."
If a VECP is accepted, the Contractor hereby grants the
Government unlimited rights in the VECP and supporting data, except that, with
respect to data qualifying and submitted as limited rights technical data, the
Government shall have the rights specified in the contract modification
implementing the VECP and shall appropriately mark the data. (The terms
"unlimited rights" and "limited rights" are defined in Part
27 of the Federal Acquisition Regulation.)
52.216-18 ORDERING (OCT 1995)
(a) Any supplies and services to be furnished under this
contract shall be ordered by issuance of delivery orders or task orders by the
individuals or activities designated in the Schedule. Such orders may be issued
from date of contract award through three months before contract expiration
(b) All delivery orders or task orders are subject to the
terms and conditions of this contract. In the event of conflict between a
delivery order or task order and this contract, the contract shall control.
(c) If mailed, a delivery order or task order is considered
"issued" when the Government deposits the order in the mail. Orders
may be issued orally, by facsimile, or by electronic commerce methods only if
authorized in the Schedule.