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(b) Cost-Plus-Incentive-Fee Contracts: Substitute the following “Sharing" provision for paragraph (e) of the applicable clause in DOTPR 12-7.15113 (a):

(e) Sharing. If a VECP submitted by the Contractor pursuant to this clause is accepted, the Contractor shall share in the savings realized by the Government in accordance with the following provision:

(1) Instant Contract. (i) Definitions: (A) Instant contract savings to the Contractor (ICS) is the unit cost reduction times the number of units affected in the instant contract. The proposed unit cost reduction includes estimated allowable Contractor development and implementation costs (CC). The Contractor's development and implementation costs include any subcontractor development and implementation costs and any subcontractor incentive payments (see (h) below). For purposes of this clause, Contractor development costs are those costs incurred after the Contractor has identified a specific value engineering project and prior to acceptance by the Government.

(B) Government costs (GC) are those costs which directly result from development and implementation of the VECP, such as test and evaluation of the VECP, and any increased costs in operations, maintenance, and logistic support.

(ii) Calculations and actions: (A) Reduce the target cost of items affected by the VECP by ICS. The estimated cost for "limi. tation of cost” or “limitation of funds" purposes (12–7.202-3), if different or separately stated, should also be reduced by the same amount.

(B) If ICS exceeds GC, add 35% (20% if this is a VE Program Requirement Change (VEPRC)) of the excess of minimum, target, and maximum fees relating to such items.

(C) If GC exceeds ICS, but acceptance of the VECP is still desirable due to concurrent or future savings, do not adjust minimum, target, or maximum fees, but offset the amount GC exceeds ICS against concurrent or future contract savings.

(D) If the Contractor cost of developing and implementing the VECP would result in an increase in the instant contract target cost, but the VECP is still desirable due to concurrent or future savings, equitably adjust the total target cost and fee in accordance with the “Changes" clause. Offset this increase and any GC against concurrent or future savings.

(2) Concurrent contracts. (i) If the VECP accepted under this contract is also used on concurrent contracts of the purchasing office for essentially the same items the Contractor shall be paid a share of any sav. ings as calculated in (ii) below.

(ii) Calculations: (A) Determine the reduction in the price of each concurrent

contract(s) as a result of incorporating the VECP.

(B) Subtract from the total amount in (A) any Government costs (GC) not yet offset (if GC was greater than ICS) in (e)(1) (ii) (C) or (D) above, and any increase in the instant contract target cost, i.e., if ICS was negative in (e)(1)(ii)(D). If the resulting number is positive, multiply it by 35% (20% if this is a VEPRC). Add this amount to the instant contract as a separate line item independent of the incentive sharing arrangement and without adjustment to any of the contract incentive parameters.

(3) Future contracts. (i) Definition. The term unit cost reduction for future contract sharing shall be the unit cost reduction under this instant contract without deducting any cost of development or implementation.

(ii) If the VECP accepted under this contract is used on future purchases of essentially the same item by the purchasing office, or its successor, the Contractor shall share in the savings on all affected end share in the savings items scheduled for delivery not later than three years after acceptance of the first item incorporating the VECP, or until the originally scheduled delivery date of the last affected end item under the instant contract, whichever is later. When sharing on future contracts is expected, the Contractor shall be responsible for the following:

(A) Maintaining records adequate to sup. port identification of the first delivered unit to which the VECP applies. These records are considered an integral part of contract documentation and shall be maintained for a period of three years after final payment on the contract under which the VECP was accepted.

(B) Annotating the receiving report or invoice, which applies to the initial unit covered by the VECP with the following statement: “This is the initial unit delivered which incorporates VECP No. --, Contract Modification No. --, dated --.".

(iii) Calculations. At the time each eligible future contract is awarded:

(A) Determine the number of units scheduled to be delivered prior to expiration of the Contractor sharing period determined in (ii) above. Multiply this by the unit cost reduction as defined in (e)(3)(i).

(B) Subtract from the total amount in (A) any Government costs or instant contract increases not yet offset in (e)(1)(ii) (C) or (D), or in (e)(2)(ii)(B), or in other contracts awarded since acceptance of the VECP. If the resulting number is positive, multiply it by 35% (20% if this is a VEPRC). Add this amount to the instant contract as a separate line item independent of the incentive sharing arrangement and withour adjustment to any of the contract incentive parameters.

(4) Collateral savings. If an accepted VECP results in a measurable net reduction in the agency's overall documentable projected costs of maintenance, operation, lo gistic support or Government-furnished property, which exceeds any increase in costs attributable to incorporation of such VECP, including acquisition costs, the contract shall be increased by twenty percent (20%) of the projected net reduction in ascertainable collateral costs (i.e., savings determined to be realized during an average year of use of the item in which the change is incorporated) and, if applicable, of the actual savings accruing from a change or reduction of Government-furnished property under the instant contract. Add this amount to the instant contract as a separate item in dependent of the incentive sharing arrangement and without adjustment to any of the contract incentive parameters. However, such increase representing the Contractor's share of collateral savings shall, in no event, exceed the price of this contract or $100,000, whichever is greater. The determination of the amount of collateral savings, if any, will be made solely by the Government and sha

not be subiect to the “Disputes" clause of this contract. In all cases, degradation of performance, service life, or capability shall be a consideration in the determination of actual savings to the agency.

(End of clause paragraph) (c) Cost-plus-fixed fee and cost-plusaward-fee contracts: Substitute the following “Sharing" provision for paragraph (e) of the applicable clause in 12-7.151-13(a):

and any increased costs in operations, maintenance, and logistic support.

(ii) Calculations and actions: (A) If ICS exceeds GC, add 25% (15% if this a VE Program Requirements Change (VEPRC) of the excess to the contract fee), and reduce the estimated cost of the items affected by the VECP, for "limitation of cost" or "limitation of funds" purposes (12-7.202-3) by ICS.

(B) If GC exceeds ICS, but acceptance of the VECP is still desirable due to concurrent or future savings, do not adjust contract fee, but offset the amount GC exceeds ICS against concurrent or future savings.

(C) If the Contractor cost of developing and implementing the VECP would result in an increase in instant contract cost, but the VECP is still desirable due to concurrent or future savings, equitably adjust the estimated cost and fee in accordance with the "Changes" clause. Offset the increase and any GC against concurrent or future sayings.

(2) Concurrent contracts. (i) If the VECP accepted under this contract is also used on concurrent contracts of the purchasing office for essentially the same items the Contractor shall be paid a share of any savings as calculated in (ii) below.

(ii) Calculations: (A) Determine the reduction in the price of each concurrent contract(s) as a result of incorporating the VECP.

(B) Subtract from the total amount in (A) any Government Costs (GC) not yet offset (if GC was greater than ICS) in (e)(1)(ii) (B) or (C) above, and any increase in the instant contract price, i.e., if ICS was negative in (e)(1)(ii)(C). If the resulting number is positive, multiply it by 25% (15% if this is a VEPRC). Add this amount to the contract

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(e) Sharing. If a VECP submitted by the Contractor pursuant to this clause is accepted the Contractor shall share in savings realized by the Government in accordance with the following provisions:

(1) Instant contract. (i) Definitions: (A) Instant contract savings to the Contractor (ICS) is the unit cost reduction times the number of units affected in the instant contract. The proposed unit cost reduction in cludes estimated allowable Contractor development and implementation costs (CC). The Contractor's development and imple mentation costs include any subcontractor development and implementation costs and any subcontractor incentive payments (see (h) below). For purposes of this clause, Contractor development costs are those costs incurred after the Contractor has identified a specific value engineering project and prior to acceptance by the Government.

(B) Government Costs (GC) are those costs which directly result from development and implementation of the VECP, such as test and evaluation of the VECP,

(3) Future contracts. (i) Definition. The term unit cost reduction for future contract sharing shall be the unit cost reduction under this instant contract without deducting any cost of development or implementation.

(11) If the VECP accepted under this contract is used on future purchases of essentially the same item by the purchasing office, or its successor, the Contractor shall share in the savings on all affected end items scheduled for delivery not later than three years after acceptance of the first item incorporating the VECP, or until the originally scheduled delivery date of the last affected end item under the instant contract, whichever is later. When sharing on future contracts is expected, the Contractor shall be responsible for the following:

(A) Maintaining records adequate to support identification of the first delivered unit to which the VECP applies. These records are considered an integral part of contract

documentation and shall be maintained for a period of three years after final payment on the contract under which the VECP was accepted.

(B) Annotating the receiving report or invoice, which applies to the initial unit coyered by the VECP with the following statement: “This is the initial unit delivered which incorporates VECP No. --, Contract Modification --, Dated --."

(iii) Calculations. At the time each eligible future contract is awarded:

(A) Determine the number of units scheduled to be delivered prior to expiration of the Contractor sharing period determined in (ii) above. Multiply this by the unit cost reduction as defined in (e)(3)(i).

(B) Subtract from the total amount in (A) any Government costs or instant contract increases not yet offset in (e)(1)(ii) (B) or (C), or in (e)(2)(ii)(B), or in other contracts awarded since acceptance of the VECP. If the resulting number is positive, multiply it by 25% (15% if this is a VEPRC).

(4) Collateral savings. If an accepted VECP results in a measurable net reduction in the cognizant agency's overall documentable projected costs of maintenance, operation, logistic support or Government-furnished property, which exceeds any increase in costs attributable to incorporation of such VECP, including acquisition costs, the contract shall be increased by twenty percent (20%) of the projected net reduction in ascertainable collateral costs (i.e., savings determined to be realized during an average year of use of the item in which the change is incorporated) and, if applicable, of the actual savings accruing from a change or reduction of Government-furnished property

urnished property under the instant contract. However, such increase representing the Contractor's share of collateral savings shall, in no event, exceed the price of this contract or $100,000, whichever is greater. The determination of the amount of collateral savings, if any, will be make solely by the Government and shall not be subject to the “Disputes" clause of this contract. In all cases, degradation of performance, service life, or capability shall be a consideration in the determination of actual savings to the agency.

(End of clause paragraph) (d) When the sharing provisions applicable to incentive contracts are to be modified in accordance with $ 121.5203-1(c), clause paragraph (e) in paragraph (b) of this section shall be further modified as follows:

(1) Change clause paragraph (e)(1)(ii) to provide substantially as follows:

(ii) If the cost reduction proposal submitted pursuant to this clause involves antici

pated decrease in the cost of performance of this contract and is accepted by the Government, the parties agree that neither the target cost, target profit, nor ceiling price of the instant contract shall be adjusted by reason of the acceptance of such proposal. The new requirement will be incorporated into the contract by a contract modification which will state that it is made pursuant to this Value Engineering clause. When the cost of performance of this contract is increased as a result of the changes, the equitable adjustment increasing the contract price shall be in accordance with the Changes clause rather than under this clause, but the resulting contract modification will state that it is made pursuant to this clause.

(End of clause paragraph) (2) Change clause paragraph (e)(2)(ii)(B) to provide substantially as follows:

(B) Subtract from the total amount in (A) any government costs not yet offset and any increase in the instant contract target cost. If the resulting number is positive, multiply it by 35% (20 % if VEPRC). Add this amount to the instant contract as a separate line item independent of the incentive sharing arrangement and without adjustment to any of the contract incentive parameters.

(End of clause paragraph) (3) Substitute the definition in 127.151-13(a)(5) for the definition in clause paragraph (e)(3)(i).

(4) Change the clause paragraph (e)(3)(iii)(B) to provide substantially as follows:

(B) Subtract from the total amount in (A) any government costs or instant contract increases not yet offset. If the resulting number is positive, multiply it by 35% (20% if VEPRC). Add this amount to the instant contract as a separate line item independent of the incentive sharing arrangement and without adjustment to any of the contract incentive parameters.

(End of clause paragraph)

8 12–7.251-10 Multi-year procurement.

The clauses set forth in DOTPR 127.151-14 shall be included in all contracts under the multi-year procurement method in accordance with instructions contained in DOTPR 121.55.

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8 12-7.302–29 Pricing of adjustments.

Insert the clause set forth in FPR 17.102-20 under the conditions prescribed therein. 8 12–7.302-30 Disabled veterans and veter.

ans of the Vietnam era. Insert the clause set forth in FPR Temporary Regulation 39 of July 1976 in all contracts which exceed $10,000. $ 12–7.302-31 Utilization of minority busi

ness enterprises. Insert the clause set forth in FPR 11.1310-2(a) under the conditions prescribed therein.

8 12–7.303-12 Subcontracts.

Insert the clause set forth in FPR 17.303-12 under the conditions prescribed therein. 8 12-7.303–16 Price reduction for defective

cost or pricing data. Insert the appropriate clause set forth in FPR 1-3.814-1 under the conditions prescribed therein.

8 12–7.303-21 Advance payments.

When advance payments are to be made in accordance with FPR Subpart 1-30.4, insert the appropriate provisions as prescribed in FPR 1-30.414-2.

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