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 DOD costs which directly result from development and implementation of the VECP, such as test and evaluation of the VECP, and any increased costs in DOD operations, maintenance, and logistic support.

(A) Reduce the target cost of items affected by the VECP by ICS. The estimated cost for "limitation of cost" or "limitation of funds" purposes (7-203.3), 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 to 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)

(1)

Concurrent Contracts.

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.

(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, 1.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.

(1) Definition.

The term unit cost reduction for future contract sharing shall be the

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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 DD Form 250, Material Inspection and Receiving Report, 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) (1).

(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 without adjustment to any of the contract incentive paramenters.

(4) Collateral Savings. If an accepted VECP results in a measurable net reduction in the cognizant Military Department'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 (1.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 line item independent 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 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 Military Department.

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(f) Payment. The Contractor's concurrent and future contract shares should be paid upon modification of concurrent contracts or future contract award, or within six (6) months thereafter. However, any such payments are subject to the condition that to the extent the Government does not receive delivery of and accept all items on which the share is paid, the Contractor shall reimburse the Government the proportionate share of the payments. If this clause is modified to provide for lump sum payments, such payments shall be made upon modification of the instant contract.

(g) Operation and Maintenance Contracts. If this is a contract for overhaul or maintenance (including repair, alteration, modification or modernization), the Contractor will be paid a share of future contract savings realized by the Government only on overhaul and maintenance of the designated items accomplished by purchase, under contract, by the designated purchasing office. Only collateral savings will be paid on application of accepted VECPS to overhaul and maintenance of items within Government resources.

(h) Subcontracts. The Contractor shall include appropriate VE arrangements in any subcontract of $100,000 or greater, and may include such arrangements in contracts of lesser value. To compute any adjustment in the contract price under paragraph (e) (1) above, the Contractor's cost of development and implementation of a VECP which is accepted under this contract shall include any development and implementation costs of a subcontractor and any VE incentive payments to a subcontractor, which clearly pertain to such VECP. However, no such payment or accrual to a subcontractor will be permitted, either as a part of the contractor's development or implementation costs or otherwise, to reduce the Government's share on collateral savings or additional purchases as contemplated by paragraphs (e)(2), (3) or (4) of this clause.

(1) Data. The Contractor may restrict the Government's right to use any sheet of a VECP or of the supporting data, submitted pursuant to this clause, in accordance with the terms of following legend if it is marked on such sheet:

"This data furnished pursuant to the Value Engineering clause of contract DAAK50-79-C0025 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 VECP submitted under said clause. This restriction does not limit the Government's right to use information contained in this data if it is or has been obtained, or is otherwise available, from the Contractor or from another source, without limitations."

In the event of acceptance of a VECP, the Contractor hereby grants to the Government unlimited rights, as defined in the clause of ASPR 7-104.9(a), in the VECP and supporting data, except that, with respect to data which qualifies as and is submitted as limited rights technical data in accordance with the clause ASPR 7-104.9(a), the Government shall have the rights specified in the contract modification referred to in paragraph (d) hereof and the data shall be appropriately marked.

(j) Miscellaneous Provisions.

(1) For purposes of sharing under paragraph (e) (1) above, the term "instant contract" shall not include any modifications of the instant contract, executed after acceptance of the particular VECP, by which the Government increases the quantity of any item or adds any item, nor shall it include any extension of the instant contract through exercise of an option provided under this contract after acceptance of the VECP. Such

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modifications and extensions shall be considered "future contracts" within the provisions of paragraph (e) (3) of this clause.

(2)

If this is an indefinite delivery type contract, the term "instant contract" for purposes of sharing under paragraph (e) (1) above shall include only those orders actually placed by the Government up to the time the particular VECP is accepted. All orders placed subsequent to the acceptance of the particular VECP shall be considered "future contracts" within the provisions of paragraph (e)(3) of this clause.

(3) If this clause is included in a basic ordering agreement, the term "instant contract", for purposes of sharing under paragraph (e)(1) above, shall be the order under which the particular VECP is approved. Other orders under the same agreement shall be considered either "concurrent contracts" (if awarded prior to acceptance of the VECP) or 'future contracts' (if awarded after acceptance of the VECP), within the provisions of paragraph (e) (2) or (e)(3) of this clause, respectively.

(4) If this clause is included in a multi-year contract, the term "instant contract" for the purpose of sharing under paragraph (e) (1) above, shall be the funded contract at the time the VECP is approved, and items purchased under subsequent funding under this contract shall be treated under the future contract VE sharing provisions in paragraph (e) (3) of this clause. The sharing period shall be the entire life of the multi-year contract, or three (3) years after delivery of the first item incorporating the VECP, whichever is longer.

(5) If this clause is included in a fixed-price contract providing for prospective price redetermination, the term "instant contract" for purposes of sharing under paragraph (e) (1) above shall be that period for which firm prices have been established. The remaining periods under this contract shall be treated under the future contract VE sharing provisions in paragraph (e)(3) of this clause.

(6) The Contracting Officer may require the Contractor to provide written notification prior to undertaking significant expenditures for VECP effort.

(k) Relation to Other Incentives. Those benefits of an approved VECP which are not rewardable under performance, design to cost (production unit cost, operating and support (0&S) costs, reliability and maintainability (R&M)) or similar incentives of the contract shall be rewarded under subparagraph (e) of this clause. The targets of such incentives affected by the VECP shall not be adjusted because of the acceptance of the VECP. If the contract does not provide such incentives to better specified targets, the VE sharing shall apply only to the amount of achievement better than target.

DAR 7-104.44 (a) (1)

*L.66 NOTICE OF RADIOACTIVE MATERIALS (1974 APR)

(a) The Contractor shall notify the Contracting Officer or his designee, in writing 100 days prior to the delivery of, or prior to completion of any servicing required by this contract of, items containing either (i) radioactive material requiring specific licensing under the regulations issued pursuant to the Atomic Energy Act 1954, as amended, and set forth in Title 10 CFR, in effect on the date of this contract, or (ii) other radioactive

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material not requiring specific licensing in which the radioactivity per gram is greater than 0.002 microcuries. Such notice shall specify the part or parts of the items which contain such radioactive materials, a description of the materials, the name and activity of the isotope, the manufacturer of the materials, and any other information known to the Contractor which will put users of the items on notice as to the hazards involved (BOB NO. 38-RO27).

(b) All items, parts or subassemblies which contain radioactive materials in which the radioactivity per gram is greater than 0.002 microcuries and all containers in which such items, parts or subassemblies are delivered to the Government shall be clearly marked and labeled as required by the latest revision of MIL-STD-1458 in effect on the date of the con

tract.

DAR 7-104.80

**L.68COST ACCOUNTING STANDARDS (1978 MAY)

(a) Unless the Cost Accounting Standards Board has prescribed rules or regulations exempting the Contractor or this contract from standards, rules, and regulations promulgated pursuant to 50 U.S.C. App. 2168 (Public Law 91-379, August 15, 1970), the contractor, in connection with this contract shall:

(1) By submission of a Disclosure Statement, disclose in writing his cost accounting practices as required by regulations of the Cost Accounting Standards Board. The required disclosures must be made prior to contract award unless the Contracting Officer provides a written notice to the Contractor authorizing post-award submission in accordance with regulations of the Cost Accounting Standards Board. The practices disclosed for this contract shall be the same as the practices currently disclosed and applied on all other contracts and subcontracts being performed by the Contractor and which contain this Cost Accounting Standards clause. If the Contractor has notified the Contracting Officer that the Disclosure Statement contains trade secrets and commercial or financial information which is privileged and confidential, the Disclosure Statement will be protected and will not be released outside the Government.

(2) Follow consistently the cost accounting practices disclosed pursuant to (1) above in accumulating and reporting contract performance cost data concerning this contract. If any change in disclosed practices is made for purposes of any contract or subcontract subject to Cost Accounting Standards Board requirements, the change must be applied prospectively to this contract, and the Disclosure Statement must be amended accordingly. If the contract price or cost allowance of this contract is affected by such changes, adjustment shall be made in accordance with subparagraph (X4) or (X5) below, as appropriate.

(3) Comply with all Cost Accounting Standards in effect on the date of award of this contract or if the Contractor has submitted cost or pricing data, on the date of final agreement on price as shown on the Contractor's signed certificate of current cost or pricing data. The Contractor shall also comply with any Cost Accounting Standard which hereafter becomes applicable to a contract or subcontract of the Contractor. Such compliance shall be required prospectively from the date of applicability to such contract or subcontract,

(4)(A) Agree to an equitable adjustment as provided in the Changes Clause of this contract if the contract cost is affected by change which, pursuant to (3) above, the contractor is required to make to his established cost accounting practices whether such practices are covered by a Disclosure Statement or not.

(B) Negotiate with the Contracting Officer to determine the terms and conditions under which a change may be made to either a disclosed cost accounting practice or an established cost accounting practice, other than a change made under other provisions of this subparagraph (4): Provided, that no agreement may be made under this provision that will increase costs paid by the United States.

(C) When the parties agree to a change to either a disclosed cost accounting practice or an established cost accounting practice, other than a change under (4XA) above, negotiate an equitable adjustment as provided in the changes clause of this contract.

(5) Agree to an adjustment of the contract price or cost allowance, as appropriate, if he or a subcontractor fails to comply with an applicable Cost Accounting Standard or to follow any practice disclosed pursuant to subparagraphs (a)(1) and (a)(2) above and such failure results in any increased costs paid by the United States. Such adjustment shall provide for recovery of the increased costs to the United States together with interest thereon computed at the rate determined by the Secretary of the Feasury pursuant to Public Law 92-41, 85 STAT. 97, or seven percent (7%) per annum, whichever is less, from the time the payment by the United States was made to the time the adjustment is effected.