The Code of Federal Regulations of the United States of America

duction during the remainder of the contract, noting any effect on maintaining the contract delivery schedule; and

(vi) The dates of any previous submissions of the proposal, the numbers of any Government contracts under which submitted, and the previous actions by the Government, if known.

(c) The Government shall not be liable for any delay in acting upon, or for any failure to act upon, any proposal submitted pursuant to this clause. The decision of the Contracting Officer as to the acceptance of any such proposal under this contract shall be final and shall not be subject to the "Disputes" clause of this contract. Unless and until a change order applies such a proposal to this contract, the Contractor shall remain obligated to perform in accordance with its existing terms. The Contracting Officer may accept in whole or in part any cost reduction proposal submitted pursuant to this clause by issuing a change order which will identify the cost reduction proposal on which it is based.

(d) If a cost reduction proposal submitted pursuant to this clause is accepted under this contract, an equitable adjustment in the contract price and in any other affected provisions of this contract shall be made in accordance with this clause and the "Changes" clause of this contract. If the equitable adjustment involves a reduction in the contract price, it shall be established by determining the amount of the total estimated decrease in the Contractor's cost of performance resulting from the adoption of the cost reduction proposal, taking into account the cost of implementing the change by the Contractor, and reducing the contract price by ---percent (----%) of such decrease. If the equitable adjustment involves an increase in the contract price, such increase shall be established under the "Changes" clause rather than under this paragraph (d). The resulting contract modification will state that it is made pursuant to this clause.

(e) Cost reduction proposals submitted under the provisions of any other contract also may be submitted under this contract for consideration pursuant to the terms of this clause.

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

This data furnished pursuant to the value engineering incentive clause of contract

shall not be disclosed outside the Government, or be duplicated, used, or disclosed, in whole or in part, for any purpose other than to evaluate a value engineering proposal submitted under said clause.

• Insert the appropriate percentage, i.e., the contractor's share (see § 1.1702-2(c)).

33-605-65

This restriction does not limit the Government's right to use information contained in this data if it is or has been obtained from another source, or is otherwise available, without limitations. If such a proposal is accepted by the Government by issuance is a change order under the "Changes" clause of said contract after the use of this data in such an evaluation, the Government shall have the right to duplicate, use, and disclose any data pertinent to the proposal as accepted, in any manner and for any purpose whatsoever, and have others so do.

After the issuance of a change order accepting a value engineering proposal, but not prior thereto, such proposal and the supporting data shall, for the sole purpose of supplementing the rights granted to the Government under this paragraph, be considered "Subject Data" within the meaning of the "Data" clause of this contract.

If the contract is to include a "Technical Information" clause rather than a "Data" clause, substitute "technical information" for "Subject Data" and "Technical Information" for "Data" in the last sentence of the clause above. See Subpart B, Part 9 of this chapter. § 1.1705-2 Value engineering incentive clause for fixed-price incentive contracts (firm targets).

For fixed-price incentive contracts (firm targets), insert the clause set forth in § 1.1705-1, modified by the substitution of the following paragraph (d) thereof:

(d) If a cost reduction proposal submitted pursuant to this clause and affecting any of the items described in paragraph (a) of the "Incentive Price Revision (Firm Target)" clause of this contract is accepted under this contract, an equitable adjustment in the total target price of such items and in any other affected provision of this contract shall be made in accordance with this clause and the "Changes" clause of this contract. The equitable adjustment in such total target price shall be established by (1) determining the amount of the total estimated decrease in the Contractor's cost of performance resulting from adoption of the cost reduction proposal, taking into account the cost of implementing the change by the Contractor, and (ii) deducting the full amount of this estimated decrease from the total target cost and adding percent (%)1 of such amount to the total target profit relating to such items. The maximum dollar limit on the total final price of such items shall be decreased by percent (------%) of this decrease. If

1 Insert the appropriate percentage, i.e., the contractors share (see § 1.1702-2(c)). 2 Insert the appropriate percentage, i.e., the Government's share (see § 1.1702-2 (c)).

the equitable adjustment involves an increase in the contract price, such increase shall be established under the "Changes" clause rather than under this paragraph (d). The resulting contract modification will state that it is made pursuant to this clause. (May 1964).

[29 F.R. 9748, July 21, 1964]

§ 1.1705-3 Value engineering incentive clause for fixed-price incentive contracts (successive targets).

For fixed-price incentive (successive targets) contracts, insert the clause in §1.1705-1, modified to substitute the following for paragraph (d) thereof:

(d) (1) If a cost reduction proposal submitted pursuant to this clause and affecting any of the items described in paragraph (a) of the "Incentive Price Revision (Successive Targets)" clause of this contract is accepted under this contract, an equitable adjustment in the total initial or firm target price of such items and in any other affected provision of this contract shall be made in accordance with this clause and the "Changes" clause of this contract. Except as otherwise provided in paragraphs (2) and (3) below the equitable adjustments in such total initial or firm target price shall be established by (1) determining the amount of the total estimated decrease in the Contractor's cost of performance resulting from adoption of the cost reduction proposal, taking into account the cost of implementing the change by the Contractor, and (ii) deducting the full amount of this estimated decrease from the initial or firm total target cost of such items (whichever is in effect at the time of adjustment), and adding percent (------%),1 or such other percentage as may be applicable pursuant to paragraph (2) below, of such amount to the initial or firm target profit relating to such items (whichever is in effect at the time of adjustment). Except where a firm fixed-price has been established in accordance with paragraph (c) of said price revision clause, if such a cost reduction proposal is accepted under this contract either before or after the establishment of a firm profit adjustment formula in accordance with said paragraph (c), the maximum dollar limit on the total final price of such items shall be decreased by percent (‒‒‒‒‒‒%) of the decrease.

(2) If a cost reduction proposal submitted pursuant to this clause and affecting any of the items referred to in paragraph (1) above is accepted under this contract after the establishment of a firm fixed-price in accordance with paragraph (c) of the "Incentive Price Revision (Successive Targets)" clause of this contract, an equitable adjust

1 Insert the appropriate percentage, i.e., the contractor's share (see § 1.1702–2(c)). 2 Insert the appropriate percentage, i.e., the Government's share (see § 1.1702–2(c)).

ment in the contract price and in any other affected provisions of this contract shall be made in accordance with this clause and the "Changes" clause of this contract. If the equiptable adjustment involves a reduction in the contract price, it shall be established by determining the amount of the total estimated decrease in the Contractor's cost of performance resulting from the adoption of the cost reduction proposal, taking into account the cost of implementing the change by the Contractor, and reducing the contract price by percent (------ %)2 of such decrease. If a firm profit adjustment formula is established in accordance with said paragraph (c), the percentage set forth in paragraph (1)(ii) above may be modified for application to cost reduction proposals, submitted pursuant to this clause and affecting any of the items referred to in paragraph (1) above, which are accepted under this contract after the establishment of said formula.

(3) If an equitable adjustment pursuant to paragraph (1) or (2) above should involve an increase in the contract price, such increase shall be established under the "Changes" clause rather than this paragraph (d). The resulting contract modification shall state that it was made pursuant to this clause. (May 1964)

[29 F.R. 9749, July 21, 1964]

§ 1.1705-4 Value engineering incentive clause for fixed-price contracts providing for prospective price redetermination.

For fixed-price contracts providing for prospective price redetermination, insert the clause set forth in § 1.1705-1, modified by adding the following to the second sentence of paragraph (d) thereof:

Provided, That for any redetermination of price, under the "Price Redetermination" clause of this contract, having an effective date subsequent to the effective date of any change order issued pursuant to this clause, the redetermined price shall not be reduced as a consequence of such change order by more than percent (------ %) of the estimated decrease in that part of the Contractor's cost of performance that is attributable to the pertinent price redetermination period.

§ 1.1705-5 Value engineering incentive clause for cost-plus-incentive-fee

contracts.

For cost-plus-incentive-fee contracts, insert the clause set forth in § 1.1705–1, modified to substitute the following paragraph (d) thereof:

(d) If a cost reduction proposal submitted pursuant to this clause is accepted,

*Insert the appropriate percentage, 1.e., the Government's share (see § 1.1702-2(c)).

an equitable adjustment in target cost and fee and in any other affected provision of this contract shall be made in accordance with this clause and the "Changes" clause of this contract. The equitable adjustment in target cost and fee shall be established by (1) determining the amount of the total estimated decrease in the Contractor's cost of performance resulting from adoption of the cost reduction proposal, taking into account the cost of implementing the change by the Contractor; and (ii) deducting the full amount of this estimated decrease from the target cost and adding

percent

(‒‒‒‒‒‒ %)** of such amount to the minimum, target and maximum fees. If the equitable adjustment involves an increase in the cost of performance of the contract, such increase shall be established under the "Changes" clause rather than under this paragraph (d). The resulting contract modification will state that it is made pursuant to this clause.

§ 1.1706 Value engineering program requirement clauses.

If it is determined in accordance with § 1.1703 to include a Value Engineering Program Requirement in a contract, the applicable clause of those set forth below shall be used.

§ 1.1706-1 Value engineering program requirement clause for use in costplus-fixed-fee contracts.

VALUE ENGINEERING PROGRAM REQUIREMENT (AUG. 1963)

(a) The Contractor shall engage in a value engineering program, and submit progress reports thereon, as specified in the Schedule. In addition, the Contractor shall submit any cost reduction change proposals resulting from the required program. This clause does not, however, apply to any such proposal unless it is identified by the Contractor at the time of its submission to the Contracting Officer, as a proposal submitted pursuant to this clause. The cost reduction change proposals contemplated by this clause are those that:

(1) Would result in less costly items than those specified herein without impairing any of their essential functions and characteristics, such as service life, reliability, economy of their essential functions and characterissary standardized procedures; and

(ii) Would require, in order to be applied to this contract, a change order to this contract.

(b) Cost reduction proposals as defined herein will be processed expeditiously and in the same manner as prescribed for any other proposal which would likewise necessitate issuance of a contract change order. As a minimum, the following information

**Insert the appropriate percentage, 1.e., the contractor's share (see § 1.1703-2(c)).

will be submitted by the Contractor with each proposal:

(1) A description of the difference between the existing contract requirement and the proposed change, and the comparative advantages and disadvantages of each;

(ii) An itemization of the requirements of the contract which must be changed if the proposal is adopted and a recommendation as to how to make each such change (e.g., suggested revision);

(iii) An estimate of the reduction in performance costs that will result from adoption of the proposal taking into account the costs of implementation by the Contractor, and the basis for the estimate;

(iv) A prediction of any effects the proposed change would have on other costs to the Government, such as Government-furnished property costs, costs of related items and costs of maintenance and operation;

(v) A statement of the time by which a change order adopting the proposal must be issued so as to obtain the maximum cost reduction during the remainder of the contract, noting any effect on maintaining the contract delivery schedule; and

(vi) The dates of any previous submissions of the proposal, the numbers of any Government contracts under which submitted, and the previous actions by the Government, if known.

(d) If a cost reduction proposal submitted pursuant to this clause is accepted under this contract, an equitable adjustment in the fixed fee and in any other affected provision of this contract shall be made in accordance with this clause and the "Changes" clause of this contract. If the adjustment involves a reduction in the cost of the contract, the equitable adjustment in the fixed fee shall be established by (i) determining the amount of the total estimated decrease in the Contractors cost of performance resulting from adoption of the cost reduction proposal, taking into account the cost of implementing the change by the Contractor; and (ii) adding percent (------%) * of such amount to the fixed fee. If the equitable adjustment involves an increase in the cost of performance of the contract, such increase shall be established under the "Changes" clause rather than under this

paragraph (d). The resulting contract modification will state that it is made pursuant to this clause.

(e) Cost reduction proposals submitted under the provisions of any other contract may also be submitted under this contract for consideration pursuant to the terms of this clause.

(f) Any progress reports submitted pursuant to (a) above, and any value engineering proposal, including supporting data, submitted pursuant to this clause shall constitute "Subject Data" under the "Data" clause of this contract, whether or not change orders or contract modifications result therefrom. Notwithstanding any other provisions of this contract, the Government shall have the unrestricted right to apply any data pertinent to any cost reduction proposal in any manner and for any purpose whatsoever unless the Contracting Officer specifically agrees otherwise in writing. If the contract is to include a "Technical than clause rather Information" "Data" clause, substitute "Technical Information" for "Subject Data" and "Technical Information" for "Data" in the first sentence of paragraph (f) of the clause above. See Subpart B, Part 9 of this chapter.

§ 1.1706-2 Value engineering program requirement clause for use in costplus-incentive-fee contracts.

For cost-plus-incentive-fee contracts, insert the clause set forth in § 1.1706-1 except that paragraph (d) shall be deleted and paragraph (d) as set forth under § 1.1705-5 substituted in lieu thereof. The percentages inserted in said paragraph (d) shall be in accordance with § 1.1703-2.

§ 1.1706-3 Value engineering program requirement clause for use in fixedprice incentive (firm targets) con

tracts.

For fixed-price incentive (firm targets) contracts, insert the clause set forth in § 1.1706-1 except that paragraph (d) shall be deleted and paragraph (d), as set forth under § 1.1705-2, substituted in lieu thereof. The percentages inserted in paragraph (d) shall be in accordance with § 1.1703-2.

§ 1.1706-4 Value engineering program requirement clause for use in fixedprice incentive (successive targets) contracts.

For fixed-price incentive (successive targets) contracts, insert the clause set forth in §1.1706-1 except that paragraph (d) shall be deleted and paragraphs (d) (1) and (2), as set forth under § 1.1705-3,

substituted in lieu thereof. The percentages inserted in paragraph (d) (1) shall be in accordance with § 1.1703-2. § 1.1706-5 Value engineering program requirement clause for use in fixedprice contracts other than fixed-price incentive contracts.

For fixed-price contracts other than fixed-price incentive contracts, insert the clause set forth in § 1.1706-1 except that paragraph (d) shall be deleted and paragraph (d) of the clause set forth under § 1.1705-1 substituted in lieu thereof. The percentages inserted in said paragraph (d) shall be in accordance with § 1.1703-2. In addition, for fixedprice contracts providing for prospective redetermination, the following shall be added to the second sentence of said paragraph (d):

Provided, That for any redetermination of price, under the "Price Redetermination" clause of this contract, having an effective date subsequent to the effective date of any change order issued pursuant to this clause, the redetermined price shall not be reduced as a consequence of such change order by more than percent (----%) of the estimated decrease in that part of the Contractor's cost of performance that is attributable to the pertinent price redetermination period.

In selecting contracts for post-award orientation conferences, the following factors shall be considered:

(a) Nature and extent of the preaward survey and discussions with the contractor,

(b) Technical complexity of the item or service,

(d) Urgency of the delivery schedule, (e) Length of the planned production cycle,

(f) Past performance of the contractor,

(g) Procurement history of the item or service,

(h) Type and value of the contract, (i) Provisioning requirements, (j) Contractor's experience with defense contracts or with the item or service being procured,

(k) Extent or subcontracting, and (1) Hazardous material or operations and safety precautions required.

(a) The need for a post-award orientation conference normally will be established as a result of substantive review and analysis of the contract by the Contract Administration Office. However, the contracting officer or technical representative of the purchasing office may initiate the request for a conference. A conference of Government personnel normally shall be held prior to notifying and conferring with the contractor to assure that the Government position on all matters is established.

(b) An orientation conference shall be held as soon as possible after contract award when analysis of the contract or other information indicates existing or potential problems which may adversely affect performance. The office which determines the need for a post-award ori

entation conference normally will make all necessary arrangements to:

(1) Conduct a preliminary meeting of Government personnel,

(2) Establish the time and place of the orientation conference, (3) Prepare an agenda,

(4) Notify all participants,
(5) Designate a chairman, and

(6) Prepare a summary report of the conference.

When the purchasing office initiates the request for a conference, the above arrangements may be made by that office or, at its request, by the Contract Administration Office.

§ 1.1803-3 Agenda.

The agenda of an orientation conference may include such matters as:

(a) Special contractual provisions, (b) Clarification of specifications and other work requirements,

(d) Furnishing and control of Government property,

(e) Billing and payment procedures, (f) Reporting requirements,

(g) Processing of engineering changes and change orders,

(h) Quality control and testing requirements,

(i) Provisioning requirements,
(j) Packaging and shipping,
(k) Subcontract consent,

(1) Prime contractor responsibility for subcontracts,

(m) Allowability of cost determinations,

(n) Incentive features and value engineering,

(0) Security requirements,

(p) Progress target dates, and (q) Major problem areas or other appropriate topics.

§ 1.1803-4 Participants.

It is essential that all parties involved in the execution, administration, and performance of a Government contract have a clear and mutual understanding of the scope of the contract, the technical requirements, and the rights and obligations of the parties. Participants in a post-award orientation conference may include, as appropriate, representatives from the purchasing office and the Contract Administration Office, other Government personnel concerned, and the contractor's representatives.

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