the VECP, and any increased costs in DOD 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 "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 (C) If GC exceeds ICS, but acceptance of the VECP is still desirable due to concur- (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)(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 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 "This is the initial unit delivered which incorporates VECP No...... (iii) Calculations. At the time each eligible future contract is awarded: Con (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 without adjustment to any of the contract incentive parameters. (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 (ie., savings determined to be realized during an average year of use of the item in which the change is incorporated) and, if appliable, 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. (End of clause paragraph) 7-204.32(c) (c) Cost-Plus-Fixed Fee and Cost-Plus-Award-Fee Contracts. Substitute the following "Sharing" provision for paragraph (e) of the applicable clause in 7-104.44(a) and/or (b): (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 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 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. (ii) Calculations and Actions: (A) If ICS exceeds GC, add 25% (15% if this is 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 (7-203.3), 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 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 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 fee. (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 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.... (iii) Calculations. At the time each eligible future contract is awarded: Con (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 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 (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. 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. (End of clause paragraph) (d) When paragraph (e)(1)(ii) of the clause in (1) above is modified in incentive contracts in accordance with 1-1704.1(c), the substitute paragraph (e)(1)(ii) should provide substantially as follows: If a cost reduction proposal submitted pursuant to this clause involves an anticipated decrease in the cost of performance of this contract and is accepted by the Government, the parties agree that neither the target cost nor the minimum target or maximum fees 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 target cost and fee 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) 7-204.33 Limitation of Liability. (a) In accordance with 1-330, in the procurement of major items, insert the following clause. LIMITATION OF LIABILITY - MAJOR ITEMS (1974 APR) (a) Except as provided below and notwithstanding any other provision of this contract, the Contractor shall not be liable for loss of or damage to property of the Government (including the supplies delivered under this contract) occurring after acceptance of the supplies delivered under this contract and resulting from any defects or deficiencies in such supplies. (b) The foregoing limitations shall not apply when the defects or deficiencies in such supplies or the Government acceptance of such supplies resulted from willful misconduct or lack of good faith on the part of any of the Contractor's directors or officers, or on the part of any of his managers, superintendents, or other equivalent representatives, who have supervision or direction of: (i) all or substantially all of the Contractor's business; or (ii) all or substantially all of the Contractor's operations at any one plant or separate location, in which this contract is being performed; or (iii) a separate and complete major industrial operation in connection with the performance of this contract. (c) Notwithstanding paragraph (a) above, if the Contractor carries insurance or has established a reserve for self-insurance covering liability for damages or losses suffered by the Government through purchase or use of the contract supplies required to be delivered to the Government under this contract, the Contractor shall be liable to the Government for damages or losses to property of the Government occurring after acceptance of the supplies delivered to the Government under this contract and resulting from any defects or deficiencies in such supplies to the extent of such insurance or reserve for self-insurance. (d) This clause does not diminish the Contractor's obligation, to the extent otherwise arising under this contract, relating to correction, repair, replacement or other relief for any defect or deficiency in supplies delivered under this contract. (e) The provisions of this clause shall not limit or otherwise affect the Government's rights pursuant to the following listed clauses, if included in this contract: GROUND AND FLIGHT RISKS, AIRCRAFT FLIGHT RISK, GOVERNMENT PROPERTY, and WARRANTY OF TECHNICAL DATA. (f) In all subcontracts hereunder, except those covered by (g) below, the Contractor shall either: (i) insert, with the advance written consent of the Contracting Officer, the substance of this clause including this paragraph (f) suitably altered to reflect the relationship of the contracting parties; or (ii) insert the substance of the clause in 7-104.45(a), suitably altered to reflect the relationship of the contracting parties. (g) In subcontracts for both major items for which this clause is appropriate, and other end items for which the clause in 7-104.45(a) is appropriate, the substance of both clauses shall be included, with the advance written consent of the Contracting Officer, with the following preamble to this clause: (End of clause) (b) In contracts for the purchase of both major items (see 1-330) for which the clause in (a) above is appropriate, and other contract end items for which the clause in 7-104.45(a) is appropriate, both clauses shall be included, with the following preamble to the LIMITATION OF LIABILITY - MAJOR ITEMS clause. LIMITATION OF LIABILITY-MAJOR ITEMS (1975 OCT) (The provisions of this clause shall apply only to those items identified in this contract as being subject to this clause.) The Contracting Officer shall identify high unit cost items by line item. (End of clause) 7-204.34 Multi-Year Procurement. In accordance with 1-322.5, insert the clauses in 7-104.47. 7-204.35 New Material. In accordance with 1-1208, insert the clause in 7-104.48. 7-204.36 Aircraft, Missile, and Space Vehicle Accident Reporting and Investigation. In accordance with 7-104.81, insert the clause therein. 7-204.37 Minority Business Enterprises. In accordance with 1-332, insert the appropriate clause or clauses in 7-104.36. 7-204.38 Special Test Equipment. Insert the clause in 7-104.26 in negotiated contracts which provide that the contractor will acquire special test equipment for the Government but do not specify the items to be acquired (see 13-306.3(c)). 7-204.39 First Article Approval. (a) In accordance with 1-1904, insert the clause in 7-104.55(a) with appropriate modifications. (b) In accordance with 1-1904, insert the clause in 7-104.55(b) with appropriate modifications. 7-204.40 Order of Precedence. In accordance with 3-501(b)Sec.C(xxxi), insert the clause in 7-2003.41. 7-204.41 United States Products and Services (Balance of Payments Programs). In accordance with 6-806.4, insert the clause in 7-2003.53. 7-204.42 Identification of Expenditures in the United States. In accordance with 6-807, insert the clause in 7-104.58. 7-204.43 Reserved. 7-204.44 Material Inspection and Receiving Report. Insert the clause in 7-104.62 except in negotiated subsistence procurements and contracts for tanker/barge shipments of bulk petroleum products. |