[Federal Register Volume 60, Number 203 (Friday, October 20, 1995)]
[Proposed Rules]
[Pages 54208-54210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26057]



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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1816 and 1852


Addition of Coverage to NASA FAR Supplement on NASA Shared 
Savings Clause

AGENCY: Office of Procurement, National Aeronautics and Space 
Administration (NASA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: This rule proposes to amend the NASA Federal Acquisition 
Regulation Supplement in order to establish the procedures for a 
``Shared Savings Clause'' to be used in solicitations and contracts. 
The intent of the clause is to provide an incentive for contractors to 
identify and implement significant cost reduction programs. In return 
they would be eligible for a share of realized savings which result 
from those cost-cutting projects once the projects are approved by the 
contracting officer.

DATES: Comments must be received on or before December 19, 1995.

ADDRESSES: Submit comments to Mr. James A. Balinskas, Analysis Division 
(Code HC), Office of Procurement, NASA Headquarters, Washington, DC 
20546. Comments on the paperwork burden should also be addressed to the 
Office of Information and Regulatory Affairs of OMB, Attention: Desk 
Officer for NASA, Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT: Mr. James A. Balinskas, (202) 385-
0445.

SUPPLEMENTARY INFORMATION:

Background

    This action revises the NASA FAR Supplement to add a ``Share 
Savings Clause'' which was developed as an element of the Agency's Cost 
Control Initiative. We expect this process will help identify and 
eliminate counterproductive, outdated or redundant activities whether 
they are mandated by the contract or created as a result of the manner 
in which the government is managing the contract.

Regulatory Flexibility Act

    NASA certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities under 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

Paperwork Reduction Act

    A copy of the proposed rule has been submitted to OMB for review 
under section 3507(d) of the Paperwork Reduction Act.
    Title: Cost Reduction Proposal (CRP).
    Summary: The CRP is used by the contractor to propose cost 
reduction projects to NASA.
    Description of the need for the information and proposed use of the 
information: The Shared Savings Clause was developed as an element of 
the Agency's Cost Control Initiative. The CRP is a means by which a 
contractor may suggest savings to NASA. The contracting officer 
evaluates the CRP in order to determine whether or not to accept the 
contractor's suggestions. If the CRP is accepted, the contractor 
becomes eligible for a share of the savings.
    Description of the likely respondents, including the estimated 
number of likely respondents, and proposed frequency of response to the 
collection of information: NASA contractors whose contracts contain the 
clause entitled ``Shared Savings'' may submit a CRP on their own 
initiative. The number of respondents is estimated to be 10.
    Estimate of the total annual reporting and recordkeeping burden 
that will result from the collection of information: The annual 
recordkeeping and reporting burden related to preparation and 
submission of CRP's is estimated to be 600 hours.
    Notice: Comments may be submitted to the OMB address shown under 
ADDRESSES.
    Time period within which the agency is requesting OMB to approve or 
disapprove the collection of information: NASA is requesting that OMB 
approve the proposed revisions to the collection of information within 
the next 60 days.
    In addition, comments may be submitted to NASA and OMB in order to 
help NASA--
    (a) evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (ii) evaluate the accuracy of the agency's estimate of the burden 
of the proposed collection of information including the validity of the 
methodology and assumptions used;
    (iii) enhance the quality, utility, and clarity of the information 
to be collected; and
    (iv) minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses.

List of Subjects in 48 CFR Parts 1816 and 1852

    Government procurement.
Tom Luedtke,
Deputy Associate Administrator for Procurement.

    Accordingly, 48 CFR Parts 1816 and 1852 are proposed to be amended 
as follows:

PART 1816--TYPES OF CONTRACTS

    1. The authority citation for 48 CFR Parts 1816 and 1852 continue 
to read as follows:

    Authority: 42 U.S.C. 2473(c)(1).

    2. Paragraph 1816.7001 is added to read as follows:


1816.7001  Shared Savings Clause.

    The contracting officer shall insert the clause at 1852.216-90, 
Shared Savings Clause, in all solicitations and contracts above the 
simplified acquisition threshold.

[[Page 54209]]


PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    3. Section 1852.216-90 is added to read as follows:


1852.216-90  Shared Savings.

    As prescribed in 1816.7001, insert the following clause:

Shared Savings

(XXX 19XX)

    (a) The Contractor is entitled, under the provisions of this 
clause, to share in cost savings resulting from the implementation 
of cost reduction projects which are presented to the Government in 
the form of Cost Reduction Proposals (CRP) and approved by the 
Contracting Officer. These cost reduction projects may require 
changes to the terms, conditions or statement of work of this 
contract. Any cost reduction projects must not, however, revise the 
essential function or service to be provided by the basic contract.
    (b) Definitions:
    (1) Cost savings means savings that result from instituting non-
recurring changes to the management or structure of the covered 
contract, as identified in an approved Cost Reduction Proposal.
    (2) Cost Reduction Proposal means a proposal that recommends 
alternatives to the established procedures or organizational support 
of a contract or group of contracts. These alternatives must result 
in a net reduction of contract cost and price to NASA. The proposal 
will include technical and cost information sufficient to enable the 
Contracting Officer to review the CRP and approve or disapprove it. 
The contractor may propose changes in other activities that impact 
performance on their contract, to include Government and other 
contractor operations, if such changes will optimize cost savings on 
their contract. A contractor shall not be entitled to share, 
however, in any cost shavings that are internal to the Government, 
or which result from changes made to any contracts to which they are 
not a party even if those changes were proposed as a part of their 
CRP.
    (3) Covered contract means the contract, excluding unexercised 
options or future contracts, whether contemplated or not, against 
which the CRP is submitted.
    (4) Contractor implementation costs or ``implementation costs'' 
means those costs the Contractor incurs, or will incur, on the 
covered contract specifically in the development, preparing, 
submitting, and supporting a CRP, as well as those costs the 
contractor will incur on the covered contract to make any structural 
or organizational changes in order to implement an approved CRP.
    (5) Government costs means internal costs of NASA or any other 
Government agency that result directly from developing and 
implementing the CRP. These may include, but are not limited to, 
costs associated with the administration of the contract or with 
such contractually related functions such as testing, operations, 
maintenance and logistics support. These costs do not include the 
normal administrative costs of reviewing and processing the Cost 
Reduction Proposal.
    (c) General. The contractor shall develop, prepare and submit 
CRP's with supporting information, as detailed in paragraph (d) of 
this clause, to the Contracting Officer. The CRP will describe the 
proposed cost reduction activity in sufficient detail to enable the 
Contracting Officer to evaluate it and to render an approval or 
disapproval. The Contractor shall share in any net cost savings 
realized from accepted and implemented CRP's in accordance with the 
terms of this clause. The Contractor's actual percentage share of 
the cost savings shall be a matter for negotiation with the 
Contracting Officer, but shall not, in any event, exceed 50% of the 
total recognized cost savings.
    (d) Computation of cost savings. The contractor is eligible to 
share in savings realized on the covered contract as a result of 
implementing approved CRP's. The cost savings to be shared between 
the Government and the Contractor will be derived by comparing a 
current estimate to complete (ETC) for the covered contract, as 
structured before implementation of the proposed CRP, to an ETC 
which takes into account the impact of that CRP. Although a CRP may 
result in cost savings that extend far into the future, the period 
over which the contractor may share in those savings will be limited 
to five years. In extenuating circumstances, this five year period 
may be extended if the contracting officer agrees with the 
contractors proposal, and written concurrence is obtained from the 
Director, Analysis Division, Office of Procurement, NASA 
Headquarters. Implementation costs of the contractor must be 
considered and specifically identified in the revised ETC. Any 
change in Government costs associated with the covered contract 
shall also be specifically identified and addressed in the CRP. The 
contractor shall not be entitled, under the provisions of this 
clause, to share in any cost reductions to the contract that are the 
result of changes stemming from any action other than an approved 
CRP. This clause does not limit, however, recovery of any such 
reimbursements that are allowed as a result of other contract 
provisions.
    (e) Supporting information. As a minimum, the Contractor shall 
provide the following supporting information with each CRP:
    (1) Identification of the current contract requirement or 
practice which is targeted for restructuring.
    (2) A description of the difference between the current process 
or procedure and the proposed change. This description shall address 
how proposed changes will meet NASA requirements and discuss the 
advantages and disadvantages of the existing practice and the 
proposed changes.
    (3) A list of contract requirements which must be revised, if 
any, if the CRP is approved, along with proposed revisions. Any 
changes to NASA, or delegated, contract management processes should 
also be addressed.
    (4) Detailed cost estimates which reflect the implementation 
costs of the CRP.
    (5) An updated ETC for the covered contract, unchanged, and an 
ETC for the covered contract which reflects changes resulting from 
implementing the CRP. If the CRP proposes changes to only a limited 
number of elements of the contract, the ETC's need only address 
those portions of the contract that have been impacted. Each ETC 
shall depict the level of costs incurred on a period basis. If other 
CRP's have been proposed or approved on a contract, the impact of 
these CRP's must be addressed in the computation of the cost savings 
to ensure that the cost savings identified are attributable only to 
the CRP under consideration in the instant case.
    (6) A depiction of each estimate to complete shall also provide 
a comparison of costs to be incurred, by period, through the end of 
the covered contract.
    (7) Identification of any other previous submissions of the CRP, 
including the dates submitted, the agencies and contracts involved, 
and the disposition of those submittals.
    (f) Administration.
    (1) The contractor shall submit proposed CRP's to the 
Contracting Officer who shall be responsible for the review. 
evaluation and approval. Normally, CRP's should not be entertained 
for the first year of performance to allow the Contracting Officer 
to assess performance against the basic requirements. If a cost 
reduction project impacts more than a single contract, the 
contractor may, upon concurrence of the Contracting Officers 
responsible for the affected contracts, submit a single CRP which 
addresses fully the cost savings projected on all affected contracts 
that contain this Shared Savings Clause. In the case of multiple 
contracts affected, responsibility for the review and approval of 
the CRP will be a matter to be decided by the affected Contracting 
Officers.
    (2) The Contracting Officer shall approve or disapprove any 
proposed cost reduction plan within 60 days after receipt. In the 
event additional time is required, the Contracting Officer shall 
notify the Contractor within the 60-day period, provide the reason 
for delay and the expected date of the decision. Failure of the 
Contracting Officer to provide a response shall not be construed as 
approval of the CRP. The contractor shall continue to perform in 
accordance with the terms and conditions of the existing contract 
until the Contracting Officer executes a contract modification 
incorporating the changes identified by the CRP. The modification 
shall also adjust the contract cost and price, establish the 
contractors share of cost savings, and establish a payment schedule.
    (3) Notwithstanding the overall level of savings computed for 
any CRP, the contractor shall not be paid any portion of its share 
of cost savings until NASA realizes a positive cost savings on the 
covered contract. (i.e., if implementation costs result in a period 
of increased cost as a result of implementation of the CRP).
    (4) The contractor shall be paid in accordance with a schedule 
to be established with the contracting officer. Normally a payment 
of 50% of the contractors share of the cost savings will be made in 
the first month after NASA realizes a positive cost savings on the 
covered contract.
    (5) Any future restructuring or reorganizing activity (such as a 
merger or acquisition) 

[[Page 54210]]
undertaken by the Contractor, or to which the contractor becomes an 
involved party, which serves to reduce, or reverse the cost savings 
realized from an approved CRP for which the contractor has received 
payment, may be cause for recomputing the net cost savings 
associated with any approved CRP. The Government reserves the right 
to make an adjustment to the contractor's share of cost savings and 
to receive a refund of moneys paid if necessary. Such adjustment may 
only be made after--
    (i) the contractor is afforded the opportunity to provide, and 
discuss with the contracting officer, full justification and support 
for their actions, and
    (ii) advance notification is provided to the Director, Analysis 
Division, Office of Procurement, NASA Headquarters.
    (g) Limitations. Contract requirements that are imposed by 
statute shall not be targeted for cost reduction exercises. The 
contractor is precluded from receiving reimbursements under this 
clause and other incentive provisions of the contract, if any, for 
the same cost reductions.
    (h) Disapproval of, or failure to approve, any proposed cost 
reduction proposal will not be considered a dispute subject to 
remedies under the Disputes clause.
    (i) Cost savings paid to the contractor in accordance with the 
provisions of this clause do not constitute profit or fee within the 
limitations imposed by 10 U.S.C. 2306(d) and 41 U.S.C. 254(b).

(End of clause)

[FR Doc. 95-26057 Filed 10-19-95; 8:45 am]
BILLING CODE 7510-01-M