[Federal Register Volume 63, Number 119 (Monday, June 22, 1998)]
[Rules and Regulations]
[Pages 34078-34079]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16121]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 48

[FAC 97-05; FAR Case 96-011; Item X]
RIN 9000-AH37


Federal Acquisition Regulation; No-Cost Value Engineering Change 
Proposals

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Interim rule with request for comments.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed on an interim rule amending 
the Federal Acquisition Regulation (FAR) to clarify that no-cost value 
engineering change proposals (VECPs) may be used when, in the 
contracting officer's judgment, reliance on other VECP approaches 
likely would not be more cost-effective, and the no-cost settlement 
would provide adequate consideration to the Government. This regulatory 
action was not subject to Office of Management and Budget review under 
Executive Order 12866, dated September 30, 1993, and is not a major 
rule under 5 U.S.C. 804.

DATES: Effective June 22, 1998.
    Comment Date: Comments should be submitted to the FAR Secretariat 
at the address shown below on or before August 21, 1998 to be 
considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVR), 1800 F Street, 
NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.
    E-Mail comments submitted over the Internet should be addressed to: 
[email protected].
    Please cite FAC 97-05, FAR case 96-011 in all correspondence 
related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC 20405, (202) 501-4755, for information 
pertaining to status or publication schedules. For clarification of 
content, contact Ms. Linda Klein, Procurement Analyst, at (202) 501-
3775. Please cite FAC 97-05, FAR case 96-011.


[[Page 34079]]


SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule clarifies that the no-cost VECP guidance at FAR 
48.104-3 permits the use of no-cost settlements when the contracting 
officer has balanced the administrative costs of negotiating a 
settlement against the anticipated savings, and when, in the 
contracting officers judgment, reliance on other VECP approaches likely 
would not be more cost-effective, and the no-cost settlement would 
provide adequate consideration to the Government. The no-cost VECP 
alternative was not intended for use when significant cost savings are 
anticipated on the instant contract.

B. Regulatory Flexibility Act

    The changes may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., because the rule could reduce 
the number of no-cost VECP settlements negotiated between the 
Government and private entities. An Initial Regulatory Flexibility 
Analysis (IRFA) has been prepared and is summarized as follows:

    This interim rule clarifies that the guidance at FAR 48.104-3, 
Sharing alternative--no-cost settlement method, permits use of no-
cost VECPs settlements when the contracting officer has balanced the 
administrative costs of negotiating a settlement against the 
anticipated savings; and, in the contracting officer's judgment, 
reliance on other VECP approaches likely would not be more cost-
effective, and the no-cost settlement would provide adequate 
consideration to the Government. The no-cost VECP alternative was 
not intended for use when significant cost savings are anticipated 
on the instant contract.

A copy of the IRFA has been submitted to the Chief Counsel for Advocacy 
of the Small Business Administration and may be obtained from the FAR 
Secretariat at the address above. Comments are invited. Comments from 
small entities concerning the affected FAR subpart also will be 
considered in accordance with 5 U.S.C. 610. Such comments must be 
submitted separately and should cite 5 U.S.C 601, et seq. (FAR Case 96-
011), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose recordkeeping or information collection 
requirements, or collection of information from offerors, contractors, 
or members of the public which require the approval of the Office of 
Management and Budget under 44 U.S.C. 3501, et seq.

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DoD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. This action 
is necessary to preclude misinterpretation and misuse of existing 
guidance and resulting VECP settlements that do not provide the 
Government with appropriate consideration. However, pursuant to Pub. L. 
98-577 and FAR 1.501, public comments received in response to this 
interim rule will be considered in the formation of the final rule.

List of Subjects in 48 CFR Part 48

    Government procurement.

    Dated: June 11, 1998.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
    Therefore, 48 CFR Part 48 is amended as set forth below:

PART 48--VALUE ENGINEERING

    1. The authority citation for 48 CFR Part 48 continues to read as 
follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

    2. Section 48.104-3 is revised to read as follows:


48.104-3  Sharing alternative--no-cost settlement method.

    In selecting an appropriate mechanism for incorporating a VECP into 
a contract, the contracting officer shall analyze the different 
approaches available to determine which one would be in the 
Government's best interest. Contracting officers should balance the 
administrative costs of negotiating a settlement against the 
anticipated savings. A no-cost settlement may be used if, in the 
contracting officer's judgment, reliance on other VECP approaches 
likely would not be more cost-effective, and the no-cost settlement 
would provide adequate consideration to the Government. Under this 
method of settlement, the contractor would keep all of the savings on 
the instant contract, and all savings on its concurrent contracts only. 
The Government would keep all savings resulting from concurrent 
contracts placed with other sources, savings from all future contracts, 
and all collateral savings. Use of this method must be by mutual 
agreement of both parties for individual VECPs.

[FR Doc. 98-16121 Filed 6-19-98; 8:45 am]
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