[Federal Register Volume 63, Number 155 (Wednesday, August 12, 1998)]
[Proposed Rules]
[Pages 43236-43238]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21441]


      

[[Page 43235]]

_______________________________________________________________________

Part II





Department of Defense

General Services Administration

National Aeronautics and Space Administration





_______________________________________________________________________



48 CFR Parts 48 and 31



Federal Acquisition Regulation (FAR); Proposed Rule

  Federal Register / Vol. 63, No. 155 / Wednesday, August 12, 1998 / 
Proposed Rules  

[[Page 43236]]



DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 48 and 52

[FAR Case 97-031]
RIN 9000-AH84


Federal Acquisition Regulation; Value Engineering Change 
Proposals

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

ACTION: Proposed rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council are proposing to amend the Federal 
Acquisition Regulation (FAR) to change the sharing periods and rates 
that contracting officers may establish for individual value 
engineering change proposals. This regulatory action was not subject to 
Office of Management and Budget review under Executive Order 12866, 
dated September 30, 1993. This is not a major rule under 5 U.S.C. 804.

DATES: Comments should be submitted on or before October 13, 1998 to be 
considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVRS), Attn: Laurie 
Duarte, 1800 F Street, NW, Room 4035, Washington, DC 20405.
    E-mail comments submitted over Internet should be addressed to: 
[email protected].
    Please cite FAR case 97-031 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 FAR case 97-031.
SUPPLEMENTARY INFORMATION:

A. Background

    This proposed rule amends the value engineering change proposal 
(VECP) guidance in FAR Parts 48 and 52 to allow the contracting officer 
to increase the sharing period from 36 to 60 months; increase the 
contractors share of incentive and concurrent savings to 75 percent; 
and increase the contractors share of collateral savings to 100 percent 
on a case-by-case basis for each VECP. The contracting officers 
unilateral decision on each of these aspects is final. This revision is 
intended to incentivize contractors to submit more value engineering 
change proposals, by allowing contracting officers to unilaterally 
increase both the share percentage and the sharing period, so that 
contractors with meritorious proposals may be given adequate 
compensation for the effort required to prepare and negotiate 
individual change proposals.

B. Regulatory Flexibility Act

    The proposed 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 increase the number of VECP settlements negotiated between the 
Government and private entities. An Initial Regulatory Flexibility 
Analysis (IRFA) has been prepared and is summarized as follows:

    The objective of the rule is to change the sharing periods and 
rates that contracting officers may establish for individual VECPs. 
By allowing longer sharing periods and allowing increased contractor 
sharing rates for collateral and concurrent savings, more 
contractors may find it feasible to submit VECPs. The rule could 
increase the number of VECP settlements negotiated between the 
Government and private entities, as the additional flexibility in 
sharing periods and contractor sharing rates it provides should 
incentivize contractors to submit more VECPs. Therefore, the rule 
may apply to all entities, large and small, that propose VECPs under 
Government contracts.

    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. Comments are invited. Comments from small entities 
concerning the affected FAR subparts 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 97-031), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose recordkeeping or information 
collection requirements, or collections 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.

List of Subjects in 48 CFR Parts 48 and 52

    Government procurement.

    Dated: August 5, 1998.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

    Therefore, it is proposed that 48 CFR Parts 48 and 52 be amended as 
set forth below:
    1. The authority citation for 48 CFR Parts 48 and 52 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).

PART 48--VALUE ENGINEERING

    2. Section 48.001 is amended by revising the definition ``Sharing 
period'' to read as follows:


48.001  Definitions.

* * * * *
    Sharing period, as used in this part, means--
    (1) The period beginning with acceptance of the first unit 
incorporating the VECP and ending at the later of--
    (i) 36 to 60 months (set at the discretion of the contracting 
officer for each VECP) after the first unit affected by the VECP is 
accepted; or
    (ii) The last scheduled delivery date of an item affected by the 
VECP under the instant contract delivery schedule in effect at the time 
the VECP is accepted (but see 48.102(g)); or
    (2) For engineering-development and low-rate-initial-production 
contracts, a period of between 36 and 60 consecutive months (set at the 
discretion of the contracting officer for each VECP) that spans the 
period of highest planned production, based on planning or production 
documentation at the time the VECP is accepted.
* * * * *
    3. Section 48.102 is amended by redesignating paragraphs (g), (h), 
and (i) as (h), (i), and (j), respectively, adding a new paragraph (g); 
and further amending newly designated paragraph (h) by removing the 
last sentence. The added text reads as follows:


48.102  Policies.

* * * * *
    (g) Sharing periods and sharing rates are determined on a case-by-
case basis by the contracting officer, using the guidelines in the 
definition of ``sharing period'' at 48.001 and in 48.104-1. In 
determining whether to establish a sharing period greater than 36 
months or to increase the sharing rate beyond the minimum levels in 
48.104-1(a), the contracting officer shall consider the

[[Page 43237]]

following, as appropriate, and shall insert supporting rationale in the 
contract file:
    (1) Extent of the change.
    (2) Complexity of the change.
    (3) Development risk (e.g., contractor's financial risk).
    (4) Development cost.
    (5) Performance and/or reliability impact.
    (6) Production period remaining at the time of VECP acceptance.
    (7) Number of units affected.
* * * * *
    4. Section 48.103 is amended by adding paragraph (c)(4) to read as 
follows:


48.103  Processing value engineering change proposals.

* * * * *
    (c) * * *
    (4) The contracting officer's determination of the duration of the 
sharing period and the contractor's sharing rate.
    5. Section 48.104-1 is amended by revising the table in paragraph 
(a)(1) to read as follows:


48.104-1  Sharing acquisition savings.

    (a) Supply or service contracts. (1) * * *

                             Government/Contractor Shares of Net Acquisition Savings                            
                                              [Figures in percent]                                              
----------------------------------------------------------------------------------------------------------------
                                                                              Sharing arrangement               
                                                             ---------------------------------------------------
                                                               Incentive  (Voluntary)      Program requirement  
                                                             --------------------------        (Mandatory)      
                        Contract type                                                  -------------------------
                                                                Instant     Concurrent                Concurrent
                                                                contract    and future    Instant     and future
                                                                  rate       contract     contract     contract 
                                                                               rate         rate         rate   
----------------------------------------------------------------------------------------------------------------
Fixed-price (includes fixed-price-award-fee; excludes other                                                     
 fixed-price incentive contracts)...........................       *50/50       *50/50        75/25        75/25
Incentive (fixed-price or cost) (other than award fee)......         (**)       *50/50         (**)        75/25
Cost-reimbursement (includes cost-plus-award-fee; excludes                                                      
 other cost-type incentive contracts).......................     ***75/25     ***75/25        85/15       85/15 
----------------------------------------------------------------------------------------------------------------
* The contracting officer may increase the contractor's sharing rate to as high as 75 percent for each VECP. See
  48.102(g)(1) through (7).                                                                                     
** Same sharing arrangement as the contract's profit or fee adjustment formula.                                 
*** The contracting officer may increase the contractor's sharing rate to as high as 50 percent for each VECP.  
  See 48.102(g)(1) through (7).                                                                                 

* * * * *
    6. Section 48.104-2 is amended by revising paragraph (b) to read as 
follows:


48.104-2  Sharing collateral savings.

* * * * *
    (b) The contractor's share of collateral savings may range from 20 
to 100 percent of the estimated savings to be realized during an 
average year of use but shall not exceed the contract's firm-fixed-
price, target price, target cost, or estimated cost, at the time the 
VECP is accepted, or $100,000, whichever is greater. The contractor's 
sharing rate is determined by the contracting officer for each VECP. In 
determining collateral savings, the contracting officer shall consider 
any degradation of performance, service life, or capability. (See 
48.104-1(a)(4) for payment of collateral savings through the instant 
contract.)

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    7. Section 52.248-1 is amended in the introductory paragraph by 
revising the first sentence and removing the last sentence; by revising 
the date of the clause; and in the clause, in paragraph (b) by revising 
the definition ``Sharing period''; in paragraph (e)(3) by revising the 
last sentence; in paragraph (f)(3) by revising the table; and in 
paragraph (j) by revising the first sentence. The revised text reads as 
follows:


52.248-1  Value Engineering.

    As prescribed in 48.201, insert the following clause. * * *

Value Engineering (XXX)

* * * * *
    (b) Definitions.
* * * * *
    Sharing period, as used in this clause, means--
    (1) The period beginning with acceptance of the first unit 
incorporating the VECP and ending at the later of--
    (i) 36 to 60 months (set at the discretion of the Contracting 
Officer for each VECP) after the first unit affected by the VECP is 
accepted; or
    (ii) The last scheduled delivery date of an item affected by the 
VECP under this contract's delivery schedule in effect at the time 
the VECP is accepted; or
    (2) For engineering-development and low-rate-initial-production 
contracts, a period of between 36 and 60 consecutive months (set at 
the discretion of the Contracting Officer for each VECP) that spans 
the period of highest planned production, based on planning or 
production documentation at the time the VECP is accepted.
* * * * *
    (e) * * *
    (3) * * * The Contracting Officer's unilateral decisions whether 
to accept or reject all or part of any VECP, as to which of the 
sharing rates applies, and as to the duration of the sharing period 
shall be final and not subject to the Disputes clause or otherwise 
subject to litigation under the Contract Disputes Act of 1978 (41 
U.S.C. 601-613).
    (f) * * *
    (3) * * *

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                                  Contractor's Share of Net Acquisition Savings                                 
                                              [Figures in percent]                                              
----------------------------------------------------------------------------------------------------------------
                                                                              Sharing Arrangement               
                                                             ---------------------------------------------------
                                                               Incentive  (Voluntary)      Program requirement  
                                                             --------------------------        (Mandatory)      
                        Contract type                                                  -------------------------
                                                                Instant     Concurrent                Concurrent
                                                                contract    and future    instant     and future
                                                                  rate       contract     contract     contract 
                                                                               rate         rate         rate   
----------------------------------------------------------------------------------------------------------------
Fixed-price (includes fixed-price-award-fee; excludes other                                                     
 fixed-price incentive contracts)...........................         * 50          *50           25           25
Incentive (fixed-price or cost) (other than award fee)......         (**)          *50         (**)           25
Cost-reimbursement (includes cost-plus-award-fee; excludes                                                      
 other cost-type incentive contracts).......................       *** 25       *** 25           15          15 
----------------------------------------------------------------------------------------------------------------
* The Contracting Officer may increase the Contractor's sharing rate to as high as 75 percent for each VECP.    
** Same sharing arrangement as the contract's profit or fee adjustment formula.                                 
*** The Contracting Officer may increase Contractor's sharing rate to as high as 50 percent for each VECP.      

* * * * *
    (j) Collateral savings. If a VECP is accepted, the instant contract 
amount shall be increased, as specified in subparagraph (h)(5) of this 
subsection, by a rate from 20 to 100 percent, as determined by the 
Contracting Officer, of any projected collateral savings determined to 
be realized in a typical year of use after subtracting any Government 
costs not previously offset. * * *
* * * * *
[FR Doc. 98-21441 Filed 8-11-98; 8:45 am]
BILLING CODE 6820-EP-P