48.104
Sharing arrangements
FAR 48.104 establishes how contractors and the government share cost savings from Value Engineering Change Proposals, incentivizing innovation and efficiency.
Overview
FAR 48.104 outlines the rules for sharing arrangements between the government and contractors when Value Engineering Change Proposals (VECPs) result in cost savings. This section details how savings from contractor-initiated improvements are calculated and distributed, including the determination of the sharing period, the allocation of acquisition and collateral savings, and the use of alternative settlement methods. The intent is to incentivize contractors to propose cost-saving changes by allowing them to share in the resulting benefits.
Key Rules
- Determining Sharing Period
- Establishes the timeframe over which cost savings from a VECP are measured and shared between the contractor and the government.
- Sharing Acquisition Savings
- Specifies how direct cost savings from reduced acquisition costs are calculated and divided.
- Sharing Collateral Savings
- Addresses the sharing of indirect or collateral savings, such as reduced maintenance or operational costs, resulting from the VECP.
- Alternative No-Cost Settlement Method
- Provides an option for settling savings distribution without a formal cost-sharing arrangement, typically when savings are minimal or difficult to quantify.
Responsibilities
- Contracting Officers: Must determine the appropriate sharing period, calculate and document savings, and ensure proper distribution to contractors.
- Contractors: Must submit VECPs with supporting data and comply with agreed-upon sharing arrangements.
- Agencies: Oversee compliance and ensure savings are accurately tracked and reported.
Practical Implications
- Encourages contractors to propose cost-saving innovations by offering a share of the savings.
- Requires careful documentation and calculation of savings to ensure fair distribution.
- Misunderstanding sharing rules or failing to document savings can result in disputes or lost incentives.