48.104-1
Determining sharing period
Contracting officers must set a clear, contract-specific sharing period for each VECP, directly impacting how and when cost savings are shared between the government and contractor.
Overview
FAR 48.104-1 outlines how contracting officers must determine the "sharing period" for Value Engineering Change Proposals (VECPs), which is the timeframe during which cost savings from a VECP are shared between the government and the contractor. The regulation provides specific guidance on how to set the start and end dates of the sharing period, depending on contract type and production schedules. The sharing period is tailored for each VECP and may differ across multiple VECPs within the same contract.
Key Rules
- Individual Sharing Periods
- Each VECP must have its own discrete sharing period, which does not have to match others in the same contract.
- Start of Sharing Period
- The sharing period begins with the acceptance of the first unit incorporating the VECP.
- End of Sharing Period (Standard Contracts)
- The end date is the later of: (a) 36-60 months after first unit acceptance (as set by the contracting officer), or (b) the last scheduled delivery date of an affected item under the current contract schedule.
- End of Sharing Period (Development/Early Production Contracts)
- For engineering-development or low-rate/early production contracts, the end is based on acceptance of a specified quantity of units delivered over 36-60 months, covering the highest planned production.
- Prolonged Production Contracts
- For contracts with prolonged schedules (e.g., shipbuilding), the standard rule applies, but agencies may allow sharing on future contracts for similar items awarded within the sharing period, even if delivery is later.
Responsibilities
- Contracting Officers: Must determine and document the sharing period for each VECP, considering contract type and production schedule.
- Contractors: Should understand how the sharing period affects their potential savings and ensure proposals align with these timelines.
- Agencies: May set additional rules for sharing savings on future contracts for similar items.
Practical Implications
- This section ensures clarity and fairness in how cost savings from VECPs are shared, incentivizing contractors to propose cost-saving changes.
- Contractors must pay close attention to how the sharing period is defined, as it directly impacts their share of savings.
- Misunderstanding the sharing period can lead to disputes or missed savings opportunities.