48.104-2
Sharing acquisition savings
FAR 48.104-2 ensures contractors are rewarded for cost-saving proposals by specifying how acquisition savings are shared and paid based on contract type and VECP nature.
Overview
FAR 48.104-2 details how acquisition savings from Value Engineering Change Proposals (VECPs) are shared between the Government and contractors. It establishes the formulas and procedures for calculating and distributing savings on supply, service, and construction contracts, depending on contract type and whether the VECP is voluntary or mandatory.
Key Rules
- Sharing Rates and Bases
- Savings are shared based on contract type (fixed-price, incentive, cost-reimbursement) and the nature of the VECP (voluntary or mandatory). Specific percentage splits are provided, with some flexibility for the contracting officer to increase the contractor’s share.
- Calculation and Payment of Savings
- Contractors are entitled to a share of net acquisition savings, which are calculated after deducting Government costs and any negative savings. Payments can be made as savings are realized, either in lump sum or as future contracts are awarded.
- Recordkeeping and Documentation
- Contractors must maintain records for 3 years after final payment to identify the first unit delivered with the VECP.
- Modification and Payment Timing
- The contracting officer must modify contracts within 3 months after price reductions or future contract awards to provide the contractor’s share.
- Construction Contracts
- Sharing applies only to instant contract and collateral savings, with fixed percentage splits (45% for fixed-price, 75% for cost-reimbursement). No sharing for incentive construction contracts.
Responsibilities
- Contracting Officers: Calculate and approve sharing rates, modify contracts for payments, determine lump-sum eligibility, and ensure timely payment.
- Contractors: Submit VECPs, maintain required records, and ensure compliance with sharing and documentation requirements.
- Agencies: Oversee adherence to sharing arrangements and ensure proper contract modifications and payments.
Practical Implications
- This section incentivizes contractors to propose cost-saving changes by guaranteeing a share of the savings. It requires careful documentation, timely contract modifications, and clear understanding of applicable sharing rates. Common pitfalls include miscalculating savings, missing deadlines for contract modifications, or inadequate recordkeeping.