Phoenix

Thank you!! I came to those same conclusions for target cost and target feel. The comments of your expert on the VE clause are comforting. I've about worn the words off the page reading and trying to apply them to the situation. Bottom line. . . do what make sense and document, document, document.

1. How do I capture the government savings when the costs will not be expended because of the change? 2. What is the contractors "share" in savings? 3. Do I adjust fee? 4. Do I adjust target cost?

I am working on a major acquisition program. My query concerns a Performance Based CPIF Contract with a 50/50 share. Period of performance of the item in question is 4 years. About a year into the contract, the contractor submitted a Value Engineering Change Proposal. This falls in the category of ?Instant Contract savings?. No collateral savings, or future savings. FAR 52.248-1 is in the contract. This is a voluntary VECP. Sad to say that little or no action has taken place and years have passed. No one in this shop has done a VECP, so off I go doing research on ?how?. My agency does not have specific guidance on the details. The proposed change would require the contractor ?not? to perform a particular element of the building the product. The function of the end product does not change. Only an adjustment to the performance specification is required. The technical folks are in agreement with the change. I understand the government obtains savings by not incurring the costs that were expected at award. I?m unclear as how the contractor shares in these savings because cost is paid as incurred or by milestones. Where does the contactor?s ?share? show up? I have read that the cost-based portion of the incentive pool should be adjusted so that contractor is not rewarded twice for the same activity. HOW IS THIS DONE? IAW FAR 52.248-1(h) Contract adjustment. The modification accepting the VECP (or a subsequent modification issued as soon as possible after any negotiations are completed) shall? (5) Provide the Contractor?s share of any net acquisition savings under the instant contract in accordance with the following: (ii) Cost-reimbursement contracts?add to contract fee. If I am to add to the contractor?s fee, what is the basis of calculation? There is nothing in the contract prohibiting making an adjustment to targets. In my mind no adjustment to target cost would by default reward the contractor in fee for being in an under run. Ok assuming that there are no over/under runs withstanding. Is that faulty logic? If it appears that I?m dazed and confused. . . it?s because I am.