[Federal Register Volume 60, Number 203 (Friday, October 20, 1995)]
[Proposed Rules]
[Pages 54208-54210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26057]
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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1816 and 1852
Addition of Coverage to NASA FAR Supplement on NASA Shared
Savings Clause
AGENCY: Office of Procurement, National Aeronautics and Space
Administration (NASA).
ACTION: Notice of proposed rulemaking.
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SUMMARY: This rule proposes to amend the NASA Federal Acquisition
Regulation Supplement in order to establish the procedures for a
``Shared Savings Clause'' to be used in solicitations and contracts.
The intent of the clause is to provide an incentive for contractors to
identify and implement significant cost reduction programs. In return
they would be eligible for a share of realized savings which result
from those cost-cutting projects once the projects are approved by the
contracting officer.
DATES: Comments must be received on or before December 19, 1995.
ADDRESSES: Submit comments to Mr. James A. Balinskas, Analysis Division
(Code HC), Office of Procurement, NASA Headquarters, Washington, DC
20546. Comments on the paperwork burden should also be addressed to the
Office of Information and Regulatory Affairs of OMB, Attention: Desk
Officer for NASA, Washington, DC 20503.
FOR FURTHER INFORMATION CONTACT: Mr. James A. Balinskas, (202) 385-
0445.
SUPPLEMENTARY INFORMATION:
Background
This action revises the NASA FAR Supplement to add a ``Share
Savings Clause'' which was developed as an element of the Agency's Cost
Control Initiative. We expect this process will help identify and
eliminate counterproductive, outdated or redundant activities whether
they are mandated by the contract or created as a result of the manner
in which the government is managing the contract.
Regulatory Flexibility Act
NASA certifies that this regulation will not have a significant
economic impact on a substantial number of small entities under
Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Paperwork Reduction Act
A copy of the proposed rule has been submitted to OMB for review
under section 3507(d) of the Paperwork Reduction Act.
Title: Cost Reduction Proposal (CRP).
Summary: The CRP is used by the contractor to propose cost
reduction projects to NASA.
Description of the need for the information and proposed use of the
information: The Shared Savings Clause was developed as an element of
the Agency's Cost Control Initiative. The CRP is a means by which a
contractor may suggest savings to NASA. The contracting officer
evaluates the CRP in order to determine whether or not to accept the
contractor's suggestions. If the CRP is accepted, the contractor
becomes eligible for a share of the savings.
Description of the likely respondents, including the estimated
number of likely respondents, and proposed frequency of response to the
collection of information: NASA contractors whose contracts contain the
clause entitled ``Shared Savings'' may submit a CRP on their own
initiative. The number of respondents is estimated to be 10.
Estimate of the total annual reporting and recordkeeping burden
that will result from the collection of information: The annual
recordkeeping and reporting burden related to preparation and
submission of CRP's is estimated to be 600 hours.
Notice: Comments may be submitted to the OMB address shown under
ADDRESSES.
Time period within which the agency is requesting OMB to approve or
disapprove the collection of information: NASA is requesting that OMB
approve the proposed revisions to the collection of information within
the next 60 days.
In addition, comments may be submitted to NASA and OMB in order to
help NASA--
(a) evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
(ii) evaluate the accuracy of the agency's estimate of the burden
of the proposed collection of information including the validity of the
methodology and assumptions used;
(iii) enhance the quality, utility, and clarity of the information
to be collected; and
(iv) minimize the burden of the collection of information on those
who are to respond, including through the use of appropriate automated,
electronic, mechanical, or other technological collection techniques or
other forms of information technology, e.g., permitting electronic
submission of responses.
List of Subjects in 48 CFR Parts 1816 and 1852
Government procurement.
Tom Luedtke,
Deputy Associate Administrator for Procurement.
Accordingly, 48 CFR Parts 1816 and 1852 are proposed to be amended
as follows:
PART 1816--TYPES OF CONTRACTS
1. The authority citation for 48 CFR Parts 1816 and 1852 continue
to read as follows:
Authority: 42 U.S.C. 2473(c)(1).
2. Paragraph 1816.7001 is added to read as follows:
1816.7001 Shared Savings Clause.
The contracting officer shall insert the clause at 1852.216-90,
Shared Savings Clause, in all solicitations and contracts above the
simplified acquisition threshold.
[[Page 54209]]
PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
3. Section 1852.216-90 is added to read as follows:
1852.216-90 Shared Savings.
As prescribed in 1816.7001, insert the following clause:
Shared Savings
(XXX 19XX)
(a) The Contractor is entitled, under the provisions of this
clause, to share in cost savings resulting from the implementation
of cost reduction projects which are presented to the Government in
the form of Cost Reduction Proposals (CRP) and approved by the
Contracting Officer. These cost reduction projects may require
changes to the terms, conditions or statement of work of this
contract. Any cost reduction projects must not, however, revise the
essential function or service to be provided by the basic contract.
(b) Definitions:
(1) Cost savings means savings that result from instituting non-
recurring changes to the management or structure of the covered
contract, as identified in an approved Cost Reduction Proposal.
(2) Cost Reduction Proposal means a proposal that recommends
alternatives to the established procedures or organizational support
of a contract or group of contracts. These alternatives must result
in a net reduction of contract cost and price to NASA. The proposal
will include technical and cost information sufficient to enable the
Contracting Officer to review the CRP and approve or disapprove it.
The contractor may propose changes in other activities that impact
performance on their contract, to include Government and other
contractor operations, if such changes will optimize cost savings on
their contract. A contractor shall not be entitled to share,
however, in any cost shavings that are internal to the Government,
or which result from changes made to any contracts to which they are
not a party even if those changes were proposed as a part of their
CRP.
(3) Covered contract means the contract, excluding unexercised
options or future contracts, whether contemplated or not, against
which the CRP is submitted.
(4) Contractor implementation costs or ``implementation costs''
means those costs the Contractor incurs, or will incur, on the
covered contract specifically in the development, preparing,
submitting, and supporting a CRP, as well as those costs the
contractor will incur on the covered contract to make any structural
or organizational changes in order to implement an approved CRP.
(5) Government costs means internal costs of NASA or any other
Government agency that result directly from developing and
implementing the CRP. These may include, but are not limited to,
costs associated with the administration of the contract or with
such contractually related functions such as testing, operations,
maintenance and logistics support. These costs do not include the
normal administrative costs of reviewing and processing the Cost
Reduction Proposal.
(c) General. The contractor shall develop, prepare and submit
CRP's with supporting information, as detailed in paragraph (d) of
this clause, to the Contracting Officer. The CRP will describe the
proposed cost reduction activity in sufficient detail to enable the
Contracting Officer to evaluate it and to render an approval or
disapproval. The Contractor shall share in any net cost savings
realized from accepted and implemented CRP's in accordance with the
terms of this clause. The Contractor's actual percentage share of
the cost savings shall be a matter for negotiation with the
Contracting Officer, but shall not, in any event, exceed 50% of the
total recognized cost savings.
(d) Computation of cost savings. The contractor is eligible to
share in savings realized on the covered contract as a result of
implementing approved CRP's. The cost savings to be shared between
the Government and the Contractor will be derived by comparing a
current estimate to complete (ETC) for the covered contract, as
structured before implementation of the proposed CRP, to an ETC
which takes into account the impact of that CRP. Although a CRP may
result in cost savings that extend far into the future, the period
over which the contractor may share in those savings will be limited
to five years. In extenuating circumstances, this five year period
may be extended if the contracting officer agrees with the
contractors proposal, and written concurrence is obtained from the
Director, Analysis Division, Office of Procurement, NASA
Headquarters. Implementation costs of the contractor must be
considered and specifically identified in the revised ETC. Any
change in Government costs associated with the covered contract
shall also be specifically identified and addressed in the CRP. The
contractor shall not be entitled, under the provisions of this
clause, to share in any cost reductions to the contract that are the
result of changes stemming from any action other than an approved
CRP. This clause does not limit, however, recovery of any such
reimbursements that are allowed as a result of other contract
provisions.
(e) Supporting information. As a minimum, the Contractor shall
provide the following supporting information with each CRP:
(1) Identification of the current contract requirement or
practice which is targeted for restructuring.
(2) A description of the difference between the current process
or procedure and the proposed change. This description shall address
how proposed changes will meet NASA requirements and discuss the
advantages and disadvantages of the existing practice and the
proposed changes.
(3) A list of contract requirements which must be revised, if
any, if the CRP is approved, along with proposed revisions. Any
changes to NASA, or delegated, contract management processes should
also be addressed.
(4) Detailed cost estimates which reflect the implementation
costs of the CRP.
(5) An updated ETC for the covered contract, unchanged, and an
ETC for the covered contract which reflects changes resulting from
implementing the CRP. If the CRP proposes changes to only a limited
number of elements of the contract, the ETC's need only address
those portions of the contract that have been impacted. Each ETC
shall depict the level of costs incurred on a period basis. If other
CRP's have been proposed or approved on a contract, the impact of
these CRP's must be addressed in the computation of the cost savings
to ensure that the cost savings identified are attributable only to
the CRP under consideration in the instant case.
(6) A depiction of each estimate to complete shall also provide
a comparison of costs to be incurred, by period, through the end of
the covered contract.
(7) Identification of any other previous submissions of the CRP,
including the dates submitted, the agencies and contracts involved,
and the disposition of those submittals.
(f) Administration.
(1) The contractor shall submit proposed CRP's to the
Contracting Officer who shall be responsible for the review.
evaluation and approval. Normally, CRP's should not be entertained
for the first year of performance to allow the Contracting Officer
to assess performance against the basic requirements. If a cost
reduction project impacts more than a single contract, the
contractor may, upon concurrence of the Contracting Officers
responsible for the affected contracts, submit a single CRP which
addresses fully the cost savings projected on all affected contracts
that contain this Shared Savings Clause. In the case of multiple
contracts affected, responsibility for the review and approval of
the CRP will be a matter to be decided by the affected Contracting
Officers.
(2) The Contracting Officer shall approve or disapprove any
proposed cost reduction plan within 60 days after receipt. In the
event additional time is required, the Contracting Officer shall
notify the Contractor within the 60-day period, provide the reason
for delay and the expected date of the decision. Failure of the
Contracting Officer to provide a response shall not be construed as
approval of the CRP. The contractor shall continue to perform in
accordance with the terms and conditions of the existing contract
until the Contracting Officer executes a contract modification
incorporating the changes identified by the CRP. The modification
shall also adjust the contract cost and price, establish the
contractors share of cost savings, and establish a payment schedule.
(3) Notwithstanding the overall level of savings computed for
any CRP, the contractor shall not be paid any portion of its share
of cost savings until NASA realizes a positive cost savings on the
covered contract. (i.e., if implementation costs result in a period
of increased cost as a result of implementation of the CRP).
(4) The contractor shall be paid in accordance with a schedule
to be established with the contracting officer. Normally a payment
of 50% of the contractors share of the cost savings will be made in
the first month after NASA realizes a positive cost savings on the
covered contract.
(5) Any future restructuring or reorganizing activity (such as a
merger or acquisition)
[[Page 54210]]
undertaken by the Contractor, or to which the contractor becomes an
involved party, which serves to reduce, or reverse the cost savings
realized from an approved CRP for which the contractor has received
payment, may be cause for recomputing the net cost savings
associated with any approved CRP. The Government reserves the right
to make an adjustment to the contractor's share of cost savings and
to receive a refund of moneys paid if necessary. Such adjustment may
only be made after--
(i) the contractor is afforded the opportunity to provide, and
discuss with the contracting officer, full justification and support
for their actions, and
(ii) advance notification is provided to the Director, Analysis
Division, Office of Procurement, NASA Headquarters.
(g) Limitations. Contract requirements that are imposed by
statute shall not be targeted for cost reduction exercises. The
contractor is precluded from receiving reimbursements under this
clause and other incentive provisions of the contract, if any, for
the same cost reductions.
(h) Disapproval of, or failure to approve, any proposed cost
reduction proposal will not be considered a dispute subject to
remedies under the Disputes clause.
(i) Cost savings paid to the contractor in accordance with the
provisions of this clause do not constitute profit or fee within the
limitations imposed by 10 U.S.C. 2306(d) and 41 U.S.C. 254(b).
(End of clause)
[FR Doc. 95-26057 Filed 10-19-95; 8:45 am]
BILLING CODE 7510-01-M
