2024: The FAR - Federal Acquisition Regulations, Part 48

Jennifer Schaus and Associates hosts a complimentary webinar series on The FAR in 2024. Join the webinars on Wednesdays and Fridays at noon, eastern.
Recordings are on YouTube and the company website.
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1. 2024 Webinar Series The FAR: Federal Acquisition Regulations Understand the rules of the federal contracting game - and play to win ! J Schaus & Associates, WASHINGTON DC – [email protected]

2. 2024 Webinar Series THE FAR ABOUT THE SERIES : We’ll cover each PART of THE FAR Typically held Wednesdays and Fridays, 12pm Complimentary Recorded Video Posted on YouTube https://www.youtube.com/@jenniferschaus/videos PPT Posted on Slideshare.net Sponsor/Advertising Options Available J Schaus & Associates, WASHINGTON DC – [email protected]

3. 2024 Webinar Series THE FAR J Schaus & Associates, WASHINGTON DC – [email protected]

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15. 2024 Webinar Series - THE FAR THANK YOU TO OUR WEBINAR SPONSORS J Schaus & Associates, WASHINGTON DC – [email protected]

16. The FAR – Federal Acquisition Regulations - WEBINAR SERIES 2024 JSchaus & Associates – Washington DC – [email protected]

17. Your “one stop” shop for Government Contracting assistance: go.gmu.edu/ govcon Leverage our training calendar at VirginiaAPEX.org & useful links Register for free counseling: https://virginiaapex.org/services/counseling/ Reach us at [email protected] or 703-277-7750 This APEX Accelerator is funded in part through a cooperative agreement with the Department of Defense. Next Steps?

18. 2024 Webinar Series THE FAR THE FAR – PART 48 J Schaus & Associates, WASHINGTON DC – [email protected]

19. 2024 Webinar Series THE FAR FAR PART #48: Value Engineering SPEAKER: Marcos Gonzalez FIRM: McCarter & English EMAIL: [email protected] J Schaus & Associates, WASHINGTON DC – [email protected]

20. What is Value Engineering? Value engineering is the formal technique by which contractor may: V oluntarily suggest methods for performing more economically and share in any resulting savings or B e required to establish a program to identify and submit to the Government methods for performing more economically. - FAR 48.101 General J Schaus & Associates, WASHINGTON DC – [email protected]

21. Purpose of Value Engineering Identify methods for performing more economically in contracts, without compromising essential functions or characteristics. FAR 48.101(a). Eliminate any factors that increase acquisition, operation, or support costs, ultimately leading to cost savings and improved efficiency in the execution of contracts. Encourages contractors to propose innovative solutions and share in the resulting savings , promoting a collaborative and cost-effective approach to contract performance. J Schaus & Associates, WASHINGTON DC – [email protected]

22. When Does VE Apply? The VEP Clause is required in contracts over $250,000, but not in: Contracts for research and development other than full-scale development; For engineering services from not-for-profit or nonprofit organizations; Personal Services; Providing for product or component improvement, unless the value engineering incentive application is restricted to areas not covered by provisions for product or component improvement; For commercial products that do not involve packaging specifications or other special requirements or specifications; or When the agency head has exempted the contract (or a class of contracts) from the requirements of this part 48. - FAR 48.201(a) J Schaus & Associates, WASHINGTON DC – [email protected]

23. Two Approaches to VEP Inventive Approach Voluntary Agency may or may not accept VECP Mandatory Approach. Agency requires and pays for value engineering A separately priced item of work on the contract schedule J Schaus & Associates, WASHINGTON DC – [email protected]

24. Preliminary Definitions Instant contract savings: T he estimated reduction in Contractor cost of performance resulting from acceptance of the VECP, minus allowable Contractor's development and implementation costs, including subcontractors' development and implementation costs. Concurrent contract savings : N et reductions in the prices of other contracts that are definitized and ongoing at the time the VECP is accepted J Schaus & Associates, WASHINGTON DC – [email protected]

25. Definitions (cont.) Future contract savings : The product of the future unit cost reduction multiplied by the number of future contract units in the sharing base. On an instant contract, future contract savings include savings on increases in quantities after VECP acceptance that are due to contract modifications, exercise of options, additional orders, and funding of subsequent year requirements on a multiyear contract. Net acquisition savings: total acquisition savings , including instant, concurrent, and future contract savings, less Government costs . J Schaus & Associates, WASHINGTON DC – [email protected]

26. Definitions (cont.) Value engineering change proposal (VECP) means a proposal that—(1) Requires a change to this, the instant contract, to implement; and (2) Results in reducing the contract price or estimated cost without impairing essential functions or characteristics; provided, that it does not involve a change— ( i ) In deliverable end item quantities only; or (ii) To the contract type only J Schaus & Associates, WASHINGTON DC – [email protected]

27. Calculating Net Acquisition Savings Acquisition savings are realized when: ( i ) the cost or price is reduced on the instant contract (ii) reductions are negotiated in concurrent contracts (iii) future contracts are awarded, or (iv) agreement is reached on a lump-sum payment for future contract savings. Net acquisition savings are first realized, and the Contractor shall be paid a share, when Government costs and any negative instant contract savings have been fully offset against acquisition savings. J Schaus & Associates, WASHINGTON DC – [email protected]

28. Sharing acquisition savings On incentive contracts, the contractor’s share of concurrent and future contract savings and of collateral savings shall be paid as a separate firm-fixed-price line item on the instant contract. FAR 48.104-2(4) The contractor’s share of future contract savings may be paid as subsequent contracts are awarded or in a lump-sum payment at the time the VECP is accepted. The lump-sum method may be used only if the contracting officer has established that this is the best way to proceed and the contractor agrees. FAR 48.104-2(5) J Schaus & Associates, WASHINGTON DC – [email protected]

29. Sharing the Savings (cont.) The sharing base for acquisition savings is the number of affected end items on contracts of the contracting office accepting the VECP. FAR 48.104-2. Formula : Instant Unit Cost Reduction multiplied by the number of units minus the contractor’s allowable development and implementation. May be positive or negative savings (NICS) J Schaus & Associates, WASHINGTON DC – [email protected]

30. Example PopCorp submits a VEP proposal proposing a method of production that will result in $.98 cost savings per unit of popcorn, but would require the purchase of $100,000 in popping equipment and implementation costs. The Agency ordered 1,000,000 units and pays for the equipment costs, which are allowable. How much are the savings? J Schaus & Associates, WASHINGTON DC – [email protected]

31. Types of Savings Acquisition savings may be realized on: The instant contract Incentive or not incentive? Concurrent contracts Future contracts J Schaus & Associates, WASHINGTON DC – [email protected]

32. The Sharing Rate If a VECP is accepted, the Contractor shall share in net acquisition savings according to the percentages shown in the table in the appropriate contract clause. The percentage paid the Contractor depends upon- (1) This contract’s type (fixed-price, incentive, or cost-reimbursement); (2) The sharing arrangement specified in paragraph (a) of this clause (incentive, program requirement, or a combination as delineated in the Schedule); and (3) The source of the savings (the instant contract, or concurrent and future contracts), as follow: J Schaus & Associates, WASHINGTON DC – [email protected]

33. Table of Rates J Schaus & Associates, WASHINGTON DC – [email protected] Contract Type Incentive Mandatory Fixed-price (includes fixed-price-award-fee; excludes other fixed-price incentive contracts) 50% for both the instant contract and concurrent and future contracts. 25% for both the instant contract and concurrent and future contracts. Incentive (fixed-price or cost) (other than award fee) For instant K, same sharing arrangement as the contract’s profit or fee adjustment formula. Otherwise 50% for concurrent and future. Same sharing arrangement as the contract’s profit or fee adjustment formula, for instant contracts. Otherwise 25% for concurrent and future. Cost-reimbursement (includes cost-plus-award-fee; excludes other cost-type incentive contracts) 25% but as high as 50% , upon CO’s decision to increase 15%

34. VECP Preparation The VECP shall include the following: A description of the difference between the existing contract requirement and the proposed requirement, the comparative advantages and disadvantages of each, a justification when an item’s function or characteristics are being altered, the effect of the change on the end item’s performance, and any pertinent objective test data. A list and analysis of the contract requirements that must be changed if the VECP is accepted, including any suggested specification revisions. (3) Identification of the unit to which the VECP applies. J Schaus & Associates, WASHINGTON DC – [email protected]

35. VECP Preparation ( cont …) (4) A separate, detailed cost estimate for ( i ) the affected portions of the existing contract requirement and (ii) the VECP. The cost reduction associated with the VECP shall take into account the Contractor’s allowable development and implementation costs, including any amount attributable to subcontracts under the Subcontracts paragraph of this clause. (5) A description and estimate of costs the Government may incur in implementing the VECP, such as test and evaluation and operating and support costs. (6) A prediction of any effects the proposed change would have on collateral costs to the agency. (7) A statement of the time by which a contract modification accepting the VECP must be issued in order to achieve the maximum cost reduction, noting any effect on the contract completion time or delivery schedule. (8) Identification of any previous submissions of the VECP, including the dates submitted, the agencies and contract numbers involved, and previous Government actions, if known. J Schaus & Associates, WASHINGTON DC – [email protected]

36. Value Engineering FAR Clauses The contracting Officer is required to insert the clause in all contracts above the simplified acquisition threshold, with the exceptions previously outlined. 52.248-1 Value Engineering 52.248-2 Value Engineering-Architect-Engineer 52.248-3 Value Engineering-Construction J Schaus & Associates, WASHINGTON DC – [email protected]

37. 52.248-1—Value Engineering (June 2020) The base clause with all requirements, including all of the information above. J Schaus & Associates, WASHINGTON DC – [email protected]

38. 52.248-2 Value Engineering-Architect-Engineer Architect-engineer contracts.  The contracting officer shall insert the clause at  52.248-2 , Value Engineering Architect-Engineer, in solicitations and contracts whenever the Government requires and pays for a specific value engineering effort in architect-engineer contracts. The clause at  52.248-1 , Value Engineering, shall not be used in solicitations and contracts for architect-engineer services. J Schaus & Associates, WASHINGTON DC – [email protected]

39. 52.248-3—Value Engineering-Construction The contracting officer shall insert the clause at 52.248-3, Value Engineering-Construction, in construction solicitations and contracts when the contract amount is estimated to exceed the simplified acquisition threshold, unless an incentive contract is contemplated. The contracting officer may include the clause in contracts of lesser value if the contracting officer sees a potential for significant savings. The contracting officer shall not include the clause in incentive-type construction contracts. If the head of the contracting activity determines that the cost of computing and tracking collateral savings for a contract will exceed the benefits to be derived, the contracting officer shall use the clause with its Alternate I. - FAR 48.202 J Schaus & Associates, WASHINGTON DC – [email protected]

40. 2024 Webinar Series THE FAR FAR PART #48: Value Engineering SPEAKER: Marcos Gonzalez FIRM: McCarter & English EMAIL: [email protected] J Schaus & Associates, WASHINGTON DC – [email protected]

41. 2024 Webinar Series THE FAR Please subscribe to our YouTube Channel for Gov Con Content Uploads including THESE WEBINARS! https://www.youtube.com/@jenniferschaus/videos J Schaus & Associates, WASHINGTON DC – [email protected]

42. 2024 Webinar Series The FAR: Federal Acquisition Regulations THANK YOU FOR JOINING US! J Schaus & Associates, WASHINGTON DC – [email protected]