DOE 970.5215-4 Cost reduction. Basic (Aug 2009) (Current)

As prescribed in 970.1504-5(c), the contracting officer shall insert the clause at 970.5215-4, Cost Reduction, in management and operating contracts, and other contracts determined by the Senior Procurement Executive, or designee, if cost savings programs are contemplated.

Cost Reduction (AUG 2009)

(a) General. It is the Department of Energy's (DOE's) intent to have its facilities and laboratories operated in an efficient and effective manner. To this end, the Contractor shall assess its operations and identify areas where cost reductions would bring cost efficiency to operations without adversely affecting the level of performance required by the contract. The Contractor, to the maximum extent practical, shall identify areas where cost reductions may be effected, and develop and submit Cost Reduction Proposals (CRPs) to the Contracting Officer. If accepted, the Contractor may share in any shared net savings from accepted CRPs in accordance with paragraph (g) of this clause.

(b) Definitions. Administrative cost is the Contractor cost of developing and administering the CRP.

Design, process, or method change is a change to a design, process, or method which has established cost, technical and schedule baseline, is defined, and is subject to a formal control procedure. Such a change must be innovative, initiated by the Contractor, and applied to a specific project or program.

Development cost is the Contractor cost of up-front planning, engineering, prototyping, and testing of a design, process, or method.

DOE cost is the Government cost incurred implementing and validating the CRP.

Implementation cost is the Contractor cost of tooling, facilities, documentation, etc., required to effect a design, process, or method change once it has been tested and approved.

Net Savings means a reduction in the total amount (to include all related costs and fee) of performing the effort where the savings revert to DOE control and may be available for deobligation. Such savings may result from a specific cost reduction effort which is negotiated on a cost-plus-incentive-fee, fixed-price incentive, or firm-fixed-price basis, or may result directly from a design, process, or method change. They may also be savings resulting from formal or informal direction given by DOE or from changes in the mission, work scope, or routine reorganization of the Contractor due to changes in the budget.

Shared Net Savings are those net savings which result from—

    (1) A specific cost reduction effort which is negotiated on a cost-plus-incentive-fee or fixed-price incentive basis, and is the difference between the negotiated target cost of performing an effort as negotiated and the actual allowable cost of performing that effort; or

    (2) A design, process, or method change, which occurs in the fiscal year in which the change is accepted and the subsequent fiscal year, and is the difference between the estimated cost of performing an effort as originally planned and the actual allowable cost of performing that same effort utilizing a revised plan intended to reduce costs along with any Contractor development costs, implementation costs, administrative costs, and DOE costs associated with the revised plan. Administrative costs and DOE costs are only included at the discretion of the Contracting Officer. Savings resulting from formal or informal direction given by the DOE or changes in the mission, work scope, or routine reorganization of the Contractor due to changes in the budget are not to be considered as shared net savings for purposes of this clause and do not qualify for incentive sharing.

(c) Procedure for submission of CRPs. 

     (1) CRPs for the establishment of cost-plus-incentive-fee, fixed-price incentive, or firm-fixed-price efforts or for design, process, or methods changes submitted by the Contractor shall contain, at a minimum, the following:

         (i) Current Method (Baseline)—A verifiable description of the current scope of work, cost, and schedule to be impacted by the initiative, and supporting documentation.

         (ii) New Method (New Proposed Baseline)—A verifiable description of the new scope of work, cost, and schedule, how the initiative will be accomplished, and supporting documentation.

         (iii) Feasibility Assessment—A description and evaluation of the proposed initiative and benefits, risks, and impacts of implementation. This evaluation shall include an assessment of the difference between the current method (baseline) and proposed new method including all related costs.

     (2) In addition, CRPs for the establishment of cost-plus-incentive-fee, fixed-price incentive, or firm-fixed-price efforts shall contain, at a minimum, the following—

         (i) The proposed contractual arrangement and the justification for its use; and

         (ii) A detailed cost/price estimate and supporting rationale. If the approach is proposed on an incentive basis, minimum and maximum cost estimates should be included along with any proposed sharing arrangements.

(d) Evaluation and decision. All CRPs must be submitted to and approved by the Contracting Officer. Included in the information provided by the CRP must be a discussion of the extent the proposed cost reduction effort may—

     (1) Pose a risk to the health and safety of workers, the community, or to the environment;

     (2) Result in a waiver or deviation from DOE requirements, such as DOE Orders and joint oversight agreements;

     (3) Require a change in other contractual agreements;

     (4) Result in significant organizational and personnel impacts;

     (5) Create a negative impact on the cost, schedule, or scope of work in another area;

     (6) Pose a potential negative impact on the credibility of the Contractor or the DOE; and

     (7) Impact successful and timely completion of any of the work in the cost, technical, and schedule baseline.

(e) Acceptance or rejection of CRPs. Acceptance or rejection of a CRP is a unilateral determination made by the Contracting Officer. The Contracting Officer will notify the Contractor that a CRP has been accepted, rejected, or deferred within (Insert Number) days of receipt. The only CRPs that will be considered for acceptance are those which the Contractor can demonstrate, at a minimum, will—

     (1) Result in net savings (in the sharing period if a design, process, or method change);

     (2) Not reappear as costs in subsequent periods; and

     (3) Not result in any impairment of essential functions.

(f) The failure of the Contracting Officer to notify the Contractor of the acceptance, rejection, or deferral of a CRP within the specified time shall not be construed as approval.

(g) Adjustment to original estimated cost and fee. If a CRP is established on a cost-plus-incentive-fee, fixed-price incentive or firm-fixed-price basis, the originally estimated cost and fee for the total effort shall be adjusted to remove the estimated cost and fee amount associated with the CRP effort.

(h) Sharing arrangement. If a CRP is accepted, the Contractor may share in the shared net savings. For a CRP negotiated on a cost-plus-incentive-fee or fixed-price incentive basis, with the specific incentive arrangement (negotiated target costs, target fees, share lines, ceilings, profit, etc.) set forth in the contractual document authorizing the effort, the Contractor's share shall be the actual fee or profit resulting from such an arrangement. For a CRP negotiated as a cost savings incentive resulting from a design, process, or method change, the Contractor's share shall be a percentage, not to exceed 25% of the shared net savings. The specific percentage and sharing period shall be set forth in the contractual document.

(i) Validation of Shared Net Savings. The Contracting Officer shall validate actual shared net savings. If actual shared net savings cannot be validated, the Contractor will not be entitled to a share of the net shared savings.

(j) Relationship to other incentives. Only those benefits of an accepted CRP not awardable under other clauses of this contract shall be considered under this clause.

(k) Subcontracts. The Contractor may include a clause similar to this clause in any subcontract. In calculating any estimated shared net savings in a CRP under this contract, the Contractor's administration, development, and implementation costs shall include any subcontractor's allowable costs, and any CRP incentive payments to a subcontractor resulting from the acceptance of such CRP. The Contractor may choose any arrangement for subcontractor CRP incentive payments, provided that the payments not reduce the DOE's share of shared net savings.

(End of clause)
 

(k) Subcontracts. The Contractor may include a clause similar to this clause in any subcontract. In calculating any estimated shared net savings in a CRP under this contract, the Contractor's administration, development, and implementation costs shall include any subcontractor's allowable costs, and any CRP incentive payments to a subcontractor resulting from the acceptance of such CRP. The Contractor may choose any arrangement for subcontractor CRP incentive payments, provided that the payments not reduce the DOE's share of shared net savings.

Prime’s Interest;

52.204-2 Security Requirements.

52.215-21 Requirements for Certified Cost or Pricing Data and Data Other Than Certified Cost or Pricing Data-Modifications.

52.216-16 Incentive Price Revision-Firm Target.

52.216-2 Economic Price Adjustment-Standard Supplies.

52.216-3 Economic Price Adjustment-Semistandard Supplies.

52.216-4 Economic Price Adjustment-Labor and Material.

52.216-5 Price Redetermination-Prospective.

52.216-6 Price Redetermination-Retroactive.

52.222-30 Construction Wage Rate Requirements-Price Adjustment (None or Separately Specified Method).

52.222-31 Construction Wage Rate Requirements-Price Adjustment (Percentage Method).

52.222-32 Construction Wage Rate Requirements-Price Adjustment (Actual Method).

52.222-43 Fair Labor Standards Act and Service Contract Labor Standards-Price Adjustment (Multiple Year and Option Contracts).

52.222-44 Fair Labor Standards Act and Service Contract Labor Standards-Price Adjustment.

52.222-55 Minimum Wages Under Executive Order 13658.

52.229-4 Federal, State, and Local Taxes (State and Local Adjustments).

52.229-6 Taxes-Foreign Fixed-Price Contracts.

52.232-29 Terms for Financing of Purchases of Commercial Items.

52.232-31 Invitation to Propose Financing Terms.

52.233-3 Protest after Award.

52.236-2 Differing Site Conditions.

52.242-14 Suspension of Work.

52.242-15 Stop-Work Order.

52.243-1 Changes-Fixed-Price.

52.243-2 Changes-Cost-Reimbursement.

52.243-3 Changes-Time-and-Materials or Labor-Hours.

52.243-4 Changes.

52.243-5 Changes and Changed Conditions.

52.243-7 Notification of Changes.

52.250-5 SAFETY Act-Equitable Adjustment.

252.216-7000 Economic Price Adjustment-Basic Steel, Aluminum, Brass, Bronze, or Copper Mill Products.

252.216-7001 Economic Price Adjustment–Nonstandard Steel Items.

252.216-7003 Economic Price Adjustment-Wage Rates or Material Prices Controlled by a Foreign Government.

252.216-7007 Economic Price Adjustment-Basic Steel, Aluminum, Brass, Bronze, or Copper Mill Products-Representation.

252.216-7008 Economic Price Adjustment-Wage Rates or Material Prices Controlled by a Foreign Government-Representation.

252.217-7003 Changes.

252.217-7027 Contract Definitization.

252.227-7002 Readjustment of Payments.

252.232-7000 Advance Payment Pool.

252.232-7012 Performance-Based Payments–Whole-Contract Basis.

252.232-7013 Performance-Based Payments-Deliverable-Item Basis.

252.236-7003 Payment for Mobilization and Preparatory Work.

252.236-7004 Payment for Mobilization and Demobilization.

252.237-7023 Continuation of Essential Contractor Services .

252.239-7004 Orders for Facilities and Services.

252.241-7000 Superseding Contract.

252.243-7001 Pricing of Contract Modifications.

252.243-7002 Requests for Equitable Adjustment.

252.247-7000 Hardship Conditions.

252.247-7002 Revision of Prices.

252.249-7000 Special Termination Costs.

252.215-7015 Program Should-Cost Review.

252.232-7015 Performance-Based Payments-Representation.

252.232-7016 Notice of Progress Payments or Performance-Based Payments.

1852.215-79 Price Adjustment for "Make-or-Buy" Changes.

1852.242-72 Denied Access to NASA Facilities

1852.243-72 Equitable Adjustments.

5252.211-9503 LEVEL OF EFFORT (COST REIMBURSEMENT) (NAVAIR)(DEC 2012)

5252.216-9200 Payment of Fixed Fee (Completion Type)

5252.216-9201 Payment of Fixed Fee Based on Staff-hours (Term Type)

5252.216-9205 Fee Determination and Payment (Indefinite Delivery Type Contracts)

5252.217-9201 Contract Maximum Amount

5252.242-9515 RESTRICTION ON THE DIRECT CHARGING OF MATERIAL (VARIATION)

5252.243-9505 ENGINEERING CHANGES (NAVAIR)

5252.227-9505 TECHNICAL DATA AND COMPUTER SOFTWARE IDENTIFICATION IN ENGINEERING CHANGE PROPOSALS (ECPs) (NAVAIR)

3052.216-70 Evaluation of offers subject to an economic price adjustment clause.

3052.216-71 Determination of award fee.

3052.231-70 Precontract costs.

5152.211-9001 Variations in Estimated Quantities-Subline Items.

5152.237-9000 Adjustments to Contractor’s Coefficient for Option Years (Job Order Contracts).

552.236-11 Use and Possession Prior to Completion.

552.270-10 Failure in Performance.

552.238-82 Modifications (Federal Supply Schedules).

552.236-79 Construction-Manager-As-Constructor.

552.215-72 Price Adjustment—Failure to Provide Accurate Information.

552.216-70 Economic Price Adjustment—FSS Multiple Award Schedule Contracts.

552.216-71 Economic Price Adjustment—Special Order Program Contracts.

552.238-81 Price Reductions.

552.243-71 Equitable Adjustments.

552.246-70 Source Inspection by Quality Approved Manufacturer.

552.246-77 Additional Contract Warranty Provisions for Supplies of a Noncomplex Nature.

652.216-71 Price Adjustment.

652.237-70 Compensatory Time Off.

652.237-72 Observance of Legal Holidays and Administrative Leave.

952.204-76 Conditional payment of fee or profit-safeguarding restricted data and other classified information.

952.208-70 Printing.

952.216-7 Allowable cost and payment.

952.216-15 Predetermined indirect cost rates.

952.223-76 Conditional payment of fee or profit-safeguarding restricted data and other classified information and protection of worker safety and health.

970.5211-1 Work authorization.

970.5215-1 Total available fee: Base fee amount and performance fee amount.

970.5215-3 Conditional Payment of Fee, Profit, and Other Incentives-Facility Management Contracts

970.5215-5 Limitation on fee.

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