Contractors can gain financially by receiving a share of acquisition savings from instant contract savings, concurrent contract savings from other contracts currently under the authority of the contracting officer and future contract savings. The savings paid the contractor may be realized on the instant contract under which the VECP is submitted, concurrent contracts between the contractor and the government to which the savings apply and to future contracts between the contractor and the government where savings occur. In addition, there are collateral cost savings which are those associated with agency costs of operation, maintenance, logistics support or government property.

The actual sharing percentages that determine what portion of the realized savings goes to the contractor and what portion is retained by the government are determined on a case by case basis by the contracting officer. A typical sharing percentage for a firm fixed price contract is 50-50 of instant contract savings. Collateral savings, those related to agency costs of operation, maintenance, logistic support or government-furnished property might range from 20-100% going to the contractor. The CO will determine the actual percentages for sharing once a VECP has been accepted. The CO’s determination will be based on consideration of the extent of the change, complexity, development risk to the contractor, development cost and performance impact. Based on this evaluation, the sharing rate for instant savings may be increased to 75/25 with the contractor receiving 75% of the savings (after cost are deducted) and up to 50% of future savings for the contractor. Whatever the percentages or sharing period, the program can put money in your pocket.

The mechanism for payment can vary. The contractor’s share of the savings for an instant contract is paid through that contract. The CO modifies the contract within three months of acceptance of the VECP to reflect the price reductions and to reflect the contractors share of the cost savings under the terms of the VE agreement. Future contract savings are generally paid as future contracts are awarded. Again, the CO will modify the contract within three months of award of the future contracts to reflect the savings if the instant contract is still current. In unusual cases, the CO may pay a lump sum at the time of acceptance of the VECP in anticipation of future contracts. The method used is up to the CO and takes into account the availability of funds and the administrative costs of paying one time or over a longer timeframe. The contractor has the responsibility of maintaining records of future contracts affected by the VECP (that is within the share period) and awarded after the term of the instant contract. These savings may be paid through application to an unrelated but existing contract with the contractor if one exists or may be paid in a lump sum to the contractor.

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