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APPENDIX F
Federal Acquisition Regulation Parts 48 and 52
Re: Value Engineering
PART 48--VALUE ENGINEERING
Sec. 48.000 Scope of part.
48.001 Definitions.
Subpart 48.~--Policies and Procedures
48.101 General.
48.102 Policies.
48. ~ 03 Processing value engineering change proposals.
48.104 Sharing arrangements.
48.104-l Determining sharing period.
48.104-2 Sharing acquisition savings.
48.104-3 Sharing collateral savings.
48. ~ 04-4 Sharing alternative--no-cost settlement method.
48.105 Relationship to other incentives.
Subpart 48.2--Contract Clauses
48.20 ~ Clauses for supply or service contracts.
48.202 Clause for construction contracts.
48.000 Scope of part.
This part prescribes policies and procedures for using and administering value
engineering techniques in contracts.
48.001 Definitions.
"Acquisition savings," as used in this part, means savings resulting from the application
of a value engineering change proposal (VECP) to contracts awarded by the same
contracting office or its successor for essentially the same unit. Acquisition savings
include--
(a) Tnstant contract savings, which are the net cost reductions on the contract under which
the VECP is submitted and accepted, and which are equal to the instant unit cost
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reduction multiplied by the number of instant contract units affected by the VECP, less
the contractor's allowable development and implementation costs;
(b) Concurrent contract savings, which are net reductions in the prices of other contracts
that are definitized and ongoing at the time the VECP is accepted; and
(c) Future contract savings, which are the product of the future unit cost reduction
multiplied by the number of future contract units in the sharing base. On an instant
contract, fixture 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.
"Collateral costs," as used in this part, means agency costs of operation, maintenance,
logistic support, or Government-fi~rnished property.
"Collateral savings," as used in this part, means those measurable net reductions resulting
from a VECP in the agency's overall projected collateral costs, exclusive of acquisition
savings, whether or not the acquisition cost changes.
"Contracting office," as used in this part, includes any contracting office that the
acquisition is transferred to, such as another branch of the agency or another agency's
office that is performing a joint acquisition action.
"Contractor's development and implementation costs," as used in this part, means those
costs the contractor incurs on a VECP specifically in developing, testing, preparing, and
submitting the VECP, as well as those costs the contractor incurs to make the contractual
changes required by Government acceptance of a VECP.
"Future unit cost reduction," as used in this part, means the instant unit cost reduction
adjusted as the contracting officer considers necessary for projected learning or changes
in quantity during the sharing period. It is calculated at the time the VECP is accepted
and applies either--
(a) Throughout the sharing period, unless the contracting officer decides that
recalculation is necessary because conditions are significantly different from those
previously anticipated, or
(b) To the calculation of a lump-sum payment, which cannot later be revised.
"Government costs," as used in this part, means those agency costs that result directly
from developing and implementing the VECP, such as any net increases in the cost of
testing, operations, maintenance, and logistics support. The term does not include the
normal administrative costs of processing the VECP or any increase in instant contract
cost or price resulting from negative instant contract savings.
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"Instant contract," as used in this part, means the contract under which the VECP is
submitted. It does not include increases in quantities after acceptance of the VECP that
are due to contract modifications, exercise of options, or additional orders. If the contract
is a multiyear contract, the term does not include quantities funded after VECP
acceptance. In a fixed-price contract with prospective price redetermination, the term
refers to the period for which firm prices have been established.
"Instant unit cost reduction" means the amount of the decrease in unit cost of
performance (without deducting any contractor's development or implementation costs)
resulting from using the VECP on the instant contract. In service contracts, the instant
unit cost reduction is normally equal to the number of hours per line-item task saved by
using the VECP on the instant contract, multiplied by the appropriate contract labor rate.
"Negative instant contract savings" means the increase in the instant contract cost or price
when the acceptance of a VECP results in an excess of the contractor's allowable
development and implementation costs over the product of the instant unit cost reduction
multiplied by the number of instant contract units affected.
"Net acquisition savings" means total acquisition savings, including instant, concurrent,
and future contract savings, less Government costs.
"Sharing base," as used in this part, means the number of affected end items on contracts
of the contracting office accepting the VECP.
"Sharing period," as used in this part, means the period beginning with acceptance of the
first unit incorporating the VECP and ending at a calendar date or event determined by
the contracting officer for each VECP.
"Unit," as used in this part, means the item or task to which the contracting officer and
the contractor agree the VECP applies.
"Value engineering," as used in this part, means an analysis of the functions of a
program, project, system, product, item of equipment, building, facility, service, or
supply of an executive agency, performed by qualified agency or contractor personnel,
directed at improving performance, reliability, quality, safety, and life-cycle costs
(Section 36 of the Office of Federal Procurement Policy Act, 41 U.S.C. 401, et seq.~.
"Value engineering change proposal (VECP)" means a proposal that--
(a) Requires a change to the instant contract to implement; and
(b) Results in reducing the overall projected cost to the agency without impairing
essential functions or characteristics; provided, that it does not involve a change--
(~) In deliverable end item quantities only;
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(2) In research and development (R&D) items or R&D test quantities that are due solely
to results of previous testing under the instant contract; or
(3) To the contract type only.
"Value engineering proposal," as used in this part, means, in connection with an A-E
contract, a change proposal developed by employees of the Federal Government or
contractor value engineering personnel under contract to an agency to provide value
engineering services for the contract or program.
Subpart 48. ~ --Policies and Procedures
48.101 General.
(a) Value engineering is the formal technique by which contractors may (~) voluntarily
suggest methods for performing more economically and share in any resulting savings or
(2) be required to establish a program to identify and submit to the Government methods
for performing more economically. Value engineering attempts to eliminate, without
impairing essential functions or characteristics, anything that increases acquisition,
operation, or support costs.
(b) There are two value engineering approaches:
(~) The first is an incentive approach in which contractor participation is voluntary and
the contractor uses its own resources to develop and submit any value engineering change
proposals (VECP's). The contract provides for sharing of savings and for payment of the
contractor's allowable development and implementation costs only if a VECP is accepted.
This voluntary approach should not in itself increase costs to the Government.
(2) The second approach is a mandatory program in which the Government requires and
pays for a specific value engineering program effort. The contractor must perform value
engineering of the scope and level of effort required by the Government's program plan
and included as a separately priced item of work in the contract Schedule. No value
engineering sharing is permitted in architect engineer contracts. All other contracts with a
program clause share in savings on accepted VECP's, but at a lower percentage rate than
under the voluntary approach. The objective of this value engineering program
requirement is to ensure that the contractor's value engineering effort is applied to areas
of the contract that offer opportunities for considerable savings consistent with the
functional requirements of the end item of the contract.
48.102 Policies.
(a) As required by Section 36 of the Of fice of Federal Procurement Policy Act (4 ~ U.S.C.
401, et seq.), agencies shall establish and maintain cost-effective value engineering
procedures and processes. Agencies shall provide contractors a substantial financial
incentive to develop and submit VECP's. Contracting activities will include value
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engineering provisions in appropriate supply, service, architect-engineer and construction
contracts as prescribed by 48.201 and 48.202 except where exemptions are granted on a
case-by-case basis, or for specific classes of contracts, by the agency head.
(b) Agencies shall--
(~) Establish guidelines for processing VECP's,
(2) Process VECP's objectively and expeditiously, and
(3) Provide contractors a fair share of the savings on accepted VECP's.
(c) Agencies shall consider requiring incorporation of value engineering clauses in
appropriate subcontracts.
(~) Agencies other than the Department of Defense shall use the value engineering
program requirement clause (52.248-l, Alternates ~ or Il) in initial production contracts
for major system programs (see definition of major system in 34.001) and for contracts
for major systems research and development except where the contracting officer
determines and documents the file to reflect that such use is not appropriate.
(2) In Sepal latent of Defense contracts, the VE program requirement clause (52.248- I,
Alternates ~ or Il), shall be placed in initial production solicitations and contracts (first
and second production buys) for major system acquisition programs as defined in DoD
Directive 5000.1, except as specified in subdivisions (~2~(i) and (ii) of this section. A
pro cram requirement clause may be included in initial production contracts for less than
major systems acquisition programs if there is a potential for savings. The contracting
officer is not required to include a program requirement clause in initial production
contracts--
(i) Where, in the judgment of the contracting officer, the prime contractor has
demonstrated an effective VE program during either earlier program phases, or during
other recent comparable production contracts.
(ii) Which are awarded on the basis of competition.
(e) Value engineering incentive payments do not constitute profit or fee within the
limitations imposed by 10 U.S.C. 2306~) and 41 U.S.C. 254(b) (see 15.404-4(c)~4~(i)~.
(f) Generally, profit or fee on the instant contract should not be adjusted downward as a
result of acceptance of a VECP. Profit or fee shall be excluded when calculating instant
or fixture contract savings.
(g) The contracting officer determines the sharing periods and sharing rates on a case-by-
case basis using the guidelines in 48.104-l and 48.104-2, respectively. In establishing a
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sharing period and sharing rate, the contracting officer must consider the following, as
appropriate, and must insert supporting rationale in the contract file:
(~) Extent of the change.
(2) Complexity of the change.
(3) Development risk (e.g., contractor's financial risk).
(4) Development cost.
(5) Performance and/or reliability impact.
(6) Production period remaining at the time of VECP acceptance.
(7) Number of units affected.
(h) Contracts for architect-engineer services must require a mandatory value engineering
program to reduce total ownership cost in accordance with 48.101(b)~2~. However, there
must be no sharing of value engineering savings in contracts for architect-engineer
services.
(i) Agencies shall establish procedures for Ending and payment of the contractor's share
of collateral savings and future contract savings.
48. ~ 03 Processing value engineering change proposals.
(a) instructions to the contractor for preparing a VECP and submitting it to the
Government are included in paragraphs (c) and (~) of the value engineering clauses
prescribed in Subpart 48.2. Upon receiving a VECP, the contracting officer or other
designated official shall promptly process and objectively evaluate the VECP in
accordance with agency procedures and shall document the contract file with the
rationale for accepting or rejecting the VECP.
(b) The contracting officer is responsible for accepting or rejecting the VECP within 45
days from its receipt by the Government. If the Government will need more time to
evaluate the VECP, the contracting officer shall notify the contractor promptly in writing,
giving the reasons and the anticipated decision date. The contractor may withdraw, in
whole or in part, any VECP not accepted by the Government within the period specified
in the VECP. Any VECP may be approved, in whole or in part, by a contract
modification incorporating the VECP. Until the effective date of the contract
modification, the contractor shall perform in accordance with the existing contract. If the
Government accepts the VECP, but properly rejects units subsequently delivered or does
not receive units on which a savings share was paid, the contractor shall reimburse the
Government for the proportionate share of these payments. If the VECP is not accepted,
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the contracting officer shall provide the contractor with prompt written notification,
explaining the reasons for rejection.
(c) The following Government decisions are unilateral decisions made solely at the
discretion of the Government:
(~) The decision to accept or reject a VECP.
(2) The determination of collateral costs or collateral savings.
(3) The decision as to which of the sharing rates applies when Alternate I] of the clause at
52.248-l, Value Engineering, is used.
(4) The contracting officer's determination of the duration of the sharing period and the
contractor's sharing rate.
48.104 Sharing arrangements.
48. ~ 04- ~ Determining sharing period.
(a) Contracting officers must determine discrete sharing periods for each VECP. If more
than one VECP is incorporated into a contract, the sharing period for each VECP need
not be identical.
(b) The sharing period begins with acceptance of the first unit incorporating the VECP.
Except as provided in paragraph (c) of this subsection, the end of the sharing period is a
specific calendar date that is the later of--
(~) 36 to 60 consecutive months (set at the discretion of the contracting officer for each
VECP) after the first unit affected by the VECP is accepted; or
(2) The last scheduled delivery date of an item affected by the VECP under the instant
contract delivery schedule in effect at the time the VECP is accepted.
(c) For engineering-development contracts and contracts containing low-rate-initial-
production or early production units' the end of the sharing period is based not on a
calendar date, but on acceptance of a specified quantity of future contract units. This
quantity is the number of units affected by the VECP that are scheduled to be delivered
over a period of between 36 and 60 consecutive months (set at the discretion of the
contracting officer for each VECP) that spans the highest planned production, based on
planning and programming or production documentation at the time the VECP is
accepted. The specified quantity begins with the first future contract unit affected by the
VECP and continues over consecutive deliveries until the sharing period ends at
acceptance of the last of the specified quantity of units.
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(d) For contracts (other than those in paragraph (c) of this subsection) for items requiring
a prolonged production schedule (e.g., ship construction, major system acquisition)' the
end of the sharing period is determined according to paragraph (b) of this subsection.
Agencies may prescribe sharing of future contract savings on all future contract units to
be delivered under contracts awarded within the sharing period for essentially the same
item, even if the scheduled delivery date is outside the sharing period.
48. 104-2 Sharing acquisition savings.
(a) Supply or service contracts. (~) The sharing base for acquisition savings is the number
of affected end items on contracts of the contracting office accepting the VECP. The
sharing rates (Government/contractor) for net acquisition savings for supplies and
services are based on the type of contract, the value engineering clause or alternate used,
and the type of savings, as follows:
(2) Acquisition savings may be realized on the instant contract, concurrent contracts, and
future contracts. The contractor is entitled to a percentage share (see paragraph Bald of
any net acquisition savings. Net acquisition savings result when the total of acquisition
savings becomes greater than the total of Government costs and any negative instant
contract savings. This may occur on the instant contract or it may not occur until
reductions have been negotiated on concurrent contracts or until fixture contract savings
are calculated, either through {ump-sum payment or as each future contract is awarded.
(i) When the instant contract is not an incentive contract, the contractor's share of net
acquisition savings is calculated and paid each time such savings are realized. This may
occur once, several times, or, in rare cases, not at all.
(ii) When the instant contract is an incentive contract, the contractor shares in instant
contract savings through the contract's incentive structure. In calculating acquisition
savings under incentive contracts, the contracting officer shall add any negative instant
contract savings to the target cost or to the target price and ceiling price and then offset
these negative instant contract savings and any Government costs against concurrent and
future contract savings.
(3) The contractor shares in the savings on all affected units scheduled for delivery during
the sharing period. The contractor is responsible for maintaining, for 3 years after final
payment on the contract under which the VECP was accepted, records adequate to
identify the first delivered unit incorporating the applicable VECP.
(4) Contractor shares of savings are paid through the contract under which the VECP was
accepted. On incentive contracts, the contractor's share of concurrent and future contract
savings and of collateral savings shall be paid as a separate f~rm-f~xed-price contract line
item on the instant contract.
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(5) Within 3 months after concurrent contracts have been modified to reflect price
reductions attributable to use of the VECP, the contracting of ficer shall modify the instant
contract to provide the contractor's share of savings.
(6) 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. The contracting officer ordinarily shall make
calculations as future contracts are awarded and, within 3 months after award, modify the
instant contract to provide the contractor's share of the savings. For future contract
savings calculated under the optional lump-sum method, the sharing base is an estimate
of the number of items that the contracting officer will purchase for delivery during the
sharing period. In deciding whether or not to use the more convenient lump-sum method
for an individual VECP, the contracting officer shall consider--
(i) The accuracy with which the number of items to be delivered during the sharing
period can be estimated and the probability of actual production of the projected quantity;
(ii) The availability of funds for a lump-sum payment; and
(iii) The administrative expense of amending the instant contract as future contracts are
awarded.
(b) Construction contracts. Sharing on construction contracts applies only to savings on
the instant contract and to collateral savings. The Government's share of savings is
determined by subtracting Government costs from instant contract savings and
multiplying the result by (~) 45 percent for fixed-price contracts or (2) 75 percent for
cost-reimbursement contracts. Value engineering sharing does not apply to incentive
construction contracts.
48. 104-3 Sharing collateral savings.
(a) The Government shares collateral savings with the contractor, unless the head of the
contracting activity has determined that the cost of calculating and tracking collateral
savings will exceed the benefits to be derived (see 48.201(e)~.
(b) The contractor's share of collateral savings may range from 20 to 100 percent of the
estimated savings to be realized during a typical year of use but must not exceed the
greater of--
(~) The contract's firm-fixed-price, target price, target cost, or estimated cost, at the time
the VECP is accepted; or
(2) $100,000.
(c) The contracting officer must determine the sharing rate for each VECP.
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(~) In determining collateral savings, the contracting officer must consider any
degradation of perfo~ance, service life, or capability.
48. ~ 04-4 Sharing alternative--no-cost settlement method.
In selecting an appropriate mechanism for incorporating a VECP into a contract, the
contracting officer shall analyze the different approaches available to determine which
one would be in the Government's best interest. Contracting officers should balance the
administrative costs of negotiating a settlement against the anticipated savings. A no-cost
settlement may be used if, in the contracting officer's judgment, reliance on other VECP
approaches likely would not be more cost-effective, and the no-cost settlement would
provide adequate consideration to the Government. Under this method of settlement, the
contractor would keep all of the savings on the instant contract, and all savings on its
concurrent contracts only. The Government would keep all savings resulting from
concurrent contracts placed with other sources, savings from all future contracts, and all
collateral savings. Use of this method must be by mutual agreement of both parties for
individual VECPs.
48. ~ 05 Relationship to other incentives.
Contractors should be offered the fullest possible range of motivation, yet the benefits of
an accepted VECP should not be rewarded both as value engineering shares and under
performance, design-to-cost, or similar incentives of the contract. To that end, when
performance, design-to-cost, or similar targets are set and incentivized, the targets of such
incentives affected by the VECP are not to be adjusted because of the acceptance of the
VECP. Only those benefits of an accepted VECP not rewardable under other incentives
are rewarded under a value engineering clause.
Subpart 48.2--Contract Clauses
48.201 Clauses for supply or service contracts.
(a) General. The contracting officer shall insert a value engineering clause in solicitations
and contracts when the contract amount is expected to be $100,000 or more, except as
specified in subparagraphs (aft) through (5) and in paragraph (f) below. A value
engineering clause may be included in contracts of lesser value if the contracting officer
sees a potential for significant savings. Unless the chief of the contracting office
authorizes its inclusion, the contracting officer shall not include a value engineering
clause in solicitations and contracts--
(~) For research and development other than full-scale development;
(2) For engineering services from not-for-profit or nonprofit organizations;
(3) For personal services (see Subpart 37.~;
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(4) 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;
(5) For commercial products (see Part ~ I) that do not involve packaging specifications or
other special requirements or specifications; or
(6) When the agency head has exempted the contract (or a class of contracts) from the
requirements of this Part 48.
(b) Value engineering incentive. To provide a value engineering incentive, the
contracting officer shall insert the clause at 52.248-l, Value Engineering, in solicitations
and contracts except as provided in paragraph (a) of this section (but see subparagraph
Bell below).
(c) Value engineering program requirement. (~) If a mandatory value engineering effort
is appropriate (i.e., if the contracting officer considers that substantial savings to the
Government may result from a sustained value engineering effort of a specified level),
the contracting officer shall use the clause with its Alternate ~ (but see subparagraph
(e)~2) below).
(2) The value engineering program requirement may be specified by the Government in
the solicitation or, in the case of negotiated contracting, proposed by the contractor as
part of its offer and included as a subject for negotiation. The program requirement shall
be shown as a separately priced line item in the contract Schedule.
(~) Value engineering incentive and program requirement. (~) If both a value engineering
incentive and a mandatory program requirement are appropriate, the contracting officer
shall use the clause with its Alternate IT (but see subparagraph (e)~3) below).
(2) The contract shall restrict the value engineering program requirement to well-defined
areas of performance designated by line item in the contract Schedule. Alternate tI
applies a value engineering program to the specified areas and a value engineering
incentive to the remaining areas of the contract.
(e) Collateral savings computation not cost-effective. If the head of the contracting
activity determines for a contract or class of contracts that the cost of computing and
tracking collateral savings will exceed the benefits to be derived, the contracting officer
shall use the clause with its--
(~) Alternate Ill if a value engineering incentive is involved;
(2) Alternate Ill and Alternate ~ if a value engineering program requirement is involved,
or
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(3) Alternate III and Alternate II if both an incentive and a program requirement are
involved.
(f) 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-l, Value Engineering, shall not be used in
solicitations and contracts for architect-engineer services.
(g) Engineering-development solicitations and contracts. For engineering-development
solicitations and contracts, and solicitations and contracts containing low-rate-initial-
production or early production units, the contracting officer
52.248-1, Value Engineering, by--
must modify the clause at
(~) Revising paragraph (i)~3~(i) of the clause by substituting "a number equal to the
quantity required to be delivered over a period of between 36 and 60 consecutive months
(set at the discretion of the Contracting Officer for each VECP) that spans the highest
planned production, based on planning and programming or production documentation at
the time the VECP is accepted;" for "the number of fixture contract units scheduled for
delivery during the sharing period;" and
(2) Revising the first sentence under paragraph (3) of the definition of "acquisition
savings" by substituting "a number equal to the quantity to be delivered over a period of
between 36 and 60 consecutive months (set at the discretion of the Contracting Officer
for each VECP) that spans the highest planned production, based on planning and
programming or production documentation at the time the VECP is accepted." for "the
number of future contract units in the sharing base."
(h) Extended production period solicitations and contracts. In solicitations and contracts
for items requiring an extended period for production (e.g., ship construction, major
system acquisition), if agency procedures prescribe sharing of future contract savings on
all units to be delivered under contracts awarded during the sharing period (see 48.104-
lfc)), the contracting officer must modify the clause at 52.248-1, Value Engineering, by
revising paragraph (i)~3)(i) of the clause and the first sentence under paragraph (3) of the
definition of "acquisition savings" by substituting "under contracts awarded during the
sharing period" for "during the sharing period."
48.202 Clause for construction contracts.
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 be $100,000 or more, 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
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exceed the benefits to be derived, the contracting officer shall use the clause with its
Alternate I.
Government/Contractor Shares of Net Acquisition Savings
(Figures in Percent)
Contract Type
Fixed-price (includes fixed-price-award-fee; excludes other fixed-price incentive
contracts)
Incentive (fixed-price or cost) (other than award fee)
Cost-reimbursement (includes cost-plus-award-fee; excludes other cost-type incentive
contracts)
Sharing Arrangement
Incentive
(voluntary)
Program
Requirement
(mandatory)
Instant contract rate
*50/50
(**)
***75/25
Con- current and future rate
*50/50
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*50/50
***75/25
Instant contract rate
75/25
(**)
85/15
Con- current and future contract rate
*75/25
75/25
85/15
* The Contracting Officer may increase the Contractor's sharing rate to as high as 75
percent for each VECP.
** Same sharing arrangement as the contract's profit or fee adjustment fonnula.
*** The Contracting Officer may increase the Contractor's sharing rate to as high as 50
percent for each VECP.
52.248-2 Value Engineering--Architect-Engineer.
As prescribed in 48.201(f), insert the following clause:
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Value Engineering--Architect-Engineer (Mar 1990)
(a) General. The Contractor shall (~) perform value engineering (VE) services and submit
progress reports as specified in the Schedule; and (2) submit to the Contracting Officer
any resulting value engineering proposals (VEP's). Value engineering activities shall be
performed concurrently with, and without delay to, the schedule set forth in the contract.
The services shall include VE evaluation and review and study of design documents
immediately following completion of the 35 percent design state or at such stages as the
Contracting Officer may direct. Each separately priced line item for VE services shall
define specifically the scope of work to be accomplished and may include VE studies of
items other than design documents. The Contractor shall be paid as the contract specifies
for this effort, but shall not share in savings which may result from acceptance and use of
VEP's by the Government.
(b) Definitions. "Life cycle cost," as used in this clause, is the sum of all costs over the
useful life of a building, system or product. It includes the cost of design, construction,
acquisition, operation, maintenance, and salvage (resale) value, if any.
"Value engineering," as used in this clause, means an organized effort to analyze the
functions of systems, equipment, facilities, services, and supplies for the purpose of
achieving the essential functions at the lowest life cycle cost consistent with required
performance, reliability, quality, and safety.
"Value engineering proposal," as used in this clause, means, in connection with an A-E
contract, a change proposal developed by employees of the Federal Government or
contractor value engineering personnel under contract to an agency to provide value
engineering services for the contract or program.
(c) Submissions. After award of an architect-engineering contract the contractor shall--
(~) Provide the Government with a fee breakdown schedule for the VE services (such as
criteria review, task team review, and bid package review) included in the contract
schedule;
(2) Submit, for approval by the Contracting Officer, a list of team members and their
respective resumes representing the engineering disciplines required to complete the
study effort, and evidence of the team leader's qualifications and engineering discipline.
Subsequent changes or substitutions to the approved VE team shall be submitted in
writing to the Contracting Officer for approval; and
(3) The team leader shall be responsible for pre-study work assembly and shall edit,
reproduce, and sign the final report and each VEP. All VEP's, even if submitted earlier as
an individual submission, shall be contained in the final report.
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(d) VEP preparation. As a minimum, the contractor shall include the following
information in each VEP:
(1) A description of the difference between the existing and proposed design, the
comparative advantages and disadvantages of each, a justification when an item's
Unction is being altered, the effect of the change on system or facility performance, and
any pertinent objective test data.
(2) A list and analysis of design criteria or specifications that must be changed if the VEP
is accepted.
(3) A separate detailed estimate of the impact on project cost of each VEP, if accepted
and implemented by the Government.
(4) A description and estimate of costs the Government may incur in implementing the
VEP, such as design change cost and test and evaluation cost.
(5) A prediction of any effects the proposed change may have on life cycle cost.
(6) The effect the VEP will have on design or construction schedules.
(e) VEP acceptance. Approved VEP's shall be implemented by bilateral modification to
this contract.
(End of clause)
52.248-3 Value Engineering--Construction.
As prescribed in 48.202, insert the following clause:
Value Engineering--Construction (Fete 2000)
(a) General. The Contractor is encouraged to develop, prepare, and submit value
engineering change proposals (VECP's) voluntarily. The Contractor shall share in any
instant contract savings realized from accepted VECP's, in accordance with paragraph (f)
of this clause.
(b) Definitions. "Collateral costs," as used in this clause, means agency costs of
operation, maintenance, logistic support, or Government-furnished property.
"Collateral savings," as used in this clause, means those measurable net reductions
resulting from a VECP in the agency's overall projected collateral costs, exclusive of
acquisition savings, whether or not the acquisition cost changes.
"Contractor's development and implementation costs," as used in this clause, means those
costs the Contractor incurs on a VECP specifically in developing, testing, preparing, and
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submitting the VECP, as well as those costs the Contractor incurs to make the contractual
changes required by Government acceptance of a VECP.
"Government costs," as used in this clause, means those agency costs that result directly
from developing and implementing the VECP, such as any net increases in the cost of
testing, operations, maintenance, and logistic support. The term does not include the
normal administrative costs of processing the VECP.
"Instant contract savings," as used in this clause, means the 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 (see paragraph (h) of this cIause).
"Value engineering change proposal (VECP)" means a proposal that--
(~) 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.
(c) VECP preparation. As a minimum, the Contractor shall include in each VECP the
information described in paragraphs (cut) through (7) of this clause. If the proposed
change is affected by contractually required configuration management or similar
procedures, the instructions in those procedures relating to format, identification, and
priority assignment shall govern VECP preparation. The VECP shall include the
following:
(~) A description of the difference between the existing contract requirement and that
proposed, the comparative advantages and disadvantages of each, a justification when an
item's function or characteristics are being altered, and the effect of the change on the end
item's performance.
(2) A list and analysis of the contract requirements that must be changed if the VECP is
accepted, including any suggested specification revisions.
(3) 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 paragraph (h) of this clause.
(4) A description and estimate of costs the Government may incur in implementing the
VECP, such as test and evaluation and operating and support costs.
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Sustainable Federal Facilities
(5) A prediction of any effects the proposed change would have on collateral costs to the
agency.
(6) 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.
(7) Identification of any previous submissions of the VECP, including the dates
submitted, the agencies and contract numbers involved, and previous Government
actions, if known.
(~) Submission. The Contractor shall submit VECP's to the Resident Engineer at the
worksite, with a copy to the Contracting Officer.
(e) Government action. (~) The Contracting Officer will notify the Contractor of the
status of the VECP within 45 calendar days after the contracting office receives it. if
additional time is required, the Contracting Officer will notify the Contractor within the
45-day period and provide the reason for the delay and the expected date of the decision.
The Government will process VECP's expeditiously; however, it will not be liable for
any delay in acting upon a VECP.
(2) If the VECP is not accepted, the Contracting Officer will notify the Contractor in
writing, explaining the reasons for rejection. The Contractor may withdraw any VECP, in
whole or in part, at any time before it is accepted by the Government. The Contracting
Officer may require that the Contractor provide written notification before undertaking
significant expenditures for VECP effort.
(3) Any VECP may be accepted, in whole or in part, by the Contracting Officer's award
of a modification to this contract citing this clause. The Contracting Officer may accept
the VECP, even though an agreement on price reduction has not been reached, by issuing
the Contractor a notice to proceed with the change. Until a notice to proceed is issued or a
contract modification applies a VECP to this contract, the Contractor shall perform in
accordance with the existing contract. The decision to accept or reject all or part of any
VECP is a unilateral decision made solely at the discretion of the Contracting Officer.
(f) Sharing-- Rates. The Government's share of savings is determined by subtracting
Government costs from instant contract savings and multiplying the result by--
(i) 45 percent for fixed-price contracts, or
(ii) 75 percent for cost-reimbursement contracts.
(2) Payment. Payment of any share due the Contractor for use of a VECP on this contract
shall be authorized by a modification to this contract to--
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(i) Accept the VECP;
135
(ii) Reduce the contract price or estimated cost by the amount of instant contract savings;
and
(iii) Provide the Contractor's share of savings by adding the amount calculated to the
contract price or fee.
~ , 1 ~ ~ . ~
(g) Collateral savings. If a VECP is accepted, the Contracting Officer will increase the
instant contract amount by zo percent of any projected collateral savings determined to
be realized in a typical year of use after subtracting any Government costs not previously
offset. However, the Contractor's share of collateral savings will not exceed the contract's
firm-fixed-price or estimated cost, at the time the VECP is accepted, or $100,000,
whichever is greater. The Contracting Officer is the sole determiner of the amount of
collateral savings.
(h) Subcontracts. The Contractor shall include an appropriate value engineering clause in
any subcontract of $50,000 or more and may include one in subcontracts of lesser value.
In computing any adjustment in this contract's price under paragraph (f) of this clause, the
Contractor's allowable development and implementation costs shall include any
subcontractor's allowable development and implementation costs clearly resulting from a
VECP accepted by the Government under this contract, but shall exclude any value
engineering incentive payments to a subcontractor. The Contractor may choose any
arrangement for subcontractor value engineering incentive payments; provided, that these
payments shall not reduce the Government's share of the savings resulting from the
VECP.
(i) Data. The Contractor may restrict the Government's right to use any part of a VECP or
the supporting data by marking the following legend on the affected parts:
These data, furnished under the Value Engineering-- Construction clause of contract
, shall not be disclosed outside the Government or duplicated, used, or
disclosed, in whole or in part, for any purpose other than to evaluate a value engineering
change proposal submitted under the clause. This restriction does not limit the
Government's right to use information contained in these data if it has been obtained or is
otherwise available from the Contractor or from another source without limitations.
If a VECP is accepted, the Contractor hereby grants the Government unlimited rights in
the VECP and supporting data, except that, with respect to data qualifying and submitted
as limited rights technical data, the Government shall have the rights specified in the
contract modification implementing the VECP and shall appropriately mark the data.
(The terms "unlimited rights" and "limited rights" are defined in Part 27 of the Federal
Acquisition Regulation.)
(End of cIause)
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Alternate ~ (Apr 1984~. When the head ofthe contracting activity determines that the cost
of calculating and tracking collateral savings will exceed the benefits to be derived in a
construction contract, delete paragraph (g) from the basic clause and redesignate the
remaining paragraphs accordingly.
Representative terms from entire chapter:
contracting officer
