Value Engineering Change Proposal (VECP) is a proposal submitted by a contractor under the Value Engineering (VE) provisions of the Federal Acquisition Regulation (FAR) (FAR Part 48) that, through a change in the contract, would lower the project’s life-cycle cost to DoD. It’s intended to reduce costs, increase quality, and improve mission capabilities across the entire spectrum of DoD systems, processes, and organizations. All types of contracts are included. Some of the benefits of VECP throughout the life-cycle of a program are: [1,2]

  • Providing incentive to industry to use its high-level engineering expertise to reduce cost and improve capability on DoD systems immediately
  • Building a more effective business relationship with industry
  • Reductions to the high cost of development, the subsequent cost of production, and the consequent costs related to operation and support may be realized
  • Fewer modifications to production lines, tooling, processes, and procedures will be required
  • Fewer drawing changes will be necessary
  • Fewer post-production changes to logistic and support elements such as manuals, maintenance facilities, and spare parts requirements will be needed
  • Increasing financial performance by sharing in the cost savings that accrue from implementation (VECPs provide a source of profit excluded from the profit limitations on contracts)
  • Creating business opportunities for modernization or technology insertion
  • Enhancing competitiveness by improving the item in production or other related items and establishing a reputation as a cost-conscious supplier
  • Improving communication with the customer

Federal Acquisition Regulation
FAR Part 48 “Value Engineering” governs VE within the Federal Government. According to FAR 48.201(a), unless exempted by an agency head, a VE incentive clause must be included in all contracts exceeding $100,000 except those for research and development (other than full-scale development), engineering services for non-profit organizations, personal services, commercial items, or a limited specific product development. Furthermore, the use of the VE incentive clause is encouraged for use in smaller dollar-value contracts where there is a reasonable chance for acquisition savings. For supplies or services contracts, FAR 52.248-1 “Value Enginering” is the incentive clause that provides the basis for contractors to submit VECP. [2]

AcqTips:

  • Program managers should push VECP made by contractors as a way of sharing cost savings and should also ensure that implementation decisions are made promptly.

AcqLinks and References:

Updated: 6/12/2018

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