48.101
General
FAR 48.101 establishes value engineering as a tool for contractors to propose or be required to implement cost-saving measures, with specific rules for voluntary and mandatory participation and savings sharing.
Overview
- FAR 48.101 outlines the general principles and approaches of value engineering in government contracts. Value engineering is a formal process that allows contractors to propose cost-saving methods or requires them to implement a value engineering program, aiming to reduce acquisition, operation, or support costs without compromising essential functions.
Key Rules
- Voluntary Value Engineering (Incentive Approach)
- Contractors may voluntarily submit Value Engineering Change Proposals (VECPs) using their own resources. If accepted, the contractor shares in the resulting savings and is reimbursed for allowable development and implementation costs. This approach should not increase government costs unless savings are realized.
- Mandatory Value Engineering Program
- The government may require a contractor to establish a value engineering program as a separately priced contract item. The contractor must perform value engineering as specified in the contract. Savings sharing is at a lower rate than the voluntary approach, and architect-engineer contracts are excluded from sharing. The goal is to focus contractor efforts on areas with significant savings potential.
Responsibilities
- Contracting Officers: Must determine whether to include voluntary or mandatory value engineering requirements and ensure proper contract clauses and pricing.
- Contractors: Must comply with the value engineering approach specified in the contract, submit VECPs as appropriate, and follow program requirements if mandated.
- Agencies: Oversee implementation, review VECPs, and ensure savings are realized without loss of essential functions.
Practical Implications
- Value engineering encourages cost savings and efficiency in contract performance. Contractors can benefit financially from accepted proposals, but must follow specific procedures. Misunderstanding the approach or failing to comply with program requirements can result in lost savings opportunities or noncompliance.