Policies
FAR 48.102 requires agencies to incentivize and fairly process contractor value engineering proposals, ensuring cost savings are shared and proper procedures are followed in applicable contracts.
Overview
FAR 48.102 establishes the policies for implementing value engineering (VE) in federal contracts. Agencies are required to maintain cost-effective VE procedures, incentivize contractors to submit Value Engineering Change Proposals (VECPs), and include VE provisions in appropriate contracts. The regulation outlines agency responsibilities for processing VECPs, sharing savings with contractors, and incorporating VE clauses in both prime and subcontractor agreements. Special rules apply to major system acquisitions and architect-engineer contracts, including when VE clauses must be used and how savings are shared. The section also clarifies that VE incentive payments are not considered profit or fee, and provides guidance on determining sharing periods and rates for savings resulting from VECPs.
Key Rules
- Agency VE Procedures
- Agencies must establish and maintain cost-effective VE procedures and provide financial incentives for contractor-submitted VECPs.
- Inclusion of VE Clauses
- VE provisions must be included in appropriate contracts unless exempted, with specific requirements for major system programs and architect-engineer services.
- Processing and Sharing Savings
- Agencies must process VECPs objectively, provide a fair share of savings to contractors, and establish guidelines for sharing periods and rates.
- Profit and Fee Treatment
- VE incentive payments are not considered profit or fee, and profit/fee should not be reduced due to VECP acceptance.
- Subcontractor Consideration
- Agencies should consider requiring VE clauses in subcontracts.
- Architect-Engineer Contracts
- Mandatory VE programs are required, but no sharing of savings is allowed for architect-engineer contracts.
Responsibilities
- Contracting Officers: Ensure VE clauses are included as required, determine sharing periods/rates, document rationale, and process VECPs fairly and promptly.
- Contractors: Submit VECPs, participate in VE programs, and comply with contract VE provisions.
- Agencies: Maintain VE procedures, incentivize VECPs, process proposals, and establish payment procedures for savings.
Practical Implications
- This section ensures agencies and contractors collaborate to reduce costs and improve value through VE. It impacts contract drafting, proposal processing, and financial arrangements. Common pitfalls include failing to include required VE clauses, improper calculation of savings, or not documenting sharing rationale.