Clauses for supply or service contracts
Contracting officers must include the appropriate value engineering clause in most supply or service contracts above the simplified acquisition threshold, with specific exceptions and tailored requirements for certain contract types.
Overview
FAR 48.201 establishes requirements for including value engineering (VE) clauses in supply or service contracts. The regulation mandates that contracting officers insert a VE clause in solicitations and contracts exceeding the simplified acquisition threshold, with specific exceptions. The VE clause incentivizes contractors to propose cost-saving changes that maintain or improve performance, quality, and reliability. The section details when to use standard and alternate VE clauses, how to handle mandatory VE programs, and special provisions for architect-engineer and engineering-development contracts. It also addresses how to modify clauses for contracts with extended production periods and when tracking collateral savings is not cost-effective. The goal is to maximize government savings while ensuring proper application of VE incentives and requirements.
Key Rules
- Mandatory Inclusion of VE Clause
- Insert a VE clause in contracts above the simplified acquisition threshold unless exceptions apply (e.g., certain R&D, nonprofit engineering services, personal services, commercial products without special requirements, or exempted by agency head).
- Use of Standard and Alternate Clauses
- Use FAR 52.248-1 for most contracts, with alternates for mandatory VE programs, combined incentive/program requirements, and when collateral savings tracking is not cost-effective.
- Special Contract Types
- Use FAR 52.248-2 for architect-engineer contracts requiring VE; modify clauses for engineering-development and extended production period contracts as specified.
Responsibilities
- Contracting Officers: Determine applicability, select and insert appropriate VE clauses and alternates, ensure compliance with exceptions, and modify clauses for special contract types.
- Contractors: Comply with VE clause requirements, propose cost-saving changes where applicable, and participate in mandatory VE programs if required.
- Agencies: May exempt contracts, determine cost-effectiveness of collateral savings tracking, and provide oversight on clause application.
Practical Implications
- This section ensures the government benefits from contractor-initiated cost-saving innovations while maintaining contract performance standards. Contractors must be aware of when VE clauses apply and understand the incentives and obligations involved. Common pitfalls include misapplying exceptions, failing to use required alternates, or not properly pricing VE program requirements.