52.248-1
Value Engineering
FAR 52.248-1 incentivizes contractors to propose cost-saving changes by sharing realized savings, but requires strict adherence to detailed submission, calculation, and compliance procedures.
Overview
FAR 52.248-1, Value Engineering, establishes the procedures and incentives for contractors to voluntarily (or mandatorily, if specified) submit Value Engineering Change Proposals (VECPs) that reduce costs without impairing essential functions or characteristics of the contract deliverables. The clause details how contractors share in net acquisition savings resulting from accepted VECPs, outlines required VECP content, submission and review processes, and specifies calculation and payment of savings. It also addresses subcontractor involvement, data rights, and alternate clause versions for mandatory or combined programs.
Key Rules
- VECP Submission and Incentives
- Contractors are encouraged (or required, if specified) to submit VECPs and share in net acquisition savings from accepted proposals, with sharing rates based on contract type and savings source.
- VECP Content Requirements
- Each VECP must include detailed descriptions, cost estimates, impact analyses, and supporting data as outlined in the clause.
- Submission and Government Review
- VECPs must be submitted to the Contracting Officer, who must respond within 45 days, and acceptance is at the Government’s sole discretion.
- Savings Calculation and Payment
- The clause provides formulas and tables for calculating contractor shares of instant, concurrent, and future contract savings, as well as collateral savings, and prescribes contract modification procedures for payment.
- Subcontractor Provisions
- Contractors must flow down value engineering requirements to subcontracts at or above the simplified acquisition threshold and may include them in lower-value subcontracts.
- Data Rights
- Contractors may restrict use of VECP data, but accepted VECPs grant the Government broad rights, subject to certain limitations for technical data.
- Alternates
- Alternate versions address mandatory programs, combined incentive/mandatory programs, and exclusion of collateral savings calculations.
Responsibilities
- Contracting Officers: Review and respond to VECPs, determine sharing rates, process contract modifications, and ensure compliance with data and subcontracting requirements.
- Contractors: Prepare and submit VECPs with required content, maintain records, flow down requirements to subcontractors, and comply with data marking and rights provisions.
- Agencies: Oversee implementation, ensure timely processing, and determine collateral savings and sharing arrangements.
Practical Implications
- This clause incentivizes contractors to propose cost-saving changes, offering a share of realized savings as motivation. Proper VECP preparation and timely submission are critical for acceptance and payment. Contractors must ensure compliance with detailed content, recordkeeping, and subcontracting requirements. Misunderstanding savings calculations, deadlines, or data rights can delay or jeopardize savings and payments.