Value Engineering-Construction
FAR 52.248-3 incentivizes contractors to propose cost-saving changes in construction contracts by sharing realized savings, provided proposals meet strict content and process requirements.
Overview
FAR 52.248-3, Value Engineering-Construction, encourages contractors to voluntarily submit value engineering change proposals (VECPs) that can reduce contract costs without compromising essential functions or characteristics. Contractors who submit accepted VECPs share in the resulting cost savings, with specific procedures for proposal preparation, submission, evaluation, and payment. The clause defines key terms, outlines the required content for VECPs, and details the process for government review and acceptance. It also establishes the contractor’s share of savings, addresses collateral savings, and sets requirements for including value engineering clauses in subcontracts. Data rights and marking requirements for VECPs are also specified. An alternate version allows omission of collateral savings calculations if not cost-effective.
Key Rules
- Encouragement and Sharing of Savings
- Contractors are encouraged to submit VECPs and will share in any instant contract savings from accepted proposals.
- VECP Content Requirements
- VECPs must include detailed descriptions, cost estimates, impact analyses, and prior submission history.
- Submission and Review Process
- VECPs are submitted to the Resident Engineer and Contracting Officer; the government must respond within 45 days.
- Savings Calculation and Payment
- Contractors receive 45% (fixed-price) or 75% (cost-reimbursement) of instant contract savings, minus government costs.
- Collateral Savings
- Contractors may receive up to 20% of projected collateral savings, subject to caps.
- Subcontractor Requirements
- Value engineering clauses must be included in subcontracts of $75,000 or more.
- Data Rights
- Contractors may restrict use of VECP data, but the government receives broad rights upon acceptance.
Responsibilities
- Contracting Officers: Review and respond to VECPs within 45 days, determine acceptance, calculate savings, and modify contracts as needed.
- Contractors: Prepare and submit complete VECPs, include required clauses in subcontracts, and properly mark data.
- Agencies: Oversee implementation, savings calculations, and ensure compliance with data rights and reporting.
Practical Implications
- This clause incentivizes contractors to propose cost-saving innovations, benefiting both parties.
- Proper preparation and documentation of VECPs are critical for acceptance and payment.
- Contractors must ensure compliance with subcontracting and data rights provisions to avoid disputes or loss of savings.