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FAR Overhaul - Part 48
Part 48 - Value Engineering
Subpart 48.1 - Policies and Procedures
Subpart 48.2 - Contract Clauses
48.001 Definitions.
As used in this part—
Acquisition savings means savings resulting from the application of a value engineering change proposal (VECP) to contracts awarded by the same contracting office of its successor for essentially the same unit. Acquisition savings include—
(1) Instant contract savings, that are the net cost reductions on the contract under which the VECP is submitted and accepted, and that are equal to the instant unit cost reduction multiplied by the number of instant contract units affected by the VECP, less the contractor’s allowable development and implementation costs;
(2) Concurrent contract savings, that are net reductions in the prices of other contracts that are definitized and ongoing at the time the VECP is accepted; and
(3) Future contract savings, that are the product of the future unit cost reduction multiplied by the number of future contract units in the sharing base. On an instant contract, future contract savings include savings on increases in quantities after VECP acceptance that are due to contract modifications, exercise of options, additional orders, and funding of subsequent year requirements on a multiyear contract.
Collateral costs means agency costs of operation, maintenance, logistic support, or Government-furnished property.
Collateral savings means those measurable net reductions resulting from a VECP in the agency’s overall projected collateral costs, exclusive of acquisition savings, whether or not the acquisition cost changes.
Contracting office includes any contracting office that the acquisition is transferred to, such as another branch of the agency or another agency’s office that is performing a joint acquisition action.
Contractor’s development and implementation costs means those costs the contractor incurs on a VECP specifically in developing, testing, preparing, and submitting the VECP, as well as those costs the contractor incurs to make the contractual changes required by Government acceptance of a VECP.
Future unit cost reduction means the instant unit cost reduction adjusted as the contracting officer considers necessary for projected learning or changes in quantity during the sharing period. It is calculated at the time the VECP is accepted and applies either—
(1) throughout the sharing period, unless the contracting officer decides that recalculation is necessary because conditions are significantly different from those previously anticipated, or
(2) to the calculation of a lump-sum payment, that cannot later be revised.
Instant contract means the contract under which the VECP is submitted. It does not include increases in quantities after acceptance of the VECP that are due to contract modifications, exercise of options, or additional orders. If the contract is a multiyear contract, the term does not include quantities funded after VECP acceptance. In a fixed-price contract with prospective price redetermination, the term refers to the period for which firm prices have been established.
Instant unit cost reduction means the amount of the decrease in unit cost of performance (without deducting any contractor’s development or implementation costs) resulting from using the VECP on the instant contract. In service contracts, the instant unit cost reduction is normally equal to the number of hours per line-item task saved by using the VECP on the instant contract, multiplied by the appropriate contract labor rate.
Sharing base means the number of affected end items on contracts of the contracting office accepting the VECP.
Sharing period means the period beginning with acceptance of the first unit incorporating the VECP and ending at a calendar date or event determined by the contracting officer for each VECP.
Unit means the item or task to which the contracting officer and the contractor agree the VECP applies.
Value engineering proposal means, in connection with an A-E contract, a change proposal developed by employees of the Federal Government or contractor value engineering personnel under contract to an agency to provide value engineering services for the contract or program.
Subpart 48.1 - Policies and Procedures
48.101 General.
Value engineering is a formal technique where contractors may (1) voluntarily suggest more economical methods and share resulting savings or (2) be required to create programs to identify and submit more economical methods to the Government.
48.102 Policies.
(a) As 41 U.S.C. 1711 requires, agencies must create and maintain cost-effective value engineering procedures. Agencies must offer contractors substantial financial incentives to develop and submit VECPs. Contracting offices must include value engineering provisions in appropriate supply, service, architect-engineer and construction contracts as sections 48.201 and 48.202 direct, except when the agency head grants exemptions for specific cases or contract classes.
(b) Non-Department of Defense agencies must use the value engineering program requirement clause (52.248-1, Alternates I or II) in initial production contracts for major systems and for major systems research and development contracts. Exceptions apply when the contracting officer determines and documents that such use is inappropriate.
(c) Department of Defense contracts must include the VE program requirement clause (52.248-1, Alternates I or II) in initial production solicitations and contracts (first and second buys) for major system acquisitions under DoD Directive 5000.1. Exceptions include:
(1) Cases where the prime contractor has proven effective VE work in earlier phases or similar production contracts.
(2) Contracts awarded through competition.
Subpart 48.2 - Contract Clauses
48.201 Clauses for supply or service contracts.
(a) General. The contracting officer must add a value engineering clause to solicitations and contracts exceeding the simplified acquisition threshold, except as noted in paragraphs (a)(1) through (5) and paragraph (f). Without approval from the chief of the contracting office, a value engineering clause must not be included in solicitations and contracts for:
(1) Research and development except full-scale development;
(2) Engineering services from nonprofit organizations;
(3) Personal services (see part 37);
(4) Product or component improvement, unless the value engineering incentive applies only to areas not covered by improvement provisions;
(5) Commercial products without special packaging or other requirements; or
(6) Contracts exempted by the agency head from part 48 requirements.
(b) Value engineering incentive. To create a value engineering incentive, the contracting officer must add clause 52.248-1, Value Engineering, to solicitations and contracts with exceptions noted in paragraph (a) and considerations in paragraph (e)(1) of this section..
(c) Value engineering program requirement.
(1) For mandatory value engineering efforts (when substantial government savings may result from sustained, specified effort levels), the contracting officer must use the clause with Alternate I, noting considerations in paragraph (e)(2) of this section.
(2) The government may specify the value engineering program requirement in the solicitation. In negotiated contracts, contractors may propose it in their offers as a negotiation topic. The program requirement must appear as a separate line item in the contract Schedule.
(d) Value engineering incentive and program requirement.
(1) When both a value engineering incentive and program requirement are appropriate, the contracting officer must use the clause with Alternate II, noting considerations in paragraph (e)(3) of this section.
(2) The contract must limit the value engineering program to clearly defined performance areas listed by line item. Alternate II applies a value engineering program to those specified areas and a value engineering incentive to all other contract areas.
(e) When calculating collateral savings costs more than the benefits, the head of the contracting activity may determine the contracting officer must use the clause with:
(1) Alternate III for value engineering incentives;
(2) Alternate III and Alternate I for value engineering program requirements; or
(3) Alternate III and Alternate II for combined incentives and program requirements.
(f) Architect-engineer contracts. For contracts requiring specific value engineering effort in architect-engineer work, the contracting officer must add clause 52.248-2, Value Engineering Architect-Engineer. Clause 52.248-1, Value Engineering, must not appear in architect-engineer solicitations and contracts.
(g)For engineering-development contracts and those with early production units, the contracting officer must modify clause 52.248-1 by:
(1) Replacing the text in paragraph (i)(3)(i) of the clause with language about quantities delivered over 36-60 months during peak production; and
(2) Revising the first sentence in paragraph (3) of the definition of "acquisition savings" with similar language about quantities over 36-60 months during peak production.
(h) For extended production periods (like ship construction or major systems), when agency procedures require sharing future contract savings on all units delivered under contracts awarded during the sharing period, the contracting officer must modify clause 52.248-1 by revising its paragraph (i)(3)(i) and the first sentence under paragraph (3) of the definition of "acquisition savings" with language about contracts awarded during the sharing period.
48.202 Clause for construction contracts.
Insert the clause 52.248-3, Value Engineering-Construction, in construction solicitations and contracts exceeding the simplified acquisition threshold, unless creating an incentive contract. This clause must not appear in incentive-type construction contracts. When computing and tracking collateral savings costs more than the benefits, as determined by the head of the contracting activity, the contracting officer must use the clause with its Alternate I.
Feedback
We welcome informal input on the revised FAR :
Non-regulatory Resources
The following are non-regulatory resources associated with FAR :
FAR Companion Guide Coming Soon.
Caveat
The FAR Council created deviations will include clauses and provisions currently required by statute and Executive Order. OMB and the FAR Council will work with Congress to recommend statutory changes and with the White House to recommend rescission of requirements stemming from prior Executive Orders that are inconsistent with the goals of Executive Order 14275 to stop the inefficient use of American taxpayer dollars in federal procurement. Any changes to Executive Orders or statute will be reflected when the Revolutionary FAR Overhaul turns to rule-making.
