This series of FAR summaries is meant to take a meaningful portion of the Federal Acquisition Regulations to ensure an easy-to-understand approach to maintain that readers comprehend the process of doing business with the government and that the government exercises a fair and reasonable approach to doing business with the general public.
FAR Part 48: Value Engineering
This has less to do with pricing value and more to do with processes that can be used to make something cheaper and better.
Do you think the government’s shooting the moon here or do you think they have a good enough reputation in the arena of five-phase contracting that they can actually work with companies to secure a better product for cheaper?
This is proof the government is not out to get anybody. At least as a whole. I laugh when I type this; there might be some people!
FAR 48.101
The contractors can voluntarily share cost-savings or be required to. The government can either provide incentives or pay for value engineering.
FAR 48.102
Value engineering change proposals (VECPs) are exchanged for money. The government pays for information. For my government friends, think of it as a paper version of an Industry Day. For my vendor friends, think of it as a way to set yourself apart. VECPs are common in the sectors of supplies, services, architecture and construction.
FAR 48.103
The government gives instructions for completing a VECP and promptly processes them including a documented reasoning for accepting or denying submissions within 45 days of receipt. The VECP is included in the contract through a modification. The decision to incorporate proposed changes is solely the government’s choice. The vendor provides the expertise.
FAR 48.104
An accepted VECP changes the production forecast because the contractor found a different method of production which makes the line-item(s) better for cheaper but not always faster. The production schedule always begins with acceptance of the first item supplied under the VECP and ends with time (30-60 months) or unit (final item supplied). This is called a sharing period.
Acquisition savings occur when production costs are less than what the government paid. The vendor is entitled to some or all of that either up front or after sweeps (making whole as per change in cost of materials) on the current contract or future buys.
Collateral savings occur when the projected production costs are less because the contractor has mastered the production process. This is in no way connected with acquisition savings.
The government decides how and when the vendor gets paid savings. This is a negotiable part of the contract.
FAR 48.105
The VECP is only rewarded once.
We were trained on these at the VA Acquisition Academy. Negotiating such a savings program can be just as heated as negotiating the pricing, terms and conditions of a contract.
If you think I can help you then email nicholas.s.robertson@outlook.com for your introductory email and free consultation.
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