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  • Question

    Does proposing to use a cheaper, substitute product qualify as a VECP?


    Answer

    1. The FAR references quoted below in pertinent part is applicable to this response.

    FAR 48.103 -- Processing Value Engineering Change Proposals
    (c) The following Government decisions are unilateral decisions made solely at the discretion of the Government:
      (1) The decision to accept or reject a VECP.

    FAR 52.248-3 -- Value Engineering – Construction
    (a) General. The Contractor is encouraged to develop, prepare, and submit value engineering change proposals (VECP’s) voluntarily. The Contractor shall share in any instant contract savings realized from accepted VECP’s … .

    (b) Definitions.
    “Value engineering change proposal (VECP)” means a proposal that --
      (1) Requires a change to this, the instant contract, to implement; and
      (2) Results in reducing the contract price or estimated cost without impairing essential functions or characteristics; provided that it does not involve a change -- (i) In deliverable end item quantities only; or (ii) To the contract type only.

    (c) VECP preparation. As a minimum, … [t]he VECP shall include the following:
      (1) A description of the difference between the existing contract requirement and that proposed, the comparative advantages and disadvantages of each, a justification when an item’s function or characteristics are being altered, and the effect of the change on the end item’s performance.
      (2) A list and analysis of the contract requirements that must be changed if the VECP is accepted, including any suggested specification revisions.
      (3) A separate, detailed cost estimate for -- (i) the affected portions of the existing contract requirement and (ii) the VECP. The cost reduction associated with the VECP shall take into account the Contractor’s allowable development and implementation costs, including any amount attributable to subcontracts … .
      (4) A description and estimate of costs the operating and support costs Government may incur in implementing the VECP, such as test and evaluation.
      (5) A prediction of any effects the proposed change would have on collateral costs to the agency.
      (6) A statement of the time by which a contract modification accepting the VECP must be issued in order to achieve the maximum cost reduction, noting any effect on the contract completion time or delivery schedule.

    (d) Submission. The Contractor shall submit VECP’s to the Resident Engineer at the worksite, with a copy to the Contracting Officer.

    (e) Government action.
      (1) The Contracting Officer will notify the Contractor of the status of the VECP within 45 calendar days after the contracting office receives it.
      (2) If the VECP is not accepted, the Contracting Officer will notify the Contractor in writing, explaining the reasons for rejection.

    2. There are actually two questions in this inquiry. One question is: “Does proposing to use a cheaper, substitute product qualify as a Value Engineering Change Proposal (VECP)? The answer is “yes” if this VECP proposes cost reductions without obviously impairing the essential functions or characteristics of the construction project and is supported by all of the information required by FAR 52.248-3(c). Because contract clause FAR 52.248-3(a) expressly encourages the contractor to develop, prepare, and submit VECPs, there are no other constraints as to what VECPs the contractor may voluntarily “propose” at its own expense for the Government’s consideration besides those specified in FAR 52.248-3(b)(2).

    3. The other question is: “Does a substitute product qualify as a Value Engineering Change?” The answer to this question would depend upon the technical evaluation of the VECP by the requiring activity’s engineering function as implied by FAR 52.248-3(d). Such evaluation should determine whether or not acceptance of the VECP would impair the essential functions of the construction project (i.e., the use of high wear epoxy coating is “essential” even in low-traffic areas) and/or if the VECP is implemented, whether the instant cost savings would be offset by significant future operational costs for maintenance. If this technical evaluation determines that the VECP is not an acceptable change to current specifications, then the contracting officer unilaterally rejects the VECP as contemplated by FAR 48.103(c)(1) and also notifies the Contractor in writing, explaining the reasons for rejection pursuant to FAR 52.248-3(e)(2).

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