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Value Engineering (VE) and Value Engineering Change Proposals (VECP)

AETM 050

DAU GLOSSARY DEFINITION

A contractor-initiated proposal where the savings are shared between the Government and the contractor. A VECP is submitted under the value engineering (VE) clause of a contract pursuant to Federal Acquisition Regulation (FAR) Part 48. It proposes a net life-cycle cost reduction to the DoD and requires a contract modification.

General Information

Overview

As stated above, VECP is a proposal submitted by a contractor under the VE provisions of the FAR that, through a change in the contract, would lower the project's life-cycle cost to DoD. VECPs are applicable to all contract types, including performance-based contracts.

The requirement for the DoD VE program is codified in 41 USC 432, Value Engineering, and 41 USC 1711, Value Engineering. The VE program is intended to reduce costs, increase quality, and improve mission capabilities across the entire spectrum of DoD systems, processes, and organizations. It employs a simple, flexible, and structured set of tools, techniques, and procedures that challenge the status quo by promoting innovation and creativity. Furthermore, it incentivizes government participants and their industry counterparts to increase their joint value proposition in achieving best value solutions as part of a successful business relationship. Where appropriate, Program Managers (PM) should engage in a broad and rigorous application of the VE methodology. PMs should be receptive to VECPs made by contractors as a way of sharing cost savings and should also ensure that implementation decisions are made promptly. 

VE Application

A common misconception is that VE applies only to production. The most opportune time to apply the VE methodology is early in the life cycle, before production begins, before field or technical manuals are drafted, and before logistic support plans are finalized. Some of the more important benefits are as follows:

  • Savings can be applied to all production units
  • Reductions to the high cost of development, the subsequent cost of production, and the consequent costs related to operation and support may be realized
  • Fewer modifications to production lines, tooling, processes, and procedures will be required
  • Fewer drawing changes will be necessary
  • Fewer post-production changes to logistic and support elements such as manuals, maintenance facilities, and spare parts requirements will be needed

Also, in today's acquisition environment, many systems remain in inventory for a long time because of major modifications or upgrades (e.g., block changes or preplanned product improvements). Therefore, opportunities for large VE savings begin in early program phases and extend late into sustainment.

VE Throughout the Life Cycle

VE offers varying benefits at differing phases throughout the life cycle, and specifics regarding each phase are addressed below:

  • Materiel Solution Analysis (MSA) VE can have a significant role in the systems engineering activities during MSA. The analysis of alternatives and associated cost-effectiveness studies can use VE to analytically evaluate functions and provide a mechanism to analyze the essential requirements and develop possible alternatives offering improved value.
  • Technology Maturation & Risk Reduction (TMRR) - In support of the process to transition technology from the technology base into program-specific, preliminary, design efforts, VE can be used to analyze the value of each requirement and the specifications derived from it by comparing function, cost, and worth.
  • Engineering and Manufacturing Development (EMD)As part of the development and refinement of the functional baseline, VE should be used for identifying the necessary top-level functions for each of the missions considering the following -  
    • Technical approaches (i.e., design concept) to the missions
    • Necessary lower-level functions for each technical approach (the VE effort needs to place emphasis on eliminating unnecessary design restrictive requirements)
    • Evaluating each function in terms of technical feasibility
    • Estimating the cost of various functions
  • Production and Deployment (P&D) - VE contributes to the systems engineering activities during production and deployment by devising alternative means for achieving required functions and developing alternative designs to meet functional needs. VE has been extensively applied to evaluate and improve manufacturing processes, methods, and materials.
  • Operations and Support (O&S) - After fielding, opportunities for VE may exist for a long time. Product life cycles are being extended; for consumables, there is no sure way to determine the total quantity that will be purchased. Also, in the past, many items that entered the defense inventory were never subjected to a VE analysis. The potential for VE savings on these items is real. Advances in technology or changes in user requirements provide a basis for potential savings.

While not entirely synonymous with VECP, the Navy’s Logistics ECPs (LECP) outlined in Naval Supply Systems Command (NAVSUP) Weapons System Support (WSS) Instruction 4105.1B, Logistics Engineering Change Proposal (LECP) Program, are very similar, seeking to achieve many of the same outcomes as VECPs. According to the instruction, “the LCEP Program seeks opportunities to reduce supply support costs, improve reliability, maintainability and/or initiate improvements that enhance or provide additional capabilities for the end user. This may be achieved through engineering initiatives which extend service life of an item, the introduction of a new, enhanced replacement item, or changes to the Level of Repair Analysis (LORA), resulting in a more efficient and responsive logistics chain."