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VECP Approval

VECP Approval Contractor Submits VECP; Maintains Interest in Process Government Processes & Contractually Approves VECP go to Selling VECP go to VECP Settlement

Contractor Submits VECP


  • Once there is concurrence on the scope of the VECP, contractor should expedite the preparation of the formal VECP in-house and provide to customer ASAP after PM brief.
  • Contractor should work as the contract requires until the contracting officer approves the VECP.
  • VECP submitted at least to PCO (with information copy to ACO), VE POC, and PM in addition to any other contractually required distribution.
  • Contractor in the formal submission (often in the cover letter) should identify terms and conditions and associated rationale for VECP acceptance; share period, savings share; government investment required.
  • There is no such thing today as a preliminary VECP (PVECP). Some program offices still use the term. It evolved from the time when configuration management MIL STDs existed. The last Mil Standard on Configuration, MILSTD-973, died several years ago with Acquisition Reform. Under MILSTD 973 and its predecessor standards, contractors could utilize e Preliminary ECPs to propose a change the contractor wanted to make. They were done before all the engineering was complete, but usually after there was enough data to show it was or could be a viable change. They also included a price. From this evolved the idea of a preliminary VECP. It was defined as "a full up proposal that included a firm price (or NTE price), a technical description of the change (including testing or qualification requirements), and all eight other required elements as describe in the VE clause, FAR 52.2481(c). The only thing it does not contain is the actual drawing or configuration changes of the final record ECP or the testing results.

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Contractor Maintains Interest in the Process


  • The contractor should try to find a "champion" in the government program office (someone who likes the change) to help get the VECP acted upon. Sometimes it is the VE POC.
  • Contractor should continue to communicate with the government through the "champion" to check on status and provides answers to questions.
  • Sometimes the contractor's local DCMA can help remind the Government Program office that they need to be acting on the VECP to obtain the maximum savings.

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Government Processes and Contractually Approves VECP


Using an IPT to concurrently address all the VECP issues, the government process can be expedited. The PM can assist here if obstacles occur.

  • The VECP must be technically approved as being able to meet the functional requirements.
  • If there has been a previously agreed sharing rate, that will not have to be negotiated. If there has not been a previously agreed upon sharing rate, the PCO may learn information as part of the IPT such as amount of risk undertaken by the contractor that will help the PCO negotiate a fair sharing rate.
  • There are several ways the PCO can approve/settle the VECP. There approval contract modification enables the contractor to begin work.
    • The PCO can negotiate the rates and settle the VECP and issue a contract modification.
    • They can issue an unpriced order with a Not to Exceed (NTE) amount cited on the modification on development and a guaranteed unit savings to be paid by the contractor. This approach may be necessary to meet customer schedule needs and capture high production quantities. The FAR VE clause recognizes this and, by implication, encourages the government to accept the VECP technically and then complete any pricing negotiations in a subsequent modification to the contract.
    • The government may also establish a not-to-exceed limit on contractor VECP development and implementation costs as well as establish a NLT savings and a NTE on government investment. This is usually done when there is a need to expedite VECP implementation and contract modification in order to assure the changes are made on imminent production units.
    • When the development and implementation costs exceed the savings on the instant contract, the VECP is implemented through a negative instant contract modification. This means that the government increases the contract by the amount of the negative savings as specified in the FAR part 48. While the contract price should be increased to cover the negative instant contract saving, it often does not happen because the Government just does not have the money. There are ways around this, such as the contractor going on risk for the negative instant contract savings with the understanding that they will be recognized in the next production lot (if and only if, there is one) or delaying settling the VECP until the next award so there are enough savings on the two contracts to avoid any negative instant contract saving.
    • Finally, as a last resort if there is a need to expedite implementation of the VECP, the contracting officer can grant approval to implement the VECP through an undefinitized contract action or via a Contracting Officer's initial modification (per FAR 52.248-1(h) (this can be a future problem). This type Undefinitized Contractual Action (UCA) has been addressed in a letter from the Director of Defense Procurement where it was stated that a UCA to technically accept a VECP and permit the contractor to apply the VECP to as many units as possible - thus maximizing VE savings - is a "good" UCA and is not to be counted towards a contracting office's goal of reducing UCAs to a very low level.
    • Formal VECP implementation and government final acceptance of the change is subject to the change passing technical qualifications.

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