***VALUE ENGINEERING GUIDE***

***FOR***

***SOCIAL SECURITY ADMINISTRATION***

#### CONTRACTORS

03/09/01

##### TABLE OF CONTENTS

Page

TABLE OF CONTENTS\...\...\...\...\...\...\...\...\...\...\...\...\... 2

INTRODUCTION\...\...\...\...\...\...\...\...\...\...\...\...\...\..... 3

ABBREVIATIONS\...\...\...\...\...\...\...\...\...\...\...\...\...\.... 4

SECTION I

WHAT IS VE?\...\...\...\...\...\...\...\...\...\...\...\...\...\.... 5

SECTION II

THE VECP. WHAT IS IT?\...\...\...\...\...\...\...\...\...\..... 6

SECTION III

TYPES OF VE PROVISIONS IN SSA CONTRACTS\...\...\...\...\... 8

SECTION IV

THE BENEFITS OF SUBMITTING VECPS\...\...\...\...\...\...\.... 9

SECTION V

SHARING OF VECP SAVINGS\...\...\...\...\...\...\...\...\...\.... 10

SECTION VI

SUBMITTING VECPS\...\...\...\...\...\...\...\...\...\...\...\..... 12

SECTION VII

PREPARING VECPS\...\...\...\...\...\...\...\...\...\...\...\...\... 13

SECTION VIII

GETTING ASSISTANCE IN PREPARING AND PROCESSING VECPS.. 16

SECTION IX

WHERE DO I SEND MY VECP?\...\...\...\...\...\...\...\...\...\... 17

SECTION X

THE \"PRELIMINARY\" VECP. WHAT IS IT?\...\...\...\...\...\... 18

SECTION XI

WHAT IF I HAVE A VE IDEA BUT DO NOT HAVE VE PROVISIONS

IN MY CONTRACT?\...\...\...\...\...\...\...\...\...\...\...\...\... 19

SECTION XII

SUBCONTRACTOR VE\...\...\...\...\...\...\...\...\...\...\...\..... 20

SECTION XIII

ADDITIONAL GUIDELINES FOR PRACTICING VE\...\...\...\...\... 21

SECTION XIV

POTENTIAL VE APPLICATIONS\...\...\...\...\...\...\...\...\..... 22

SECTION XV

VE APPLICATIONS CHECKLIST\...\...\...\...\...\...\...\...\..... 23

SECTION XVI

A CONTRACTOR\'S GUIDE FOR AN EFFECTIVE VE PROGRAM\...\... 24

APPENDIX NO. 1

VE RESOURCES\...\...\...\...\...\...\...\...\...\...\...\...\...\... 26

APPENDIX NO. 2

FAR REFERENCES\...\...\...\...\...\...\...\...\...\...\...\...\.... 27

## INTRODUCTION

The purpose of this Guide is to motivate you, the Social Security
Administration (SSA) contractor, to practice Value Engineering (VE), and
to provide information and suggestions that contribute to the
effectiveness of your VE efforts. We designed the Guide to answer your
basic questions concerning the What - Why - When - Where - Who - and How
of VE.

There are two parts of the VE equation. Our in-house VE effort is one
part. We strive to maintain effective administrative and service
operations while minimizing costs. The other part is yours. By
submitting a Value Engineering Change Proposal (VECP), you will help
control costs by proposing to eliminate or modify any work elements that
are not necessary to meet the functional requirements of the contract.

The VECP process allows you to deliver a more suitable product, system,
or service, while improving your profit base. Improved profitability is
achieved by sharing in the cost savings resulting from VE changes to
your contracts. VE may also give you a competitive advantage in the
marketplace and enhance your reputation as a quality, cost-conscious
company.

The Guide is not intended to make you an expert on VE principles or
techniques. It will rather assist you in preparing and submitting a
VECP. The more knowledge, understanding, and care you apply to the VECP,
the more effective it will be. We are seeking your VECP and will
promptly evaluate it in accordance with all pertinent contract clauses
and Federal Acquisition Regulation (FAR) provisions.

This Guide is *not* designed to address the special VE requirements for
architect-engineer (A&E) contracts. When an A&E contract requires a VE
effort, you must submit a Value Engineering Proposal (VEP) rather than a
VECP, and we must pay you a pre-established amount for your VE services
rather than a share of any resulting cost savings. Refer to FAR
48.102(h), 48.201(f), and 52.248-2.

**ABBREVIATIONS**

A&E Architect-Engineer

CO Contracting Officer

FAR Federal Acquisition Regulation

FFP Firm Fixed Price

GFP Government-Furnished Property

Prime Prime Contractor

Sub Subcontractor

VE Value Engineering

VECP Value Engineering Change Proposal

VEI Value Engineering Incentive

VEPR Value Engineering Program Requirement

**SECTION I**

**WHAT IS VE?**

VE is a systematic and creative methodology that analyzes the function
of items, services, or systems to ensure that the required functions are
performed at the lowest possible overall cost. (Overall cost includes
the cost of buying, operating, and supporting the item, service, or
system). VE is performed to eliminate or modify any element contributing
to the overall cost that is not necessary to maintain the required
performance and quality.

As used in SSA, VE is synonymous with other value improvement terms such
as Value Analysis, Value Control, and Value Management. While minor
technical differences may exist among these terms, the basic objectives
and philosophy remain the same. As a management discipline, VE has been
successfully applied across the entire spectrum of the acquisition
process. Its application is not and should not be limited by the term
\"engineering\" to hardware design and production. Application of VE may
be to systems, equipment, facilities, procedures, methods, software,
supplies, and the like.

You may contact the VE-related organizational resources listed in
Appendix No. 1 to learn VE methodology. They are experts in the field.

**SECTION II**

**THE VECP. WHAT IS IT?**

A Value Engineering Change Proposal (VECP) is your proposal to change a
contract in accordance with applicable VE contract provisions. If
accepted and implemented by SSA, the VECP will provide SSA with overall
cost savings. The VE clauses in contracts prescribe that you share
substantially in the savings that accrue from implementing the change.
In other words, the VECP provides the means to lower our acquisition
costs while generating financial gain for you. The VECP is a management
tool for us both.

You may generate a VECP without fully applying formal VE analysis. We
will give this proposal the same consideration and, if approved, the
same savings share as those resulting from using recognized VE
methodology. (Note that companies that use specialized VE teams to apply
formal VE methodology are better able to maximize their VE payoff. For
these companies, funds resulting from their shares of the VE savings
become an important part of their profit structure.)

You may apply seven basic elements in VE methodology from the component
level up to and including entire systems. In specific cases, you may
consider some of the elements as \"givens.\" You may not have to rigidly
follow the elements in sequence. In many cases, your employees who are
familiar with the service or function may perform one or more of the
analytic elements intuitively. The VE elements are:

\(a\) *VE project selection*. VE project selection is the choice of
system, service, hardware, component, requirement, etc., for VE
application and provides the answer to the question, \"What is it?\"

\(b\) *Determination of function*. Determination of function is the
analyzing and defining of the function of the selected VE project that
answers the question, \"What does it do?\" The analysis may even
question the function itself.

\(c\) *Information gathering*. Information gathering is the collection
and assembly of all necessary information on the selected VE item. This
allows VE personnel to become intimately familiar with the item while
answering the questions, \"What does it cost?\" and \"What is this
function worth?\"

\(d\) *Developing alternatives*. Developing alternatives is the most
important element of the seven. In many cases, companies have a
ready-made \"alternative\" and find ways to apply it to achieve VE
savings. However, the use of free imagination tempered with experience
may develop the best ideas. In initial \"brainstorming\" sessions, all
ideas should be duly recorded and considered. This element answers the
question, \"What else can perform this function?\"

\(e\) *Analyzing alternatives*. Analyzing alternatives \"weeds out\"
those ideas that are not technically or financially feasible. This
permits the selection of alternatives for further feasibility testing
based on the development of cost estimates and answers the question,
\"What is the cost of the alternatives?\"

\(f\) *Feasibility testing and function verification*. Feasibility
testing and function verification supports the determination that the
selected alternatives can perform the required function and are
technically feasible. A viable alternative must provide the essential
functional performance and be capable of being implemented. This element
provides answers to the questions, \"Are the alternatives technically
feasible?\" and \"Does the alternative provide the essential function?\"

\(g\) *Preparing and submitting VECPs*. Preparing and submitting VECPs
covers the final selection, documentation, and formal preparation of the
alternative proposal. The VECP must be prepared and submitted in
accordance with the requirements of the contract.

**SECTION III**

**TYPES OF VE PROVISIONS IN SSA CONTRACTS**

VE may be implemented in your contract through the use of one of two
basic clauses, the VE incentive (VEI) clause or the VE program
requirements (VEPR) clause. (You can find these clauses in FAR Part 52).
Generally, the VEI clause is required in all contracts valued at
\$100,000 or more (unless the contract falls under one of the six
exemptions in FAR 48.201), and is the type of VE clause most commonly
found in SSA contracts. The VEI clause may be included in contracts
under \$100,000 if the contracting officer (CO) believes there is a
potential for significant savings through VECPs. Under this clause, VE
is a voluntary effort, to be pursued at your option. However, if you
participate in the VEI program by originating and submitting VECPs, you
will be rewarded for your ideas (if SSA adopts them) by sharing in the
resulting savings. The sharing rate you receive is specified in FAR Part
48 and in the applicable VE clauses of Part 52. Please refer to Appendix
No. 2 for all pertinent FAR clauses.

The VEPR clause requires that you establish a VE program and calls for
the mandatory program to be included as a separately priced contract
line item. The VEPR will specify a certain level of VE activity as well
as the portion of the contract\'s scope of work to which it applies.
Usually, the VEPR provisions are used in an attempt to reduce the cost
of certain high-cost items or systems. Your share of savings for
approved VECPs originated under VEPR provisions is less than the share
provided for voluntary VECPs under the basic VEI provisions.

In some circumstances, a contract may contain both VEI and VEPR
provisions. The VEPR can be directed to well-defined performance areas,
and the basic VEI clause can be used to cover VECPs on items not covered
by the VEPR performance area. For VECPs submitted on contracts
containing both VEI and VEPR clauses, the CO decides whether a
particular VECP falls within the purview of the VEI clause or, in the
alternative, whether the VECP is covered by VEPR provisions.

The FAR contains various VEI and VEPR clauses for use in contracts for
supplies or services, and construction. The sharing arrangement between
SSA and you will vary with the contract type (fixed-price, incentive, or
cost-reimbursement).

**SECTION IV**

**THE BENEFITS OF SUBMITTING VECPS**

There are many advantages to submitting VECPs. A direct benefit is that
you, the SSA contractor, share in the cost savings that accrue from
implementing the VECPs. VE becomes a corporate management tool for
increasing your return on investment through proposed changes in
contract specifications, purchase descriptions, or statements of work,
without any decrease in the quality, reliability, performance, or
maintainability of the items you are delivering.

In addition to rewards received from sharing in the savings on
successful VECPs, contractors practicing VE in their day-to-day
operations become extremely competitive by controlling the costs of
various products and services and by improving the quality of those
products and services. An active VE program also helps to establish your
reputation as a cost-conscious company. These benefits are indirect but
nonetheless very real. SSA gains also by obtaining its essential
supplies and services with the minimum expenditure of tax dollars.

VECPs should identify savings that are substantial enough to justify
your administrative effort and to make acceptance of the VECPs
attractive to SSA.

**SECTION V**

**SHARING OF VECP SAVINGS**

Acquisition and collateral savings are the two basic types of savings
that can be shared when a VECP is approved and implemented. The sharing
arrangements discussed below relate to the typical firm fixed price
(FFP) supply or service contract with VEI provisions.

Acquisition savings may be realized on the instant contract, concurrent
contracts, and future contracts. The instant contract is the one under
which the VECP is submitted. Concurrent contracts are those that you or
other SSA contractors have for essentially the same item. Future
contracts are those that will be awarded after acceptance of the VECP.
If the VECP is accepted and implemented, you are entitled to a 50
percent share of any net acquisition savings over a three-year period.

In calculating net acquisition savings, your costs of developing and
implementing the VECP and SSA\'s cost of implementation are taken into
consideration. For audit purposes, you must identify and record your
VECP development and implementation costs. Development costs are those
incurred after you have decided to prepare a VECP and before SSA has
accepted the VECP. Implementation costs are those incurred in
implementing the change after the VECP has been approved. Your share of
future contract savings may be paid as subsequent contracts are awarded
or on a lump-sum basis when the VECP is accepted. The \"lump-sum\"
method may be used only if both parties agree to it.

Where the benefits derived from collateral savings exceed the costs of
tracking it, you and SSA may share in collateral savings as well.
Collateral savings are those measurable net reductions in the SSA cost
of operations, maintenance, logistics support, or Government-furnished
Property (GFP), resulting from an accepted VECP. In some cases, a VECP
may increase an item\'s acquisition cost and still result in substantial
collateral savings. Your collateral share is 20 percent of the estimated
collateral savings to be realized during an average 1-year period. This
share cannot exceed the greater of \$100,000 or the value of the instant
contract. We determine the amount of collateral savings.

Note: The sharing of savings varies with other types of contracts.

The VE clause for construction contracts provides for the sharing of
instant and collateral savings only and the clause for A&E contracts
does not provide for any sharing of savings.

As an alternative to the sharing arrangements described above, the FAR
allows for a no-cost VECP settlement where you and the Government agree.
You keep all savings from the instant contract and from its concurrent
contracts. SSA keeps all savings from concurrent contracts with other
firms, as well as all future and collateral savings. This minimizes the
administrative costs to SSA and you associated with the negotiation of
savings. Refer to Appendix No. 2 for the applicable FAR provisions on
sharing mechanisms.

**SECTION VI**

###### SUBMITTING VECPS

When should VECPs be submitted? You may submit a VECP only under an
active contract. VECPs originated during the early program stages
normally generate greater savings because they are applicable to a
larger number of units and implementation costs are not as great. As a
program ages, the potential for savings decreases, but this does not
rule out the application of VE. The potential savings must exceed the
cost of developing and implementing a VECP for the VECP to be
profitable. Potential savings are a function of the total quantity to be
produced and the life cycle cost structure of the item. Viable VE
opportunities may exist even late in a program\'s life. For example,
accumulated program experience and data may indicate that testing is
excessive or elements of a management reporting system are no longer
applicable. These are all areas where VE savings are possible and may
result in increased profits to you.

Areas of potential VE application may be identified in many ways.
Personnel working on a program may have knowledge and experience that
indicate a \"better\" way to do something, or this same knowledge and
experience may help them recognize superfluous requirements. Also, some
items in the SSA inventory are bought in large quantities on a regular
basis. Due to advances in technology, materials and processes, the
applicable specifications may be outdated. Items acquired on a
repetitive basis to old specifications are good candidates for VE.
Another area offering potential for VE is where you have an item
designed and developed on a stringent schedule to meet urgent
requirements. Under these conditions, the designers may have
incorporated the \"old reliable\" components or subsystems into the
design simply because time would not permit qualification of an improved
substitute. However, a newer, less expensive, and more reliable
alternative may now be available. Whenever this situation exists,
submitting a VECP to incorporate the newer, improved component or
subsystem should be considered.

**SECTION VII**

**PREPARING VECPS**

The likelihood of the VECP being approved by SSA is largely proportional
to the effort applied to developing it. Therefore, you must present
sufficient information so that SSA may conduct a thorough and timely
evaluation. Failure to provide adequate data will result in requests for
additional information or may possibly result in a rejection of the
VECP. The approach you use in submitting a proposal in response to a
solicitation should be used in preparing a VECP. The following is the
minimum information needed in your VECP:

\(a\) Describe the difference between the existing contract requirement
and the proposed requirement. List the advantages and disadvantages of
each. Justify changes to the item\'s functions or characteristics.
Describe the effect the proposed change will have on the item\'s
performance and quality and include any pertinent objective test data;

\(b\) Itemize and analyze each contractual requirement that must be
changed if the VECP is accepted and include any recommendations for
changing specifications;

\(c\) Identify the item or task affected by the VECP;

\(d\) Provide a detailed cost estimate for both the old and proposed
items and tasks. Make sure you account for your estimated development
and implementation costs and include any costs attributable to
subcontractors (subs);

\(e\) Provide a description and estimate of costs the Government may
incur in implementing the VECP, such as test and evaluation and
operating and support costs;

\(f\) Predict the collateral cost savings or increases that the
Government would experience if the VECP is implemented;

\(g\) Identify the date by which a contract modification authorizing the
VECP must be issued to obtain the maximum savings, and note any effect
on the delivery schedule or contract completion date; and

\(h\) Identify earlier submissions of the VECP, giving the dates
submitted, agencies involved, contract numbers, and previous actions by
the Government, if known;

Preparing the transmittal letter for forwarding the VECP is an important
step towards achieving success in the VE arena. The transmittal letter
should state that the VECP is being submitted pursuant to the VE
provisions of your contract; should serve as a \"Table of Contents\" for
your VECP; and should briefly state the estimated price changes and
nature of the proposed technical change, along with identifying where
complete details can be found in the proposal. You should view the
letter as a marketing document that highlights the VECPs technical
benefits and overall cost reduction.

Normally, the Government has unlimited rights to use the data in a VECP.
If your VECP contains information that you wish to restrict from use
prior to SSA\'s approval, you should include an appropriate legend on
each page or sheet of the VECP. The FAR language for supply/service
contracts for this legend is, \"These data, furnished under the Value
Engineering clause of contract \...\..., shall not be disclosed outside
the Government or duplicated, used or disclosed, in whole or in part,
for any purpose other than to evaluate a value engineering change
proposal submitted under the clause. This restriction does not limit the
Government\'s right to use information contained in these data if it has
been obtained or is otherwise available from the Contractor or from
another source without limitations\". The VE clauses for A&E and
construction contracts contain similar language. Refer to Appendix No. 2
for the relevant FAR provisions. If and when the VECP is approved, SSA
usually will retain the right to use any and all data contained in the
VECP and its supporting documents.

If the VECP contains proprietary data you wish to restrict even if SSA
approves the VECP, include a statement to that effect in your
transmittal letter. You should mark the proposal with an appropriate
limited rights legend and explain in the proposal the basis for
asserting limited rights. The contract modification implementing the
VECP should specify the limited rights that the Government has accepted.
You should realize, however, that a VECP that results in a \"sole
source\" condition for future acquisitions may not be as readily
accepted as one that does not impose this restriction on sources.

The proposal should contain enough information and support so that it
will answer all reasonable questions the evaluator might have. Keep in
mind that you are trying to sell your idea. If you provide insufficient
information, our evaluator may determine that

you have not thoroughly investigated all areas or that you are
withholding negative aspects. To avoid this, submit a carefully prepared
VECP initially.

Please make sure that your VECP meets all of the above requirements.
Review the VECP and ask yourselves the following questions:

\(a\) Does the contract contain VE provisions? If not, see Section XI,
\"What if I Have a VE Idea but do not Have VE Provisions in my
Contract?\"

\(b\) Is this really a VECP? Is SSA\'s approval needed to implement this
idea? If so, will there be a reduction in cost to SSA on this contract,
on concurrent or future contracts, or in the collateral area?

\(c\) Does the VECP contain all of the information required by the VE
clause in the contract?

\(d\) Does the VECP contain any data that should be restricted prior to
approval? If so, has the \"data restriction\" language of the FAR been
marked on all sheets containing such data? If proprietary data are
involved, has the proprietary data been identified using the appropriate
limited rights legend?

\(e\) Has a transmittal letter been prepared? Will the letter help you
sell the proposal, or will it hinder your prospects? And

\(f\) Does your VECP contain answers to all the questions that an SSA
evaluator might ask? Is there any other supporting data that is needed
to help the evaluation process along?

If you have answered all of these questions affirmatively, you are now
ready to submit your VECP.

**SECTION VIII**

**GETTING ASSISTANCE IN PREPARING AND PROCESSING VECPS**

The CO is your exclusive point-of-contact for questions on the
contractual aspects of specific VECPs and is responsible for decisions
on the contractual implementation of particular VECPs.

If you have a technical question on a particular VECP, the CO will seek
the advice of (or refer you to) the project officer (PO) for resolution.
The PO is the final authority for decisions concerning the technical
adequacy of specific VECPs.

**SECTION IX**

**WHERE DO I SEND MY VECP?**

Submit your VECPs to the CO. The CO has the exclusive authority to
negotiate and contractually authorize the VECP.

SSA examines each VECP from a technical perspective (including a
programmatic and logistics viewpoint). We try to advise you whether or
not your VECP has been accepted from a technical standpoint within 45
days of receipt. If the VECP has been approved by the appropriate
technical official(s), then the CO will strive to contractually
authorize the VECP within another 45 days.

We will process your VECPs as quickly as possible, but will not be held
liable for any delays. It is ultimately the CO\'s decision to accept or
reject some or all of the VECP. That decision is not subject to the
Disputes clause in your contract or otherwise subject to litigation
under the Contract Disputes Act of 1978, as amended. Refer to Appendix
No. 2 for the applicable FAR clauses on the Government\'s evaluation of
VECPs.

**SECTION X**

**THE \"PRELIMINARY\" VECP! WHAT IS IT?**

A preliminary VECP is a vehicle for submitting an idea to the CO to get
an indication of whether or not a \"full-blown\" VECP should be pursued.
Furnishing a preliminary VECP would be beneficial if the development of
the VECP would require risking significant funds. You would notify the
CO that you believe VE might apply to a particular item, and would
provide the approximate costs for developing the VECP as well as the
estimated savings that might be achieved. The CO would then indicate
whether the idea deserves additional study, or whether it should be
dropped. You should be aware that an indication from the CO that the
idea has potential does not guarantee that your formal VECP will be
accepted. As with any VECP, there is the possibility that it might be
rejected, and there is some element of risk involved. However, the idea
behind preliminary VECPs is to reduce this risk so that you do not spend
a lot of money on ideas that have little or no chance of being accepted
by SSA.

Also be aware that submittal of a preliminary VECP does not establish
ownership of a VE idea or a right to share in any resulting savings.
This ownership is not established until a fully documented VECP is
submitted. You should therefore weigh the risk of inadvertent disclosure
of your idea to a competitor, against the risk of investing time and
money for a VECP that is of little or no interest to SSA.

There is a provision in the FAR that allows the CO to require written
notification (i.e., submittal of a preliminary VECP) before risking
significant funds. (Please see Appendix No. 2 for the FAR reference.) If
this requirement is not invoked, then your submission of preliminary
VECPs is optional. However, submitting a preliminary VECP is
advantageous to you in the following ways:

\(a\) It establishes a \"Date of Record\" for the development costs that
you incurred in preparing the VECP; and

\(b\) Your risk is minimized in areas where the CO does not desire VE
activity. If you submit a preliminary VECP, be sure to include the
\"data restriction\" language of the FAR. (See Appendix No. 2 for the
applicable FAR reference.)

**SECTION XI**

**WHAT IF I HAVE A VE IDEA BUT DO NOT HAVE**

**VE PROVISIONS IN MY CONTRACT?**

If you have an idea for a VECP but your contract does not contain VE
provisions, notify the CO of the situation. Ask the CO whether a VE
clause would be appropriate for your particular contract. If the CO
determines that it is suitable, then the CO will modify the contract to
incorporate the applicable VE provisions. After we issue the
modification, you may submit your VECP.

**SECTION XII**

**SUBCONTRACTOR VE**

The FAR requires the prime contractor (you) to extend VE provisions to
its subs on contracts of \$100,000 or more, and permits VE clauses to be
extended to subs on contracts of lesser value. (See Appendix No. 2 for
the FAR reference.)

You may extend to your sub a percentage of whatever amount you receive
as your share for a successful VECP. The sharing between is a matter of
negotiation and should provide motivation for the sub to do VE and to
submit VECPs to you. It should also provide you with a fair share, since
you are responsible for putting a sub\'s VECP into the proper format and
for \"selling\" it to the Government. Sub development and implementation
costs and the sub\'s shares of instant contract savings are considered
part of your development and implementation costs. Note that agreements
made between the sub and you are not permitted to reduce the
Government\'s share of concurrent, future, or collateral savings.

A sub may not submit a VECP directly to SSA. The sub should submit its
VECP to you, and you should submit it to SSA.

**SECTION XIII**

**ADDITIONAL GUIDELINES FOR PRACTICING VE**

When you bid or price a contract and you have a VECP in mind, do not set
your price with the expectation that SSA will automatically accept the
contemplated VECP.

When submitting a VECP for SSA\'s approval:

\(a\) Do not initiate action to implement it unless the CO issues a
formal contract modification authorizing the VECP. Until you are given a
formal go-ahead, you must perform in accordance with the original
contract;

\(b\) State a specific time period within which your VECP must be
accepted or rejected; and

\(c\) Identify other similar or related contracts to which your VECP may
apply.

When you decide to do a VECP, be sure to keep records of your
development costs and require your subs to do likewise.

Be as accurate as you can in calculating your implementation costs and
insist that SSA use accurate and complete data in calculating its
implementation costs.

If and when your VECP is incorporated into the contract(s), maintain
internal records identifying the first delivered item containing the
VECP and place a note to that effect on the appropriate acceptance and
payment documents.

Don\'t hesitate to submit a VECP that involves an SSA property right. Do
exercise extreme caution when data rights of other parties are involved.

**SECTION XIV**

**POTENTIAL VE APPLICATIONS**

Potential VECP candidates abound. VECPs may be applied to all kinds of
contract requirements from systems, facilities, and procedures to
software, supplies, and equipment. For example, VECPs have been used
successfully in the following areas:

Construction;

Logistics support;

Facilities;

Equipment maintenance;

Management and financial control systems;

Manufacturing processes;

Material handling and transportation;

Packaging, packing, and preservation;

Procedures and reports;

Publications and manuals;

Quality assurance and reliability;

Salvage, rejected, or excess material;

Site preparation and adaptation;

Software (computer) programs and flow-charts;

Specifications and drawings;

Technical, logistics, and management data; and

Test procedures.

SECTION XV

VE APPLICATIONS CHECKLIST

You may want to consider the questions in (a) and (b) when applying VE
to your contracts. This is offered as a guide, not a substitute for
other proven VE techniques.

\(a\) *Materials*: Can you change the design to eliminate parts? Can you
purchase the present design a lower cost? Can you use a standard part?
Would an altered standard part be more economical? If the part is to
improve appearance, is its presence justified? Is there a less costly
part that will perform the same function? Can you change the design to
simplify the part? Can you use a part designed for other equipment? Can
you use a less expensive material? Can you reduce the number of
different materials? Can you use any newly developed materials? Can you
combine two or more parts?

\(b\) *Specifications and standards*: Can you change a specification to
effect a cost reduction? Are inspection standards realistic? Is the
present level of testing necessary? Can you eliminate redundant
inspections or tests? Is the present level of packaging needed? Can you
simplify the packaging? Is bulk packing possible? Is packaging arranged
for lowest cost total material handling?

**SECTION XVI**

**A CONTRACTOR\'S GUIDE FOR AN EFFECTIVE VE PROGRAM**

The following is a list of questions you may ask yourselves to determine
the critical internal management attitudes and disciplines needed to run
a successful corporate VE Program:

\(a\) Do you set company goals for VECP income?

\(b\) Are VECP goals established for line, department, and program
managers?

\(c\) Does top management review VECP income and approve VE operating
goals and budgets?

\(d\) Does top management consult with key customer personnel to agree
on VECP goals on major contracts and programs?

\(e\) Do personnel, such as marketing staff, work on the \"VE team\" and
do they receive credit for approved VECPs or are they \"penalized\" due
to decreased credit for reduced contract price?

\(f\) Do your negotiators understand the VE provisions in the FAR?

\(g\) Do you place VE sharing provisions in your subcontracts?

\(h\) Is VECP income identified separately by your accounting people so
that top management is informed of VE expenditures and receipts and can
recognize VE\'s contribution to your company?

\(i\) Do you assign resources to the development of specific VECPs? and

\(j\) Do you have an efficient system for developing VECPs and do you
obtain internal company approval prior to submittal to the Government?

\(k\) Have you improved your VE program through the formal training of
the personnel involved? Do you conduct formal VE workshops to expand
your in-house capabilities? Training is available on-site from private
VE consultants and varies from straight classroom instruction to actual
\"hands on\" in-house VE projects guided by the instructor. You may
tailor this type of training to your needs.

**APPENDIX NO. 1**

**VE RESOURCES**

Various reports and other information on VE are available from the
organizations listed below. Contact them and request a list of available
literature along with a price list.

SAVE

60 Revere Drive, Suite 500

Northbrook, Illinois 60062

Attention: Ms. Melanie Epel

Phone (847) 480-1730

You can also request Value Society books at the above number.

**APPENDIX NO. 2**

**FAR REFERENCES**

VE SUBJECT FAR SECTION

Scope of part 48.000

Definitions 48.001

General 48.101

Policies 48.102

Processing VECPs 48.103

Sharing arrangements 48.104

Relationship to other

incentives 48.105

Clauses for supply

or service contracts 48.201

Clause for construction

contracts 48.202

VEI clause for supply or

service contracts 52.248-1

General information 52.248-1(a)

Definitions 52.248-1(b)

VECP preparation 52.248-1(c)

Submission 52.248-1(d)

Government action 52.248-1(e)

Sharing rates 52.248-1(f)

Calculating net

acquisition savings 52.248-1(g)

Contract adjustment 52.248-1(h)

Concurrent and future

contract savings 52.248-1(i)

Collateral savings 52.248-1(j)

Relationship to other

incentives 52.248-1(k)

Subcontractors 52.248-1(l)

Data 52.248-1(m)

VEPR clause 52.248-1, Alt. I

Clause for both VEI and VEPR 52.248-1, Alt. II

VEI clause with no sharing

of collateral savings 52.248-1, Alt. III

VE A&E 52.248-2

VE clause for construction

contracts 52.248-3

General 52.248-3(a)

Definitions 52.248-3(b)

VECP preparation 52.248-3(c)

Submission 52.248-3(d)

Government action 52.248-3(e)

Sharing 52.248-3(f)

Collateral savings 52.248-3(g)

Subcontracts 52.248-3(h)

Data 52.248-3(i)

VE construction with no

sharing of collateral savings 52.248-3, Alt. I